FIRST DIVISION G.R. No. 76633 October 18, 1988 EASTERN SHIPPING LINES, INC., petitioner, vs.

PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents. Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law Office for respondent Kathleen D. Saco.

arising out of or by virtue of any law or contract involving Filipino contract workers, including seamen." These cases, according to the 1985 Rules and Regulations on Overseas Employment issued by the POEA, include "claims for death, disability and other benefits" arising out of such employment. 2 The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and consequently his widow's claim should have been filed with Social Security System, subject to appeal to the Employees Compensation Commission. We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985. Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as "employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract. 3 A contract worker is described as "any person working or who has worked overseas under a valid employment contract and shall include seamen" 4 or "any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment contract and shall include seamen." 5 These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign country. 6 It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Saco's employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order NO. 797. 7 The second is its payment 8 of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas workers." Significantly, the office administering this fund, in the receipt it prepared for the private respondent's signature, described the subject of the burial benefits as "overseas contract worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee. The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although working abroad in its international flights, are not considered overseas workers. If this be so, the petitioner should not have found it necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under the definitions given be considered seamen nor are their appointments coursed through the POEA. The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This

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

circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this Court. 10 The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that "all parties to the employment of any Filipino seamen on board any oceangoing vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date." In the second place, even if it had not done so, the provisions of the said circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State. 11 But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows: ... The governing Board of the Administration (POEA), as hereunder provided shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court held: We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving commission a wide and sweeping authority

that is not canalized within banks that keep it from overflowing,' in short a clearly profligate and therefore invalid delegation of legislative powers. There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it. 13 Under the sufficient standard test, there must be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. 14 Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally certain. In the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception. The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the "power of subordinate legislation." With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in' the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas

Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices." Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public convenience and welfare" in Calalang v. Williams 17 and "simplicity, economy and efficiency" in Cervantes v. Auditor General, 18 to mention only a few cases. In the United States, the "sense and experience of men" was accepted in Mutual Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v. United States. 20 It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondent's claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that Section C. Compensation and Benefits. 1. In case of death of the seamen during the term of his Contract, the employer shall pay his beneficiaries the amount of: a. P220,000.00 for master and chief engineers b. P180,000.00 for other officers, including radio operators and master electrician c. P 130,000.00 for ratings. 2. It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to whatever benefits which the seaman is entitled to under Philippine laws. ... 3. ... c. If the remains of the seaman is buried in the Philippines, the owners shall pay the beneficiaries of the seaman an amount not exceeding P18,000.00 for burial expenses. The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July 12,1976, providing an follows: Income Benefits under this Rule Shall be Considered Additional Benefits. All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with such laws.

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

SECOND DIVISION G.R. No. 73681 June 30, 1988 COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners, vs. HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

(e) It was also ascertained that the company sustained damages resulting from the infractions committed by the three salesmen, and that the final results of the investigation fully convinced the company of the existence of just causes for the dismissal of the three salesmen; (f) The formation of the union and the membership therein of Sayson, Reynante and Mejia were not in any manner connected with the company's decision to dismiss the three; that the fact that their dismissal came at a time when the alleged union was being formed was purely coincidental; (g) The union's charge therefore, that the membership in the union and refusal to retract precipitated their dismissal was totally false and amounted to a malicious imputation of union busting; (h) The company never coerced or attempted to coerce employees, much less interferred in the exercise of their right to selforganization; the company never thwarted nor tried to defeat or frustrate the employees' right to form their union in pursuit of their collective interest, as long as that right is exercised within the limits prescribed by law; in fact, there are at present two unions representing the rank and file employees of the company-the factory workers who are covered by a CBA which expired on 31 October 1985 (which was renewed on May 31, 1985) and are represented by Colgate Palmolive Employees Union (PAFLU); whereas, the salaried employees are covered by a CBA which will expire on 31 May 1986 represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office Chapter. (pp. 4-6, Rollo) The respondent Union, on the other hand, in its position paper, reiterated the issue in its Notice to Strike, alleging that it was duly registered with the Bureau of Labor Relations under Registry No. 10312-LC with a total membership of 87 regular salesmen (nationwide) out of 117 regular salesmen presently employed by the company as of November 30, 1985 and that since the registration of the Union up to the present, more than 2/3 of the total salesmen employed are already members of the Union, leaving no doubt that the true sentiment of the salesmen was to form and organize the Colgate-Palmolive Salesmen Union. The Union further alleged that the company is unreasonably delaying the recognition of the union because when it was informed of the organization of the union, and when presented with a set of proposals for a collective bargaining agreement, the company took an adversarial stance by secretly distributing a "survey sheet on union membership" to newly hired salesmen from the Visayas, Mindanao and Metro Manila areas, purposely avoiding regular salesmen who are now members of the union; that in the accomplishment of the form, District Sales Managers, and Sales Supervisors coerced salesmen from the Visayas and Mindanao by requiring them to fill up and/or accomplish said form by checking answers which were adverse to the union; that with a handful of the survey sheets secured by management through coercion, it now would like to claim that all salesmen are not in favor of the organization of the union, which acts are clear manifestations of unfair labor practices. On August 9,1985, respondent Minister rendered a decision which: (a) found no merit in the Union's Complaint for unfair labor practice allegedly committed by petitioner as regards the alleged refusal of petitioner to negotiate with the Union, and the secret distribution of survey sheets allegedly intended to discourage unionism, (b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio Mejia "not without fault" and that "the company 1 has grounds to dismiss above named salesmen" and at the same time respondent Minister directly certified the respondent Union as the collective bargaining agent for the sales force in petitioner company and ordered the reinstatement of the three salesmen to the company on the ground that the employees were first offenders.

PARAS, J.: Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent Minister of Labor and Employment (MOLE) directly certifying private respondent as the recognized and duly-authorized collective bargaining agent for petitioner's sales force and ordering the reinstatement of three employees of petitioner. Acting on the petition for certiorari with prayer for temporary restraining order, this Court issued a Temporary Restraining Order enjoining respondents from enforcing and/or carrying out the assailed order. The antecedent facts are as follows: On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor Relations (BLR) on ground of unfair labor practice consisting of alleged refusal to bargain, dismissal of union officers/members; and coercing employees to retract their membership with the union and restraining non-union members from joining the union. After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition of petitioner assumed jurisdiction over the dispute pursuant to Article 264 (g) of the Labor Code, Thereafter the case was captioned AJML-3-142-85, BLR-3-8685 "In Re: Assumption of Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines, Inc." In its position paper, petitioner pointed out that (a) There is no legal basis for the charge that the company refused to bargain collectively with the union considering that the alleged union is not the certified agent of the company salesmen; (b) The union's status as a legitimate labor organization is still under question because on 6 March 1985, a certain Monchito Rosales informed the BLR that an overwhelming majority of the salesmen are not in favor of the Notice of Strike allegedly filed by the Union (Annex "C"); (c) Upon verification of the records of the Ministry of Labor and Employment, it appeared that a petition for cancellation of the registration of the alleged union was filed by Monchito Rosales on behalf of certain salesmen of the company who are obviously against the formation of the Colgate Palmolive Sales Labor Union which is supposed to represent them; (d) The preventive suspensions of salesmen Peregrino Sayson, Salvador Reynante and Cornelio Mejia, and their eventual dismissal from the employ of the company were carried out pursuant to the inherent right and prerogative of management to discipline erring employees; that based on the preliminary investigation conducted by the company, there appeared substantial grounds to believe that Sayson, Reynante and Mejia violated company rules and regulations necessitating their suspension pending further investigation of their respective cases;

Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his assailed Order, dated December 27, 1985. Petitioner now comes to Us with the following: Assignment of Errors I Respondent Minister committed a grave abuse of discretion when he directly certified the Union solely on the basis of the latter's self-serving assertion that it enjoys the support of the majority of the sales force in petitioner's company. II Respondent Minister committed a grave abuse of discretion when, notwithstanding his very own finding that there was just cause for the dismissal of the three (3) salesmen, he nevertheless ordered their reinstatement. (pp. 7-8, Rollo) Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case assumed by him under Art. 264 (g) of the Labor Code but this power was exceeded when he certified respondent Union as the exclusive bargaining agent of the company's salesmen since this is not a representation proceeding as described under the Labor Code. Moreover the Union did not pray for certification but merely for a finding of unfair labor practice imputed to petitioner-company. The petition merits our consideration. The procedure for a representation case is outlined in Arts. 257-260 of the Labor Code, in relation to the provisions on cancellation of a Union registration under Arts. 239-240 thereof, the main purpose of which is to aid in ascertaining majority representation. The requirements under the law, specifically Secs. 2, 5, and 6 of Rule V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the certified bargaining representative is the true choice of the employees against all contenders. The Constitutional mandate that the State shall "assure the rights of the workers to self-organization, collective bargaining, security of tenure and just and humane conditions of work," should be achieved under a system of law such as the aforementioned provisions of the pertinent statutes. When an overzealous official by-passes the law on the pretext of retaining a laudable objective, the intendment or purpose of the law will lose its meaning as the law itself is disregarded. When respondent Minister directly certified the Union, he in fact disregarded this procedure and its legal requirements. There was therefore failure to determine with legal certainty whether the Union indeed enjoyed majority representation. Contrary to the respondent Minister's observation, the holding of a certification election at the proper time is not necessarily a mere formality as there was a compelling legal reason not to directly and unilaterally certify a union whose legitimacy is precisely the object of litigation in a pending cancellation case filed by certain "concerned salesmen," who also claim majority status. Even in a case where a union has filed a petition for certification elections, the mere fact that no opposition is made does not warrant a direct certification. More so as in the case at bar, when the records of the suit show that the required proof was not presented in an appropriate proceeding and that the basis of the direct certification was the Union's mere allegation in its position paper that it has 87 out of 117 regular salesmen. In other words, respondent Minister merely relied on the self-serving assertion of the respondent Union that it enjoyed the support of the majority of the salesmen, without subjecting such assertion to the test of competing claims. As pointed out by petitioner in its petition, what the respondent Minister achieved in rendering the assailed orders was to make a mockery of the procedure provided under the law for representation cases because: (a) He has created havoc by impliedly establishing a procedural short-cut to obtaining a direct certification-by merely filing a notice of strike. (b) By creating such a short-cut, he has officially encouraged disrespect for the law.

(c) By directly certifying a Union without sufficient proof of majority representation, he has in effect arrogated unto himself the right, vested naturally in the employees, to choose their collective bargaining representative. (d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose majority representation is under serious question. This is highly irregular because while the Union enjoys the blessing of the Minister, it does not enjoy the blessing of the employees. Petitioner is therefore under threat of being held liable for refusing to negotiate with a union whose right to bargaining status has not been legally established. (pp. 9-10, Rollo) The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence was sufficient to warrant the dismissal of the employees the law warrants their dismissal without making any distinction between a first offender and a habitual delinquent. Under the law, respondent Minister is duly mandated to equally protect and respect not only the labor or workers' side but also the management and/or employers' side. The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. To order the reinstatement of the erring employees namely, Mejia, Sayson and Reynante would in effect encourage unequal protection of the laws as a managerial employee of petitioner company involved in the same incident was already dismissed and was not ordered to be reinstated. As stated by Us in the case of San Miguel Brewery vs. National Labor Union, 2 "an employer cannot legally be compelled to continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical to his interest." In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the dismissal of the employees to the assumption order created a doubt as to whether their dismissal was really for just cause or due to their activities." 4 This is of no moment for the following reasons: (a) Respondent Minister has still maintained in his assailed order that a just cause existed to justify the dismissal of the employees. (b) Respondent Minister has not made any finding substantiated by evidence that the employees were dismissed because of their union activities. WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the respondent Minister, dated December 27, 1985 for grave abuse of discretion. However, in view of the fact that the dismissed employees are first offenders, petitioner is hereby ordered to give them separation pay. The temporary restraining order is hereby made permanent. SO ORDERED. Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

SECOND DIVISION G.R. No. L-54334 January 22, 1986 KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG PAGGAWA (KILUSAN), respondents. Ablan and Associates for petitioner. Abdulcadir T. Ibrahim for private respondent.

The case was further reset to May 11, 1979 due to the withdrawal of the Company's counsel of record, Atty. Rodolfo dela Cruz. On May 24, 1978, Atty. Fortunato Panganiban formally entered his appearance as counsel for the Company only to request for another postponement allegedly for the purpose of acquainting himself with the case. Meanwhile, the Company submitted its position paper on May 28, 1979. When the case was called for hearing on June 4, 1979 as scheduled, the Company's representative, Mr. Ching, who was supposed to be examined, failed to appear. Atty. Panganiban then requested for another postponement which the labor arbiter denied. He also ruled that the Company has waived its right to present further evidence and, therefore, considered the case submitted for resolution. On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the National Labor Relations Commission. On July 20, 1979, the National Labor Relations Commission rendered its decision, the dispositive portion of which reads as follows: WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of unjustified refusal to bargain, in violation of Section (g) Article 248 (now Article 249), of P.D. 442, as amended. Further, the draft proposal for a collective bargaining agreement (Exh. "E ") hereto attached and made an integral part of this decision, sent by the Union (Private respondent) to the respondent (petitioner herein) and which is hereby found to be reasonable under the premises, is hereby declared to be the collective agreement which should govern the relationship between the parties herein. SO ORDERED. (Emphasis supplied) Petitioner now comes before Us assailing the aforesaid decision contending that the National Labor Relations Commission acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in rendering the challenged decision. On August 4, 1980, this Court dismissed the petition for lack of merit. Upon motion of the petitioner, however, the Resolution of dismissal was reconsidered and the petition was given due course in a Resolution dated April 1, 1981. Petitioner Company now maintains that its right to procedural due process has been violated when it was precluded from presenting further evidence in support of its stand and when its request for further postponement was denied. Petitioner further contends that the National Labor Relations Commission's finding of unfair labor practice for refusal to bargain is not supported by law and the evidence considering that it was only on May 24, 1979 when the Union furnished them with a copy of the proposed Collective Bargaining Agreement and it was only then that they came to know of the Union's demands; and finally, that the Collective Bargaining Agreement approved and adopted by the National Labor Relations Commission is unreasonable and lacks legal basis. The petition lacks merit. Consequently, its dismissal is in order. Collective bargaining which is defined as negotiations towards a collective agreement, 6 is one of the democratic frameworks under the New Labor Code, designed to stabilize the relation between labor and management and to create a climate of sound and stable industrial peace. It is a mutual responsibility of the employer and the Union and is characterized as a legal obligation. So much so that Article 249, par. (g) of the Labor Code makes it an unfair labor practice for an employer to refuse "to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to wages, hours of work, and all other terms and conditions of employment including proposals for adjusting any grievance or question arising under such an agreement and executing a contract incorporating such agreement, if requested by either party.

CUEVAS, J.: Petition for certiorari to annul the decision 1 of the National Labor Relations Commission (NLRC) dated July 20, 1979 which found petitioner Sweden Ice Cream guilty of unfair labor practice for unjustified refusal to bargain, in violation of par. (g) of Article 249 2 of the New Labor Code, 3 and declared the draft proposal of the Union for a collective bargaining agreement as the governing collective bargaining agreement between the employees and the management. The pertinent background facts are as follows: In a certification election held on October 3, 1978, the Pambansang Kilusang Paggawa (Union for short), a legitimate late labor federation, won and was subsequently certified in a resolution dated November 29, 1978 by the Bureau of Labor Relations as the sole and exclusive bargaining agent of the rank-and-file employees of Sweden Ice Cream Plant (Company for short). The Company's motion for reconsideration of the said resolution was denied on January 25, 1978. Thereafter, and more specifically on December 7, 1978, the Union furnished 4 the Company with two copies of its proposed collective bargaining agreement. At the same time, it requested the Company for its counter proposals. Eliciting no response to the aforesaid request, the Union again wrote the Company reiterating its request for collective bargaining negotiations and for the Company to furnish them with its counter proposals. Both requests were ignored and remained unacted upon by the Company. Left with no other alternative in its attempt to bring the Company to the bargaining table, the Union, on February 14, 1979, filed a "Notice of Strike", with the Bureau of Labor Relations (BLR) on ground of unresolved economic issues in collective bargaining. 5 Conciliation proceedings then followed during the thirty-day statutory cooling-off period. But all attempts towards an amicable settlement failed, prompting the Bureau of Labor Relations to certify the case to the National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to Presidential Decree No. 823, as amended. The labor arbiter, Andres Fidelino, to whom the case was assigned, set the initial hearing for April 29, 1979. For failure however, of the parties to submit their respective position papers as required, the said hearing was cancelled and reset to another date. Meanwhile, the Union submitted its position paper. The Company did not, and instead requested for a resetting which was granted. The Company was directed anew to submit its financial statements for the years 1976, 1977, and 1978.

While it is a mutual obligation of the parties to bargain, the employer, however, is not under any legal duty to initiate contract negotiation. 7 The mechanics of collective bargaining is set in motion only when the following jurisdictional preconditions are present, namely, (1) possession of the status of majority representation of the employees' representative in accordance with any of the means of selection or designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to bargain under Article 251, par. (a) of the New Labor Code . ... all of which preconditions are undisputedly present in the instant case. From the over-all conduct of petitioner company in relation to the task of negotiation, there can be no doubt that the Union has a valid cause to complain against its (Company's) attitude, the totality of which is indicative of the latter's disregard of, and failure to live up to, what is enjoined by the Labor Code to bargain in good faith. We are in total conformity with respondent NLRC's pronouncement that petitioner Company is GUILTY of unfair labor practice. It has been indubitably established that (1) respondent Union was a duly certified bargaining agent; (2) it made a definite request to bargain, accompanied with a copy of the proposed Collective Bargaining Agreement, to the Company not only once but twice which were left unanswered and unacted upon; and (3) the Company made no counter proposal whatsoever all of which conclusively indicate lack of a sincere desire to negotiate. 8 A Company's refusal to make counter proposal if considered in relation to the entire bargaining process, may indicate bad faith and this is specially true where the Union's request for a counter proposal is left unanswered. 9 Even during the period of compulsory arbitration before the NLRC, petitioner Company's approach and attitude-stalling the negotiation by a series of postponements, non-appearance at the hearing conducted, and undue delay in submitting its financial statements, lead to no other conclusion except that it is unwilling to negotiate and reach an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness to discuss freely and fully the claims and demands set forth by the Union much less justify its opposition thereto. 10 The case at bar is not a case of first impression, for in the Herald Delivery Carriers Union (PAFLU) vs. Herald Publications 11 the rule had been laid down that "unfair labor practice is committed when it is shown that the respondent employer, after having been served with a written bargaining proposal by the petitioning Union, did not even bother to submit an answer or reply to the said proposal This doctrine was reiterated anew in Bradman vs. Court of Industrial Relations 12 wherein it was further ruled that "while the law does not compel the parties to reach an agreement, it does contemplate that both parties will approach the negotiation with an open mind and make a reasonable effort to reach a common ground of agreement As a last-ditch attempt to effect a reversal of the decision sought to be reviewed, petitioner capitalizes on the issue of due process claiming, that it was denied the right to be heard and present its side when the Labor Arbiter denied the Company's motion for further postponement. Petitioner's aforesaid submittal failed to impress Us. Considering the various postponements granted in its behalf, the claimed denial of due process appeared totally bereft of any legal and factual support. As herein earlier stated, petitioner had not even honored respondent Union with any reply to the latter's successive letters, all geared towards bringing the Company to the bargaining table. It did not even bother to furnish or serve the Union with its counter proposal despite persistent requests made therefor. Certainly, the moves and overall behavior of petitioner-company were in total derogation of the policy enshrined in the New Labor Code which is aimed towards expediting settlement of economic disputes. Hence, this Court is not prepared to affix its imprimatur to such an illegal scheme and dubious maneuvers. Neither are WE persuaded by petitioner-company's stand that the Collective Bargaining Agreement which was approved and adopted by the NLRC is a total nullity for it lacks the company's consent, much less its argument that once the Collective Bargaining Agreement is implemented, the Company will face the prospect of closing down because it has to pay a staggering

amount of economic benefits to the Union that will equal if not exceed its capital. Such a stand and the evidence in support thereof should have been presented before the Labor Arbiter which is the proper forum for the purpose. We agree with the pronouncement that it is not obligatory upon either side of a labor controversy to precipitately accept or agree to the proposals of the other. But an erring party should not be tolerated and allowed with impunity to resort to schemes feigning negotiations by going through empty gestures. 13 More so, as in the instant case, where the intervention of the National Labor Relations Commission was properly sought for after conciliation efforts undertaken by the BLR failed. The instant case being a certified one, it must be resolved by the NLRC pursuant to the mandate of P.D. 873, as amended, which authorizes the said body to determine the reasonableness of the terms and conditions of employment embodied in any Collective Bargaining Agreement. To that extent, utmost deference to its findings of reasonableness of any Collective Bargaining Agreement as the governing agreement by the employees and management must be accorded due respect by this Court. WHEREFORE, the instant petition is DISMISSED. The temporary restraining order issued on August 27, 1980, is LIFTED and SET ASIDE. No pronouncement as to costs. SO ORDERED. Concepcion, Jr., (Chairman), Abad Santos, Escolin and Alampay, JJ., concur.

On December 28, 1972, Arbitrator Flavio Aguas rendered a joint decision in the two cases mentioned above recognizing the jurisdiction of the Court of First Instance of Bulacan, the dispositive portion reading as follows: THIRD DIVISION G.R. No. L-49046 January 26, 1988 SATURNO A. VICTORIA, petitioner, vs. HON. AMADO G. INCIONG, DEPUTY MINISTER, and FAR EAST BROADCASTING COMPANY, INC., respondents. IN VIEW WHEREOF, and in the interest of justice and equity, it is hereby directed that: 1. That striking members of the Far East Broadcasting Company Employees Association return to their respective positions in the corporation; 2. The respondent Far East Broadcasting Company Incorporated to accept back the returning strikers without loss in rank seniority or status; 3. The workers shall return to work within [10] days from receipt of this resolution otherwise they shall be deemed to have forfeited such right; FERNAN, J.: Petition for review of the Order of the then Acting Secretary of Labor Amado G. Inciong dated June 6, 1978, in NLRC Case No. RB-1764-75, reversing the decision of the National Labor Relations Commission dated November 17, 1976 and holding that, under the law and facts of the case, there was no necessity for private respondent to obtain a clearance for the termination of petitioner's employment under Article 257 [b] of the Labor Code, as amended, and that a mere report of such termination was sufficient, under Section 11 [f]. Rule XIV of the Rules and Regulations implementing said Code. Petitioner Saturno Victoria was employed on March 17, 1956 by private respondent Far East Broadcasting Company, Incorporated as a radio transmitter operator. Sometime in July 1971, he and his co-workers organized the Far East Broadcasting Company Employees Association. After registering their association with the then Department of Labor, they demanded recognition of said association by the company but the latter refused on the ground that being a non-profit, nonstock, non-commercial and religious corporation, it is not covered by Republic Act 875, otherwise known as the Industrial Peace Act, the labor law enforced at that time. Several conciliation meetings were held at the Department of Labor and in those meetings, the Director of Labor Relations Edmundo Cabal advised the union members that the company could not be forced to recognize them or to bargain collectively with them because it is a non-profit, non-commercial and religious organization. Notwithstanding such advice, the union members led by Saturno Victoria as its president, declared a strike and picketed the company's premises on September 6, 1972 for the purpose of seeking recognition of the labor union. As a countermeasure, the company filed a case for damages with preliminary injunction against the strikers before the then Court of First Instance of Bulacan docketed as Civil Case No. 750-V. Said court issued an injunction enjoining the three-dayold strike staged against the company. The complaint was later amended seeking to declare the strike illegal. Upon the declaration of martial law on September 21, 1972 and the promulgation of Presidential Decree No. 21 creating the National Labor Relations Commission, the ad hoc National Labor Relations Commission took cognizance of the strike through NLRC Case No. 0021 entitled "Far East Broadcasting Company Employees Association, complainant versus Far East Broadcasting Company, respondent" and NLRC Case No. 0285 entitled "Generoso Serino, complainant, versus Far East Broadcasting Company, respondent", both cases for reinstatement due to the company's return to accept the union's offer to return to work during the pendency of the case in the Court of First Instance. 4. The respondent shall report compliance with this decision within fifteen [15] days from receipt hereof. This Order shall, however, be without prejudice to whatever decision the Court of First Instance of Bulacan may promulgate in Civil Case No. 750-V and to the requirements the existing order may need of people working with the mass media of communications. IT IS SO ORDERED. 1 The decision of the arbitrator was successively appealed to the ad hoc National Labor Relations Commission, the Secretary of Labor and the Office of the President of the Philippines, and was affirmed in all instances. On April 23, 1975, the Court of First Instance of Bulacan rendered judgment, to wit: WHEREFORE, judgment is hereby rendered: 1. Making injunction against defendants permanent; 2. Declaring that this Court has jurisdiction to try and hear the instant case despite Section 2 of Presidential Decree No. 2; 3. Declaring that plaintiff Far East Broadcasting Company is a non-profit organization since it does not declare dividends; 4. Declaring that the strike admitted by the defendants to have been declared by them is illegal inasmuch as it was for the purpose of compelling the plaintiff-company to recognize their labor union which could not be legally done because the plaintiffs were not covered by Republic Act 875; 5. Declaring that the evidence presented is insufficient to show that defendants caused the damage to the plaintiff consequent on the destruction of its relays and its antennas as well as its transmission lines. SO ORDERED. 2 On April 24, 1975, by virtue of the above decision, the company notified Saturno Victoria that he is dismissed effective April 26, 1975. Thereupon, he filed Case No. RB-IV-1764 before the National Labor Relations Commission, Regional Branch IV against the company alleging violation of article 267 of the Labor Code which requires clearance from the Secretary of Labor for every shutdown of business establishments or dismissal of employees. On February 27, 1976, Labor Arbiter Manuel B. Lorenzo

rendered a decision in petitioner's favor declaring the dismissal to be illegal, thereby ordering reinstatement with fun backwages. On appeal, the arbiter's decision was aimed by the National Labor Relations Commission. But when the commission's decision was in turn appealed to the Secretary of Labor, it was set aside and in lieu thereof the questioned Order dated June 6, 1978 was issued. In view of its brevity and for a better understanding of the reasons behind it, We quote the disputed Order in full: ORDER This is an appeal by respondent from the Decision of the National Labor Relations Commission, dated November 17, 1976. The Commission upheld the Decision of the labor arbiter dated February 27, 1976 ordering respondent to reinstate with full backwages herein complainant Saturno A. Victoria based on the finding that respondent did not file any application for clearance to terminate the services of complainant before dismissing him from his employment. Briefly the facts of this case are as follows: Complainant Saturno Victoria is the president of the Far East Broadcasting Company Employees Union. On September 8, 1972, the said union declared a strike against respondent company. On September 11, 1972, respondent filed with the Court of First Instance of Bulacan, Civil Case No. 750-V, for the issuance of an injunction and a prayer that the strike be declared illegal. On October 24, 1972, complainant together with the other strikers filed with the ad hoc National Labor Relations Commission Case Nos. 0021 and 0285 for reinstatement. The Arbitrator rendered a decision in said case on December 28, 1972, wherein he ordered respondent to reinstate complainants subject to the following condition: "This Order shall, however, be without prejudice to whatever decision the Court of First Instance may promulgate on Civil Case No. 750-V and to the requirements the existing order may need of people working with the mass media of communications." Since said decision was affirmed by the NLRC, the Secretary of Labor, and the Office of the President of the Philippines, complainants were reinstated pursuant thereto. In a Decision dated April 23, 1975, in Civil Case No. 750-V, promulgated by the Court of First Instance of Bulacan, the strike staged by herein complainant and the other strikers was declared illegal. Based on said Decision, respondent dismissed complainant from his employment. Hence, complainant filed the instant complaint for illegal dismissal. Under the aforecited facts, we do not agree with the ruling of the Commission now subject of this appeal that an application for clearance to terminate herein complainant is mandatory on the part of respondent before terminating complainant's services. We believe that what would have been necessary was a report as provided for under Section 11 [f] Rule XIV, Book V of the Rules and Regulations Implementing the Labor Code. Moreover, even if an application for clearance was flied, this Office would have treated the same as a report. Otherwise, it would render nugatory the Decision of the Arbitrator dated December 28, 1972 in Case Nos. 0021 and 0285 which was affirmed by the Commission, the Secretary of Labor and the Office of the President of the Philippines, ordering his temporary reinstatement, subject to whatever Decision the CFI of Bulacan may promulgate in Civil Case No. 750-V. It could be clearly inferred from said CFI Decision that if the strike is declared illegal, the strikers will be considered to have lost their employment status under the then existing laws and jurisprudence, otherwise strikers could stage illegal strike with impunity. Since the strike was declared illegal, respondent acted in good faith when it dispensed with the services of herein complainant.

For failure of respondent to file the necessary report and based on equitable considerations, complainant should be granted separation pay equivalent to one-half month salary for every year of service. WHEREFORE, let the decision of the National Labor Relations Commission dated November 17, 1976 be, as it is hereby, set aside and a new judgment is entered, ordering respondent to give complainant separation pay equivalent to one-half month salary for every year of service. SO ORDERED. 3 Petitioner elevates to Us for review on certiorari the aforequoted Order seeking to persuade this Court that then Acting Secretary of Labor Amado G. Inciong committed reversible error in holding that, under the law and facts of this case, a mere report of the termination of the services of said petitioner was sufficient. Petitioner assigns the following errors: I WHETHER OR NOT A CLEARANCE FROM THE SECRETARY OF LABOR IS STILL NECESSARY BEFORE THE PETITIONER HEREIN COULD BE DISMISSED CONSIDERING THE RESTRICTIVE CONDITION IN THE DECISION OF THE COMPULSORY ARBITRATOR IN NLRC CASE NOS. 0021 AND 0285. II WHETHER OR NOT THE DECISION OF THE COURT OF FIRST INSTANCE OF BULACAN IN CIVIL CASE NO. 750-V IPSO FACTO GAVE THE RESPONDENT COMPANY AUTHORITY TO DISMISS HEREIN PETITIONER WITHOUT ANY CLEARANCE FROM THE SECRETARY OF LABOR. 4 The substantive law on the matter enforced during the time of petitioner's dismissal was Article 267 [b] of the Labor Code [in conjunction with the rules and regulations implementing said substantive law.] Article 267 reads: No employer that has no collective bargaining agreement may shut down his establishment or dismiss or terminate the service of regular employees with at least one [1] year of service except managerial employees as defined in this book without previous written clearance from the Secretary of Labor. Petitioner maintains that the abovecited provision is very clear. It does not make any distinction as to the ground for dismissal. Whether or not the dismissal sought by the employer company is for cause, it is imperative that the company must apply for a clearance from the Secretary of Labor. In a recent case 5 penned by Justice Abraham F. Sarmiento promulgated on June 30, 1987, we had occasion to rule in agreement with the findings of then Presidential Assistant for Legal Affairs Ronaldo Zamora that the purpose in requiring a prior clearance from the Secretary of Labor in cases of shutdown or dismissal of employees, is to afford the Secretary ample opportunity to examine and determine the reasonableness of the request. The Solicitor General, in relation to said pronouncement and in justification of the Acting Labor Secretary's decision makes the following observations: It is true that article 267 [b] of the Labor Code requires that before any business establishment is shut down or any employee is dismissed, written clearance from the Secretary of Labor must first be obtained. It is likewise true that in the case of

petitioner, there was no written clearance in the usual form. But while there may not have been strict compliance with Article 267 there was substantial compliance. The Secretary of Labor twice manifested his conformity to petitioner's dismissal. The first manifestation of acquiescence by the Secretary of Labor to the dismissal of petitioner was his affirmance of the decision of the arbitrator in NLRC Case Nos. 0021 and 0285. The arbitrator ordered the reinstatement of the strikers but subject to the decision of the CFI of Bulacan in Civil Case No. 750-V. The Secretary of Labor affirmed the decision of the arbitrator. In effect, therefore, the Secretary of Labor issued a carte blanche to the CFI of Bulacan to either dismiss or retain petitioner. The second manifestation was his decision in NLRC Case No. RB-IV-1764-65 wherein he said that clearance for the dismissal of petitioner was not required, but only a report; that even if an application for clearance was filed, he would have treated it as a mere report. While this is not prior clearance in the contemplation of Article 267, it is at least a ratification of the dismissal of petitioner. 6 We agree with the Solicitor General. Technically speaking, no clearance was obtained by private respondent from the then Secretary of Labor, the last step towards full compliance with the requirements of law on the matter of dismissal of employees. However, the rationale behind the clearance requirement was fully met. The Secretary of Labor was apprised of private respondent's intention to terminate the services of petitioner. This in effect is an application for clearance to dismiss petitioner from employment. The affirmance of the restrictive condition in the dispositive portion of the labor arbiter's decision in NLRC Case Nos. 0021 and 0285 by the Secretary of Labor and the Office of the President of the Philippines, signifies a grant of authority to dismiss petitioner in case the strike is declared illegal by the Court of First Instance of Bulacan. Consequently and as correctly stated by the Solicitor General, private respondent acted in good faith when it terminated the employment of petitioner upon a declaration of illegality of the strike by the Court of First Instance of Bulacan. Moreover, the then Secretary of Labor manifested his conformity to the dismissal, not once, but twice. In this regard, the mandatory rule on clearance need not be applied. The strike staged by the union in 1972 was a futile move. The law then enforced, Republic Act 875 specifically excluded respondent company from its coverage. Even if the parties had gone to court to compel recognition, no positive relief could have been obtained since the same was not sanctioned by law. Because of this, there was no necessity on the part of private respondent to show specific acts of petitioner during the strike to justify his dismissal. This is a matter of responsibility and of answerability. Petitioner as a union leader, must see to it that the policies and activities of the union in the conduct of labor relations are within the precepts of law and any deviation from the legal boundaries shall be imputable to the leader. He bears the responsibility of guiding the union along the path of law and to cause the union to demand what is not legally demandable, would foment anarchy which is a prelude to chaos. Petitioner should have known and it was his duty to impart this imputed knowledge to the members of the union that employees and laborers in non- profit organizations are not covered by the provisions of the Industrial Peace Act and the Court of Industrial Relations [in the case at bar, the Court of First Instance] has no jurisdiction to entertain petitions of labor unions or organizations of said non-profit organizations for certification as the exclusive bargaining representatives of said employees and laborers. 7 As a strike is an economic weapon at war with the policy of the Constitution and the law at that time, a resort thereto by laborers shall be deemed to be a choice of remedy peculiarly their own and outside of the statute, and as such, the strikers must accept all the risks attendant upon their choice. If they succeed and the employer succumbs, the law will not stand in their way in the enjoyment of the lawful fruits of their victory. But if they fail, they cannot thereafter invoke the protection of the

law for the consequences of their conduct unless the right they wished vindicated is one which the law will, by all means, protect and enforce. 8 We further agree with the Acting Secretary of Labor that what was required in the case of petitioner's dismissal was only a report as provided under Section 11 [f] of Rule XIV of the Rules and Regulations implementing the Labor Code which provides: Every employer shall submit a report to the Regional Office in accordance with the form presented by the Department on the following instances of termination of employment, suspension, lay-off or shutdown which may be effected by the employer without prior clearance within five [5] days thereafter: xxx xxx xxx [f] All other terminations of employment, suspension, lay-offs or shutdowns, not otherwise specified in this and in the immediately preceding sections. To hold otherwise would render nugatory the conditions set forth in the decision of Labor Arbiter Aguas on the basis of which petitioner was temporarily reinstated. Inasmuch as there was a valid and reasonable ground to dismiss petitioner but no report as required by the implementing rules and regulations of the Labor Code was filed by respondent Company with the then Department of Labor, petitioner as held by the Acting Secretary of Labor, is entitled to separation pay equivalent to one-half month salary for every year of service. WHEREFORE, the petition is dismissed. The decision of the acting Secretary of Labor is AFFIRMED in toto. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

EN BANC G.R. No. 130866 September 16, 1998 ST. MARTIN FUNERAL HOME, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO ARICAYOS, respondents. REGALADO, J.: The present petition for certiorari stemmed from a complaint for illegal dismissal filed by herein private respondent before the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. III, in San Fernando, Pampanga. Private respondent alleges that he started working as Operations Manager of petitioner St. Martin Funeral Home on February 6, 1995. However, there was no contract of employment executed between him and petitioner nor was his name included in the semi-monthly payroll. On January 22, 1996, he was dismissed from his employment for allegedly misappropriating P38,000.00 which was intended for payment by petitioner of its value added tax (VAT) to the Bureau of Internal Revenue (BIR). 1 Petitioner on the other hand claims that private respondent was not its employee but only the uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home. Sometime in 1995, private respondent, who was formerly working as an overseas contract worker, asked for financial assistance from the mother of Amelita. Since then, as an indication of gratitude, private respondent voluntarily helped the mother of Amelita in overseeing the business. In January 1996, the mother of Amelita passed away, so the latter then took over the management of the business. She then discovered that there were arrears in the payment of taxes and other government fees, although the records purported to show that the same were already paid. Amelita then made some changes in the business operation and private respondent and his wife were no longer allowed to participate in the management thereof. As a consequence, the latter filed a complaint charging that petitioner had illegally terminated his employment. 2 Based on the position papers of the parties, the labor arbiter rendered a decision in favor of petitioner on October 25, 1996 declaring that no employer-employee relationship existed between the parties and, therefore, his office had no jurisdiction over the case. 3 Not satisfied with the said decision, private respondent appealed to the NLRC contending that the labor arbiter erred (1) in not giving credence to the evidence submitted by him; (2) in holding that he worked as a "volunteer" and not as an employee of St. Martin Funeral Home from February 6, 1995 to January 23, 1996, or a period of about one year; and (3) in ruling that there was no employer-employee relationship between him and petitioner. 4

On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and remanding the case to the labor arbiter for immediate appropriate proceedings. 5 Petitioner then filed a motion for reconsideration which was denied by the NLRC in its resolution dated August 18, 1997 for lack of merit, 6 hence the present petition alleging that the NLRC committed grave abuse of discretion. 7 Before proceeding further into the merits of the case at bar, the Court feels that it is now exigent and opportune to reexamine the functional validity and systemic practicability of the mode of judicial review it has long adopted and still follows with respect to decisions of the NLRC. The increasing number of labor disputes that find their way to this Court and the legislative changes introduced over the years into the provisions of Presidential Decree (P.D.) No. 442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization Act of 1980) now stridently call for and warrant a reassessment of that procedural aspect. We prefatorily delve into the legal history of the NLRC. It was first established in the Department of Labor by P.D. No. 21 on October 14, 1972, and its decisions were expressly declared to be appealable to the Secretary of Labor and, ultimately, to the President of the Philippines. On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to take effect six months after its promulgation. 8 Created and regulated therein is the present NLRC which was attached to the Department of Labor and Employment for program and policy coordination only. 9 Initially, Article 302 (now, Article 223) thereof also granted an aggrieved party the remedy of appeal from the decision of the NLRC to the Secretary of Labor, but P.D. No. 1391 subsequently amended said provision and abolished such appeals. No appellate review has since then been provided for. Thus, to repeat, under the present state of the law, there is no provision for appeals from the decision of the NLRC. 10 The present Section 223, as last amended by Section 12 of R.A. No. 6715, instead merely provides that the Commission shall decide all cases within twenty days from receipt of the answer of the appellee, and that such decision shall be final and executory after ten calendar days from receipt thereof by the parties. When the issue was raised in an early case on the argument that this Court has no jurisdiction to review the decisions of the NLRC, and formerly of the Secretary of Labor, since there is no legal provision for appellate review thereof, the Court nevertheless rejected that thesis. It held that there is an underlying power of the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by statute; that the purpose of judicial review is to keep the administrative agency within its jurisdiction and protect the substantial rights of the parties; and that it is that part of the checks and balances which restricts the separation of powers and forestalls arbitrary and unjust adjudications. 11 Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of the aggrieved party is to timely file a motion for reconsideration as a precondition for any further or subsequent remedy, 12 and then seasonably avail of the special civil action of certiorari under Rule 65, 13 for which said Rule has now fixed the reglementary period of sixty days from notice of the decision. Curiously, although the 10-day period for finality of the decision of the NLRC may already have lapsed as contemplated in Section 223 of the Labor Code, it has been held that this Court may still take

cognizance of the petition for certiorari on jurisdictional and due process considerations if filed within the reglementary period under Rule 65. 14 Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally provided as follows: Sec. 9. Jurisdiction. The Intermediate Appellate Court shall exercise: (1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction; (2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards, or commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. The Intermediate Appellate Court 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. These provisions shall not apply to decisions and interlocutory orders issued under the Labor Code of the Philippines and by the Central Board of Assessment Appeals. 15 Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902 effective March 18, 1995, to wit: Sec. 9. Jurisdiction. The Court of Appeals shall exercise: (1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction; (2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Social Security Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

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. Trials or hearings in the Court of Appeals must be continuous and must be completed within, three (3) months, unless extended by the Chief Justice. It will readily be observed that, aside from the change in the name of the lower appellate court, 16 the following amendments of the original provisions of Section 9 of B.P. No. 129 were effected by R.A. No. 7902, viz.: 1. The last paragraph which excluded its application to the Labor Code of the Philippines and the Central Board of Assessment Appeals was deleted and replaced by a new paragraph granting the Court of Appeals limited powers to conduct trials and hearings in cases within its jurisdiction. 2. The reference to the Labor Code in that last paragraph was transposed to paragraph (3) of the section, such that the original exclusionary clause therein now provides "except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948." (Emphasis supplied). 3. Contrarily, however, specifically added to and included among the quasi-judicial agencies over which the Court of Appeals shall have exclusive appellate jurisdiction are the Securities and Exchange Commission, the Social Security Commission, the Employees Compensation Commission and the Civil Service Commission. This, then, brings us to a somewhat perplexing impass, both in point of purpose and terminology. As earlier explained, our mode of judicial review over decisions of the NLRC has for some time now been understood to be by a petition for certiorari under Rule 65 of the Rules of Court. This is, of course, a special original action limited to the resolution of jurisdictional issues, that is, lack or excess of jurisdiction and, in almost all cases that have been brought to us, grave abuse of discretion amounting to lack of jurisdiction. It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants exclusive appellate jurisdiction to the Court of Appeals over all final adjudications of the Regional Trial Courts and the quasijudicial agencies generally or specifically referred to therein except, among others, "those falling within the appellate jurisdiction of the Supreme Court in accordance with . . . the Labor Code of the Philippines under Presidential Decree No. 442, as amended, . . . ." This would necessarily contradict what has been ruled and said all along that appeal does not lie from decisions of the NLRC. 17 Yet, under such excepting clause literally construed, the appeal from the NLRC cannot be brought to the Court of Appeals, but to this Court by necessary implication. The same exceptive clause further confuses the situation by declaring that the Court of Appeals has no appellate jurisdiction over decisions falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of B.P. No. 129, and those specified cases in Section 17 of the Judiciary Act of 1948. These cases can, of course, be properly excluded from the exclusive

appellate jurisdiction of the Court of Appeals. However, because of the aforementioned amendment by transposition, also supposedly excluded are cases falling within the appellate jurisdiction of the Supreme Court in accordance with the Labor Code. This is illogical and impracticable, and Congress could not have intended that procedural gaffe, since there are no cases in the Labor Code the decisions, resolutions, orders or awards wherein are within the appellate jurisdiction of the Supreme Court or of any other court for that matter. A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there may have been an oversight in the course of the deliberations on the said Act or an imprecision in the terminology used therein. In fine, Congress did intend to provide for judicial review of the adjudications of the NLRC in labor cases by the Supreme Court, but there was an inaccuracy in the term used for the intended mode of review. This conclusion which we have reluctantly but prudently arrived at has been drawn from the considerations extant in the records of Congress, more particularly on Senate Bill No. 1495 and the Reference Committee Report on S. No. 1495/H. No. 10452. 18 In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship speech 19 from which we reproduce the following excerpts: The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129, reorganized the Court of Appeals and at the same time expanded its jurisdiction and powers. Among others, its appellate jurisdiction was expanded to cover not only final judgment of Regional Trial Courts, but also all final judgment(s), decisions, resolutions, orders or awards of quasi-judicial agencies, instrumentalities, boards and commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of BP Blg. 129 and of subparagraph 1 of the third paragraph and subparagraph 4 of Section 17 of the Judiciary Act of 1948. Mr. President, the purpose of the law is to ease the workload of the Supreme Court by the transfer of some of its burden of review of factual issues to the Court of Appeals. However, whatever benefits that can be derived from the expansion of the appellate jurisdiction of the Court of Appeals was cut short by the last paragraph of Section 9 of Batas Pambansa Blg. 129 which excludes from its coverage the "decisions and interlocutory orders issued under the Labor Code of the Philippines and by the Central Board of Assessment Appeals. Among the highest number of cases that are brought up to the Supreme Court are labor cases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions enumerated in Section 9 and, additionally, extends the coverage of appellate review of the Court of Appeals in the decision(s) of the Securities and Exchange Commission, the Social Security Commission, and the Employees Compensation Commission to reduce the number of cases elevated to the Supreme Court. (Emphases and corrections ours) xxx xxx xxx Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides the ideal situation of drastically reducing the workload of the Supreme Court without depriving the litigants of the privilege of review by an appellate tribunal.

In closing, allow me to quote the observations of former Chief Justice Teehankee in 1986 in the Annual Report of the Supreme Court: . . . Amendatory legislation is suggested so as to relieve the Supreme Court of the burden of reviewing these cases which present no important issues involved beyond the particular fact and the parties involved, so that the Supreme Court may wholly devote its time to cases of public interest in the discharge of its mandated task as the guardian of the Constitution and the guarantor of the people's basic rights and additional task expressly vested on it now "to determine whether or not there has been a grave abuse of discretion amounting to lack of jurisdiction on the part of any branch or instrumentality of the Government. We used to have 500,000 cases pending all over the land, Mr. President. It has been cut down to 300,000 cases some five years ago. I understand we are now back to 400,000 cases. Unless we distribute the work of the appellate courts, we shall continue to mount and add to the number of cases pending. In view of the foregoing, Mr. President, and by virtue of all the reasons we have submitted, the Committee on Justice and Human Rights requests the support and collegial approval of our Chamber. xxx xxx xxx Surprisingly, however, in a subsequent session, the following Committee Amendment was introduced by the said sponsor and the following proceedings transpired: 20 Senator Roco. On page 2, line 5, after the line "Supreme Court in accordance with the Constitution," add the phrase "THE LABOR CODE OF THE PHILIPPINES UNDER P.D. 442, AS AMENDED." So that it becomes clear, Mr. President, that issues arising from the Labor Code will still be appealable to the Supreme Court. The President. Is there any objection? (Silence) Hearing none, the amendment is approved. Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also discussed with our Colleagues in the House of Representatives and as we understand it, as approved in the House, this was also deleted, Mr. President. The President. Is there any objection? (Silence) Hearing none, the amendment is approved. Senator Roco. There are no further Committee amendments, Mr. President. Senator Romulo. Mr. President, I move that we close the period of Committee amendments. The President. Is there any objection? (Silence) Hearing none, the amendment is approved. (Emphasis supplied). xxx xxx xxx

Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on second reading and being a certified bill, its unanimous approval on third reading followed. 21 The Conference Committee Report on Senate Bill No. 1495 and House Bill No. 10452, having theretofore been approved by the House of Representatives, the same was likewise approved by the Senate on February 20, 1995, 22 inclusive of the dubious formulation on appeals to the Supreme Court earlier discussed. The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to the Supreme Court were eliminated, the legislative intendment was that the special civil action of certiorari was and still is the proper vehicle for judicial review of decisions of the NLRC. The use of the word "appeal" in relation thereto and in the instances we have noted could have been a lapsus plumae because appeals by certiorari and the original action for certiorari are both modes of judicial review addressed to the appellate courts. The important distinction between them, however, and with which the Court is particularly concerned here is that the special civil action of certiorari is within the concurrent original jurisdiction of this Court and the Court of Appeals; 23 whereas to indulge in the assumption that appeals by certiorari to the Supreme Court are allowed would not subserve, but would subvert, the intention of Congress as expressed in the sponsorship speech on Senate Bill No. 1495. Incidentally, it was noted by the sponsor therein that some quarters were of the opinion that recourse from the NLRC to the Court of Appeals as an initial step in the process of judicial review would be circuitous and would prolong the proceedings. On the contrary, as he commendably and realistically emphasized, that procedure would be advantageous to the aggrieved party on this reasoning: On the other hand, Mr. President, to allow these cases to be appealed to the Court of Appeals would give litigants the advantage to have all the evidence on record be reexamined and reweighed after which the findings of facts and conclusions of said bodies are correspondingly affirmed, modified or reversed. Under such guarantee, the Supreme Court can then apply strictly the axiom that factual findings of the Court of Appeals are final and may not be reversed on appeal to the Supreme Court. A perusal of the records will reveal appeals which are factual in nature and may, therefore, be dismissed outright by minute resolutions. 24 While we do not wish to intrude into the Congressional sphere on the matter of the wisdom of a law, on this score we add the further observations that there is a growing number of labor cases being elevated to this Court which, not being a trier of fact, has at times been constrained to remand the case to the NLRC for resolution of unclear or ambiguous factual findings; that the Court of Appeals is procedurally equipped for that purpose, aside from the increased number of its component divisions; and that there is undeniably an imperative need for expeditious action on labor cases as a major aspect of constitutional protection to labor. Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all such petitions should hence forth be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired.

Apropos to this directive that resort to the higher courts should be made in accordance with their hierarchical order, this pronouncement in Santiago vs. Vasquez, et al. 25 should be taken into account: One final observation. We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the precious time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction. WHEREFORE, under the foregoing premises, the instant petition for certiorari is hereby REMANDED, and all pertinent records thereof ordered to be FORWARDED, to the Court of Appeals for appropriate action and disposition consistent with the views and ruling herein set forth, without pronouncement as to costs. SO ORDERED. Narvasa, C.J., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban Martinez, Quisumbing and Purisima, JJ., concur.

SO ORDERED. 4 On May 19, 1994, complainants in the abovementioned labor case filed before the Commission a motion for the issuance of a writ of execution as respondent's appeal to the Commission and this Court 5 were respectively denied. On June 16, 1994, Executive Labor Arbiter Gelacio C. Rivera, Jr. to whom the case was reassigned in view of Labor Arbiter Olegario's transfer, issued a writ of execution 6 directing NLRC Deputy Sheriff Adam Ventura to execute the judgment against respondents, Green Mountain Farm, Roberto Ongpin and Almus Alabe Sheriff Ventura then proceeded to enforce the writ by garnishing certain personal properties of respondents. Findings that said judgment debtors do not have sufficient personal properties to satisfy the monetary award, Sheriff Ventura proceeded to levy upon a real property covered by Tax Declaration No. 9697, registered in the name of Roberto Ongpin, one of the respondents in the labor case. Thereafter, Sheriff Ventura caused the publication on the July 17, 1994 edition of the Baguio Midland Courier the date of the public auction of said real property. On July 27, 1994, a month before the scheduled auction sale, herein petitioner filed before the Commission a third-party claim 7 asserting ownership over the property levied upon and subject of the Sheriff notice of sale. Labor Arbiter Rivera thus issued an order directing the suspension of the auction sale until the merits of petitioner's claim has been resolved. 8 However, on August 16, 1994, petitioner filed with the Regional Trial Court of La Trinidad, Benguet a complaint for injunction and damages, with a prayer for the issuance of a temporary retraining order against Sheriff Ventura, reiterating the same allegations it raised in the third party claim it field with the Commission. The petition was docketed as Civil Case No. 94-CV0948, entitled "Deltaventures Resources, Inc., petitioner vs. Adam P. Ventura, et al., defendants." The next day, August 17, 1994, respondent Judge Cabato issued a temporary restraining order, enjoining respondents in the civil case before him to hold in abeyance any action relative to the enforcement of the decision in the labor case. 9 Petitioner likewise filed on August 30, 1994, an amended complaint 10 to implead Labor arbiter Rivera and herein private respondent-laborers. Further, on September 20, 1994, petitioner, filed with the Commission a manifestation 11 questioning the latter's authority to hear the case, the matter being within the jurisdiction of the regular courts. The manifestation however, was dismissed by Labor arbiter Rivera on October 3, 1994. 12 Meanwhile, on September 20, 1994, private respondent-laborers, moved for the dismissal of the civil case on the ground of the court's lack of jurisdiction. 13 Petitioner filed its opposition to said motion on October 4, 1994. 14 On November 7, 1994, after both parties had submitted their respective briefs, respondent court rendered its assailed decision premised on the following grounds: First, this Court is equal rank with the NLRC, hence, has no jurisdiction to issue an injunction against the execution of the NLRC decision. . . . Second, the NLRC retains authority over all proceedings anent the execution of its decision. This power carries with it the right to determine every question which may be involved in the execution of its decision. . . . Third, Deltaventures Resources, Inc. should rely on and comply with the Rules of the NLRC because it is the principal procedure to be followed, the Rules of Court being merely suppletory in application, . . .

SECOND DIVISION G.R. No. 118216 March 9, 2000 DELTAVENTURES RESOURCES, INC., petitioner, vs. HON. FERNANDO P. CABATO, Presiding Judge Regional Trial Court, La Trinidad, Benguet, Branch 62; HON. GELACIO L. RIVERA, JR., Executive Labor Arbiter, NLRC-CAR, Baguio City, ADAM P. VENTURA, Deputy-Sheriff, NLRC-CAR, Baguio City; ALEJANDRO BERNARDINO, AUGUSTO GRANADOS, PILANDO TANGAY, NESTOR RABANG, RAY DAYAP, MYRA BAYAONA, VIOLY LIBAO, AIDA LIBAO, JESUS GATCHO and GREGORIO DULAY, respondents. QUISUMBING, J.: This special civil action for certiorari seeks to annual the Order dated November 7, 1994, 1 of respondent Judge Fernando P. Cabato of the Regional Trial Court of La Trinidad, Benguet, Branch 62, in Civil Case No. 94-CV-0948, dismissing petitioner's amended third-party complaint, as well as the Order dated December 14, 1994, 2 denying motion for reconsideration. On July 15, 1992, a Decision 3 was rendered by Executive Labor Arbiter Norma Olegario, National Labor Relations Commission Regional Arbitration Board, Cordillera Autonomous Region (Commission), in NLRC Case No. 01-08-0165-89 entitled "Alejandro Bernardino, et al, vs. Green Mountain Farm, Roberto Ongpin and Almus Alabe", the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered declaring the respondents guilty of Illegal Dismissal and Unfair Labor Practice and ordering them to pay the complainants, in solidum, in the amount herein below listed: 1. Violy Libao P131,368.07 2. Myra Bayaona 121,470.23 3. Gregorio Dulay 128,362.17 4. Jesus Gatcho 126,475.17 5. Alejandro Bernardino 110,158.20 6. Pilando Tangay 107,802.66 7. Aida Libao 129,967.34 8. Rey Dayap 123,289.21 9. Nestor Rabang 90,611.69 10. Augusto Granados 108,106.03 plus attorney's fees in the amount of P10.000.00. Respondent Almus Alabe is also ordered to answer in exemplary damages in the amount of P5,00.00 each to all the complainants. xxx xxx xxx

Fourth, the invocation of estoppel by the plaintiffs is misplaced. . . . . [B]efore the defendants have filed their formal answer to the amended complaint, they moved to dismiss it for lack of jurisdiction. Lastly, the plaintiff, having in the first place addressed to the jurisdiction of the NLRC by filing with it a Third Party Claim may not at the same time pursue the present amended Complaint under the forum shopping rule. 15 Their motion for reconsideration having been denied by respondent Judge, 16 petitioner promptly filed this petition now before us. In spite of the many errors assigned by petitioner, 17 we find that here the core issue is whether or not the trial court may take cognizance of the complaint filed by petitioner and consequently provide the injunction relief sought. Such cognizance in turn, would depend on whether the acts complained of are related to, connected or interwoven with the cases falling under the exclusive jurisdiction of the Labor arbiter or the NLRC. Petitioner avers that court a quo erred in dismissing the third-party claim on the ground of lack of jurisdiction. Further, it contends that the NLRC-CAR did not acquire jurisdiction over the claim for it did not impugn the decision of the NLRC-CAR but merely questioned the propriety of the levy made by Sheriff Ventura. In support of its claim, petitioner asserts that the instant case does not involve a labor dispute, as no-employer-employee relationship exists between the parties. Nor is the petitioner's case related in any way to either parties' case before the NLRC-CAR hence, not within the jurisdiction of the Commission. Basic as a hornbook principle, jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complainant 18 which comprise a concise statement of the ultimate facts constituting the petitioner's cause of action. 19 Thus we have held that: Jurisdiction over the subject-matter is determined upon the allegations made in the complainant, irrespective of whether the plaintiff is entitled or not entitled to recover upon the claim asserted therein - a matter resolved only after and as a result of the trial. 20 Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce and execute the commission's decision in NLRC Case No. 01-08-0165-89 (Illegal Dismissal and Unfair Labor Practice) against Green Mountain Farm, Roberto Ongpin and Almus Alabe. Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complainant was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts. Precedents abound confirming the rule that said courts have no labor jurisdiction to act on labor cases or various incidents arising therefrom, including the execution of decisions, awards or orders. 21 Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official concerned under the Department of Labor and Employment. To hold otherwise is to sanction split jurisdiction which is obnoxious to the orderly administration of justice. 22 Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself to the jurisdiction of the Commission acting through the Labor Arbiter. It failed to perceive the fact that what it is really controverting is the decision of

the Labor arbiter and not the act of the deputy sheriff in executing said order issued as a consequence of said decision rendered. Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is terminated. 23 Whatever irregularities attended the issuance and execution of the alias writ of execution should be referred to the same administrative tribunal which rendered the decision. 24 This is because any court which issued a writ of execution has the inherent power, for the advancement of justice, to correct errors of its ministerial officers and to control its own processes. 25 The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction over incidents arising from, in connection with or relating to labor disputes, as the controversy under consideration, to the exclusion of the regular courts. Having established that jurisdiction over the case rests with the Commission, we find no grave abuse of discretion on the part of respondent Judge Cabato in denying petitioner's motion for the issuance of an injunction against the execution of the decision of the National Labor Relations Commission. Moreover, it must be noted that the Labor Code in Article 254 explicitly prohibits issuance of a temporary or permanent injunction or restraining order in any case involving or growing out of labor disputes by any court or other entity (except as otherwise provided in Arts. 218 and 264). As correctly observed by court a quo, the main issue and the subject of the amended complaint for injunction are questions interwoven with the execution of the Commission's decision. No doubt the aforecited prohibition in Article 254 is applicable. Petitioner should have filed its third-party claim before the Labor Arbiter, from whom the writ of execution originated, before instituting said civil case. The NLRC's Manual on Execution of Judgment, 26 issued pursuant to Article 218 of the Labor Code, provides the mechanism for a third-party claimant to assert his claim over a property levied upon by the sheriff pursuant to an order or decision of the Commission or of the Labor Arbiter. The power of the Labor Arbiter to issue a writ of execution carries with it the power to inquire into the correctness of the execution of his decision and to consider whatever supervening events might transpire during such execution. Moreover, in denying petitioner's petition for injunction, the court a quo is merely upholding the time-honored principle that a Regional Trial Court, being a co-equal body of the National Labor Relations Commission, has no jurisdiction to issue any restraining order or injunction to enjoin the execution of any decision of the latter. 27 WHEREFORE, the petition for certiorari and prohibition is DENIED. The assailed Orders of respondent Judge Fernando P. Cabato dated November 7, 1994 and December 14, 1994, respectively are AFFIRMED. The records of this case are hereby REMANDED to the National Labor Relations Commission for further proceedings.1wphi1.nt Costs against petitioner. SO ORDERED. Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

THIRD DIVISION G.R. No. 85985 August 13, 1993 PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents. Solon Garcia for petitioner. Adolpho M. Guerzon for respondent PALEA. MELO, J.: In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a Code of Discipline among employees is a shared responsibility of the employer and the employees. On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code was circulated among the employees and was immediately implemented, and some employees were forthwith subjected to the disciplinary measures embodied therein. Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-72051-85) with the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by Management" (Rollo, p. 41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the Code had been circulated in limited numbers; that being penal in nature the Code must conform with the requirements of sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that implementation of the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that employees dismissed under the Code be reinstated and their cases subjected to further hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14, Record.) PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and regulations regarding employess' conduct in carrying out their duties and functions, and alleging that by implementing the Code, it had not violated the collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as defective for, respectively, running counter to the construction of penal laws and making punishable any offense within PAL's contemplation. These provisions are the following: Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and regulations of the company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures and standards, including standards of quality, productivity and behaviour, as issued and promulgated by the company through its duly authorized officials. Any violations thereof shall be punishable with a penalty to be determined by the gravity and/or frequency of the offense. Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The penalty for an offense shall be determined on the basis of his past record of offenses of any nature or the absence thereof. The more habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an employee may be dismissed if the number of his past offenses warrants such penalty in the judgment of management even if each offense considered separately may not warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the other hand, due regard shall be given to the length of time between commission of individual offenses to determine whether the employee's conduct may indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a pattern of incorrigibility. Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was "not totally fault free" considering that while the issuance of rules and regulations governing the conduct of employees is a "legitimate management prerogative" such rules and regulations must meet the test of "reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing provision that makes punishable any offense one can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-39, Rollo.) The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that PAL's assertion that it had furnished all its employees copies of the Code is unsupported by documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition of penalties on employees who thought all the while that the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance . . . finds application only after it has been conclusively shown that the law was circulated to all the parties concerned and efforts to disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She thereupon disposed: WHEREFORE, premises considered, respondent PAL is hereby ordered as follows: 1. Furnish all employees with the new Code of Discipline;

2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand the same for further hearing; and 3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision. All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit. SO ORDERED. (p. 40, Rollo.) PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations: Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall govern the conduct of its employees would result in the erosion and deterioration of an otherwise harmonious and smooth relationship between them as did happen in the instant case. There is no dispute that adoption of rules of conduct or discipline is a prerogative of management and is imperative and essential if an industry, has to survive in a competitive world. But labor climate has progressed, too. In the Philippine scene, at no time in our contemporary history is the need for a cooperative, supportive and smooth relationship between labor and management more keenly felt if we are to survive economically. Management can no longer exclude labor in the deliberation and adoption of rules and regulations that will affect them. The complainant union in this case has the right to feel isolated in the adoption of the New Code of Discipline. The Code of Discipline involves security of tenure and loss of employment a property right! It is time that management realizes that to attain effectiveness in its conduct rules, there should be candidness and openness by Management and participation by the union, representing its members. In fact, our Constitution has recognized the principle of "shared responsibility" between employers and workers and has likewise recognized the right of workers to participate in "policy and decision-making process affecting their rights . . ." The latter provision was interpreted by the Constitutional Commissioners to mean participation in "management"' (Record of the Constitutional Commission, Vol. II). In a sense, participation by the union in the adoption of the code if conduct could have accelerated and enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.) Respondent Commission thereupon disposed: WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of Discipline. The pending cases adverted to in the appealed decision if still in the arbitral level,

should be reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained. SO ORDERED. (p. 5, NLRC Decision.) PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.) As stated above, the Principal issue submitted for resolution in the instant petition is whether management may be compelled to share with the union or its employees its prerogative of formulating a code of discipline. PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of responsibility therefor between employer and employee. Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the participation of workers in decision and policy-making processes affecting the rights, duties and welfare." However, even in the absence of said clear provision of law, the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's prerogatives must be without abuse of discretion. In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's right to implement a new system of distributing its products, but gave the following caveat: So long as a company's management prerogatives are 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 or under valid agreements, this Court will uphold them. (at p. 28.) All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative being invoked is clearly a managerial one. A close scrutiny of the objectionable provisions of the Code reveals that they are not purely businessoriented nor do they concern the management aspect of the business of the company as in the San Miguel case. The provisions of the Code clearly have repercusions on the employee's right to security of tenure. The implementation of the provisions may result in the deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on infringement of constitutional rights, we must uphold the constitutional requirements for the protection of

labor and the promotion of social justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (Employees Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635). Verily, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of the employees. In treating the latter, management should see to it that its employees are at least properly informed of its decisions or modes action. PAL asserts that all its employees have been furnished copies of the Code. Public respondents found to the contrary, which finding, to say the least is entitled to great respect. PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the functions of management without having to discuss the same with PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement: The Association recognizes the right of the Company to determine matters of management it policy and Company operations and to direct its manpower. Management of the Company includes the right to organize, plan, direct and control operations, to hire, assign employees to work, transfer employees from one department, to another, to promote, demote, discipline, suspend or discharge employees for just cause; to lay-off employees for valid and legal causes, to introduce new or improved methods or facilities or to change existing methods or facilities and the right to make and enforce Company rules and regulations to carry out the functions of management. The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful manner. Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights to participate in the deliberation of matters which may affect their rights and the formulation of policies relative thereto. And one such mater is the formulation of a code of discipline. Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To promote the enlightenment of workers concerning their rights and obligations . . . as employees." This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the "obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious labor-management relationship and the then already existing state policy of enlightening workers concerning their rights as employees demand no less than the observance of transparency in managerial moves affecting employees' rights. Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business

demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in the absence of full cooperation of the employees. Such cooperation cannot be attained if the employees are restive on account, of their being left out in the determination of cardinal and fundamental matters affecting their employment. WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is made as to costs. SO ORDERED. Feliciano, Bidin, Romero and Vitug, JJ., concur.

Union security Contracting out SPECIAL FIRST DIVISION G.R. No. 127598 February 22, 2000 All benefits Retroactivity

MANILA ELECTRIC COMPANY, petitioner, vs. Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and WORKERS ASSOCIATION (MEWA), respondent. RESOLUTION YNARES-SANTIAGO, J.: In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows: WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the modifications set forth above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality of the MERALCO retirement fund.1 The modifications of the public respondent's resolutions include the following: January 27, 1999 decision P1,900.00 for 199596 modified to one month remanded to the Secretary denied granted up to P60,000.00 denied 40 days (typo error) not apply to those who are not exposed to the risk no need for cash bond, no need to reduce quota and MAPL exclude confidential employees Secretary's resolution P2,200.00 2 months granted granted granted granted 30 days members of a team

maintenance of membership no need to consult union existing terms and conditions Dec. 28, 1996-Dec. 27, 199(9)

closed shop consult first all terms from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a motion for intervention and a motion for reconsideration of the said Decision. A separate intervention was likewise made by the supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona fide legal interest in the outcome of the case.3 The Court required the "proper parties" to file a comment to the three motions for reconsideration but the Solicitor-General asked that he be excused from filing the comment because the "petition filed in the instant case was granted" by the Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking Immediate Reconsideration" was also filed by the alleged newly elected president of the Union.5 Other subsequent pleadings were filed by the parties and intervenors. The issues raised in the motions for reconsideration had already been passed upon by the Court in the January 27, 1999 decision. No new arguments were presented for consideration of the Court. Nonetheless, certain matters will be considered herein, particularly those involving the amount of wages and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards. Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it would simply pass the cost covering such increase to the consumers through an increase in the rate of electricity. This is a non sequitur. The Court cannot be threatened with such a misleading argument. An increase in the prices of electric current needs the approval of the appropriate regulatory government agency and does not automatically result from a mere increase in the wages of petitioner's employees. Besides, this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the Union relies to support its position regarding the wage issue cannot be an accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of Evidence provides: Commercial lists and the like. Evidence of statements of matters of interest to persons engaged in an occupation contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them therein. Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited report is a mere newspaper account and not even a commercial list. At most, it is but an analysis or opinion which carries no persuasive weight for purposes of this case as no sufficient figures to support it were presented. Neither did anybody testify to its accuracy. It cannot be said that businessmen generally rely on news items such as this in their occupation. Besides, no evidence was presented that the publication was regularly prepared by a person in touch with the market and that it is generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible.6 In the same manner, newspapers containing stock quotations are not admissible in evidence when the source of the reports is available.7 With more reason, mere analyses or projections of such reports

Wages X'mas bonus Retirees Loan to coops GHSIP, HMP and Housing loans Signing bonus Union leave High voltage/pole

Collectors CBU

include

cannot be admitted. In particular, the source of the report in this case can be easily made available considering that the same is necessary for compliance with certain governmental requirements. Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An estimate by the All Asia financial analyst stated that petitioner's net operating income for the same year was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by petitioner as its projected net operating income. The P5.7 billion which was the Secretary's basis for granting the P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than the highest increase granted to supervisory employees.9 As mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the factors that should affect wage determination" because collective bargaining disputes particularly those affecting the national interest and public service "requires due consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute."10 The Court takes judicial notice that the new amounts granted herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-file employees within the community. It should be noted that the relations between labor and capital is impressed with public interest which must yield to the common good.11 Neither party should act oppressively against the other or impair the interest or convenience of the public.12 Besides, matters of salary increases are part of management prerogative.13 On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no question that these arbitral awards were to be given retroactive effect. However, the parties dispute the reckoning period when retroaction shall commence. Petitioner claims that the award should retroact only from such time that the Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v. NLRC,15 said: The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5, 1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed upon by the parties. But since no agreement to that effect was made, public respondent did not abuse its discretion in giving the said CBA a prospective effect. The action of the public respondent is within the ambit of its authority vested by existing law. On the other hand, the Union argues that the award should retroact to such time granted by the Secretary, citing the 1993 decision of St. Luke's.16 Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the previous CBA, contrary to the position of petitioner. Under the circumstances of the case, Article 253-A cannot be properly applied to herein case. As correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing petitioner's Motion for Reconsideration Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress that the provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by and between the parties, and not arbitral awards . . .

Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof. In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that: In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations between management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused its discretion in making his award retroactive. In dismissing this contention this Court held: Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof. The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a three-year period. Labor laws are silent as to when an arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day immediately following such date and if agreed thereafter, the effectivity depends on the agreement of the parties.18 On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention of the government. Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to the first day after the six-month period following the expiration of the last day of the CBA should there be one. In the absence of a CBA, the Secretary's determination of the date of retroactivity as part of his discretionary powers over arbitral awards shall control. It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties because it requires the interference and imposing power of the State thru the Secretary of Labor when he assumes jurisdiction. However, the arbitral award can be considered as an approximation of a collective bargaining agreement which would otherwise have been entered into by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by analogy to an arbitral award by the Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof." In other words, the law contemplates retroactivity whether the agreement be entered into before or after the said six-month period. The agreement of the parties need not be categorically stated for their acts may be considered in determining the duration of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of the Board and its President addressed to their stockholders, which states that the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as indicative of petitioner's recognition that the CBA award covers the said period. Earlier, petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering the same period inclusive.21 In addition, petitioner does not dispute the allegation that in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the period immediately following the last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason to

retroact the subject CBA awards to a different date. The period is herein set at two (2) years from December 1, 1995 to November 30, 1997. On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that it is no different from housing loans granted by the employer. The award of loans for housing is justified because it pertains to a basic necessity of life. It is part of a privilege recognized by the employer and allowed by law. In contrast, providing seed money for the establishment of the employee's cooperative is a matter in which the employer has no business interest or legal obligation. Courts should not be utilized as a tool to compel any person to grant loans to another nor to force parties to undertake an obligation without justification. On the contrary, it is the government that has the obligation to render financial assistance to cooperatives and the Cooperative Code does not make it an obligation of the employer or any private individual.22 Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any confusion, it is herein declared that the union leave is only thirty (30) days as granted by the Secretary of Labor and affirmed in the Decision of this Court. The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more has been rejected by the Court. Suffice it to say that the employer is allowed to contract out services for six months or more. However, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of employees, and in treating the latter, the employer should see to it that its employees are at least properly informed of its decision or modes of action in order to attain a harmonious labor-management relationship and enlighten the workers concerning their rights.23 Hiring of workers is within the employer's inherent freedom to regulate and is a valid exercise of its management prerogative subject only to special laws and agreements on the matter and the fair standards of justice.24 The management cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what management decides.25 Contracting out of services is an exercise of business judgment or management prerogative.26 Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.27 As mentioned in the January 27, 1999 Decision, the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate limitations, such that the employer must be motivated by good faith and the contracting out should not be resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.29 These are matters that may be categorically determined only when an actual suit on the matter arises. WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the award of wage is increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the monetary advances granted by petitioner to its rank-and-file employees during the pendency of this case assuming such advances had actually been distributed to them. The assailed Decision is AFFIRMED in all other respects.1wphi1.nt SO ORDERED. Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

EN BANC G.R. No. L-28607 May 31, 1971 SHELL OIL WORKERS' UNION, petitioner, vs. SHELL COMPANY OF THE PHILIPPINES, LTD., and THE COURT OF INDUSTRIAL RELATIONS, respondents. J.C. Espinas, B. C. Pineda, J. J. de la Rosa & Associates for petitioner. Siguion Reyna, Montecillo, Belo & Ongsiako for respondent Company. FERNANDO, J.: The insistence on the part of respondent Shell Company of the Philippines to dissolve its security guard section, stationed at its Pandacan Installation notwithstanding its being embraced in, and its continuance as such thus assured by an existing collective bargaining contract, resulted in a strike called by petitioner Shell Oil Workers' Union, hereinafter to be designated as the Union, certified a month later on June 27, 1967 by the President to respondent Court of Industrial Relations. Against its decision declaring the strike illegal primarily on the ground that such dissolution was a valid exercise of a management prerogative, this appeal is taken. With due Recognition that the system of industrial democracy fostered in the regime of unionization and collective bargaining leaves room for the free exercise of management rights, but unable to close our eyes to the violation of a contract still in force implicit in such dissolution thus giving rise to an unfair labor practice, we cannot sustain respondent Court of Industrial Relations. Consequently, the harsh and unwarranted sanction imposed, the dismissal of the security guards and the officers of the Union, cannot stand. Insofar, however, as individual liability is deemed incurred for serious acts of violence, whether committed by a leader or member of the Union, we leave things as adjudged. The deep-rooted differences between the parties that led to the subsequent strike were made clear in the presidential certification. As set forth in the opening paragraph of the decision now on appeal: "Before this Court for resolution is the labor dispute between the petitioner Shell Oil Workers' Union, Union for brevity, and the respondent Shell Company of the Philippines Limited, Company for short, which was certified to this Court on June 27, 1967 by the Office of the President of the Republic of the Philippines pursuant to the provision of Section 10 of Republic Act No. 875. Said dispute ... 'was a result of the transfer by the Company of the eighteen (18) security guards to its other department and the consequent hiring of a private security agency to undertake the work of said security guards.'" 1 The respective contentions of the parties were then taken up. Petitioner "filed the petition on July 7, 1967 alleging, among others, that the eighteen (18) security guards affected are part of the bargaining

unit and covered by the existing collective bargaining contract, and as such, their transfers and eventual dismissals are illegal being done in violation of the existing contract. It, therefore, prayed that said security guards be reinstated with full back wages from the time of their dismissal up to the time of their actual reinstatement." 2 Then came a summary of the stand Of Shell Company: "For hours hereafter, respondent Company filed its Answer [to] the material allegations in the Union's petition and adverted that the issues in this case are: (1) whether or not the Company commits unfair labor practice in contracting out its security service to an independent professional security agency and assigning the 18 guards to other sections of the Company; (2) whether or not the dismissal of the 18 security guards are justified; and (3) whether or not (the strike called by the Union on May 25, 1967 is legal. As special and affirmative defenses, the Company maintained that in contracting out the security service and redeploying the 18 security guards affected, it was merely performing its legitimate prerogative to adopt the most efficient and economical method of operation; that said guards were transferred to other sections with increase, except for four (4) guards, in rates of pay and with transfer bonus; the said action was motivated by business consideration in line with past established practice and made after notice to and discussion with the Union; that the 18 guards concerned were dismiss for wilfully refusing to obey the transfer order; and that the strike staged by the Union on May 25, 1967 is illegal. Primarily, Company prayed, among others, for the dismissal of the Union's petition and the said Union's strike be declared illegal followed by the termination of the employee status of those responsible and who participated in said illegal strike." 3 The move for the dissolution of the security section by reassigning the guards to other positions and contracting out such service to an outside security agency had its origins as far back as 1964. A study made by the Shell Company for the purpose of improving the productivity, organization and efficiency of its Pandacan Installation recommended its dissolution. If an outside agency to perform such service were to be hired, there would be a savings of P96,000.00 annually in addition to further economy consequent on the elimination to overtime an administration expenses. Its implementation was scheduled for 1965. 4 There was then, in July 1966, a joint consultation by the Union and management on the matter. At that stage, it would appear that there was no serious opposition to such a move provided it be done gradually and in close consultation with the Union. There was even an offer if cooperation as long as a scheme for retirement of the security guards affected or their redeployment would be followed. 5 The tentative character of such proposed dissolution was made evident by the fact however that on August 26, 1966, a collective bargaining contract was executed between the Union and the Shell Company effective from the first of the month of that year to December 31, 1969. It contained the usual grievance procedure and no strike clauses. 6 More relevant to the case before this Court, however, was the inclusion of the category of the security guards in such collective bargaining contract. This was stressed in the brief for the petitioner where specific mention is made of the agreement covering rank and file personnel regularly employed by the Company, included in which is the work area covered by the Pandacan Installation. 7 There was likewise specific reference to such positions in the wage schedule for hourly-rated categories appearing in an appendix thereof. 8 Mention was expressly made in another appendix of the regular remuneration as well as premium pay and night compensation. 9 Nonetheless, Shell Company was bent on doing away with the security guard section, to be replaced by an outside security agency. That was communicated to the Union in a panel to panel meeting on May 3, 1967. A counter-offer on the part of the Union to reduce the working days per week of the guards from

six to five was rejected by Shell Company on the ground of its being unusual and impracticable. Two days later, there was a meeting of the Union where a majority of the members made clear that should there be such a replacement of the company guards by a private security agency, there would be a strike. It was noted in the decision that when the strike vote was taken, of 243 members, 226 were for the approval of a motion to that effect. 10 On the afternoon of May 24, 1967, a notice of reassignment effective at 8:00 o'clock the next morning was handed to the guards affected. At 10:00 o'clock that evening, there was a meeting by the Union attended by ten officers and a majority of the members wherein it was agreed viva voce that if there would be an implementation of the circular dissolving the security section to be replaced by guards from an outside agency, the Union would go on strike immediately. 11 The strike was declared at half-past 7:00 o'clock in the morning of May 25, 1967 when security guards from an outside agency were trying to pass the main gate of the Shell Company to their work. With the picket line established, they were unable to enter. Efforts were made by the Conciliation Service of the Department of Labor to settle the matter, but they were unsuccessful. 12 It was not until June 27, 1967, however, that the Presidential certification came. 13 There was a return to work order on July 6, 1967 by respondent Court, by virtue of which pending the resolution of the case, the Shell Company was not to lockout the employees involved and the employees in turn were not to strike. The decision of respondent Court was rendered on August 5, 1967. It declared that no unfair labor practice was committed by Shell Company in dissolving its security guards from an outside agency, as such a step was well within management prerogative. Hence for it, the strike was illegal, there being no compliance with the statutory requisites before an economic strike could be staged. Respondent Court sought to reinforce such a conclusion by a finding that its purpose was not justifiable and that it was moreover carried out with violence. There was thus a failure on its part to accord due weight to the terms of an existing collective bargaining agreement. Accordingly as was made clear in the opening paragraph of this opinion we view matters differently. The strike cannot be declared illegal, there being a violation of the collective bargaining agreement by Shell Company. Even if it were otherwise, however, this Court cannot lend sanction of its approval to the outright dismissal of all union officers, a move that certainly would have the effect of considerably weakening a labor organization, and thus in effect frustrate the policy of the Industrial Peace Act to encourage unionization. To the extent, however, that the serious acts of violence occurring in the course of the strike could be made the basis for holding responsible a leader or a member of the Union guilty of their commission, what was decided by respondent Court should not be disturbed. 1. It is the contention of Shell Company, sustained by respondent Court, that the dissolution of the security guard section to be replaced by an outside agency is a management prerogative. The Union argues otherwise, relying on the assurance of the continued existence of a security guard section at least during the lifetime of the collective bargaining agreement. The second, third and fourth assignment of errors, while they could have been more felicitously worded, did attack the conclusion reached by respondent Court as contrary to and in violation of the existing contract. It is to be admitted that the stand of Shell Company as to the scope of management prerogative is not devoid of plausibility if it were not bound by what was stipulated. The growth of industrial democracy fostered by the institution of collective bargaining with the workers entitled to be represented by a union of their choice, has no doubt contracted the sphere of what appertains solely to the employer. It would be going too far to assert, however, that a decision on each and every aspect of the productive process must be reached jointly by an agreement between labor and management. Essentially, the freedom to manage the business

remains with management. It still has plenty of elbow room for making its wishes prevail. In much the same way that labor unions may be expected to resist to the utmost what they consider to be an unwelcome intrusion into their exclusive domain, they cannot justly object to management equally being jealous of its prerogatives. More specifically, it cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. it is the opinion of the Court, that while management has the final say on such matter, the labor union is not to be completely left out. What was done by Shell Company in informing the Union as to the step it was intending to take on the proposed dissolution of the security guard section to be replaced by an outside agency is praiseworthy. There should be mutual consultation eventually deference is to be paid to what management decides. Thereby, in the words of Chief Justice Warren, there is likely to be achieved "peaceful accommodation of conflicting interest." 14 In this particular case though, what was stipulated in an existing collective bargaining contract certainly precluded Shell Company from carrying out what otherwise would have been within its prerogative if to do so would be violative thereof. 2. The crucial question thus is whether the then existing collective bargaining contract running for three years from August 1, 1966 to December 31, 1969 constituted a bar to such a decision reached by management? The answer must be in the affirmative. As correctly stressed in the brief for the petitioner, there was specific coverage concerning the security guard section in the collective bargaining contract. It is found not only in the body thereof but in the two appendices concerning the wage schedules as well as the premium pay and the night compensation to which the personnel in such section were entitled. 15 It was thus an assurance of security of tenure, at least, during the lifetime of the agreement. Nor is it a sufficient answer, as set forth in the decision of respondent Court, that while such a section would be abolished, the guards would not be unemployed as they would be transferred to another position with an increase in pay and with a transfer bonus. For what is involved is the integrity of the agreement reached, the terms of which should be binding of both parties. One of them may be released, but only with the consent of the other. The right to object belongs to the latter, and if exercised, must be respected. Such a state of affairs should continue during the existence of the contract. Only thus may there be compliance with and fulfillment of the covenants in a valid subsisting agreement. What renders the stand of Shell Company even more vulnerable is the fact that as set forth in its brief and as found by respondent Court as far back as 1964, it had already been studying the matter of dissolving the security guard section and contracting out such service to an outside agency. Apparently, it had reached a decision to that effect for implementation the next year. In July 1966, there was a joint consultation between it and the Union on the matter. Nonetheless on August 26, 1966, a collective bargaining contract was entered into which, as indicated above, did assure the continued existence of the security guard section. The Shell Company did not have to agree to such a stipulation. Or it could have reserved the right to effect a dissolution and reassign the guards. It did not do so. Instead, when it decided to take such a step resulting in the strike, it would rely primarily on provisions in the collective bargaining contract couched in general terms, merely declaratory of certain management prerogatives. Considering the circumstances of record, there can be no justification then for Shell Company's insistence on pushing through its project of such dissolution without thereby incurring a violation of the collective bargaining agreement.

3. The Shell Company, in failing to manifest fealty to what was stipulated in an existing collective bargaining contract, was thus guilty of an unfair labor practice. Such a doctrine first found expression in Republic Savings Bank v. Court of Industrial Relations, 16 the opinion of the Court being penned by Justice Castro. There was a reiteration of such a view in Security Bank Employees Union v. Security Bank and Trust Company. 17 Thus: "It being expressly provided in the industrial Peace Act that [an] unfair labor practice is committed by a labor union or its agent by its refusal 'to bargain collectively with the employer' and this Court having decided in the Republic Savings Bank case that collective bargaining does not end with the execution of an agreement, being a continuous process, the duty to bargain necessarily imposing on the parties the obligation to live up to the terms of such a collective bargaining agreement if entered into, it is undeniable that non-compliance therewith constitutes an unfair labor practice." 18 4. Accordingly, the unfair labor practice strike called by the Union did have the impress of validity. Rightly labor is justified in making use of such a weapon in its arsenal to counteract what is clearly outlawed by the Industrial Peace Act. That would be one way to assure that the objectives of unionization and collective bargaining would not be thwarted. It could, of course, file an unfair labor practice case before the Court of Industrial Relations. It is not precluded, however, from relying on its own resources to frustrate such an effort on the part of employer. So we have consistently held and for the soundest of reasons. 19 There is this categorial pronouncement from the present Chief Justice: "Again, the legality of the strike follows as a corollary to the finding of fact, made in the decision appealed from which is supported by substantial evidence to the effect that the strike had triggered by the Company's failure to abide by the terms and conditions of its collective bargaining agreement with the Union, by the discrimination, resorted to by the company, with regard to hire and tenure of employment, and the dismissal of employees due to union activities, as well as the refusal of the company to bargain collectively in good faith." 20 As a matter of fact, this Court has gone even further. It is not even required that there be in fact an unfair labor practice committed by the employer. It suffices, if such a belief in good faith is entertained by labor, as the inducing factor for staging a strike. So it was clearly stated by the present Chief Justice while still an Associate Justice of this Court: "As a consequence, we hold that the strike in question had been called to offset what petitioners were warranted in believing in good faith to be unfair labor practices on the part of Management, that petitioners were not bound, therefore, to wait for the expiration of thirty (30) days from notice of strike before staging the same, that said strike was not, accordingly, illegal and that the strikers had not thereby lost their status as employees of respondents herein." 21 5. It would thus appear that the decision now on appeal did not reflect sufficient awareness of authoritative pronouncements coming from this Court. What is worse, certain portions thereof yield the impression that an attitude decidedly unsympathetic to labors resort to strike is evident. Such should not be the case. The right to self-organization so sedulously guarded by the Industrial Peace Act explicitly includes the right "to engage in concerted activities for the purpose of collective bargaining and to the mutual aid or protection." 22 From and after June 17, 1953 then, there cannot be the least doubt that a strike as form of concerted activity has the stamp of legitimacy. As a matter of law, even under the regime of compulsary arbitration under the Court of Industrial Relations Act, 23 a strike was by no means a forbidden weapon. Such is the thought embodied in the opinion of Justice Laurel in Rex

Taxicab Company v. Court of Industrial Relations. 24 Thus: "In other words, the employee, tenant or laborer is inhibited from striking or walking out of his employment only when so enjoined by the Court of Industrial Relations and after a dispute has been submitted thereto and pending award or decision by the court of such dispute. It follows that, as in the present case, the employees or laborers may strike before being ordered not to do so and before an industrial dispute is submitted to the Court of Industrial Relations, subject to the power of the latter, after hearing when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or settled, to order them to return, with the consequence that if the strikers fail to return to work, when so ordered, the court may authorize the employer to accept other employees or laborers." 25 Former Chief Justice Paras, in a case not too long before enactment of the Industrial Peace Act, had occasion to repeat such a view. Thus: "As a matter of fact, a strike may not be staged only when, during the pendency of an industrial dispute, the Court of industrial Relations has issued the proper injunction against the laborers (section 19, Commonwealth Act No. 103, as amended). Capital need not, however, be apprehensive about the recurrence of strikes in view of the system of compulsory arbitration by the Court of Industrial Relations." 26 A strike then, in the apt phrase of Justice J.B.L. Reyes, is "an institutionalized factor of democratic growth." 27 This is to foster industrial democracy. Implicit in such a concept is the recognization that concerning the ends which labor considers worth while, its wishes are ordinarily entitled to respect. Necessarily so, the choice as to when such an objective may be attained by striking likewise belongs to it. There is the rejection of the concept that an outside authority, even if governmental, should make the decisions for it as to ends which are desirable and how they may be achieved. The assumption is that labor can be trusted to determine for itself when the right to strike may be availed of in order to attain a successful fruition in their disputes with management. It is true that there is a requirement, in the Act that before the employees may do so, they must file with the Conciliation Service of the Department of Labor a notice of their intention to strike. 28 Such a requisite however, as has been repeatedly declared by this Court, does not have to be complied with in case of unfair labor practice strike, which certainly is entitled to greater judicial protection if the Industrial Peace Act is to be rendered meaningful. What has been said thus far would demonstrate the unwarranted deviation of the decision now on appeal from what is indicated by the law and authoritative decisions. 6. Respondent Court was likewise impelled to consider the strike illegal because of the violence that attended it. What is clearly within the law is the concerted activity of cessation of work in order that a union's economic demands may be granted or that an employer cease and desist from an unfair labor practice. That the law recognizes as a right. There is though a disapproval of the utilization of force to attain such an objective. For implicit in the very concept of a legal order is the maintenance of peaceful ways. A strike otherwise valid, if violent in character may be placed beyond the pale. Care is to be taken, however, especially where an unfair labor practice is involved, to avoid stamping it with illegality just because it is tainted by such acts. To avoid rendering illusory the recognition of the right to strike, responsibility in such a case should be individual and not collective. A different conclusion would be called for, of course, if the existence of force while the strike lasts is pervasive and widespread, consistently and deliberately resorted to as a matter of policy. It could be reasonably concluded then that even if justified as to ends it becomes illegal because of the means employed. Respondent Court must have unduly impressed by the evidence submitted by the Shell Company to the effect that the strike was marred by acts of force, intimidation and violence on the evening of June 14

and twice in the mornings of June 15 and 16, 1967 in Manila. Attention was likewise called to the fact that even on the following day, with police officials stationed at the strike-bound area, molotov bombs did explode and the streets were obstructed with wooden planks containing protruding nails. Moreover, in the branches of the Shell Company in Iloilo City as well as in Bacolod, on dates unspecified, physical injuries appeared to have been inflicted on management personnel. Respondent Court in the appealed decision did penalize with loss of employment the ten individuals responsible for such acts. Nor is it to be lost sight of that before the certification on June 27, 1967, one month had elapsed during which the Union was on strike. Except on those few days specified then, the Shell Company could not allege that the strike was conducted in a manner other than peaceful. Under the circumstances, it would be going too far to consider that it thereby became illegal. This is not by any means to condone the utilization of force by labor to attain its objectives. It is only to show awareness that is labor conflicts, the tension that fills the air as well as the feeling of frustration and bitterness could break out in sporadic acts of violence. If there be in this case a weighing of interests in the balance, the ban the law imposes on unfair labor practices by management that could provoke a strike and its requirement that it be conducted peaceably, it would be, to repeat, unjustified, considering all the facts disclosed, to stamp the strike with illegality. It is enough that individual liability be incurred by those guilty of such acts of violence that call for loss of employee status. Such an approach is reflected in our recent decisions. As was realistically observed by the present Chief Justice, it is usually attended by "the excitement, the heat and the passion of the direct participants in the labor dispute, at the peak thereof ...." 29 Barely four months ago, in Insular Life Assurance Co., Ltd. Employees Association v. Insular life Assurance Co., Ltd., 30 there is the recognition by this Court, speaking through Justice Castro, of picketing as such being "inherently explosive." 31 It is thus clear that not every form of violence suffices to affix the seal of illegality on a strike or to cause the loss of employment by the guilty party. 7. In the light of the foregoing, there being a valid unfair labor practice strike, the loss of employment decreed by respondent Court on all the Union officers cannot stand. The premise on which such penalty was decreed was the illegality of the strike. We rule differently. Hence, its imposition is unwarranted. It is to be made clear, however, that because of the commission of specific serious acts of violence, the Union's President, Gregorio Bacsa, as well as its Assistant Auditor, Conrado Pea, did incur such a penalty. 32 On this point, it may be observed further that even if there was a mistake in good faith by the Union that an unfair labor practice was committed by the Shell Company when such was not the case, still the wholesale termination of employee status of all the officers of the Union, decreed by respondent Court, hardly commends itself for approval. Such a drastic blow to a labor organization, leaving it leaderless, has serious repercussions. The immediate effect is to weaken the Union. New leaders may of course emerge. It would not be unlikely, under the circumstances, that they would be less than vigorous in the prosecution of labor's claims. They may be prove to fall victims to counsels of timidity and apprehension. At the forefront of their consciousness must be an awareness that a mistaken move could well mean their discharge from employment. That would be to render the right to self-organization illusory. The plain and unqualified constitutional command of protection to labor should not be lost sight of. 33 The State is thus under obligation to lend its aid and its succor to the efforts of its labor elements to improve their economic condition. It is now generally accepted that unionization is a means to such

an end. It should be encouraged. Thereby, labor's strength, what there is of it, becomes solidified. It can bargain as a collectivity. Management then will not always have the upper hand nor be in a position to ignore its just demands. That, at any rate, is the policy behind the Industrial Peace Act. The judiciary and administrative agencies in consrtruing it must ever be conscious of its implications. Only thus may there be fidelity to what is ordained by the fundamental law. For if it were otherwise, instead of protection, there would be neglect or disregard. That is ito negate the fundamental principle that the Constitution is the supreme law. WHEREFORE, the decision of respondent Court of Industrial Relations of August 5, 1967 is reversed, the finding of illegality of the strike declared by the Shell Oil Workers' Union on May 25, 1967 not being in accordance with law. Accordingly, the dismissal by the Shell Company on May 27, 1967 of the eighteen security guards, 34 with the exception of Ernesto Crisostomo, who was found guilty of committing a serious act of violence is set aside and they are declared reinstated. The continuance of their status such is, however, dependent on whether or not a security guard section is provided for in the collective bargaining contract entered into after the expiration of the contract that expired on December 31, 1969. The loss of employee status of the officers of the Union, 35 decreed by respondent Court in its decision, is likewise set aside, except as to Gregorio Bacsa and Conrado Pena, both of whom did commit serious acts of violence. The termination of the employment status of Nestor Samson, Jose Rey, Romeo Rosales, Antonio Labrador and Sesinando Romero, who committed acts of violence not serious in character, is also set aside, but while allowed to be reinstated, they are not entitled to back pay. Ricardo Pagsibigan and Daniel Barraquel, along with the aforesaid Gregorio Baesa, Conrado Pea and Ernesto Crisostomo, were legally penalized with dismissal because of the serious acts of violence committed by them in the course of the strike. The rest of the employees laid off should be reinstated with back pay to be counted from the date they were separated by virtue of the appealed decision, from which should be deducted whatever earnings may have been received by such employees during such period. The case is hereby remanded to respondent Court for the implementation of this decision. In ascertaining the back wages to which the security guards are entitled, it must likewise be ascertained whether or not the security guard section is continued after December 31, 1969. Without costs. Concepcion, C.J., Zaldivar, Teehankee, Villamor and Makasiar, JJ., concur. Castro, J., took no part.

the said Supplemental Pleading. Being essentially a charge, such Supplemental Pleading cannot even be considered a pleading. A complaint is the first technical pleading in an unfair labor practice suit. (NLRB v. Raymond Pearson, Inc., 243 F 2d 456). In this jurisdiction, the necessity of a prior investigation before the institution of a formal complaint for unfair labor practice is well settled. EN BANC G.R. No. L-28472 April 30, 1968 xxx xxx xxx

CALTEX FILIPINO MANAGERS AND SUPERVISORS ASSOCIATION, petitioner, vs. COURT OF INDUSTRIAL RELATIONS and CALTEX (PHILIPPINES), INC., respondents. Domingo de Lara and Associates for petitioner. Siguion Reyna, Montecillo, Belo and Ongsiako for respondent Caltex (Phil.), Inc. REYES, J.B.L., Actg. C.J.: Caltex Filipino Managers and Supervisors Association (CAFIMSA), which is composed, as its name implies, of Filipino employees occupying managerial and supervisory positions in Caltex (Philippines) Inc., instituted two charges 1 before the Court of Industrial Relations accusing the company and four of its officials with unfair labor practice under Republic Act No. 875, and praying that corresponding complaints against the latter be filed with the same court. After conducting the necessary preliminary investigation 2, the Prosecution Division of the said court accordingly filed on September 10, 1965 a complaint 3 against the company and two of its officials for violation of Section 4(a), subsections 1, 4, and 6 4 of the aforementioned Act. The respondents named in the complaint subsequently filed their answer, denying commission of any unfair labor practice. All the while, however, significant events were transpiring. On April 22, 1965, CAFIMSA declared a strike to which the company countered by filing its Urgent Petition of April 26, 1965 5 praying, among other things, that the said strike be declared illegal for unlawful interference with the jurisdiction and judicial processes of the Industrial Court in the pending certification proceedings 6 previously filed by the company way back on February 22, 1965. The strike lasted up to May 30, 1965 with the execution of a Return to Work Agreement between CAFIMSA and the company. On August 26, 1967, the court, acting on the Urgent Manifestation and Motion of CAFIMSA, issued a resolution granting the latter's request that the evidence to be introduced in Case No. 1484-MC(1) be also considered as evidence in Case No. 4344ULP in order to expedite the proceedings and avoid duplication of work. Thus, the two cases were thereafter tried jointly. Then on November 27, 1967, after the company had rested its case and after CAFIMSA, itself, had presented many witnesses, the latter filed a Motion to admit a Supplemental Pleading thereto attached. To this motion, the company interposed an objection principally on the ground that the matters treated in the Supplemental Pleading are new matters constituting alleged acts of unfair labor practice which happened after the strike on April 22, 1965, and over which the Court of Industrial Relations has no jurisdiction for the reason that there is no preliminary investigation conducted in connection with the said charges, as required by law. Said motion was consequently denied by the court as per its Order of October 28, 1967, which reads in part as follows: A perusal of the Supplemental Pleading sought to be admitted would indicate that it is indeed a charge for unfair labor practice allegedly committed by the company after the strike of April 22, 1965 and after the execution of the "Return to Work Agreement" of May 30, 1965, and which allegedly continues up to the present. It prays for sanction to be imposed upon the company upon a finding of guilt. On the other hand, the issue in the case at bar is whether or not the strike declared by the Caltex Filipino Managers and Supervisors Association on April 22, 1965 is legal. Undoubtedly, the Court has no jurisdiction over the matters alleged in the Supplemental Pleading for the reason that they are new matters foreign to the case at bar which has not been processed in a preliminary investigation conducted for the purpose as required by law, and consequently, it cannot legally impose any sanction prayed for in

Premises considered, the Motion to Admit Supplemental Pleading dated October 27, 1967 should be, as it is hereby, DENIED for lack of merit.... CAFIMSA moved for reconsideration of the afore-quoted Order, substantiating the same with a separate written argument. The court en banc, however, denied 7 the motion. Notice of the denial was received by CAFIMSA's counsel on December 20, 1967. Its motion for reconsideration having been denied, CAFIMSA filed the instant Petition with the Supreme Court on January 17, 1968. 8 It argues that the Industrial Court's technical refusal to admit the Supplemental Pleading in question violates Section 5(b) 9 of Republic Act No. 875 to the prejudice of its rights, CAFIMSA claiming that another preliminary investigation as suggested by the Court of Industrial Relations will be useless ceremony. Aside from being too technical, it argues that the stand taken by the court will, in effect, encourage multiplicity of suits and deprive it of a full, complete and speedy relief because it will be precluded from presenting evidence relative to the new acts complained of and which are necessary to sustain its case against the company. It further claims that the said court thereby acted in excess of its jurisdiction and with grave abuse of discretion are alternatively, that the proceedings before the same are in excess of its jurisdiction and with grave abuse of discretion wherein, in both cases, there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. CAFIMSA thus prays that the instant Petition be given due course under either Rule 43 or Sections 1 and 2 of Rule 65 of the Rules of Court, and that after hearing, judgment be rendered annulling the Industrial Court's Order of October 28, 1967, and another one be issued directing the said court to admit the Supplemental Pleading in question. The Supreme Court, in its Resolution of January 24, 1968, decided to give due course to the instant Petition. On January 27, 1968, Caltex (Philippines) Inc., as one of the respondents in the case at bar, moved to dismiss the instant Petition on the grounds (a) that it was filed out of time; 10 (b) that it was intended to delay the proceedings in Case No. 1484MC(1) pending in the Court of Industrial Relations; and (c) that the basic question raised in the Petition, that is, whether a supplemental pleading charging new acts of unfair labor practice may be admitted by the said court without prior preliminary investigation, has been definitely disposed of by the Supreme Court in the case of National Union of Printing Workers vs. Asia Printing Company. 11 The company's motion to dismiss was followed by a Motion for Reconsideration of the Supreme Court's Resolution of January 24, 1968 giving due course to the Petition. Required to comment on the company's motion to dismiss, CAFIMSA alleged (1) that Rule 65 and not Rule 43 of the Rules of Court controls the Petition; hence, the same was filed on time because Rule 65 prescribes no time limit; (2) that the Petition was filed in good faith and not for purposes of delay; and (3) that the Asia Printing Co. case, supra, does not apply in the case at bar because it does not involve the question of filing an amended and/or supplemental pleading. It re-asserts its argument in its Petition that Republic Act No. 875 provides no procedure for the presentation of a supplemental pleading and, therefore, the applicable provision of the Rules of Court (Rule 10, section 6) 12 should be availed of in accordance with Section 10 of the Rules of the Court of Industrial Relations. After the company filed its Rejoinder refuting CAFIMSA's arguments, the Supreme Court finally resolved to consider the present case as a special civil action of mandamus, and to deny the company's motion to dismiss. Thenceforth, the company seasonably filed its answer as required by the Clerk of Court of the Supreme Court. Reiterating its previous arguments that the Court of Industrial Relations properly denied the Supplemental Pleading in question, and that the filing of the motion to admit the same was intended to delay and has in fact delayed the proceedings in Case No. 1484-MC(1), the company adds (1) that mandamus will not lie in the case at bar considering that the Petition states no cause of action for mandamus, and that the Industrial Court may not be compelled by mandamus to admit a supplemental pleading under Rule 10 of the Rules of Court, granting that the same is applicable, for the admission of the same is discretionary, not ministerial, upon

the court; and (2) that petitioner CAFIMSA has a plain, speedy, and adequate remedy in the ordinary course of law for it can institute the corresponding charge before the Prosecution Division of the respondent court. The poser now confronting the Supreme Court is whether mandamus will issue to compel the Court of Industrial Relations to admit a supplemental pleading which actually charges additional acts of unfair labor practice without conducting another preliminary investigation relative thereto. Under Rule 10 of the Rules of Court, pleadings may be amended (and for that matter, supplemented), to the end that the actual merits of the controversy may speedily be determined in the most expeditious and inexpensive manner by doing away with technicalities. For in the graphic language of the Court. "(l)itigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other.... Lawsuits, unlike duels, are not won by a rapier's thrust." 13 It is, therefore, largely on the basis of this liberal policy of the law that CAFIMSA now seeks admission of its Supplemental Pleading, and because the Court of Industrial Relations, by specific provision of law, 14 is free to act "without regard to technicalities of law or procedure" in trying unfair labor practice cases. As a matter of fact, the Supreme Court has categorically ruled that the "Court of Industrial Relations is not narrowly constrained by technical rules of procedure." 15 But while the Supreme Court is the last one to be swayed by technicalities, it cannot ignore the overriding wisdom of the rule established by the very same provision of law requiring a prior preliminary investigation of a charge for unfair labor practice. The Court of Industrial Relations found, and the Supreme Court has no reason to question it, that the aforementioned Supplemental Pleading is in fact a charge for new acts of unfair labor practice on the part of the respondent company. This being the case, said charge for unfair labor practice has to be sifted first in a preliminary investigation required by law before the Court of Industrial Relations may formally take cognizance of the same. As was clearly expounded by the Supreme Court in the leading case of National Union of Printing Workers, vs. Asia Printing Co., supra: 16 Such investigation is mandatory, because the law uses the word 'must'. Now, whether or not a regular complaint is to be filed by him (investigator) depends upon the result of said investigation. It is when a regular complaint based on the said investigation is filed that the CIR intervenes by requiring the respondent to answer the complaint and then both parties are heard to receive the evidence to be adduced by them. The investigation is really necessary not only for the protection of the respondent but also for the benefit of the CIR itself so that the respondent may not be required to defend itself against frivolous and unfounded charges, and the valuable time of the CIR dissipated and unnecessarily spent in hearing charges without any basis. (Emphasis supplied.) The afore-quoted ratiocination is just as applicable in the case at bar as it is in the cited case. Both cases involve a charge for unfair labor practice. Therefore, if preliminary investigation was deemed indispensable in proceeding with one, there is no reason why the same should not be deemed essential in proceeding with the other. The mere fact that the cited case does not involve a supplemental pleading in no way imports that the doctrine therein enunciated is not applicable in the present case. "Requirements which are of the very essence of the thing to be done, and ignoring of which would practically nullify vital purpose, are regarded as 'mandatory' and imperative." 17 Consequently, it is our considered opinion that to allow petitioner CAFIMSA to submit its Supplemental Pleading would, in effect, amount to a circumvention of this mandatory requirement. It would render nugatory the very purpose of the law in establishing said procedure, which is to avoid harassments and forestall unmeritorious suits. Certainly, it could not have been the intention of Congress to require one thing and then at the same time dispense with it altogether. That would be a selfdefeating legislation. In all cases where the authority of the courts to proceed is conferred by a statute, and when the manner of obtaining jurisdiction is prescribed by statute, the mode of proceeding is mandatory, and must be strictly complied with, or the proceeding will be utterly void." 18 Thus, in one case, 19 a judge of the Court of Industrial Relations trying an unfair labor practice suit remanded the matter to the Prosecution Division of the said court for preliminary investigation, where the record of the case plainly showed that no such investigation had been conducted. For, indeed, even in the proceedings 20 before the

United States National Labor Relations Board after which that of the Court of Industrial Relations was patterned preliminary investigation is a "must". In view of the clear and explicit requirement of law, the Court also opines that the argument against multiplicity of suits would not constitute a legal justification to confer jurisdiction to the Court of Industrial Relations. And, surely, neither is the said Supplemental Pleading admissible on the ground that the acts therein complained of are germane to Case No. 4344-ULP and Case No. 1484-MC(1) pending before the Industrial Court because, as correctly observed by that court, they are acts committed after the strike of April 22, 1965 and the Return to Work Agreement of May 30, 1965, while the acts that gave rise to the afore-mentioned two pending cases were committed prior to the said strike. But in spite of all the foregoing, may the Court of Industrial Relations be compelled by mandamus to admit the Supplemental Pleading in question under Rule 10 of the Rules of Court, assuming that the same is applicable in the case at bar? The Supreme Court does not believe so. For one thing, mandamus will not lie to compel the performance of a discretionary power. 21 And this Court has previously held that the "(a)dmission or non-admission of a supplemental pleading lies in the sound discretion of the court." 22 Its admission is not of right. ( Ibid) And another thing, special civil action for mandamus is also improper if some other equally adequate remedy is still available in the ordinary course of law. 23 Obviously, petitioner CAFIMSA has some other equally adequate remedy, for it can file the necessary charge before the Prosecution Division of the respondent court. If the purpose was to prove these facts alleged as circumstantial evidence of the intent of the Company to interfere with or discriminate against the petitioners, such facts are receivable in evidence without need of a supplemental pleading. WHEREFORE, the writ of mandamus applied for is denied. Costs against the petitioner. Dizon, Makalintal Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

FIRST DIVISION G.R. No. L-69494 May 29, 1987 A.C. RANSOM LABOR UNION-CCLU, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, First Division A.C. RANSOM (PHIIS.) CORPORATION RUBEN HERNANDEZ, MAXIMO C. HERNANDEZ, SR., PORFIRIO R. VALENCIA, LAURA H. CORNEJO, FRANCISCO HERNANDEZ, CELESTINO C. HERNANDEZ and MA. ROSARIO HERNANDEZ, respondents. RESOLUTION

On January 21, 1974, the UNION filed another Motion for Execution alleging that although RANSOM had assumed a posture of suffering from business reverse, its officers and principal stockholders had organized a new corporation, the Rosario Industrial Corporation (thereinafter called ROSARIO), using the same equipment, personnel, business stocks and the same place of business. For its part, RANSOM declared that ROSARIO is a distinct and separate corporation, which was organized long before these instant cases were decided adversely against RANSOM. It appears that sometime in 1969, ROSARIO, a closed corporation, was, in fact, established. It was engaged in the same line of business as RANSOM with the same Hernandez family as the owners, the same officers, the same President, the same counsel and the same address at 555 Quirino Avenue, Paranaque, Rizal. The compound, building, plant, equipment, machinery, laboratory and bodega were the same as those occupied and used by RANSOM. The UNION claims that ROSARIO thrives to this day. Writs of execution were issued successively against RANSOM on June 23, 1976, and February 17, 1977, to no avail. On December 18, 1978, the UNION again filed an ex-parte Motion for Writ of Execution and Garnishment praying that the Writ issue against the Officers/Agents of RANSOM personally and or their estates, as the case may be, considering their success in hiding or shielding the assets of said company. RANSOM countered that the CIR Decision, dated August 19, 1972, could no longer be enforced by mere Motion because more than five (5) years had already lapsed. Acting on the Motion, Labor Arbiter Tito F. Genilo issued, on March 11, 1980, an Order, the pertinent part of which reads: Under the circumstances and pursuant to the decision aforementioned, especially that portion holding the respondent corporation's officers and agents liable, the following officers of the respondent corporation as appears in the record-are hereby deemed included parties respondents in their official capacity: a) Ruben Hernandez (President, per his testimony on August 21, 1974); b) Maximo C. Hernandez, Jr. (Director); c) Porfirio N. Valencia (Director); d) Laura H. Cornejo (Director); e) Francisco Hernandez (Chairman of the Board); f) Celestino C. Hernandez (Director); and g) Ma. Rosario Hernandez (Director). Consequently, let a writ of execution be issued for P 164,984.00 against respondent corporation and its officers/agents enumerated above. SO ORDERED. (Emphasis supplied) 4

MELENCIO-HERRERA, J.: In a joint Decision in two earlier cases rendered by the then Court of Industrial Relations (CIR) on August 19, 1972, it declared in the dispositive portion thereof: IN VIEW OF ALL THE FOREGOING, ... the A.C. Ransom Philippine Corporation is guilty of unfair labor practice of interference and discrimination herein above held and specified; ordering said corporation, its officers and agents to cease and desist from committing the same: finding the strike legal and justified; and to reinstate immediately ... , to their respective positions with backwages from July 25, 1969 until actually reinstated, without loss of seniority rights and other privileges appurtenant to their employment. (Emphasis supplied). 1 This Court affirmed that Decision when it denied the Petition for Review filed by RANSOM on February 26, 1973 in G.R. Nos. L-36226-68. The backwages due the 22 employees having been computed at P 199,276.00 by the (CIR) Examiner, successive Motions for Execution were filed by the UNION on January 27, 1973 and March 1, 1973, all of which RANSOM opposed stressing its "precarious financial position if immediate execution of the backwages would be ordered." Upon the UNION's Motion of April 22, 1973 asking the CIR that RANSOM be ordered to deposit with the Court the backwages due them. RANSOM manifested that it did not have the necessary funds to deposit and asked that the employees' earnings elsewhere during this suspension be deducted. After several hearings, a recomputation was made and the award of P199,276.00 was reduced to P 164,984.00. 2 The records show that, upon application filed by RANSOM on April 2, 1973, it was granted clearance by the Secretary of Labor on June 7, 1973 to cease operation and terminate employment effective May 1, 1973, without prejudice to the right of subject employees to seek redress of grievances under existing laws and decrees. 3 The reasons given by RANSOM for the clearance application were financial difficulties on account of obligations incurred prior to 1966.

It appears that among the persons named in the aforequoted Order, Ma. Rosario Hernandez died in 1971; Francisco Hernandez died in 1977: and Celestino C. Hernandez passed away in 1979. And Maximo Hernandez who was named in the CIR Decision, died in 1966. 5 The NLRC, on appeal, modified the Decision by relieving the officers and agents of liability as follows: As to the liability of the respondent's officers and agents, we agree with the contention of the respondent-appellant that there is nothing in the order dated March 11, 1980 that would justify the holding of the individual officers and agents of respondent in their personal capacity. As a general rule, officers of the corporation are not liable personally for the official acts unless they have exceeded the scope of their authority. In the absence of evidence showing that the officers mentioned in the Order of the Labor Arbiter dated March 11, 1980 have exceeded their authority, the writ of execution can not be enforced against them, especially' so since they were not given a chance to be heard. WHEREFORE, the Order appealed from is hereby affirmed, except as modified above. SO ORDERED. 6 Reconsideration sought by the UNION from the NLRC was denied, hence this special civil action of Certiorari. On June 10, 1986, this Court promulgated its Decision, the dispositive portion of which decrees: WHEREFORE, the questioned Decision of the National Labor Relations Commission is SET ASIDE, and the Order of the Labor Arbiter Tito F. Genilo of March 11, 1980 is reinstated with the modification that personal liability for the backwages due the 22 strikers shall be limited to Ruben Hernandez, who was President of RANSOM in 1974, jointly and severally with other Presidents of the same corporation who had been elected as such after 1972 or up to the time the corporate life was terminated. Both parties have moved for reconsideration. Private respondents point out that they were never impleaded as parties in the Trial Court, and that their personal liabilities were never at issue; that judgment holding Ruben Hernandez personally liable is tantamount to deprivation of property without due process of law; and that he was not an officer of the corporation at the time the unfair labor practices were committed. The UNION on the other hand, in its own Motion for Reconsideration, prays that the veil of corporate fiction be pierced and that the Decision be modified, in that all the individual private respondents and not only the President, should be held jointly and severally liable with RANSOM. On November 4, 1986, it further filed an Urgent Motion for Preliminary Mandatory Injunction "directing private respondents to deposit the amount of P 199,276.00 or to put up a supersedeas bond of the same sum." Incontrovertible is the fact that RANSOM was found guilty by the CIR, in its Decision of August 19, 1972, of unfair labor practice; that its officers and agents were ordered to cease and desist from further committing acts constitutive of the same, and to reinstate immediately the 22 union members to their respective positions with backwages from July 25, 1969 until actually reinstated.

The CIR Decision became final, conclusive, and executory after this Court denied the RANSOM petition for review in 1973. In other words, this Court upheld that portion of the judgment ordering the officers and agents of RANSOM to reinstate the laborers concerned, with backwages. The inclusion of the officers and agents was but proper since a corporation, as an artificial being, can act only through them. It was also pursuant to the CIR Act (CA No. 103 ), 7 the Industrial Peace Act (R.A. 875) 8 the Minimum Wage Law (R.A. 602). 9 Consequently, when, in resolving the UNION's Motion for Writ of Execution and Garnishment in the Order of March 11, 1980, Labor Arbiter Genilo named the seven (17) private respondents herein as the RANSOM officers and agents, who should be held liable ( supra), he merely implemented the already final and executory CIR decision of August 19, 1972. The NLRC, on appeal to it by RANSOM, could not have modified the CIR Decision, as affirmed by this Court, by relieving RANSOM's officers and agents of liability. It is also for that reason that in our Decision of June 10, 1986 we set aside said NLRC Decision and reinstated the Order of Labor Arbiter Genilo, with modification, in that we limited liability for backwages due the 22 UNION members to the President of RANSOM in 1974 jointly and severally with other Presidents of the same corporation who had been elected as such after 1972 or up to the time the corporation life was terminated, since the President should also be deemed included in the term "employer. " The foregoing, however, limits the scope of liability and deviates from the CIR Decision, affirmed by this Court in 1973, holding the officers and agents of RANSOM liable. In other words, the officers and agents listed in the Genilo Order except for those who have since passed away, should, as affirmed by this Court, be held jointly and severally liable for the payment of backwages to the 22 strikers. This finding does not ignore the legal fiction that a corporation has a personality separate and distinct from its stockholders and members, for, as this Court had held "where the incorporators and directors belong to a single family, the corporation and its members can be considered as one in order to avoid its being used as an instrument to commit injustice," 10 or to further an end subversive of justice. 11 In the case of Claparols vs. CIR 12 involving almost similar facts as in this case, it was also held that the shield of corporate fiction should be pierced when it is deliberately and maliciously designed to evade financial obligations to employees. To the same effect was this Court's rulings in still other cases: When the notion of legal entity is used as a means to perpetrate fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, and or confuse legitimate issues the veil which protects the corporation will be lifted (Villa Rey Transit, Inc. vs. Ferrer, 25 SCRA 846 [1968]; Republic vs. Razon, 20 SCRA 234 [1967]; A.D. Santos, Inc. vs. Vasquez, 22 SCRA 1156 [1968]; Telephone Eng'g. & Service Company, Inc. vs. WCC, 104 SCRA 354 [1981]). The alleged bankruptcy of RANSOM furnishes no justification for non-payment of backwages to the employees concerned taking into consideration Article 110 of the Labor Code, which provides: ART. 110. Worker preference in case of bankruptcy. - In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shag be paid in full before other creditors may establish any claim to a share in the assets of the employer.

The term "wages" refers to all remunerations, earnings and other benefits in terms of money accruing to the employees or workers for services rendered. They are to be paid in full before other creditors may establish any claim to a share in the assets of the employer. Section 10. Payment of wages in case of bankruptcy.-Unpaid wages earned by the employees before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be paid in full before other creditors may establish any claim to a share in the assets of the employer. 13 The foregoing provisions are but in consonance with the principles of social justice and protection to labor guaranteed by past and present Constitutions and are not really being given any retroactive effect when applied herein. The Decision of the CIR was rendered on August 19, 1972. Clearance to RANSOM to cease operations and terminate employment granted by the Secretary of Labor was made effective on May 1, 1973. The right of the employees concerned to backwages awarded them, therefore, had already vested at the time and even before clearance was granted. Note should also be taken of the fact that the clearance was without prejudice to the right of subject employees to seek redress of grievances under existing laws and decrees. The worker preference applies even if the employer's properties are encumbered by means of a mortgage contract, as in this case. So that, when machinery and equipment of RANSOM were sold to Revelations Manufacturing Corporation for P 2M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized, even though it is claimed that those proceeds were turned over to the Commercial Bank and Trust Company (Comtrust) in payment of RANSOM obligations, since the workers' preference is over and above the claim of other creditors. The contention, therefore, of the heirs of the late Maximo C. Hernandez, Sr. that since they paid from their own personal funds the balance of the amount owing by RANSOM to Comtrust they are the "preferential creditors" of RANSOM, is clearly without merit. Workers are to be paid in full before other creditors may establish any claim to a share in the assets of the employer. ... even if the employer's properties are encumbered by means of a mortgage contract, still the workers' wages which enjoy first preference in case of bankruptcy or liquidation are duly protected by an automatic first lien over and above all other earlier encumbrances on the said properties. Otherwise, workers' wages may be imperilled by foreclosure of mortgages, and as a consequence, the aforecited provision of the New Labor Code would be rendered meaningless. 14 Aggravating RANSOM's clear evasion of payment of its financial obligations is the organization of a "run-away corporation," ROSARIO, in 1969 at the time the unfair labor practice case was pending before the CIR by the same persons who were the officers and stockholders of RANSOM, engaged in the same line of business as RANSOM, producing the same line of products, occupying the same compound, using the same machineries, buildings, laboratory, bodega and sales and accounts departments used by RANSOM, and which is still in existence. Both corporations were closed corporations owned and managed by members of the same family. Its organization proved to be a convenient instrument to avoid payment of backwages and the reinstatement of the 22 workers. This is another instance where the fiction of separate and distinct corporate entities should be disregarded.

It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in the present case could, and should, be pierced as it was deliberately and maliciously designed to evade its financial obligation to its employees. ... When a notion of legal entity is used to. defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association or persons, or, in the case of two corporations, will merge them into one. 15 The corporation will be treated merely as an aggregation of individuals or, where there are two corporations, they will be merged as one, the one being merely regarded as part of the instrumentality of the other. 16 The UNION's plea, therefore, for the reinstatement of the 22 strikers in ROSARIO should be favorably heard. However, ROSARIO shall have the option to award them separation pay equivalent to one-half month for every year of service actually rendered by the 22 strikers. The plea of the UNION for the restoration of the original computation of P199,276.00 or to grant the 22 Union members three (3) years backwages is rejected. It is the amount of P164,984.00 as backwages, which was the subject of the Writ of Execution issued by the Labor Arbiter pursuant to the CIR Decision of 1972. With the conclusions arrived at, the UNION's Urgent Motion for a Writ of Preliminary Mandatory Injunction directing private respondents to deposit the amount due as backwages in the meantime, need no longer be acted on. A final and executory Decision in favor of the UNION obtained in 1972 and affirmed by this Court in 1973 has remained unsatisfied to this date despite no less than ten (10) Motions for Execution over a period of fourteen (14) years, not to mention the fact that this is the second time that this case is before this Court. The detriment and prejudice caused the employees concerned is subversive of the ends of justice. This protracted litigation must end and labor should now enjoy the just deserts of its legal victory. ACCORDINGLY, private respondents' Motion for Reconsideration is hereby denied with FINALITY; the Motion for Reconsideration filed by petitioner is granted in part; and the dispositive portion of the Decision, dated June 10, 1986, is hereby amended to read as follows: WHEREFORE, the questioned Decision of the National Labor Relations Commission is SET ASIDE, and the Order of Labor Arbiter Tito F. Genilo of March 11, 1980 is reinstated with the modification that Rosario Industrial Corporation and its officers and agents are hereby held jointly and severally liable with the surviving private respondents for the payment of the backwages due the 22 union members. Rosario Industrial Corporation is hereby ordered to reinstate the 22 union members or, if this is not possible, to award them separation pay equivalent at least to one (1) month pay or to one (1) month salary for every year of service actually rendered by them with A.C. Ransom (Phils). Corporation, whichever is higher. This decision is immediately executory.

SO ORDERED. Yap (Chairman), Cruz, Paras * and Gancayco, JJ., concur. Narvasa ** and Sarmiento, *** JJ., took no part. Feliciano, J., is on leave. EN BANC G.R. No. L-21278 December 27, 1966

the premises of the University, resulting in the disruption of classes in the University. Despite further efforts of the officials from the Department of Labor to effect a settlement of the differences between the management of the University and the striking faculty members no satisfactory agreement was arrived at. On March 21, 1963, the President of the Philippines certified to the Court of Industrial Relations the dispute between the management of the University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No. 875. In connection with the dispute between the University and the Faculty Club and certain incidents related to said dispute, various cases were filed with the Court of Industrial Relations hereinafter referred to as CIR. The three cases now before this Court stemmed from those cases that were filed with the CIR. CASE NO. G.R. NO. L-21278 On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR. On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR, until further order from this Court, "to desist and refrain from 1 further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)." On December 4, 1963, this Court ordered the injunction bond increased to P100,000.00; but on January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the bond to P50,000.00. A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30 involved in the Case G.R. No. L-21278, is here necessary. CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty Club. As we have stated, the dispute between the University and the Faculty Club was certified on March 21, 1963 by the President of the Philippines to the CIR. On the strength of the presidential certification, respondent Judge Bautista set the case for hearing on March 23, 1963. During the hearing, the Judge endeavored to reconcile the part and it was agreed upon that the striking faculty members would return to work and the University would readmit them under a status quo arrangement. On that very same day, however, the University, thru counsel filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over the case, because (1) the Industrial Peace Act is not applicable to the University, it being an educational institution, nor to the members of the Faculty Club, they being independent contractors; and (2) the presidential certification is violative of Section 10 of the Industrial Peace Act, as the University is not an industrial establishment and there was no industrial dispute which could be certified to the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification. In the same order, the respondent Judge, believing that the dispute could not be decided promptly, ordered the strikers to return immediately to work and the University to take them back under the last terms and conditions existing before the dispute arose, as per agreement had during the hearing on March 23, 1963; and likewise enjoined the University, pending adjudication of the case, from dismissing any employee or laborer without previous authorization from the CIR. The University filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and at the same time asking that the motion for reconsideration be first heard by the CIR en banc. Without the motion for reconsideration having been acted upon by the CIR en banc, respondent Judge set the case for hearing on the merits for May 8, 1963. The University moved for the cancellation of said hearing upon the ground

FEATI UNIVERSITY, petitioner, vs. HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents. ---------------------------------------G.R. No. L-21462 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant, vs. FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee. ---------------------------------------G.R. No. L-21500 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant, vs. FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee. Rafael Dinglasan for petitioner. Cipriano Cid and Associates for respondents. ZALDIVAR, J.: This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed to file only one brief for the three cases. On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU hereinafter referred to as Faculty Club wrote a letter to Mrs. Victoria L. Araneta, President of petitioner Feati University hereinafter referred to as University informing her of the organization of the Faculty Club into a registered labor union. The Faculty Club is composed of members who are professors and/or instructors of the University. On January 22, 1963, the President of the Faculty Club sent another letter containing twenty-six demands that have connection with the employment of the members of the Faculty Club by the University, and requesting an answer within ten days from receipt thereof. The President of the University answered the two letters, requesting that she be given at least thirty days to study thoroughly the different phases of the demands. Meanwhile counsel for the University, to whom the demands were referred, wrote a letter to the President of the Faculty Club demanding proof of its majority status and designation as a bargaining representative. On February 1, 1963, the President of the Faculty Club again wrote the President of the University rejecting the latter's request for extension of time, and on the same day he filed a notice of strike with the Bureau of Labor alleging as reason therefor the refusal of the University to bargain collectively. The parties were called to conferences at the Conciliation Division of the Bureau of Labor but efforts to conciliate them failed. On February 18, 1963, the members of the Faculty Club declared a strike and established picket lines in

that the court en banc should first hear the motion for reconsideration and resolve the issues raised therein before the case is heard on the merits. This motion for cancellation of the hearing was denied. The respondent Judge, however, cancelled the scheduled hearing when counsel for the University manifested that he would take up before the Supreme Court, by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the issues raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of March 30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278. Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had employed professors and/or instructors to take the places of those professors and/or instructors who had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of court certain parties, alleging that the University refused to accept back to work the returning strikers, in violation of the return-to-work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the petition for contempt, denying the allegations of the Faculty Club and alleging by way of special defense that there was still the motion for reconsideration of the order of March 30, 1963 which had not yet been acted upon by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating that "said replacements are hereby warned and cautioned, for the time being, not to disturb nor in any manner commit any act tending to 2 disrupt the effectivity of the order of March 30,1963, pending the final resolution of the same." On April 8, 1963, there placing professors and/or instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that are sought to be annulled in case G.R. No. L-21278. CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963 before the CIR, praying that it be certified as the sole and exclusive bargaining representative of all the employees of the University. The University filed an opposition to the petition for certification election and at the same time a motion to dismiss said petition, raising the very same issues raised in Case No. 41-IPA, claiming that the petition did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of the individual contracts of the professors, instructors, and teachers, who are members of the Faculty Club, would expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the petition because the Industrial Peace Act is not applicable to the members of the Faculty Club nor to the University. This case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No. 41-IPA) had already been certified by the President to the CIR and the issues raised in Case No. 1183-MC were absorbed by Case No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case No. 1183-MC were separate and distinct from the issues raised in Case No. 41-IPA; that the questions of recognition and majority status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could not exercise its power of compulsory arbitration unless the legal issue regarding the existence of employer-employee relationship was first resolved. The University prayed that the motion of the Faculty Club to withdraw the petition for certification election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding that the reasons stated by the Faculty Club in the motion to withdraw were well taken, on April 6, 1963, issued an order granting the withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in the case, G.R. No. L-21278, now before Us. CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials of the University. The Faculty Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of the University, with indirect contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the order dated March 30, 1963. Based on the complaint thus filed by

the Acting Chief Prosecutor of the CIR, respondent Judge Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the above named officials of the University so that they may be dealt with in accordance with law, and the same time fixed the bond for their release at P500.00 each. This order of April 29, 1963 is also one of the orders sought to be annulled in the case, G.R. No. L-2l278. The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent Judge Jose S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V30. Let it be noted that when the petition for certiorari and prohibition with preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed by the University. On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary injunction, admitting some allegations contained in the petition and denying others, and alleging special defenses which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential certification, so that it had jurisdiction to issue the questioned orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer and to the members of the Faculty Club as employees who are affiliated with a duly registered labor union, so that the Court of Industrial Relations had jurisdiction to take cognizance of Cases Nos. 1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that the petition for certiorari and prohibition with preliminary injunction was prematurely filed because the orders of the CIR sought to be annulled were still the subjects of pending motions for reconsideration before the CIR en banc when said petition for certiorari and prohibition with preliminary injunction was filed before this Court. CASE G.R. NO. L-21462 This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club as a labor union, praying that it be certified as the sole and exclusive bargaining representative of all employees of the University. This petition was opposed by the University, and at the same time it filed a motion to dismiss said petition. But before Judge Baltazar Villanueva could act on the petition for certification election and the motion to dismiss the same, Faculty Club filed a motion to withdraw said petition upon the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41-IPA which was certified by the President of the Philippines. Judge Baltazar Villanueva, by order April 6, 1963, granted the motion to withdraw. The University filed a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition for certiorari and prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963, ordering respondent Judge Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations). On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution denying the motion for reconsideration of the order of April 6, 1963 in Case No. 1183-MC. On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the CIR en banc, dated June 5, 1963, denying the motion for reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the University alleges (1) that the resolution of the Court of Industrial Relations of June 5, 1963 was null and void because it was issued in violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the issues of employer-employee relationship, the alleged status as a labor union, majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA and therefore

the motion to withdraw the petition for certification election should not have been granted upon the ground that the issues in the first case have been absorbed in the second case; and (3) the lower court acted without or in excess of jurisdiction in taking cognizance of the petition for certification election and that the same should have been dismissed instead of having been ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC and the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction. The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari; and specially alleging that the lower court's order granting the withdrawal of the petition for certification election was in accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of the writ of preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction was issued against Judge Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge Baltazar Villanueva who was the trial judge of Case No. 1183-MC. CASE G.R. NO. L-21500 This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to the strike staged by the members of the Faculty Club and the dispute was certified by the President of the Philippines to the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction over the case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification; and in that same order Judge Bautista ordered the strikers to return to work and the University to take them back under the last terms and conditions existing before the dispute arose; and enjoined the University from dismissing any employee or laborer without previous authority from the court. On April 1, 1963, the University filed a motion for reconsideration of the order of March 30, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As we have already stated, this Court in said case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations). On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but actually received and stamped at the Office of the Clerk of the CIR on June 28, 1963, denying the motion for reconsideration of the order dated March 30, 1963 in Case No. 41-IPA. On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but actually received by said petitioner on July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as G.R. No. L21500. In its petition for certiorari the University alleges (1) that the resolution of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the certification made by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective bargaining purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace Act, and consequently it has no right to strike and picket on the ground of petitioner's alleged refusal to bargain collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5) that the return-to-work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that

the order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction. On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on the ground that the petition being filed by way of an appeal from the orders of the Court of Industrial Relations denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed from are interlocutory in nature. This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases are decided on the merits after the hearing. Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three cases on the merits of the issues raised. The University has raised several issues in the present cases, the pivotal one being its claim that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is an educational institution and not an industrial establishment and hence not an "employer" in contemplation of said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are independent contractors and, therefore, not employees within the purview of the said Act. In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos , L-10091, Jan. 29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor Union , PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent thereto, and We find that they do not sustain the contention of the University. It is true that this Court has ruled that certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion College, and other juridical entities, like the Boy Scouts of the Philippines and Manila Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no jurisdiction to take cognizance of charges of unfair labor practice filed against them, but it is nonetheless true that the principal reason of this Court in ruling in those cases that those institutions are excluded from the operation of Republic Act 875 is that those entities are not organized, maintained and operated for profit and do not declare dividends to stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a portion of the decision: It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and managed by a "religious non-stock corporation duly organized and existing under the laws of the Philippines." It was organized not for profit or gain or division of the dividends among its stockholders, but solely for religious and educational purposes. It likewise appears that the Philippine Association of College and University Professors, respondent herein, is a non-stock association composed of professors and teachers in different colleges and universities and that since its organization two years ago, the university has adopted a hostile attitude to its formation and has tried to discriminate, harass and intimidate its members for which reason the association and the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of unfair labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the following grounds:

"(a) That complainants therein being college and/or university professors were not "industrial" laborers or employees, and the Philippine Association of College and University Professors being composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor organization within the meaning of the laws creating the Court of Industrial Relations and defining its powers and functions; "(b) That the University of San Agustin, respondent therein, is not an institution established for the purpose of gain or division of profits, and consequently, it is not an "industrial" enterprise and the members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 5636-5640); "(c) That, as a necessary consequence, alleged controversy between therein complainants and respondent is not an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction, not only on the parties but also over the subject matter of the complaint." The issue now before us is: Since the University of San Agustin is not an institution established for profit or gain, nor an industrial enterprise, but one established exclusively for educational purposes, can it be said that its relation with its professors is one of employer and employee that comes under the jurisdiction of the Court of Industrial Relations? In other words, do the provisions of the Magna Carta on unfair labor practice apply to the relation between petitioner and members of respondent association? The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered the query in the negative in the following wise: "The main issue involved in the present case is whether or not a charitable institution or one organized not for profit but for more elevated purposes, charitable, humanitarian, etc., like the Boy Scouts of the Philippines, is included in the definition of "employer" contained in Republic Act 875, and whether the employees of said institution fall under the definition of "employee" also contained in the same Republic Act. If they are included, then any act which may be considered unfair labor practice, within the meaning of said Republic Act, would come under the jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act, particularly, its definitions of employer and employee, then the Industrial Court would have no jurisdiction at all. xxx xxx xxx

petition filed by respondent Araos. Wherefore, the appealed decision and resolution of the CIR are hereby set aside, with costs against respondent." There being a close analogy between the relation and facts involved in the two cases, we cannot but conclude that the Court of Industrial Relations has no jurisdiction to entertain the complaint for unfair labor practice lodged by respondent association against petitioner and, therefore, we hereby set aside the order and resolution subject to the present petition, with costs against respondent association. The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et al., G.R. No. L13748, October 30, 1959, where this Court ruled that: In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry organized for profit but an institution of learning devoted exclusively to the education of the youth. The Court of First Instance of Manila in its decision in Civil Case No. 28870, which has long become final and consequently the settled law in the case, found as established by the evidence adduced by the parties therein (herein petitioner and respondent labor union) that while the University collects fees from its students, all its income is used for the improvement and enlargement of the institution. The University declares no dividend, and the members of the corporation who founded it, as ordained in its articles of incorporation, receive no material compensation for the time and sacrifice they render to the University and its students. The respondent union itself in a case before the Industrial Court (Case No. 314-MC) has averred that "the University of Santo Tomas, like the San Beda College, is an educational institution operated not for profit but for the sole purpose of educating young men." (See Annex "B" to petitioner's motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo Tomas is not a corporation created for profit but an educational institution and therefore not an industrial or business organization. In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court repeated the same ruling when it said: The main issue in this appeal by petitioner is that the industry trial court committed an error in holding that it has jurisdiction to act in this case even if it involves unfair labor practice considering that the La Consolacion College is not a business enterprise but an educational institution not organized for profit. If the claim that petitioner is an educational institution not operated for profit is true, which apparently is the case, because the very court a quo found that it has no stockholder, nor capital . . . then we are of the opinion that the same does not come under the jurisdiction of the Court of Industrial Relations in view of the ruling in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29, 1958. It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La Consolacion College, cited above, all involve charges of unfair labor practice under Republic Act No. 875, and the uniform rulings of this Court are that the Court of Industrial Relations has no jurisdiction over the charges because said Act does not apply to educational institutions that are not operated or maintained for profit and do not declare dividends. On the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this Court upheld the decision of the Court of Industrial Relations finding the Far Eastern University, also an educational institution, guilty of unfair labor practice. Among the findings of fact in said case was that the Far Eastern University made profits from the school year 1952-1953 to 1958-1959. In affirming the decision of the lower court, this Court had thereby ratified the ruling of the Court of Industrial Relations which applied the Industrial Peace Act to educational institutions that are organized, operated and maintained for profit. It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of San Agustin, the University of Sto. Tomas, and La Consolacion College, this Court was not unanimous in the view that the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or non-profit organizations which include educational

"On the basis of the foregoing considerations, there is every reason to believe that our labor legislation from Commonwealth Act No. 103, creating the Court of Industrial Relations, down through the Eight-Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature to apply only to industrial employment and to govern the relations between employers engaged in industry and occupations for purposes of profit and gain, and their industrial employees, but not to organizations and entities which are organized, operated and maintained not for profit or gain, but for elevated and lofty purposes, such as, charity, social service, education and instruction, hospital and medical service, the encouragement and promotion of character, patriotism and kindred virtues in youth of the nation, etc. "In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof regarding labor disputes and unfair labor practice, does not apply to the Boy Scouts of the Philippines, and consequently, the Court of Industrial Relations had no jurisdiction to entertain and decide the action or

institutions not operated for profit. There are members of this Court who hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities the only exception being the Government, including any political subdivision or instrumentality thereof, in so far as governmental functions are concerned. However, in the Far Eastern University case this Court is unanimous in supporting the view that an educational institution that is operated for profit comes within the scope of the Industrial Peace Act. We consider it a settled doctrine of this Court, therefore, that the Industrial Peace Act is applicable to any organization or entity whatever may be its purpose when it was created that is operated for profit or gain. Does the University operate as an educational institution for profit? Does it declare dividends for its stockholders? If it does not, it must be declared beyond the purview of Republic Act No. 875; but if it does, Republic Act No. 875 must apply to it. The 3 University itself admits that it has declared dividends. The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA which order was issued after evidence was heard also found that the University is not for strictly educational purposes and that "It realizes profits and parts of such earning is distributed as dividends to private stockholders or individuals (Exh. A and 4 also 1 to 1-F, 2-x 3-x and 4-x)" Under this circumstance, and in consonance with the rulings in the decisions of this Court, above cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati University. But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it is not an industrial establishment. At most, it says, it is only a lessee of the services of its professors and/or instructors pursuant to a contract of services entered into between them. We find no merit in this claim. Let us clarify who is an "employer" under the Act. Section 2(c) of said Act provides: Sec. 2. Definitions.As used in this Act (c) The term employer include any person acting in the interest of an employer, directly or indirectly, but shall not include any labor organization (otherwise than when acting as an employer) or any one acting in the capacity or agent of such labor organization. It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word "means" which the Act uses in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest. This variation and distinction in terminology and phraseology cannot be presumed to have been the inconsequential product of an oversight; rather, it must have been the result of a deliberate and purposeful act, more so when we consider that as legislative records show, Republic Act No. 875 had been meticulously and painstakingly drafted and deliberated upon. In using the word "includes" and not "means", Congress did not intend to give a complete definition of "employer", but rather that such definition should be complementary to what is commonly understood as employer. Congress intended the term to be understood in a broad meaning because, firstly, the statutory definition includes not only "a principal employer but also a person acting in the interest of the employer"; and, secondly, the Act itself specifically enumerated those who are not included in the term "employer", namely: (1) a labor organization (otherwise than when acting as an employer), (2) anyone acting in the capacity of officer or agent of such labor organization [Sec. 2(c)], and (3) the Government and any political subdivision or instrumentality thereof insofar as the right to strike for the purpose of securing changes or modifications in the terms and conditions of employment is concerned (Section 11). Among these statutory exemptions, educational institutions are not included; hence, they can be included in the term "employer". This Court, however, has ruled that those 5 educational institutions that are not operated for profit are not within the purview of Republic Act No. 875. As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of the term "employer". The term encompasses those that are in ordinary parlance "employers." What is commonly meant by "employer"? The term "employer" has been given several acceptations. The lexical definition is "one who employs; one who uses; one who

engages or keeps in service;" and "to employ" is "to provide work and pay for; to engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's Compensation Act defines employer as including "every person or association of persons, incorporated or not, public or private, and the legal representative of the deceased employer" and "includes the owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or manager of the business carried on in the establishment or place of work but who, for reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that "employer includes any person acting directly or indirectly in the interest of the employer in relation to an employee and shall include the Government and the government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any person, natural or juridical, domestic or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]). This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve unfair labor practices and hence within the purview of Republic Act No. 875, defined the term employer as follows: An employer is one who employs the services of others; one for whom employees work and who pays their wages or salaries (Black Law Dictionary, 4th ed., p. 618). An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c, Rep. Act 875). Under none of the above definitions may the University be excluded, especially so if it is considered that every professor, instructor or teacher in the teaching staff of the University, as per allegation of the University itself, has a contract with the latter for teaching services, albeit for one semester only. The University engaged the services of the professors, provided them work, and paid them compensation or salary for their services. Even if the University may be considered as a lessee of services under a contract between it and the members of its Faculty, still it is included in the term "employer". "Running through the word `employ' is the thought that there has been an agreement on the part of one person to perform a certain service in return for compensation to be paid by an employer. When you ask how a man is employed, or what is his employment, the thought that he is under agreement to perform some service or services for another is predominant and paramount." (Ballentine Law Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557, 560, 122 S.E. Rep. 202). To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is not state that the employers included in the definition of 2 (c) of the Act. This contention can not be sustained. In the first place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition of the term "employer" are only and exclusively "industrial establishments"; on the contrary, as stated above, the term "employer" encompasses all employers except those specifically excluded by the Act. In the second place, even the Act itself does not refer exclusively to industrial establishments and does not confine its application thereto. This is patent inasmuch as several provisions of the Act are applicable to non-industrial workers, such as Sec. 3, which deals with "employees' right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices; Section 8 which nullifies private contracts contravening employee's rights; Section 9 which relates to injunctions in any case involving a labor dispute; Section 11 which prohibits strikes in the government; Section 12 which provides for the exclusive collective bargaining representation for labor organizations; Section 14 which deals with the procedure for collective bargaining; Section 17 which treats of the rights and conditions of membership in labor organizations; Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation service, compilation of collective bargaining contracts, advisory labor-management relations; Section 22 which empowers the Secretary of Labor to

make a study of labor relations; and Section 24 which enumerates the rights of labor organizations. (See Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January 29, 1958.) This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the Industrial Peace Act "refers only to organizations and entities created and operated for profits, engaged in a profitable trade, occupation or industry". It cannot be denied that running a university engages time and attention; that it is an occupation or a business from which the one engaged in it may derive profit or gain. The University is not an industrial establishment in the sense that an industrial establishment is one that is engaged in manufacture or trade where raw materials are changed or fashioned into finished products for use. But for the purposes of the Industrial Peace Act the University is an industrial establishment because it is operated for profit and it employs persons who work to earn a living. The term "industry", for the purposes of the application of our labor laws should be given a broad meaning so as to cover all enterprises which are operated for profit and which engage the services of persons who work to earn a living. The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor conditions in any field of employment where the objective is earning a livelihood on the one side and gaining of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510). The University urges that even if it were an employer, still there would be no employer-employee relationship between it and the striking members of the Faculty Club because the latter are not employees within the purview of Sec. 2(d) of Republic Act No. 875 but are independent contractors. This claim is untenable. Section 2 (d) of Republic Act No. 875 provides: (d) The term "employee" shall include any employee and shall not be limited to the employee of a particular employer unless the act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment. This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include", complementary. It embraces not only those who are usually and ordinarily considered employees, but also those who have ceased as employees as a consequence of a labor dispute. The term "employee", furthermore, is not limited to those of a particular employer. As already stated, this Court in the cases of The Angat River Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as "one who employs the services of others; one for whom employees work and who pays their wages or salaries. "Correlatively, an employee must be one who is engaged in the service of another; who performs services for another; who works for salary or wages. It is admitted by the University that the striking professors and/or instructors are under contract to teach particular courses and that they are paid for their services. They are, therefore, employees of the University. In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites as authority Francisco's Labor Laws, 2nd ed., p. 3, which states: While the term "workers" as used in a particular statute, has been regarded as limited to those performing physical labor, it has been held to embrace stenographers and bookkeepers. Teachers are not included, however. It is evident from the above-quoted authority that "teachers" are not to be included among those who perform "physical labor", but it does not mean that they are not employees. We have checked the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the last case confirms Our view.

That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University case, supra, considered university instructors as employees and declared Republic Act No. 875 applicable to them in their employment relations with their school. The professors and/or instructors of the University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875 includes among employees any individual whose work has ceased as consequence of, or in connection with a current labor dispute. Striking employees maintain their status as employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858). The contention of the University that the professors and/or instructors are independent contractors, because the University does not exercise control over their work, is likewise untenable. This Court takes judicial notice that a university controls the work of the members of its faculty; that a university prescribes the courses or subjects that professors teach, and when and where to teach; that the professors' work is characterized by regularity and continuity for a fixed duration; that professors are compensated for their services by wages and salaries, rather than by profits; that the professors and/or instructors cannot substitute others to do their work without the consent of the university; and that the professors can be laid off if their work is found not satisfactory. All these indicate that the university has control over their work; and professors are, therefore, employees and not independent contractors. There are authorities in support of this view. The principal consideration in determining whether a workman is an employee or an independent contractor is the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576). Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee, and not a contractor, though paid specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in Words and Phrases, loc, cit.) . Employees are those who are compensated for their labor or services by wages rather than by profits. (People vs. Distributors Division, Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and Phrases, loc, cit.) Services of employee or servant, as distinguished from those of a contractor, are usually characterized by regularity and continuity of work for a fixed period or one of indefinite duration, as contrasted with employment to do a single act or a series of isolated acts; by compensation on a fixed salary rather than one regulated by value or amount of work; . . . (Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.) Independent contractors can employ others to work and accomplish contemplated result without consent of contractee, while "employee" cannot substitute another in his place without consent of his employer. (Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p. 576). Moreover, even if university professors are considered independent contractors, still they would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed that Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United States, and this Act did not exclude "independent contractors" from the orbit of "employees". It was in the subsequent legislation the Labor Management Relation Act (Taft-Harley

Act) that "independent contractors" together with agricultural laborers, individuals in domestic service of the home, supervisors, and others were excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331). It having been shown that the members of the Faculty Club are employees, it follows that they have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875) which provides as follows: Sec. 3. Employees' right to self-organization.Employees shall have the right to self-organization and to form, join or assist labor organizations of their own choosing for the purpose of collective bargaining through representatives of their own choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. . . . We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside in the instant case, that the right of employees to self-organization is guaranteed by the Constitution, that said right would exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are engaged in commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching staff of private universities, colleges, and schools in the Philippines, regardless of whether the university, college or school is run for profit or not, are included in the term "employees" as contemplated in Republic Act No. 875 and as such they may organize themselves pursuant to the above-quoted provision of Section 3 of said Act. Certainly, professors, instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of our labor laws and one such law is Republic Act No. 875. The contention of the University in the instant case that the members of the Faculty Club can not unionize and the Faculty Club can not exist as a valid labor organization is, therefore, without merit. The record shows that the Faculty Club is a duly 5a registered labor organization and this fact is admitted by counsel for the University. The other issue raised by the University is the validity of the Presidential certification. The University contends that under Section 10 of Republic Act No. 875 the power of the President of the Philippines to certify is subject to the following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an industry that is vital to the national interest. The University maintains that those conditions do not obtain in the instant case. This contention has also no merit. We have previously stated that the University is an establishment or enterprise that is included in the term "industry" and is covered by the provisions of Republic Act No. 875. Now, was there a labor dispute between the University and the Faculty Club? Republic Act No. 875 defines a labor dispute as follows: The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether the disputants stand in proximate relation of employer and employees. The test of whether a controversy comes within the definition of "labor dispute" depends on whether the controversy involves or concerns "terms, tenure or condition of employment" or "representation." It is admitted by the University, in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the President of the University a letter informing the latter of the organization of the Faculty Club as a labor union, duly registered with the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which was attached a list of demands consisting of 26 items, and asking the President of the University to answer within ten days from date of receipt thereof; that the University questioned the right of the Faculty Club to be the exclusive representative of the majority of the employees and asked proof that the Faculty Club had been designated or selected as exclusive representative by the vote of the majority of said employees; that on February 1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason therefor the refusal of the

University to bargain collectively with the representative of the faculty members; that on February 18, 1963 the members of the Faculty Club went on strike and established picket lines in the premises of the University, thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair labor practice against the University, but which was later dismissed (on April 2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7, 1963 a petition 6 for certification election, Case No. 1183-MC, was filed by the Faculty Club in the CIR. All these admitted facts show that the controversy between the University and the Faculty Club involved terms and conditions of employment, and the question of representation. Hence, there was a labor dispute between the University and the Faculty Club, as contemplated by Republic Act No. 875. It having been shown that the University is an institution operated for profit, that is an employer, and that there is an employer-employee relationship, between the University and the members of the Faculty Club, and it having been shown that a labor dispute existed between the University and the Faculty Club, the contention of the University, that the certification made by the President is not only not authorized by Section 10 of Republic Act 875 but is violative thereof, is groundless. Section 10 of Republic Act No. 875 provides: When in the opinion of the President of the Philippines there exists a labor dispute in an industry indispensable to the national interest and when such labor dispute is certified by the President to the Court of Industrial Relations, said Court may cause to be issued a restraining order forbidding the employees to strike or the employer to lockout the employees, and if no other solution to the dispute is found, the Court may issue an order fixing the terms and conditions of employment. This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act No. 875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it was held: It thus appears that when in the opinion of the President a labor dispute exists in an industry indispensable to national interest and he certifies it to the Court of Industrial Relations the latter acquires jurisdiction to act thereon in the manner provided by law. Thus the court may take either of the following courses: it may issue an order forbidding the employees to strike or the employer to lockout its employees, or, failing in this, it may issue an order fixing the terms and conditions of employment. It has no other alternative. It can not throw the case out in the assumption that the certification was erroneous. xxx xxx xxx

. . . The fact, however, is that because of the strike declared by the members of the minority union which threatens a major industry the President deemed it wise to certify the controversy to the Court of Industrial Relations for adjudication. This is the power that the law gives to the President the propriety of its exercise being a matter that only devolves upon him. The same is not the concern of the industrial court. What matters is that by virtue of the certification made by the President the case was placed under the jurisdiction of said court. (Emphasis supplied) To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the presidential certification, the CIR may exercise its broad powers as provided in Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship may be threshed out before the CIR, and the CIR may issue such order or orders as may be necessary to make effective the exercise of its jurisdiction. The parties involved in the case may appeal to the Supreme Court from the order or orders thus issued by the CIR. And so, in the instant case, when the President took into consideration that the University "has some 18,000 students and employed approximately 500 faculty members", that `the continued disruption in the operation of the University will necessarily

prejudice the thousand of students", and that "the dispute affects the national interest", 7 and certified the dispute to the CIR, it is not for the CIR nor this Court to pass upon the correctness of the reasons of the President in certifying the labor dispute to the CIR. The third issue raised by the University refers to the question of the legality of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963). It alleges that the orders are illegal upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding the employees to strike or forbidding the employer to lockout the employees, as the case may be, before either contingency had become a fait accompli; (3) that the taking in by the University of replacement professors was valid, and the return-to-work order of March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR could not issue said order without having previously determined the legality or illegality of the strike. The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be sustained. When a case is certified by the President to the Court of Industrial Relations, the case thereby comes under the operation of Commonwealth Act No. 103, and the Court may exercise the broad powers and jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing the terms of employment." This clause is broad enough to authorize the Court to order the strikers to return to work and the employer to readmit them. This Court, in the cases of the Philippine Marine Officers Association vs. The Court of Industrial Relations, Compania Maritima, et al .; and Compaia Martima, et al. vs. Philippine Marine Radio Officers Association and CIR, et al ., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared: We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers' Association that upon certification by the President under Section 10 of Republic Act 875, the case comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to the national interest when the President certifies the case to the Court of Industrial Relations. The evident intention of the law is to empower the Court of Industrial Relations to act in such cases, not only in the manner prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted authority to find a solution to an industrial dispute and such solution consists in the ordering of employees to return back to work, it cannot be contended that the Court of Industrial Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its power of conciliation and arbitration if it does not have the power and jurisdiction to carry into effect the solution it has adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can order the return of the workers with or without backpay as a term or condition of employment. The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960. When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR has found under the authority of the presidential certification and conformable thereto cannot be questioned (Radio Operators Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54 O.G. 3218). Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a lockout when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:

There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is limited to the prevention of strikes and lockouts. Even after a strike has been declared where the President believes that public interest demands arbitration and conciliation, the President may certify the ease for that purpose. The practice has been for the Court of Industrial Relations to order the strikers to work, pending the determination of the union demands that impelled the strike . There is nothing in the law to indicate that this practice is abolished." (Emphasis supplied) Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the return-to-work order would be an impairment of its contract with the replacements. As stated by the CIR in its order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would return to work under the status quo arrangement and the University would readmit them, and the return-to-work order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot disregard. The faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost their right to go back to their positions, because the declaration of a strike is not a renunciation of their employment and their employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of replacements was not authorized by the CIR. At most, that was a temporary expedient resorted to by the University, which was subject to the power of the CIR to allow to continue or not. The employment of replacements by the University prior to the issuance of the order of March 30, 1963 did not vest in the replacements a permanent right to the positions they held. Neither could such temporary employment bind the University to retain permanently the replacements. Striking employees maintained their status as employees of the employer (Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of strikers do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.) It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common good and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code). Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the return-towork order without having resolved previously the issue of the legality or illegality of the strike, citing as authority therefor the case of Philippine Can Company v. Court of Industrial Relations , G.R. No. L-3021, July 13, 1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances being very different. The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not certified by the President. In that case the company no longer needed the services of the strikers, nor did it need substitutes for the strikers, because the company was losing, and it was imperative that it lay off such laborers as were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this Court in ruling, in that case, that the legality or illegality of the strike should have been decided first before the issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking professors and instructors because of impending bankruptcy. On the contrary, it was imperative for the University to hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike should be decided first before the issuance of the return-to-work order does not apply to the case at bar. Besides, as We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation of an agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963. The University also maintains that there was no more basis for the claim of the members of the Faculty Club to return to their work, as their individual contracts for teaching had expired on March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for the return-to-work order of the CIR because the contractual relationships having ceased there were

no positions to which the members of the Faculty Club could return to. This contention is not well taken. This argument loses sight of the fact that when the professors and instructors struck on February 18, 1963, they continued to be employees of the University for the purposes of the labor controversy notwithstanding the subsequent termination of their teaching contracts, for Section 2(d) of the Industrial Peace Act includes among employees "any individual whose work has ceased a consequence of, or in connection with, any current labor dispute or of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment." The question raised by the University was resolved in a similar case in the United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read: On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their employment. The company believing it had not committed any unfair labor practice, refused the employees' offer and claimed the right to employ others to take the place of the strikers, as it might see fit. This constituted discrimination in the hiring and tenure of the striking employees. When the employees went out on a strike because of the unfair labor practice of the company, their status as employees for the purpose of any controversy growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217. For the purpose of such controversy they remained employees of the company. The company contended that they could not be their employees in any event since the "contract of their employment expired by its own terms on April 23, 1939." In this we think the company is mistaken for the reason we have just pointed out, that the status of the employees on strike became fixed under Sec. 2 (3) of the Act because of the unfair labor practice of the company which caused the strike. The University, furthermore, claims that the information for indirect contempt filed against the officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest were improper, irregular and illegal because (1) the officers of the University had complied in good faith with the return-to-work order and in those cases that they did not, it was due to circumstance beyond their control; (2) the return-to-work order and the order implementing the same were illegal; and (3) even assuming that the order was legal, the same was not Yet final because there was a motion to reconsider it. Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision of that order is valid and legal. Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and legal. Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the same procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect contempt, among which is "disobedience or resistance to lawful writ, process, order, judgment, or command of a court," and the person guilty thereof can be punished after a written charge has been filed and the accused has been given an opportunity to be heard. The last paragraph of said section provides: But nothing in this section shall be so construed as to prevent the court from issuing process to bring the accused party into court, or from holding him in custody pending such proceedings. The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge Bautista relied when he issued the questioned order of arrest.

The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly violated was within the court's jurisdiction to issue. Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from any award, order or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for special reason the court shall order that execution be stayed. Any award, order or decision that is appealed is necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes and lockouts, may compel compliance or obedience of its award, order or decision even if the award, order or decision is not yet final because it is appealed, and it follows that any disobedience or non-compliance of the award, order or decision would constitute contempt against the Court of Industrial Relations which the court may punish as provided in the Rules of Court. This power of the Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience of an award, order or decision, even if not yet final, is a special one and is exercised only in cases involving strikes and lockouts. And there is reason for this special power of the industrial court because in the exercise of its jurisdiction over cases involving strikes and lockouts the court has to issue orders or make decisions that are necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout, or to effect the prompt creation of a situation that would be most beneficial to the management and the employees, and also to the public even if the solution may be temporary, pending the final determination of the case. Otherwise, if the effectiveness of any order, award, or decision of the industrial court in cases involving strikes and lockouts would be suspended pending appeal then it can happen that the coercive powers of the industrial court in the settlement of the labor disputes in those cases would be rendered useless and nugatory. The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order, award, or decision of the Court of Industrial Relations shall after such order, award or decision has become final, conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are final (meaning one that is not appealed) may be the subject of contempt proceedings. We believe that there is no inconsistency between the abovequoted provision of Section 6 and the provision of Section 14 of Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of Section 14 an order, award or decision of the Court of Industrial Relations in cases involving strikes and lockouts are immediately executory, so that a violation of that order would constitute an indirect contempt of court. We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103 which provides as follows: SEC. 19. Implied condition in every contract of employment.In every contract of employment whether verbal or written, it is an implied condition that when any dispute between the employer and the employee or laborer has been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the provisions of this Act . . . and pending award, or decision by the Court of such dispute . . . the employee or laborer shall not strike or walk out of his employment when so enjoined by the Court after hearing and when public interest so requires, and if he has already done so, that he shall forthwith return to it, upon order of the Court, which shall be issued only after hearing when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work, the Court may authorize the employer to accept other employees or laborers. A condition shall further be implied that while such dispute . . . is pending, the employer shall refrain from accepting other employees or laborers, unless with the express authority of the Court, and shall permit the continuation in the service of his employees or laborers under the last terms and conditions existing before the dispute arose. . . . A violation by the employer or by the employee or laborer of such an order or the implied contractual condition set forth in this section shall constitute contempt of the Court of Industrial Relations and shall

be punished by the Court itself in the same manner with the same penalties as in the case of contempt of a Court of First Instance. . . . We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged, they were simply ordered arrested to be brought before the Judge to be dealt with according to law. Whether they are guilty of the charge or not is yet to be determined in a proper hearing. Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No. L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that order. In other words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue that order, and neither did it abuse its discretion when it issued that order. In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that petition for certification election was because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The University opposed the petition for withdrawal, but at the same time it moved for the dismissal of the petition for certification election. It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee relationship between the University and the Faculty Club, the alleged status of the Faculty Club as a labor union, its majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and, therefore, the motion to withdraw the petition for certification election should not have been granted upon the ground that the issues in the first case were absorbed in the second case. We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by the discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L-21278. After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification election had in a way produced the situation desired by the University. After considering the arguments adduced by the University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR did not commit any error when it granted the withdrawal of the petition for certification election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the questions relating to the labor disputes between the University and the Faculty Club may be threshed out, and decided, in that case. In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion for the reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has jurisdiction to issue that order of March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963. IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction issued in Case G.R. No. L-21278 is

dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati University. It is so ordered. Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur. Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to strike.

On May 10, 1997, Publico returned to NYK as instructed. After waiting for three and half (3) hours, she was finally able to see Stephen Ng. When she inquired why she was barred from reporting for work, Mr. Ng told her she was dismissed due to her refusal to render overtime service. Aggrieved, private respondent filed a complaint for illegal dismissal against petitioner corporation and its manager, petitioner Cathy Ng, docketed as NLRC NCR Case No. 00-06-03925-97. Before the Labor Arbiter, petitioners predictably had a different version of the story. Allegedly, they took the pains to verify why Publico did not report for work on May 7, 1997 and found out that her husband did not allow her to work at night. As night work is a must in their line of business, particularly when there are rush orders, petitioners claimed that given Publicos failure to render overtime work, they were left with no other recourse but to fire her. On March 19, 1998, the Labor Arbiter held Publicos dismissal to be illegal, disposing as follows: SECOND DIVISION G.R. No. 146267 February 17, 2003 WHEREFORE, the respondents are hereby ordered to reinstate the complainant to her former position with full backwages from the date her salary was withheld until she is actually reinstated, which amounted to P50,168.30 x x x. The respondents are, likewise, assessed the sum of P5,016.83 representing 10% of the amount awarded as attorneys fees. The rest of the claims are dismissed for lack of merit. SO ORDERED.3 On appeal, the NLRC, in a resolution4 dated May 17, 2000, affirmed the decision of the Labor Arbiter in toto. In due time, petitioners impugned the NLRC decision by way of a special civil action of certiorari filed before the Court of Appeals, docketed as CA-G.R. SP No. 60542. Petitioners ascribed grave abuse of discretion amounting to lack or excess of jurisdiction to public respondent NLRC for affirming the ruling of the Labor Arbiter. In its resolution of September 15, 2000, the appellate court dismissed the petition outright. The Court of Appeals pointed out that there was non-compliance with Section 1 of Rule 65 of the 1997 Rules of Civil Procedure as the petition was merely accompanied by a certified xerox copy of the assailed NLRC decision, instead of a certified true copy thereof as required by the Rules of Court.5 Furthermore, petitioners failed to attach the other pleadings and documents pertinent and material to their petition, such as the parties position papers, their evidence and the motion for reconsideration in contravention of the said rule.61awphi1.nt Petitioners duly moved for reconsideration, explaining that they had requested for a certified true copy of the NLRCs decision but since the original NLRC decision was printed on onionskin was not legible, the NLRC itself photocopied the resolution and certified it afterwards. As proof of payment of petitioners request for a certified true copy of the NLRC decision, petitioners attached a copy of the official receipts issued by the NLRC, which described the nature of the entry as "CERT. TRUE COPY." 7 Petitioners, likewise, appended in their motion copies of pertinent pleadings and documents not previously attached in their petition. On December 5, 2000, the appellate court denied petitioners motion for reconsideration.8 Hence this petition for review. Before us, petitioners submit the following issues for our resolution: I whether or not the court of appeals should have given due course to the petition for certiorari.

NYK INTERNATIONAL KNITWEAR CORPORATION PHILIPPINES and/or CATHY NG, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and VIRGINIA M. PUBLICO, respondents. DECISION QUISUMBING, J.: In this petition for review, petitioners NYK International Knitwear Corporation Philippines (henceforth NYK, for brevity) and its manager, Cathy Ng, assail the resolution1 dated September 15, 2000 of the Court of Appeals in CA-G.R. SP No. 60542, which dismissed their petition for certiorari for non-compliance with Section 1, Rule 65 of the 1997 Rules of Civil Procedure. Also assailed is the appellate courts resolution2 of December 5, 2000, which denied the motion for reconsideration. The facts, as gleaned from the findings of the Labor Arbiter as affirmed by the National Labor Relations Commission (NLRC), show that: On February 8, 1995, herein petitioner NYK hired respondent Virginia Publico as a sewer. Under the terms and conditions of her employment, Publico was paid on a piece-rate basis, but required to work from 8:00 A.M. to 12:00 midnight. On the average, she earned P185.00 daily. At about 10:00 P.M. of May 7, 1997, Publico requested that she be allowed to leave the work place early, as she was not feeling well due to a bout of influenza. Permission was refused but nonetheless, Publico went home. The following day, Publico called up her employer and notified management that she was still recovering from her ailment. On May 9, 1997, Publico reported for work. To her mortification and surprise, however, the security guard prevented her from entering the NYK premises, allegedly on managements order. She begged to be allowed inside, but the guard remained adamant. It was only when Publico declared that she would just complete the unfinished work she had left on May 7 that the guard let her in. Once inside the factory, Publico requested to see the owner, one Stephen Ng. Her request was declined. She was instead asked to come back the following day.

II whether or not there exists evidence on record to warrant the ruling that complainant was illegally dismissed, and corollary thereto, whether or not there is legal justification to award backwages and order reinstatement. III whether or not there was grave abuse of discretion on the part of the public respondent nlrc so as to justify a reversal of its resolutionS dated may 17, 2000 and june 30, 2000.9 Only two issues need resolution, one having to do with adjective law and the other with substantial law, namely: (1) Did the Court of Appeals commit a reversible error in dismissing CA-G.R. SP No. 60542 on purely technical grounds, i.e., that the attached copy of the NLRC decision is a mere photocopy of the original decision; and (2) Did the Court of Appeals err in refusing to rule on the correctness of the NLRCs findings that private respondent was illegally dismissed? On the first issue, petitioners contend that they have substantially complied with the requirements of Section 1, Rule 65, hence, in the interests of justice and equity, the Court of Appeals should have given due course to their special civil action for certiorari. Private respondent, on the other hand, maintains that petitioners wanton disregard of the Rule warrant the outright dismissal of their petition. She adds that the present petition raises factual issues that the Court cannot pass upon at the first instance.1a\^/phi1.net Section 1 of Rule 65,10 1997 Rules of Civil Procedure, requires that the petition shall be accompanied by a certified true copy of the judgment or order subject thereof, together with copies of all pleadings and documents relevant and pertinent thereto. The precursor of the Revised Rules of Civil Procedure, Administrative Circular No. 3-96, which took effect on June 1, 1996, instructs us what a "certified true copy" is: 1. The "certified true copy" thereof shall be such other copy furnished to a party at his instance or in his behalf, duly authenticated by the authorized officers or representatives of the issuing entity as hereinbefore specified. xxx 3. The certified true copy must further comply with all the regulations therefor of the issuing entity and it is the authenticated original of such certified true copy, and not a mere xerox copy thereof, which shall be utilized as an annex to the petition or other initiatory pleading. (Emphasis supplied.) xxx Applying the preceding guidepost in the present case, the disputed document although stamped as "certified true copy" is not an authenticated original of such certified true copy, but only a xerox copy thereof, in contravention of paragraph 3 of the

above-quoted guidelines. Hence, no error may be ascribed to the Court of Appeals in dismissing the petition for certiorari outright pursuant to paragraph 5 of Administrative Circular No. 3-96, which provides: 5. It shall be the duty and responsibility of the party using the documents required by Paragraph (3) of Circular No. 1-88 to verify and ensure compliance with all the requirements therefor as detailed in the preceding paragraphs. Failure to do so shall result in the rejection of such annexes and the dismissal of the case. Subsequent compliance shall not warrant any reconsideration unless the court is fully satisfied that the non-compliance was not in any way attributable to the party, despite due diligence on his part, and that there are highly justifiable and compelling reasons for the court to make such other disposition as it may deem just and equitable. (Emphasis supplied.) The members of this Court are not unmindful that in exceptional cases and for compelling reasons, we have disregarded similar procedural defects in order to correct a patent injustice made. However, petitioners here have not shown any compelling reason for us to relax the rule. Petitioners are hereby reminded that the right to file a special civil action of certiorari is neither a natural right nor a part of due process. A writ of certiorari is a prerogative writ, never demandable as a matter of right, never issued except in the exercise of judicial discretion.11 Hence, he who seeks a writ of certiorari must apply for it only in the manner and strictly in accordance with the provisions of the law and the Rules. To avoid further delay in resolving the present controversy, we now come to the second issue. Petitioners contend that private respondents refusal to render night work is tantamount to abandonment of duties which constitutes a just ground for termination of service. They aver that the Labor Arbiter gravely erred in awarding backwages to private respondent, as there was no illegal dismissal. Petitioners allege that management did not terminate her services, but in fact asked her to return to work during the preliminary conferences. Hence, it would be the height of injustice to award backwages for work, which was never rendered through private respondents own choice.1awphi1.nt Petitioners add that they cannot be held solidarily liable in this case as there was neither malice nor bad faith. Petitioners arguments fail to persuade us. Petitioners raise factual questions which are improper in a petition for review on certiorari. Findings of facts of the NLRC, particularly in a case where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive upon this Court.12 Hence, petitioners bare allegations of abandonment cannot stand the unswerving conclusion by both quasi-judicial agencies below that private respondent was unlawfully dismissed. We find no reason to deviate from the consistent findings of the Labor Arbiter and the NLRC that there was no basis to find that Virginia abandoned her work. Indeed, factual findings of the NLRC affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in matters within their jurisdictions, when sufficiently supported by evidence on record, are accorded respect if not finality, and are considered binding on this Court.13 As long as their decisions are devoid of any unfairness or arbitrariness in the process of their deduction from the evidence proffered by the parties, all that is left is for the Court to stamp its affirmation and declare its finality. No reversible error may thus be laid at the door of the Court of Appeals when it refused to rule that the NLRC committed a grave abuse of discretion amounting to want or excess of jurisdiction in holding that private respondent was illegally dismissed. Anent petitioners assertion that they cannot be solidarily liable in this case as there was no malice or bad faith on their part has no leg to stand on. What the Court finds apropos is our disquisition in A.C. Ransom Labor Union-CCLU v. NLRC, 14 which held that since a corporation is an artificial person, it must have an officer who can be presumed to be the employer, being the "person acting in the interest of the employer." In other words the corporation, in the technical sense only, is the employer. In a subsequent case, we ordered the corporate officers of the employer corporation to pay jointly and solidarily the private respondents monetary award.15 More recently, a corporation and its president were directed by this Court to jointly and severally reinstate the illegally dismissed employees to their former positions and to pay the monetary awards.16

In this case Cathy Ng, admittedly, is the manager of NYK. Conformably with our ruling in A. C. Ransom, she falls within the meaning of an "employer" as contemplated by the Labor Code,17 who may be held jointly and severally liable for the obligations of the corporation to its dismissed employees. Pursuant to prevailing jurisprudence, Cathy Ng, in her capacity as manager and responsible officer of NYK, cannot be exonerated from her joint and several liability in the payment of monetary award to private respondent. WHEREFORE, the instant petition is DENIED. The assailed resolutions of the Court of Appeals dated September 15, 2000 and December 5, 2000, are hereby AFFIRMED. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Austria-Martinez and Callejo, Sr., JJ., concur.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per week. 1 On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that the same was a countermove to their having formed a labor union and becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3, 1983. During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.

THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990 ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents. J.C. Espinas & Associates for petitioners. Tomas A. Reyes for private respondent.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being given ample time to look for a new job. On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position paper denying the employer-employee relationship between private respondent and petitioners on the theory that private respondent and petitioners were engaged in a joint venture. 3 After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations were conducted, mode of payment of compensation for services rendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4 On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one of employeremployee relationship existed between private respondent and petitioners. From the adverse decision against them, petitioners appealed to the National Labor Relations Commission. On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of the labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners. Hence, the instant petition.

FERNAN, C.J.: The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they were illegally dismissed from their employment. Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is an employeremployee relationship between them and private respondent, petitioners invite attention to the following: that they were directly hired by private respondent through its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various capacities; that private respondent, through its operations manager, supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishing port, which were communicated to the patron/pilot by radio (single side band); that they were not allowed to join other outfits even the other vessels owned by private respondent without the permission of the operations manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and regulations imposed on them by private respondent. Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it added facts not contained in the records when it stated that the pilot-crew members do not receive compensation from the boat-owners except their share in the catch produced by their own efforts; that public respondent ignored the evidence of petitioners that private respondent controlled the fishing operations; that public respondent did not take into account established jurisprudence that the relationship between the fishing boat operators and their crew is one of direct employer and employee. Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a "joint fishing venture" exists between private respondent and petitioners rests on the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground that there is no employer-employee relations between the boatowner and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee relationship between the boat-owner and the pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and crew members contribute the corresponding labor and the parties get specific shares in the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the pilot and crew members shared in the catch. We rule in favor of petitioners. Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that its power be exercised according to justice and equity and substantial merits of the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their job to earn a living to support their families, convince Us to adopt a more liberal attitude in applying to petitioners the 10calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter. Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the pendency of the case understandably have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse decision against them would not reach them within such time frame as would allow them to faithfully abide by the 10calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer provide equitable justification to conclude that there is substantial compliance with the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail. We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that are generally considered are the following (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 with respect to the means and methods by which the work is to be accomplished. 8 The employment relation arises from contract of hire, express or implied. 9 In the absence of hiring, no actual employer-employee relation could exist. From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. The test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 11 The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing venture" existed between private respondent and petitioners is not applicable in the instant case. There is neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they only share in their own catch produced by their own efforts. The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private respondent. 12 While performing the fishing operations, petitioners received instructions via a single-side band radio from private respondent's operations manager who called the patron/pilot in the morning. They are told to report their activities, their position, and

the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew members. The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for public respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of the changes in the conditions of employment agreed upon by the private respondent and petitioners as discussed earlier. Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under no obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day and be the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were directly hired by private respondent, through its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976. While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for a period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 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. 14 Aside from performing activities usually necessary and desirable in the business of private respondent, it 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. . . . The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in accordance with their own understanding 15 is not supported by recorded evidence. Except that such claim appears as an allegation in

private respondent's position paper, there is nothing in the records showing such a sharing scheme as preferred by private respondent. Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side on the accusation against them unmistakably reveals the disciplinary power exercised by private respondent over them and the corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of petitioners from their employment was characterized by undue haste when less extreme measures consistent with the requirements of due process should have been first exhausted. In that sense, the dismissal of petitioners was tainted with illegality. Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes generally a parity of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It would be inconsistent with the principle of parity of standing between the joint co-venturers as regards the conduct of business, if private respondent would outrightly exclude petitioners from the conduct of the business without first resorting to other measures consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have discussed with an open mind the advantages and disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties. But this was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of private respondent that the non-filing of the criminal complaints against petitioners was for humanitarian reasons will not help its cause either. We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master fisherman locally known as "maestro" in charge of recruiting others to complete the crew members are considered employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew members because of an alleged partnership agreement between him, as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there existed an employer-employee relationship between the boat-owner and the fishermen crew members not only because they worked for and in the interest of the business of the boat-owner but also because they were subject to the control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter. In Philippine Fishing Boat Officers and Engineers Union vs . Court of Industrial Relations, 112 SCRA 159 (1982), we held that the employer-employee relationship between the crew members and the owners of the fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Bidin and Corts, JJ., concur. Feliciano, J., concurs in the result.

De los Reyes was allowed discretion to devise ways and means to fulfill his obligations as agent and would be paid commission fees based on his actual output. It further insists that the nature of this work status as described in the contracts 3 had already been squarely resolved by the Court in the earlier case of Insular Life Assurance Co., Ltd. v. NLRC and Basiao where the complainant therein, Melecio Basiao, was similarly situated as respondent De los Reyes in that he was appointed first as an agent and then promoted as agency manager, and the contracts under which he was appointed contained terms and conditions identical to those of Delos Reyes. Petitioner concludes that since Basiao was declared by the Court to be an independent contractor and not an employee of petitioner, there should be no reason why the status of De los Reyes herein vis-a-vis petitioner should not be similarly determined. We reject the submissions of petitioner and hold that respondent NLRC acted appropriately within the bounds of the law. The records of the case are replete with telltale indicators of an existing employer-employee relationship between the two parties despite written contractual disavowals. These facts are undisputed: on 21 August 1992 petitioner entered into an agency contract with respondent Pantaleon de los 4 Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commissions. The contract was prepared by petitioner in its entirety and De los Reyes merely signed his conformity thereto. It contained the stipulation that no employer-employee relationship shall be created between the parties and that the agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. De los Reyes however was prohibited by petitioner from working for any other life insurance company, and violation of this stipulation was sufficient ground for termination of the contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit to the former all completed applications for insurance within ninety (90) consecutive days, deliver policies, receive and collect initial premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on policy loans. Private respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written communication by petitioner to respondent De los Reyes, the latter was 5 urged to register with the Social Security System as a self-employed individual as provided under PD No. 1636. 6 On 1 March 1993 petitioner and private respondent entered into another contract where the latter was appointed as Acting Unit Manager under its office the Cebu DSO V (157). As such, the duties and responsibilities of De los Reyes included the recruitment, training, organization and development within his designated territory of a sufficient number of qualified, competent and trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new business and in the furtherance of the agency's assigned goals. It was similarly provided in the management contract that the relation of the acting unit manager and/or the agents of his unit to the company shall be that of independent contractor. If the appointment was terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to any unit. As in the previous agency contract, De los Reyes together with his unit force was granted freedom to exercise judgment as to time, place and means of soliciting insurance. Aside from being granted override commissions, the acting unit manager was given production bonus, development allowance and a unit development financing scheme euphemistically termed "financial assistance" consisting of payment to him of a free portion of P300.00 per month and a validate portion of P1,200.00. While the latter amount was deemed as an advance against expected commissions, the former was not and would be freely given to the unit manager by the company only upon fulfillment by him of certain manpower and premium quota requirements. The agents and underwriters recruited and trained by the acting unit manager would be attached to the unit but petitioner reserved the right to determine if such assignment would be made or, for any reason, to reassign them elsewhere. Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the company's conservation program, i.e., preservation and maintenance of existing insurance policies, and to accept moneys duly receipted on agent's

FIRST DIVISION

G.R. No. 119930 March 12, 1998 INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu City), LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS REYES, respondents.

BELLOSILLO, J.: On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII Case No. 03-0309-94 filed by private respondent Pantaleon de los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of salaries and back wages after finding no employer-employee relationship between De los Reyes 1 and petitioner INSULAR LIFE. On appeal by private respondent, the order of dismissal was reversed by the National Labor 2 Relations Commission (NLRC) which ruled that respondent De los Reyes was an employee of petitioner. Petitioner's motion for reconsideration having been denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits. Seeking relief through this special civil action for certiorari with prayer for a restraining order and/or preliminary injunction, petitioner now comes to us praying for annulment of the decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995 denying the motion for reconsideration of the decision. It faults NLRC for acting without jurisdiction and/or with grave abuse of discretion when, contrary to established facts and pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter and held instead that the complaint was properly filed as an employer-employee relationship existed between petitioner and private respondent. Petitioner reprises the stand it assumed below that it never had any employer-employee relationship with private respondent, this being an express agreement between them in the agency contracts, particularly reinforced by the stipulation therein that

receipts provided the same were turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written consent of petitioner. Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993 that his services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and separation pay. Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the absence of employeremployee relationship. It reasoned out that based on the criteria for determining the existence of such relationship or the socalled "four-fold test," i.e., (a) selection and engagement of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of control, De los Reyes was not an employee but an independent contractor. On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed on the ground that the element of control was not sufficiently established since the rules and guidelines set by petitioner in its agency agreement with respondent Delos Reyes were formulated only to achieve the desired result without dictating the means or methods of attaining it. Respondent NLRC however appreciated the evidence from a different perspective. It determined that respondent De los Reyes was under the effective control of petitioner in the critical and most important aspects of his work as Unit Manager. This conclusion was derived from the provisions in the contract which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was to serve exclusively the company, therefore, he was not an independent contractor; (b) he was required to meet certain manpower and production quota; and, (c) petitioner controlled the assignment to and removal of soliciting agents from his unit. The NLRC also took into account other circumstances showing that petitioner exercised employer's prerogatives over De los Reyes, e.g., (a) limiting the work of respondent De los Reyes to selling a life insurance policy known as "Salary Deduction Insurance" only to members of the Philippine National Police, public and private school teachers and other employees of private companies; (b) assigning private respondent to a particular place and table where he worked whenever he was not in the field; (c) paying private respondent during the period of twelve (12) months of his appointment as Acting Unit Manager the amount of P1,500.00 as Unit Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance of his expected commissions; and, (d) promising that upon completion of certain requirements, he would be promoted to Unit Manager with the right of petitioner to revert him to agent status when warranted. Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between petitioner and De los Reyes as contracts of agency. We however hold otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case.. It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the "employee" is an independent contractor when the terms of the agreement clearly show otherwise. For, the employment status of a person is defined and prescribed by law and not by what 7 the parties say it should be. In determining the status of the management contract, the "four-fold test" on employment earlier mentioned has to be applied.

Petitioner contends that De los Reyes was never required to go through the pre-employment procedures and that the probationary employment status was reserved only to employees of petitioner. On this score, it insists that the first requirement of selection and engagement of the employee was not met. A look at the provisions of the contract shows that private respondent was appointed as Acting Unit Manager only upon 8 recommendation of the District Manager. This indicates that private respondent was hired by petitioner because of the favorable endorsement of its duly authorized officer. But, this approbation could only have been based on the performance of De los Reyes as agent under the agency contract so that there can be no other conclusion arrived under this premise than the fact that the agency or underwriter phase of the relationship of De los Reyes with petitioner was nothing more than a trial or probationary period for his eventual appointment as Acting Unit Manager of petitioner. Then, again, the very designation of the appointment of private respondent as "acting" unit manager obviously implies a temporary employment status which may be made permanent only upon compliance with company standards such as those enumerated under Sec. 6 of the management 9 contract. On the matter of payment of wages, petitioner points out that respondent was compensated strictly on commission basis, the amount of which was totally dependent on his total output. But, the manager's contract, speaks differently. Thus 4. Performance Requirements. To maintain your appointment as Acting Unit Manager you must meet the following manpower and production requirements: Quarter Active Calendar Year Production Agents Cumulative FYP Production 1st 2 P 125,000 2nd 3 250,000 3rd 4 375,000 4th 5 500,000 5.4. Unit Development Financing (UDF). As an Acting Unit Manager you shall be given during the first 12 months of your appointment a financial assistance which is composed of two parts: 5.4.1. Free Portion amounting to P300 per month, subject to your meeting prescribed minimum performance requirement on manpower and premium production. The free portion is not payable by you. 5.4.2. Validate Portion amounting to P1,200 per month, also subject to meeting the same prescribed minimum performance requirements on manpower and premium production. The validated portion is an advance against expected compensation during the UDF period and thereafter as may be necessary. The above provisions unquestionably demonstrate that the performance requirement imposed on De los Reyes was applicable quarterly while his entitlement to the free portion (P300) and the validated portion (P1,200) was monthly starting on the first month of the twelve (12) months of the appointment. Thus, it has to be admitted that even before the end of the first quarter and prior to the so-called quarterly performance evaluation, private respondent was already entitled to be paid both the free and validated portions of the UDF every month because his production performance could not be determined until after the lapse of the quarter involved. This indicates quite clearly that the unit manager's quarterly performance had no bearing at all on his entitlement at least to the free portion of the UDF which for all intents and purposes comprised the salary regularly paid to him by petitioner. Thus it cannot be validly claimed that the financial assistance consisting of the free portion of the UDF was

purely dependent on the premium production of the agent. Be that as it may, it is worth considering that the payment of compensation by way of commission does not militate against the conclusion that private respondent was an employee of petitioner. Under Art. 97 of the Labor Code, "wage" shall mean "however designated, capable of being expressed in terms of 10 money, whether fixed or ascertained on a time, task, price or commission basis . . . ." As to the matter involving the power of dismissal and control by the employer, the latter of which is the most important of the test, petitioner asserts that its termination of De los Reyes was but an exercise of its inherent right as principal under the contracts and that the rules and guidelines it set forth in the contract cannot, by any stretch of the imagination, be deemed as an exercise of control over the private respondent as these were merely directives that fixed the desired result without dictating the means or method to be employed in attaining it. The following factual findings of the NLRC 11 however contradict such claims: A perusal of the appointment of complainant as Acting Unit Manager reveals that: 1. Complainant was to "exclusively" serve respondent company. Thus it is provided: . . . 7..7 Other causes of Termination: This appointment may likewise be terminated for any of the following causes: . . . 7..7..2. Your entering the service of the government or another life insurance company; 7..7..3. Your accepting a managerial or supervisory position in any firm doing business in the Philippines without the written consent of the Company; . . . 2. Complainant was required to meet certain manpower and production quotas. 3. Respondent (herein petitioner) controlled the assignment and removal of soliciting agents to and from complainant's unit, thus: . . . 7..2. Assignment of Agents: Agents recruited and trained by you shall be attached to your unit unless for reasons of Company policy, no such assignment should be made. The Company retains the exclusive right to assign new soliciting agents to the unit. It is agreed that the Company may remove or transfer any soliciting agents appointed and assigned to the said unit. . . . It would not be amiss to state that respondent's duty to collect the company's premiums using company receipts under Sec. 7.4 of the management contract is further evidence of petitioner's control over respondent, thus: xxx xxx xxx 7.4. Acceptance and Remittance of Premiums . . . . . the Company hereby authorizes you to accept and to receive sums of money in payment of premiums, loans, deposits on applications, with or without interest, due from policyholders and applicants for insurance, and the like, specially from policyholders of business solicited and sold by the agents attached to your unit provided however, that all such payments shall be duly receipted by you on the corresponding Company's "Agents' Receipt" to be provided you for this purpose and to be covered by such rules and accounting regulations the Company may issue from time to time on the matter. Payments received by you shall be turned over to the Company's designated District or Service Office clerk or directly to the Home Office not later than the next working day from receipt thereof . . . . 12 Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao to the instant case under the doctrine of stare decisis, postulating that both cases involve parties similarly situated and facts which are almost identical. But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent was appointed Agency Manager under an Agency Manager Contract. To implement his end of the agreement, Melecio Basiao organized an agency

office to which he gave the name M. Basiao and Associates. The Agency Manager Contract practically contained the same terms and conditions as the Agency Contract earlier entered into, and the Court observed that, "drawn from the terms of the contract they had entered into, (which) either expressly or by necessary implication, Basiao (was) made the master of his own time and selling methods, left to his own judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the bases of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to and was free to adopt the selling methods he deemed most effective." Upon these premises, Basiao was considered as agent an independent contractor of petitioner INSULAR LIFE. Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency manager. There is no evidence that to implement his obligations under the management contract, De los Reyes had organized an office. Petitioner in fact has admitted that it provided De los Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field. Placed under petitioner's Cebu District Service Office, the unit was given a name by petitioner De los Reyes and Associates and assigned Code No. 11753 and Recruitment No. 109398. Under the managership contract, De los Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was imposed premium production quotas. Of course, the acting unit manager could not underwrite other lines of insurance because his Permanent Certificate of Authority was for life insurance only and for no other. He was proscribed from accepting a managerial or supervisory position in any other office including the government without the written consent of petitioner. De los Reyes could only be promoted to permanent unit manager if he met certain requirements and his promotion was recommended by the petitioner's District Manager and Regional Manager and approved by its Division Manager. As Acting Unit Manager, De los Reyes performed functions beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised administrative functions which were necessary and beneficial to the business of INSULAR LIFE. In Great Pacific Life Insurance Company v . NLRC 13 which is closer in application than Basiao to this present controversy, we found that "the relationships of the Ruiz brothers and Grepalife were those of employer-employee. First, their work at the time of their dismissal as zone supervisor and district manager was necessary and desirable to the usual business of the insurance company. They were entrusted with supervisory, sales and other functions to guard Grepalife's business interests and to bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the company . . . . A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out . . . ." We need elaborate no further. Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner. WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the Decision of the National Labor Relations Commission dated 3 March 1995 and its Order of 6 April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the Labor Arbiter a quo who is directed to hear and dispose of this case with deliberate dispatch in light of the views expressed herein. SO ORDERED. Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.

On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the judgment of the labor arbiter. The labor tribunal declared that petitioners are employees of private respondent, and, as such, their dismissal must be for just cause and after due process. It disposed of the case as follows: WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is hereby SET ASIDE and another one entered: 1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions without loss of seniority and other privileges appertaining thereto; to pay the complainants full backwages and other benefits, less earnings elsewhere, and to reimburse the drivers the amount paid as washing charges; and 2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence. SO ORDERED.4 SECOND DIVISION G.R. No. 119268 February 23, 2000 Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed another motion for reconsideration. This time, public respondent, in its decision5 dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and private respondent have no employer-employee relationship. It held that the relationship of the parties is leasehold which is covered by the Civil Code rather than the Labor Code, and disposed of the case as follows: VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course. Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of jurisdiction. No costs. SO ORDERED.6 Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant petition. In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of discretion in rendering the assailed decision, arguing that: I THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN. II

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.) respondents. QUISUMBING, J.: This special civil action for certiorari seeks to annul the decision of public respondent promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and its resolution2 dated December 13, 1994 which denied petitioners motion for reconsideration. Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in the operation of "Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a 24-hour work schedule under the boundary system. Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their rights and interests. Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were singled out because they were the leaders and active members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a decision3 dated August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
1

THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY. III IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY. 7 The petition is impressed with merit. The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of power.8 In labor cases, this Court has declared in several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of labor tribunal. In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private respondent. Nevertheless, the labor tribunal took cognizance of the letter from private respondent and treated said letter as private respondent's appeal. In a certiorari action before this Court, we ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent as private respondent's appeal in clear violation of the rules on appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC. In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when he failed to resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the NLRC. In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing and deciding an appeal without an appeal bond having been filed as required under Article 223 of the Labor Code. In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule governing position papers. In this case, the parties have already filed their position papers and even agreed to consider the case submitted for decision, yet the labor arbiter still admitted a supplemental position paper and memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein and the documents attached thereto. In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to set aside judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had, without sufficient basis, extended the reglementary period for filing petition for relief from judgment contrary to prevailing rule and case law. In this case before us, private respondent exhausted administrative remedy available to it by seeking reconsideration of public respondent's decision dated April 28, 1994, which public respondent denied. With this motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have committed before resort to courts of justice can be had.14 Thus, when private respondent filed a second motion for reconsideration, public respondent should have forthwith denied it

in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for reconsideration from the same party, thus: Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision with proof of service that a copy of the same has been furnished within the reglementary period the adverse party and provided further, that only one such motion from the same party shall be entertained. [Emphasis supplied] The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of a business or an industry.15 As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a prohibited pleading16 which should have not been entertained at all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of justice",17 especially when its disposition of a legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking cognizance and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in seeking reliefs in labor cases. But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows: On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi drivers purely on the "boundary system". Under this system the driver takes out his unit and pays the owner/operator a fee commonly called "boundary" for the use of the unit. Now, in the determination the existence of employer-employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the following four-fold test: "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control the employees conduct." "Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important that the other requisites may even be disregarded". Under the control test, an employer-employee relationship exists if 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. Otherwise, no such relationship exists. (Ibid.) Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On the matter of control, the drivers, once they are out plying their trade, are free to choose whatever manner they conduct their trade and are beyond the physical control of the owner/operator; they themselves determine the amount of revenue they would want to earn in a day's driving; and, more significantly aside from the fact that they

pay for the gasoline they consume, they likewise shoulder the cost of repairs on damages sustained by the vehicles they are driving. Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is covered by a charter agreement under the Civil Code rather than the Labor Code.18 The foregoing ratiocination goes against prevailing jurisprudence. In a number of cases decided by this Court,19 we ruled that the relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. We have applied by analogy the abovestated doctrine to the relationships between bus owner/operator and bus conductor,20 auto-calesa owner/operator and driver,21 and recently between taxi owners/operators and taxi drivers.22 Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually necessary or desirable in the usual business or trade of their employer. As consistently held by this Court, termination of employment must be effected in accordance with law. The just and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and after affording them notice and hearing prior to termination. In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither were there two (2) written notices sent by private respondent informing each of the petitioners that they had been dismissed from work. These lack of valid cause and failure on the part of private respondent to comply with the twin-notice requirement underscored the illegality surrounding petitioners' dismissal. Under the law, 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.23 It must be emphasized, though, that recent judicial pronouncements24 distinguish between employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus, employees illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was withheld from them up to the time of their actual reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. Considering that petitioners were terminated from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily earnings.

With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play.25 Hence, the drivers are not entitled to reimbursement of washing charges.1wphi1.nt WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private respondent is directed to reinstate petitioners to their positions held at the time of the complained dismissal. Private respondent is likewise ordered to pay petitioners their full backwages, to be computed from the date of dismissal until their actual reinstatement. However, the order of public respondent that petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private respondents. SO ORDERED. Bellosillo, Mendoza and De Leon, Jr., JJ., concur. Buena, on official leave.

the union had asked petitioner to negotiate with respect to said fifteen drivers and helpers who were being excluded from the benefits of their subsisting collective bargaining agreement, but petitioner refused to do so. The union prayed for a desistance order and that petitioner be ordered to bargain collectively in good faith and to grant the drivers and helpers the same benefits and privileges extended to and enjoyed by all its other employees. In answer, petitioner denied the unfair labor practice imputed to it and countered that the fifteen drivers and helpers were not its employees, but separate and independent employee's of its salesmen and propagandists who exercised discretion and control over their selection, employment, compensation, suspension and dismissal. It is admitted that respondent union is sole and exclusive collective bargaining representative for all the employees of petitioner and that collective bargaining agreements had been successively signed between the union and petitioner on March 14, 1962 and on February 18, 1964. Both the union and petitioner exhausted steps 1 to 3 of the grievance machinery provided in the collective bargaining agreement with regard to the union's claim that the benefits thereof should be extended to the fifteen drivers and helpers and the petitioner's contrary stand that they were not its "employees." Hence, as they could not resolve by conferences this dispute, the union invoked the final step in the grievance machinery, after written notice thereof, and elevated the issue of the true status of said drivers and helpers to respondent court through its complaint for unfair labor practice. Respondent court in its decision, affirmed by its resolution en banc of April 11, 1966, categorically held petitioners disclaimer of the employee status of drivers and 17 helpers to be baseless and untenable as follows: "In accordance with the "memorandum of instructions," Exhibit "24," which the respondent corporation issues to the salesman or propagandist, it is really from here that the latter is authorized by the former to engage the services of a driver or helper. So that even when the driver or helper does not apply directly to the respondent corporation for the job but to the salesman or propagandist, nevertheless, the authority of the saleman or propagandist to employ the driver or helper emanates from the respondent corporation. It is, therefore, apparent that in truth and in fact, the respondent corporation is the "employer" of the driver or helper and not the salesman or propagandist who is merely expressly authorized by the former to engage such services. "The salary of the driver or helper also comes from the respondent corporation in the form of 'driver allowance' which is appropriated for the purpose. This allowance is given to the salesman or propagandist who in turn pays the same to the driver or helper for salaries or wages. Of course, we realize that this mode of paying the salaries or wages of the driver or helper indirectly through the salesman or propagandist will save the respondent corporation the burden of record keeping and other similar indirect costs. Nevertheless, it could not be denied that it is the respondent corporation that pays the wages and salaries of the driver or helper." "The duties and obligations of the driver or helper do not come from the salesman or propagandist but are expressly stated by the respondent corporation in the "memorandum of instructions." He does not only accompany the salesman or propagandist in all the trips, but also drives or watches the truck which is the property of the respondent corporation. He assists the salesman in making deliveries, to different stores and in the preparation of inventories. These duties are the dictates of respondent corporation and not of the salesman or propagandist. It is therefore clear that the terms and conditions of employment of the driver or helper are those fixed and determined by the respondent corporation. From all the foregoing consideration we are convinced that the driver and helper is an "employee" of respondent corporation." It therefore rendered the following judgment against petitioner:.

EN BANC G.R. No. L-25984 October 30, 1970 ALHAMBRA INDUSTRIES, INC., petitioner, vs. COURT OF INDUSTRIAL RELATIONS and ALHAMBRA EMPLOYEES ASSOCIATION (FTUP), respondents. Gambao and Hofilea for petitioner. A. E. Pacis for respondents.

TEEHANKEE, J.:. Appeal by certiorari from respondent court's decision in an unfair labor practice case that the fifteen drivers and helpers not recognized by petitioners are in truth and in fact its employees, and not separate and independent employees of its salesmen and propagandists, and are therefore entitled retroactively to all the privileges, rights and benefits provided for all its other regular employees under its collective bargaining agreement with respondent union. The complaint for unfair labor practice1 for violation of section 4 (a) subsections (4) and (6) of the Industrial Peace Act, was filed by the acting prosecutor of respondent court against petitioner, upon the charges of respondent union that fifteen of the union members, employed as drivers and helpers of petitioner, were being discriminated against by petitioner's not affording the the benefits and privileges enjoyed by all the other employees for no justifiable reason other than their union membership; and that

IN CONCLUSION, THEREFORE, we rule and so hold that all the fifteen (15) drivers and helpers whose names are listed in the "Partial Stipulation of Facts" are employees of the respondent Alhambra Industries, Inc., and as such they should be given and/or extended all the privileges, rights and benefits that are given to all other regular employees, including those fringe benefits provided for in the Collective Bargaining Agreement signed and concluded between the complainant union and the respondent corporation, retroactive as of the effectivity of the first agreement of March 14, 1962 up to the present. Petitioner in this appeal, does not dispute the respondent courts basic ruling that the fifteen drivers and helpers are in truth and in fact its employees and that its making use of its salesmen and propagandists, as the ostensible "employers" of the drivers and helpers was in effect but an elaborate artifice to deprive the drivers and helpers of their status as employees of petitioner, entitled to enjoy all the privileges, rights and benefits provided for all other employees under the collective bargaining agreements. The lone error assigned by petitioner in its brief is that respondent court "acted in excess of jurisdiction in entering judgment against petitioner in spite of its finding that the petitioner had not committed any act of unfair labor practice." 2 Petitioner uses as props for this lone assigned error respondent court's statements in the body of its decision that (S)ince the grant of benefits to the drivers will depend on a finding by the Court that they are employees' of the respondent corporation and not on account of their membership with the complainant union or activities therein, then the charge of discrimination against the respondent corporation is without basis in fact and in law. Settled is the rule in this jurisdiction that in order to judge an employer of discrimination in accordance with the Act, it must he due to the union affiliation or activities of the employee concerned" and that "both parties tried their level best to decide the issue before the Court is the last step provided for in their grievance machinery, Step No. 4. ... Since the grant of benefits to the drivers and helpers hinges on the decision of the Court that they are "employees" of the respondent corporation, then the latter could not have been guilty of refusal to bargain in accordance with the Act." Petitioner, invoking section 5(c) of the Industrial Peace Act,3 thus contends that "it is mandatory upon the respondent court to order the dismissal of the complaint, once it finds out that no unfair labor practice has been committed" and it should have "left the parties alone to settle their differences through conciliation meditation and recourse to the ordinary courts." Petitioner's appeal must be dismissed. It is speciously grounded on mere form rather than the realities of the case. In form, respondent court gently treated petitioner's scheme to deprive the fifteen drivers and helpers of their rightful status as employees and did not denounce it as a betrayal of the salutary purpose and objective of the Industrial Peace Act,4 but instead remarked that since the grant of employees' benefits hinged on the court's decision on their status as such employees, petitioner "could not have been guilty of refusal to bargain in accordance with the Act." The reality, however, is that respondent court expressly found that "in truth and in fact, (petitioner) corporation is the "employer" of the driver or helper and not the salesman or propagandist who is merely expressly authorized by the former to engage such services." Petitioner's failure to comply with its duty under the collective bargaining agreement to extend the privileges, rights and benefits thereof to the drivers and helpers as its actual employees clearly amounted to the commission of an unfair labor practice. And consequently respondent court properly ordered in, its judgment that said drivers and helpers "should be given and/or extended all the privileges, rights and benefits that are given to all the other regular employees retroactive as of the effectivity of the first agreement of March 14, 1962 up to the present." In ordering, respondent court but discharging its function under section 5(c) of the Act, supra, to order the cessation of an unfair labor practice and "take such affirmative action as will effectuate the policies of this Act." Failure on petitioner's part to live up in good faith to the terms of its collective bargaining agreement by denying the privileges and benefits thereof to the fifteen drivers and helpers through its device of trying to pass them off as "employees" of its salesmen and propagandists was a serious violation of

petitioner's duty to bargain collectively and constituted unfair labor practice in any language.5 As succinctly stated by Mr. Justice Castro on Republic Savings Bank vs. Court of Industrial Relations, 6 in unfair labor practice cases, "(T)he question is whether the (respondent) committed the act charged in the complaint. If it did, it is of no consequence either as a matter of procedure or of substantive law, what the act is denominated whether as a restraint, interference or coercion, as some members of the Court believe it to be, or as a discriminatory discharge as other members think it is, or as refusal to bargain as some other members view it, or even as a combination of any or all of these." ACCORDINGLY, the judgment appealed from is affirmed. The writ of preliminary injunction heretofore issued on May 17, 1966 is lifted and set aside. With costs against petitioner. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando and Barredo, JJ., concur. Villamor, J., took no part. Makasiar J., is on leave.

In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review for certiorari. Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employer-employee relationship between the parties is contested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification. It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875." The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a nonadversary, fact finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter of their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really contested. Besides, the substantial difference between the work performed by said musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under which the services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar. Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film companies. It does not intend to represent the other employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the employees of said film companies, including those who are not musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say: As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical

EN BANC G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. x---------------------------------------------------------x G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. Nicanor S. Sison for petitioner-appellant. Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations. Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild. CONCEPCION, J.: Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of.

background. Thus, the musical director may compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding compensation of the musicians under him. When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the truck of the film company. The film company provides the studio for the use of the musicians for that particular recording. The musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner time. During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera as director, he supervises the performance of all the action, including the musicians who appear in the scenes so that in the actual performance to be shown on the screen, the musical director's intervention has stopped. And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of the company assist in the operation. Hence, the work of the musicians is an integral part of the entire motion picture since they not only furnish the music but are also called upon to appear in the finished picture. The question to be determined next is what legal relationship exits between the musicians and the company in the light of the foregoing facts. We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for. Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) . In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment.' The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.' To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into common controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times brought into an economic relationship with 'employers', who are

not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.) In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given . By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining. The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.). It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace and the advancement of the general welfare, and the best interests of employers and employees by the settlement of issues respecting terms and conditions of employment through the process of collective bargaining between employers and representatives of their employees. The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to establish the status of the worker, not as an employee. The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio substantially under the direction and control of the company. In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employeremployee relationship exist where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.). Thus, in said similar case of Connor Lumber Company, the Supreme Court said:. 'We find that the independent contractors and persons working under them are employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient authority over the persons working under their immediate supervision to warrant their exclusion from the unit. We shall include in the unit the employees working under the supervision of the independent contractors, but exclude the contractors.' 'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.). The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture

director, the performance of the musicians before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen. Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875. In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film companies." We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the management and the workers contracted in the Maligaya cases were agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case. Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. AlLagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondentsappellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, but employees of said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish their services" as in the cases before us. The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation Commission for further evidence. The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not contested by herein petitionersappellants "the work of the musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who had directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details such are left to the leader's discretion." This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies, not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time. What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the company" not the musical director "supervises the recording of the musicians and tells them what to do in every detail". The motion picture director not the musical director "solely directs and performance of the musicians before the camera". The motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director "directly controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.". It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned control over the means to be used" in reading the desired end is possessed and exercised by the film companies over the musicians in the cases before us. WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered. Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur. Gutierrez David, J., took no part.

this task, he was required by RFC to put up a monthly bond of P200.00 as security deposit to guarantee the performance of his obligation as sales representative. Petitioner contends that he was under the direct control and supervision of Mr. Dante So and Mr. Sadi Lim, plant manager and senior salesman of RFC, respectively. He avers that on 1 July 1991, he was transferred by RFC to Peninsula Manpower Company, Inc. ("PMCI"), an agency which provides RFC with additional contractual workers pursuant to a contract for the supply of manpower services (hereinafter referred to as the "Contract of Service").4 After his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales representative. Subsequently, on 25 November 1991, he was informed by Ms. Susan Chua, personnel manager of RFC, that his services were terminated and he was asked to surrender his ID card. Petitioner was told that his dismissal was due to the expiration of the Contract of Service between RFC and PMCI. Petitioner claims that he was dismissed from employment despite the absence of any notice or investigation. Consequently, on 3 December 1991, petitioner filed a case against RFC before the Labor Arbiter for illegal dismissal and non-payment of 13th month pay.5 Private respondent Regent Food Corporation, on the other hand, maintains that no employer-employee relationship existed between petitioner and itself. It insists that petitioner is actually an employee of PMCI, allegedly an independent contractor, which had a Contract of Service6 with RFC. To prove this fact, RFC presents an Employment Contract7 signed by petitioner on 1 July 1991, wherein PMCI appears as his employer. RFC denies that petitioner was ever employed by it prior to 1 July 1991. It avers that petitioner was issued an ID card so that its clients and customers would recognize him as a duly authorized representative of RFC. With regard to the P200.00 pesos monthly bond posted by petitioner, RFC asserts that it was required in order to guarantee the turnover of his collection since he handled funds of RFC. While RFC admits that it had control and supervision over petitioner, it argues that such was exercised in coordination with PMCI. Finally, RFC contends that the termination of its relationship with petitioner was brought about by the expiration of the Contract of Service between itself and PMCI and not because petitioner was dismissed from employment. On 3 December 1991, when petitioner filed a complaint for illegal dismissal before the Labor Arbiter, PMCI was initially impleaded as one of the respondents. However, petitioner thereafter withdrew his charge against PMCI and pursued his claim solely against RFC. Subsequently, RFC filed a third party complaint against PMCI. After considering both versions of the parties, the Labor Arbiter rendered a decision,8 dated 15 June 1994, in favor of petitioner. The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons: (1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as an agency worker and then subsequently reassigned to RFC as sales representative; (2) RFC had direct control and supervision over petitioner; (3) RFC actually paid for the wages of petitioner although coursed through PMCI; and, (4) Petitioner was terminated per instruction of RFC. Thus, the Labor Arbiter decreed, as follows: ACCORDINGLY, premises considered respondent RFC is hereby declared guilty of illegal dismissal and ordered to immediately reinstate complainant to his former position without loss of seniority rights and other benefits and pay him backwages in the amount of P103,974.00. The claim for 13th month pay is hereby DENIED for lack of merit. This case, insofar as respondent PMCI [is concerned] is DISMISSED, for lack of merit. SO ORDERED.9 RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision,10 dated 21 June 1996, the NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an independent contractor because it has substantial capital and, as such, is the true employer of

FIRST DIVISION G.R. No. 126586 February 2, 2000

ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents. KAPUNAN, J.: This petition for certiorari under Rule 65 seeks to annul and set aside the decision,1 promulgated on 21 June 1996, of the National Labor Relations Commission ("NLRC") which reversed the decision2 of the, Labor Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate Alexander Vinoya to his former position and pay him backwages. Private respondent Regent Food Corporation is a domestic corporation principally engaged in the manufacture and sale of various food products. Private respondent Ricky See, on the other hand, is the president of RFC and is being sued in that capacity. Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his services were terminated on 25 November 1991. The parties presented conflicting versions of facts. Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales representative on 26 May 1990. On the same date, a company identification card3 was issued to him by RFC. Petitioner alleges that he reported daily to the office of RFC, in Pasig City, to take the latter's van for the delivery of its products. According to petitioner, during his employ, he was assigned to various supermarkets and grocery stores where he booked sales orders and collected payments for RFC. For

petitioner. The NLRC, thus, held PMCI liable for the dismissal of petitioner. The dispositive portion of the NLRC decision states: WHEREFORE, premises considered, the appealed decision is modified as follows: 1. Peninsula Manpower Company Inc. is declared as employer of the complainant; 2. Peninsula is ordered to pay complainant his separation pay of P3,354.00 and his proportionate 13th month pay for 1991 in the amount of P2,795.00 or the total amount of P6,149.00. SO ORDERED.11 Separate motions for reconsideration of the NLRC decision were filed by petitioner and PMCI. In a resolution,12 dated 20 August 1996, the NLRC denied both motions. However, it was only petitioner who elevated the case before this Court. In his petition for certiorari, petitioner submits that respondent NLRC committed grave abuse of discretion in reversing the decision of the Labor Arbiter, and asks for the reinstatement of the latter's decision. Principally, this petition presents the following issues: 1. Whether petitioner was an employee of RFC or PMCI. 2. Whether petitioner was lawfully dismissed. The resolution of the first issue initially boils down to a determination of the true status of PMCI, whether it is a labor-only contractor or an independent contractor. In the case at bar, RFC alleges that PMCI is an independent contractor on the sole ground that the latter is a highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles of Incorporation and the Treasurer's Affidavit13 submitted by PMCI to the Securities and Exchange Commission showing that it has an authorized capital stock of One Million Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos (P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI is a duly organized corporation engaged in the business of creating and hiring a pool of temporary personnel and, thereafter, assigning them to its clients from time to time for such duration as said clients may require. RFC further contends that PMCI has a separate office, permit and license and its own organization. Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal.14 In laboronly contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; (b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal.15 On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion

of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.16 A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur: (a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; (b) The contractor or subcontractor has substantial capital or investment; and (c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.17 Previously, in the case of Neri vs. NLRC,18 we held that in order to be considered as a job contractor it is enough that a contractor has substantial capital. In other words, once substantial capital established it is no longer necessary for the contractor to show evidence that it has investment in the form of tools, equipment, machineries, work premises, among others. The rational for this is that Article 106 of the Labor Code does not require that the contractor possess both substantial capital and investment in the form of tools, equipment, machineries, work premises, among others.19 The decision of the Court in Neri, thus, states: Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.20 However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court considered not only the fact that it had substantial capitalization. The Court noted that BCC carried on an independent business and undertook the performance of its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof.21 The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for its principal.22 Thus, the Court ruled that BCC was an independent contractor. The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox Corporation vs. NLRC.23 In the said case, petitioner Fuji Xerox implored the Court to apply the Neri doctrine to its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly capitalized venture registered with the Securities and Exchange Commission, the Department of Labor and Employment, and the Social Security System with assets exceeding P5,000,000.00 possessing at least 29 typewriters, office equipment and service vehicles, and its own pool of employees with 25 clerks assigned to its clients on a temporary basis.24 Despite the evidence presented by Fuji Xerox the Court refused to apply the Neri case and explained: Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment,

machineries and work premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case, the Court had already found that BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.25 Not having shown the above circumstances present in Neri, the Court declared Skillpower, Inc. to be engaged in labor-only contracting and was considered as a mere agent of the employer. From the two aforementioned decisions, it may be inferred that it is not enough to show substantial capitalization or investment in the form of tools, equipment, machineries and work premises, among others, to be considered as an independent contractor. In fact, jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors might be considered such as, but not necessarily confined to, whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.26 Given the above standards and the factual milieu of the case, the Court has to agree with the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting. First of all, PMCI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, among others, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be considered as substantial capitalization. In the case of Neri, which was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which was fully subscribed and paid-for. Moreover, when the Neri case was decided in 1993, the rate of exchange between the dollar and the peso was only P27.30 to $127 while presently it is at P40.390 to $1.28 The Court takes judicial notice of the fact that in 1993, the economic situation in the country was not as adverse as the present, as shown by the devaluation of our peso. With the current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000,00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor. Second, PMCI did not carry on an independent business nor did it undertake the performance of its contract according to its own manner and method, free from the control and supervision of its principal, RFC. The evidence at hand shows that the workers assigned by PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself provides that RFC can require the workers assigned by PMCI to render services even beyond the regular eight hour working day when deemed necessary.29 Furthermore, RFC undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect the actual working hours.30 With regard to petitioner, RFC admitted that it exercised control and supervision over him.31 These are telltale indications that PMCI was not left alone to supervise and control its alleged employees. Consequently, it can be, concluded that PMCI was not an independent contractor since it did not carry a distinct business free from the control and supervision of RFC. Third, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators that an entity is an independent contractor as explained by the Court in the cases of Neri and

Fuji. As stated in the Contract of Service, the sole undertaking of PMCI was to provide RFC with a temporary workforce able to carry out whatever service may be required by it.32 Such venture was complied with by PMCI when the required personnel were actually assigned to RFC. Apart from that, no other particular job, work or service was required from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency for RFC. Since the undertaking of PMCI did not involve the performance of a specific job, but rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor. Lastly, in labor-only contracting, the employees recruited, supplied or placed by the contractor perform activities which are directly related to the main business of its principal. In this case, the work of petitioner as sales representative is directly related to the business of RFC. Being in the business of food manufacturing and sales, it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its sales orders and collecting payments for such. Thus, the work of petitioner as sales representative in RFC can only be categorized as clearly related to, and in the pursuit of the latter's business. Logically, when petitioner was assigned by PMCI to RFC, PMCI acted merely as a labor-only contractor. Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be considered as the employer of petitioner. However, even granting that PMCI is an independent contractor, as RFC adamantly suggests, still, a finding of the same will not save the day for RFC. A perusal of the Contract of Service entered into between RFC and PMCI reveals that petitioner is actually not included in the enumeration of the workers to be assigned to RFC. The following are the workers enumerated in the contract: 1. Merchandiser 2. Promo Girl 3. Factory Worker 4. Driver33 Obviously, the above enumeration does not include the position of petitioner as sales representative. This only shows that petitioner was never intended to be a part of those to be contracted out. However, RFC insists that despite the absence of his position in the enumeration, petitioner is deemed included because this has been agreed upon between itself and PMCI. Such contention deserves scant consideration. Had it really been the intention of both parties to include the position of petitioner they should have clearly indicated the same in the contract. However, the contract is totally silent on this point which can only mean that petitioner was never really intended to be covered by it. Even if we use the "four-fold test" to ascertain whether RFC is the true employer of petitioner that same result would be achieved. In determining the existence of employer-employee relationship the following elements of the "four-fold test" are generally considered, namely: (1) the selection and engagement of the employee or the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the employee.34 Of these four, the "control test" is the most important.35 A careful study of the evidence at hand shows that RFC possesses the earmarks of being the employer of petitioner. With regard to the first element, the power to hire, RFC denies any involvement in the recruitment and selection of petitioner and asserts that petitioner did not present any proof that he was actually hired and employed by RFC.

It should be pointed out that no particular form of proof is required to prove the existence of an employer-employee relationship.36 Any competent and relevant evidence may show the relationship.37 If only documentary evidence would be required to demonstrate that relationship, no scheming employer would ever be brought before bar of justice.38 In the case at bar, petitioner presented the identification card issue to him on 26 May 1990 by RFC as proof that it was the latter who engaged his services. To our mind, the ID card is enough proof that petitioner was previously hired by RFC prior to his transfer as agency worker to PMCI. It must be noted that the Employment Contract between petitioner and PMCI was dated 1 July 1991. On the other hand, the ID card issued by RFC to petitioner was dated 26 May 1990, or more than one year before the Employment Contract was signed by petitioner in favor of PMCI. It makes one wonder why, if petitioner was indeed recruited by PMCI as its own employee on 1 July 1991, how come he had already been issued an ID card by RFC a year earlier? While the Employment Contract indicates the word "renewal," presumably an attempt to show that petitioner had previously signed a similar contract with PMCI, no evidence of a prior contract entered into petitioner and PMCI was ever presented by RFC. In fact, despite the demand made by the counsel of petitioner for production of the contract which purportedly shows that prior to 1 July 1991 petitioner was already connected with PMCI, RFC never made a move to furnish the counsel of petitioner a copy of the alleged original Employment Contract. The only logical conclusion which may be derived from such inaction is that there was no such contract end that the only Employment Contract entered into between PMCI and petitioner was the 1 July 1991 contract and no other. Since, as shown by the ID card, petitioner was already with RFC on 26 May 1990, prior to the time any Employment Contract was agreed upon between PMCI and petitioner, it follows that it was RFC who actually hired and engaged petitioner to be its employee. With respect to the payment of wages, RFC disputes the argument of petitioner that it paid his wages on the ground that petitioner did not submit any evidence to prove that his salary was paid by it, or that he was issued payslip by the company. On the contrary, RFC asserts that the invoices39 presented by it, show that it was PMCI who paid petitioner his wages through its regular monthly billings charged to RFC. The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor Code, do not issue payslips directly to their employees.40 Under the current practice, a third person, usually the purported contractor (service or manpower placement agency), assumes the act of paying the wage.41 For this reason, the lowly worker is unable to show proof that it was directly paid by the true employer. Nevertheless, for the workers, it is enough that they actually receive their pay, oblivious of the need for payslips, unaware of its legal implications.42 Applying this principle to the case at bar, even though the wages were coursed through PMCI, we note that the funds actually came from the pockets of RFC. Thus, in the end, RFC is still the one who paid the wages of petitioner albeit indirectly. As to the third element, the power to dismiss, RFC avers that it was PMCI who terminated the employment of petitioner. The facts on record, however, disprove the allegation of RFC. First of all, the Contract of Service gave RFC the right to terminate the workers assigned to it by PMCI without the latter's approval. Quoted hereunder is the portion of the contract stating the power of RFC to dismiss, to wit: 7. The First party ("RFC") reserves the right to terminate the services of any worker found to be unsatisfactory without the prior approval of the second party ("PMCI").43 In furtherance of the above provision, RFC requested PMCI to terminate petitioner from his employment with the company. In response to the request of RFC, PMCI terminated petitioner from service. As found by the Labor Arbiter, to which we agree, the dismissal of petitioner was indeed made under the instruction of RFC to PMCI.

The fourth and most important requirement in ascertaining the presence of employer-employee relationship is the power of control. The power of control refers to the authority of the employer to control the employee not only with regard to the result of work to be done but also to the means and methods by which the work is to be accomplished.44 It should be borne in mind, that the "control test" calls merely for the existence of the right to control the manner of doing the work, and not necessarily to the actual exercise of the right.45 In the case at bar, we need not belabor ourselves in discussing whether the power of control exists. RFC already admitted that it exercised control and supervision over petitioner.46 RFC, however, raises the defense that the power of control was jointly exercised with PMCI. The Labor Arbiter, on the other hand, found that petitioner was under the direct control and supervision of the personnel of RFC and not PMCI. We are inclined to believe the findings of the Labor Arbiter which is supported not only by the admission of RFC but also by the evidence on record. Besides, to our mind, the admission of RFC that it exercised control and supervision over petitioner, the same being a declaration against interest, is sufficient enough to prove that the power of control truly exists. We, therefore, hold that an employer-employee relationship exists between petitioner and RFC. Having determined the real employer of petitioner, we now proceed to ascertain the legality of his dismissal from employment. Since petitioner, due to his length of service, already attained the status of a regular employee,47 he is entitled to the security of tenure provided under the labor laws. Hence, he may only be validly terminated from service upon compliance with the legal requisites for dismissal. Under the Labor Code, the requirements for the lawful dismissal of an employee are two-fold, the substantive and the procedural aspects. Not only must the dismissal be for a valid or authorized cause,48 the rudimentary requirements of due process notice and hearing49 must, likewise, be observed before an employee may be dismissed. Without the concurrence of the two, the termination would, in the eyes of the law, be illegal.50 As the employer, RFC has the burden of proving that the dismissal of petitioner was for a cause allowed under the law and that petitioner was afforded procedural due process. Sad to say, RFC failed to discharge this burden. Indeed, RFC never pointed to any valid or authorized cause under the Labor Code which allowed it to terminate the services of petitioner. Its lone allegation that the dismissal was due to the expiration or completion of contract is not even one of the grounds for termination allowed by law. Neither did RFC show that petitioner was given ample opportunity to contest the legality of his dismissal. In fact, no notice of such impending termination was ever given him. Petitioner was, thus, surprised that he was already terminated from employment without any inkling as to how and why it came about. Petitioner was definitely denied due process. Having failed to establish compliance with the requirements on termination of employment under the Labor Code, the dismissal of petitioner is tainted with illegality. An employee who has been illegally dismissed is entitled to reinstatement to his former position without loss of seniority rights and to payment of full backwages corresponding to the period from his illegal dismissal up to actual reinstatement.51 Petitioner is entitled to no less. WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of the Labor Arbiter, rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED.1wphi1.nt SO ORDERED. Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3 ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month. On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads: Dear Mr. Lopez, We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA. As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date. Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement. FIRST DIVISION G.R. No. 138051 June 10, 2004 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 SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement. In his Order dated 2 December 1996, the Labor 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 respondents plea of lack of

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 Arbiters dismissal of the case for lack of jurisdiction. The Facts In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows: a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant. The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997. On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors. The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The pertinent parts of the decision read as follows: xxx While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement of his services. It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary. The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit." The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989). x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998. On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8 Hence, this petition. The Rulings of the NLRC and Court of Appeals The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC: x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss) Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President. Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza. We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement. It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from complainantappellants Position Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainantappellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00). Similarly, complainant is also entitled to be paid 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 (P150,000.00) per year. Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996). Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied) The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC with its own.13 The Issue In assailing the decision of the Court of Appeals, SONZA contends that: THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14 The Courts Ruling We affirm the assailed decision. No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its "talents." There is no case law stating that a radio and television program host is an employee of the broadcast station. The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the country. SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor. Employee or Independent Contractor? The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.17 SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important element.19 A. Selection and Engagement of Employee ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent contractorship." Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee. In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element. B. Payment of Wages ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of 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-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22 SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an independent contractual relationship rather than an employeremployee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship. The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.

Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR")27 that a television program host is an independent contractor. We quote the following findings of the U.S. court: Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the "equipment necessary to tape the show." Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration. x x x Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x 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. SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests. We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective programming."34 ABSCBNs sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.

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

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABSCBN was completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.35 Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement. In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.37 SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance.38 Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the programs.39 A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows. Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs 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 employeremployee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that: Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.44 The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative.45 Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised over him. This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case. MJMDC as Agent of SONZA SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer. In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the employees of the "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 SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which

stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA. As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49 Policy Instruction No. 40 SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees. Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact. Affidavits of ABS-CBNs Witnesses SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant. While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus: Section 3. Submission of Position Papers/Memorandum xxx These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. x x x Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.50

The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter. Talents as Independent Contractors ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure. The right of labor to security of tenure as guaranteed in the 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 SONZAs 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 SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code . Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58 WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED. Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.: RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe. ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner. TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ... Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust. ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ... Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2 In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3 Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5 The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6 This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition.

FIRST DIVISION G.R. No. 84484 November 15, 1989 INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. Tirol & Tirol for petitioner. Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

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

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action. The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective. Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9 It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo AlLagadan 10 ... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ... has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really

invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses. More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee. The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods or the methods themselves of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance." The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company. The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits. WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED. Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.

as NCR-LRD-M-1-044-85 in the National Labor Relations Division of the National Capital Region. Petitioner opposed it alleging that 1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the petition; 2. The subject of the present petition had previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata; 3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and 4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition. Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an order declaring that there was an employer-employee relationship between the parties and directed that an election be conducted. Petitioner appealed the order to the Director of BLR citing among others the following reasons 1. That the subject of the present petition has previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783, 2751 and 2949 ULP December 21, 1965); 2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there was no employer-employee relationship between the shoeshiners and petitioner Besas (Order in NCR-LSED1-020-85); Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res judicata. xxx xxx xxx Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It declared that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the causes of action in the certification election case are different from the parties and causes of action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with petition for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds: I THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE CONSIDERATION OF THIS HONORABLE COURT. II

SECOND DIVISION G.R. No. 72409 December 29, 1986 MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES, petitioner, vs. THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPIL-KATIPUNAN), respondents. De Asis and Hernando Law Office for petitioner. Estebal M. Mendoza for private respondent.

PARAS, J.: This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-165-85, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1-044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17) shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the rights, privileges and benefits of an employee as provided in the Labor Code. Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a Petition for Certification Election, docketed

THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS, SURMISES AND CONJECTURES. III THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER. IV THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS IMPLEMENTING RULES. V THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINER-MEMBERS OF THE RESPONDENT UNION, VI THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS THEREFORE BABRED BY THE PRINCIPLE OF RES ADJUDICATA. The main thrust of the instant petition is the question of employer-employee relationship between petitioner BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are shoeshiners while 16 persons are non-shoeshiners. The question of employer-employee relationship became a primodial consideration in resolving whether or not the subject shoeshiners have the juridical personality and standing to present a petition for certification election as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of the employees must support the petition for certification election and that in order to be certified as the sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters. In the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently nullified the result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec. 8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as the sole and exclusive bargaining agent of the workers of Besa's. The present petition merits Our consideration. The records of the case reveal that an employer-employee relationship does not exist between the 17 shoeshiners and petitioner. Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners against herein petitioner BESA declared in its Decision dated December 21, 1965 that: The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not, however, contribute anything to the capital of the employer other than his service. It is the employer of the piece

worker who pays his wages, while the shoe shiner in this instance is paid directly by his customer. The piece worker is paid for work accomplished without regard or concern to the profit as derived by his employer, but in the case of the shoe shiners, the proceeds derived from the trade are always divided share and share alike with respondent BESA. The shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the piece worker supervises and controls his work, but in the case of the shoe shiner, respondent BESA does not exercise any degree of control or supervision over their person and their work. All these are not obtaining in the case of a piece worker as he is in fact an employee in contemplation of law, distinct from the shoe shiner in this instance who, in relation to respondent MAMERTO B. BESA, is a partner in the trade. Consequently, employer-employee relationship between members of the Petitioning union and respondent MAMERTO B. BESA being absent the latter could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6, Annex "B1 " of said Decision).<re||an1w> Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an increase both in minimum wage and cost of living allowance, opined as follows: Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of employer-employee relationship which is determined by the concurrence of the following conditions: 1. right to hire 2. payment of wages 3. right to fire; and 4. control and supervision The most important condition to be considered is the exercise of control and supervision over the employees, per our conversation, the persons concerned under your query are the shoe shiners and based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but are partners instead. This is due to the fact that the owner/manager does not exercise control and supervision over the shoe shiners. That the shiners have their own customers from whom they charge the fee and divide the proceeds equally with the owner, which make the owner categorized them as on purely commission basis. The attendant circumstances clearly show that there is no employer-employee relationship existing, and such the owner/manager is not by law, under obligation to extend to those on purely commission basis the benefit of Wage Order No. 2. However, the law does not preclude the employer in giving such benefit to all its employees including those which may not be covered by the mandate of the law. (Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition) The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employer-employee relationship exists. The Supreme Court in the Rosario Brothers case ruled that; A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit because it is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein.

Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d] power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc, vs. Ople, 131 SCRA 72, 1984) WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8-165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED. SO ORDERED. Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur.

On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the Company"). The Company opposed the petition mainly on the ground that the union members are actually not employees but are independent contractors as evidenced by the collection agency agreement which they signed. The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretary's resolution was denied. Hence, this petition in which the Company alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in that: a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of employer-employee relationship is at issue; b) the right of petitioner to due process was denied when the evidence of the union members' being commission agents was disregarded by the Labor Secretary; c) the public respondents patently erred in finding that there exists an employer-employee relationship; d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees but are independent contractors. The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Company's position that the union members are independent contractors. To prove that union members are employees, it is asserted that they "perform the most desirable and necessary activities for the continuous and effective operations of the business of the petitioner Company" (citing Article 280 of the Labor Code). They add that the termination of the agreement by the petitioner pending the resolution of the case before the DOLE "only shows the weakness of petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to self-organization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code, which defines job-contracting, they cannot legally qualify as independent contractors who must be free from control of the alleged employer, who carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the like necessary in the conduct of the business. The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employer-employee relationship; "(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 although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]). The Collection Agency Agreement defines the relationship between the Company and each of the union members who signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a collecting agent" who is to be considered at all times as an

THIRD DIVISION G.R. No. 91307 January 24, 1991 SINGER SEWING MACHINE COMPANY, petitioner vs. HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents. Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner. Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent. GUTIERREZ, JR., J.: This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration in the case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine CompanySinger Machine Collectors Union-Baguio (SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).

independent contractor and not employee of the Company; (b) collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless the agent has a pending obligation or indebtedness in favor of the Company. Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They quote paragraph 2 which states that an agent shall utilize only receipt forms authorized and issued by the Company. They also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly collection quota required by the Company is deemed by respondents as a control measure over the means by which an agent is to perform his services. The nature of the relationship between a company and its collecting agents depends on the circumstances of each particular relationship. Not all collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category depending on the facts of each case. The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner. The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of the service. The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to encourage a collecting agent to report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives a bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former take control only over the amount of collection, which is a result of the job performed. The respondents' contention that the union members are employees of the Company is based on selected provisions of the Agreement but ignores the following circumstances which respondents never refuted either in the trial proceedings before the labor officials nor in its pleadings filed before this Court.

1. The collection agents are not required to observe office hours or report to Singer's office everyday except, naturally and necessarily, for the purpose of remitting their collections. 2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the part of the collection agents from working elsewhere. Nor are these agents required to account for their time and submit a record of their activity. 3. The manner and method of effecting collections are left solely to the discretion of the collection agents without any interference on the part of Singer. 4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts assigned to them. 5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the amounts of collection each of them make. They do not receive any commission if they do not effect any collection even if they put a lot of effort in collecting. They are paid commission on the basis of actual collections. 6. The commissions earned by the collection agents are directly deducted by them from the amount of collections they are able to effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8) If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there seems to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their position. A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee relationship between the Company and the collection agents cannot be sustained. The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]). No such words as "to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus: We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly approximates that of an independent contractor than that of an employee. The latter is paid for the labor he performs, that is, for the acts of which such labor consists the former is paid for the result thereof . . . . xxx xxx xxx Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to compensation therefor. His

right to compensation depends upon and is measured by the tangible results he produces." Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See also Social Security System v. Court of Appeals, 30 SCRA 210 [1969]). The grounds specified in the contract for termination of the relationship do not support the view that control exists "for the causes of termination thus specified have no relation to the means and methods of work that are ordinarily required of or imposed upon employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra) The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There is nothing in the agreement which implies control by the Company not only over the end to be achieved but also over the means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]). The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition 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. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this case. Respondents assert that the said provision on job contracting requires that for one to be considered an independent contractor, he must have "substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business." There is no showing that a collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code which provides: Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. xxx xxx xxx There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by

such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him." (p. 20) It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer is solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is proven that there is a job-contracting situation. The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the union members are not its employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for certification election. The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their "union" to be granted their petition for direct certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra: . . . The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmen's compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because, it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein . . . . (At p. 689) WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made permanent. SO ORDERED. Fernan, C.J., Feliciano and Bidin, JJ., concur.

Petitioner moved to dismiss the complaint for lack of jurisdiction on the ground that there was no employer-employee relationship between it and private respondent. The labor arbiter denied the motion on January 2, 1990 and January 31, 1990.
5

Respondent Commission, on July 6, 1993 and May 26, 1994, affirmed the orders of the labor arbiter. Hence this petition. Petitioner solely contends that: THE PUBLIC RESPONDENT SERIOUSLY ERRED IN REFUSING TO DISMISS THE ACTION IN NLRC CASE NO. V-0027-90 BEFORE IT (AND/OR RAB VI CASE NO. 06-06-10249-89 BEFORE ITS ARBITRATION BRANCH NO. VI) AND THEREBY CONSEQUENTLY DIRECT/ORDER DESISTANCE FROM FURTHER PROCEEDINGS THEREON NOTWITHSTANDING THE FACT THAT NEITHER THE SAID RESPONDENT NOR THE LABOR ARBITER OF ITS ARBITRATION BRANCH POSSESSES JURISDICTION OVER THE SUBJECT MATTER OF THE SAID SUIT IN LIGHT OF THE ADMITTED ABSENCE OF ANY EMPLOYER-EMPLOYEE RELATIONSHIP AS BETWEEN PETITIONER AND PRIVATE RESPONDENT AND/OR THE "FARMWORKERS" IT SEEKS TO REPRESENT. 6 The jurisdiction of labor arbiters and respondent Commission is defined in Article 217 of the Labor Code which reads: Art. 217. Jurisdiction of Labor Arbiters and the Commission. Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; SECOND DIVISION G.R. No. 116236 October 2, 1996 VICTORIAS MILLING CO., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL FEDERATION OF SUGAR WORKERS-FOOD AND GENERAL TRADES (NFSW-FGT), respondents. PUNO, J.:p This petition for certiorari seeks to annul and set aside the Decision and Resolution of the National Labor Relations Commission in NLRC Case No. AC-No. V-0027-90 affirming the orders of the labor arbiter in RAB VI Case No. 06-06-1024989 denying petitioner's motion to dismiss. In September 1989, private respondent National Federation of Sugar Workers-Food and General Trades (NFSW-FGT), on behalf of "all workers of farm owners," 1 instituted a suit against petitioner Victorias Milling Co., Inc., a sugar central in Victorias, Negros Oriental, planter Hacienda Estrella II/Ferraris and all other haciendas within petitioner's milling district before Regional Arbitration Branch No. VI, National Labor Relations Commission (NLRC), Department of Labor and Employment. 2 Pursuant to Republic Act. No. 809, 3 private respondent sought to recover the share of the workers in the increased deliveries enjoyed by the planter of unrefined sugar and by-products produced in petitioner's refinery from 1952 to crop year 1983-1984. 4 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary an other forms of damages arising from employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00), regardless of whether accompanied with a claim for reinstatement. 7 The labor arbiter and National Labor Relations Commission have original and exclusive jurisdiction over all disputes involving workers, whether agricultural or non-agricultural, if the dispute falls under paragraphs 1 to 6 of Article 217. Not all claims for money and benefits are included in this jurisdiction. Article 217 assumes that the cases or disputes arise out of or in connection with an employer-employee relationship between the parties. 8 The question now is whether an employer-employee relationship exists between petitioner sugar central and private respondent farm workers. The answer is in the negative.

As early as 1981 in the case of Federation of Free Farmers v. Court of Appeals, 9 this Court had ruled that a sugar central does not have any privity of any kind with the sugar farm workers, to wit: . . . From the very beginning of the sugar industry, the centrals have never had any privity of any kind with the plantation laborers, since they had their own laborers to take of. In other words, both the centrals and the planters have always been the one dealing with their respective laborers regarding the terms and conditions of their employment, particularly as to wages. . . 10 Sugar farm workers/laborers were the direct responsibility of their respective planters and the central did not deal with the planter's workers but only with the planter. R.A. 809 did not create any employer-employee relationship between the planters' workers and the sugar centrals. In fact, the law affirmed the old practice of the central dealing only with the planter by directly issuing to it the planter's share of the unrefined sugar per their milling contracts. 11 Section 1 of R.A. 809 apportions the proceeds of the sugar between the sugar central and the planter as follows: Sec. 1. In the absence of written milling agreements between the majority of planters and the millers of sugar-cane in any milling district in the Philippines, the unrefined sugar produced in that district from the milling by any sugar central of the sugar-cane of any sugar-cane planter or plantation owner, as well as all by-products and derivatives thereof, shall be divided between them as follows: Sixty per centum for the planter, and forty per centum for the central in any milling district the maximum actual production of which is not more than four hundred thousand piculs: Provided, That the provisions of this section shall not apply to sugar centrals with an actual production of less than one hundred fifty thousand piculs; Sixty-two and one-half per centum for the planter, and thirty-seven and one-half per centum for the central in any milling district the maximum actual production of which exceeds four hundred thousand piculs but does not exceed six hundred thousand piculs; Sixty-five per centum for the planter, and thirty-five per centum for the central in any milling district the maximum actual production of which exceeds six hundred thousand piculs but does not exceed nine hundred thousand piculs; Sixty-seven and one-half per centum for the planter, and thirty-two and one-half per centum for the central in any milling district the maximum actual production of which exceeds nine hundred thousand piculs but does not exceed one million two hundred thousand piculs; Seventy per centum for the planter, and thirty per centum for the central in any milling district the maximum actual production of which exceeds one million two hundred thousand piculs. By actual production is meant the total production of the mill for the crop year immediately preceding. The planter's share included the workers' share such that if any increase was made on the planter's participation in the proceeds, it became the planter's obligation to pay his workers their 60% share of such increase. To ensure that the workers received their share, the law tasked the Department of Labor with the distribution thereof, thus: Sec. 9. In addition to the benefits granted by the Minimum Wage Law, the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborer in the plantation in the following proportion:

Sixty per centum of the increased participation for the laborers and forty per centum for the planters. The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor. The benefits granted to laborers in sugar plantations under this Act and in the Minimum Wage Law shall not in any way be diminished by such labor contracts known as "by the piece," "by the volume," "by the area," or by other system of "pakyaw," the Secretary of Labor being hereby authorized to issue the necessary orders for the enforcement of this provision. Clearly, there is no privity between the sugar centrals and the sugar farm workers. The workers are not employees of the sugar central but of the planter. 12 And R.A. 809 expressly recognizes the planter, not the central, as the employer of the farm workers by imposing on it the duty of paying its respective workers their share of the proceeds from the milled sugar. As held by this Court: . . . Accordingly, the only obligation of the centrals, like VICTORIAS, is to give to the respective planters, like the PLANTERS herein, the planters' share of the proceeds of the milled sugar in the proportion stipulated in the milling contract which would necessarily include the portion of 60% pertaining to the laborers. Once this has been done, the central is already out of the picture, and thereafter, the matter of paying the plantation laborers of the respective planters becomes exclusively the concern of the planters, the laborers and the Department of Labor. Under no principle of law or equity can We impose on the central here VICTORIAS any liability to the plantation laborers, should any of their respective planters-employers fail to pay their legal share. 13 Private respondent admits that the sugar central may not be held solidarily liable with the planter for the workers' share. It argues, however, that the central's non-liability does not preclude it from being impleaded as an indispensable party without whose presence the court cannot proceed and render judgment. 14 It claims that petitioner sugar central and the planters have conspired, confederated and confabulated" to deprive the workers of their rightful share under the law. It opines that once impleaded, petitioner may be compelled to reveal the names of the planters who milled therewith and submit the milling contracts and other records necessary for the successful prosecution of private respondent's case. 15 An indispensable party is a "party in interest without whom no final determination can be had of an action. 16 To be indispensable, a person must first be a real party in interest, i.e., one who stands to be benefited or injured by the judgment of the suit, or the party entitled to the avails of the suit. 17 Petitioner does not stand to be benefited or injured by the judgment in the suit. It has no privity with, much less any legal obligation to private respondent. 18 Private respondent need not implead petitioner to obtain evidence to prove its claims against the planters. It has sufficient remedies under the law and our rules of procedure. It may obtain a subpoena from the labor arbiter to require the sugar central to product its records, 19 or it may resort to the various modes of discovery under the Revised Rules of Court. 20 It may also find recourse with the Department of Labor and Employment, the office called upon to supervise the distribution of the workers' share. 21 IN VIEW WHEREOF, the petition is granted. The Decision and Order of respondent National Labor Relations Commission in NLRC Case AC-No. V0027-90 are reversed and set aside and the labor arbiter is ordered to dismiss RAB VI Case No. 06-0610249-89 with respect to herein petitioner Victorias Milling Co., Inc. and to proceed with dispatch in resolving the same. SO ORDERED. Regalado, Romero and Torres, Jr., JJ., concur. Mendoza, J., is on leave.

November 1985, respectively. In the course of their employment, private respondents were assigned to secure the premises of CISCORs clients, among them, the herein petitioner, Development Bank of the Philippines ("DBP") which, in turn, assigned private respondents to secure one of its properties or assets, the Riverside Mills Corporation. On 11 August 1987, private respondent Villanueva resigned from CISCOR. On 15 August 1987, private respondents Morillo, Bacea and Cos followed suit in resigning from CISCOR. Thereafter, private respondents claimed from CISCOR the return of their cash bond and payment of their 13th month pay and service incentive leave pay. For failure of CISCOR to grant their claims, private respondents Villanueva and Cos filed against CISCOR and its President/Manager Ernesto Medina NLRC NCR Case No. 00-10-3562-87 on 13 October 1987, while private respondents Morillo and Bacea filed NLRC NCR Case No. 00-093383-87 on 29 September 1987. In said two (2) cases, private respondents sought recovery of their cash bond, payment of 13th month pay, and their five-day service incentive leave pay. The two (2) cases were consolidated and assigned to Labor Arbiter Crescencio Iniego. In their position paper filed on 23 November 1987, private respondents (as complainants) alleged that they tendered their resignations in August 1987 upon the assurance of CISCOR that they would be paid the cash benefits due them. For failure of CISCOR to comply, private respondents claimed violations committed by CISCOR and Medina, specifically, the non-payment of their 13th month pay, five (5) day service incentive leave pay from the date of employment to the time of their separation, non-refund of their cash bond, non-payment of legal holiday pay and rest day pay. On the other hand, CISCOR and Medina in their position paper filed on 3 March 1988 admitted that private respondents were former security guards of CISCOR. They added, however, that sometime in 1987, petitioner allegedly formed its own security agency and pirated private respondents who tendered their voluntary resignations from CISCOR. Thereafter, when private respondents sought from CISCOR the return of their cash bond deposit, payment of 13th month pay and service incentive leave pay, CISCOR explained to private respondents that in view of the claim of petitioner that it incurred losses when private respondents and their other co-security guards secured the premises of Riverside Mills Corporation, private respondents, prior to the payment of their claims, were asked to first secure an individual/agency clearance from petitioner to show that no losses were incurred while they were guarding Riverside Mills Corporation. Instead of getting such clearance from the petitioner, private respondents secured their clearance from CISCORs detachment commander. Hence, for failure to secure the required clearance, private respondents cash bond deposit, their proportionate 13th month pay and service incentive leave pay were withheld to answer for liabilities incurred while private respondents were guarding Riverside Mills Corporation. On 10 March 1988, CISCOR filed a motion with leave to implead petitioner bank and averred therein that in view of its contract with the petitioner whereby, for a certain service fee, CISCOR undertook to guard petitioners premises, both CISCOR and petitioner, under the Labor Code, are jointly and severally liable to pay the salaries and other statutory benefits due the private respondents, petitioner being an indispensable party to the case. On 11 March 1988, Labor Arbiter Iniego issued an order granting the aforesaid motion and including petitioner as one of the respondents therein. To this, private respondents filed their opposition and alleged, among others, that petitioner, not being an employer of the private respondents, was not a proper, necessary or indispensable party to the case. In answer, petitioner filed its position paper alleging therein that it was not made a respondent by the herein private respondents in their complaint, and that none of the original parties to the case (private respondents and CISCOR/Medina) interposed any claim against the petitioner. It further stated that it cannot be held liable to the claim of private respondents because there was no failure on the part of CISCOR and Medina to pay said claims. If CISCOR had apparently failed to pay private respondents claims, it was only due to the failure of private respondents to secure their individual clearance of accountability or agency clearance that there were no losses incurred while they were guarding Riverside Mills Corporation. On 12 July 1988, the Labor Arbiter rendered a decision, the dispositive part of which reads: WHEREFORE, judgment is hereby rendered ordering the respondents Confidential Investigation and Security Corporation, Mr. Ernesto Medina and Development Bank of the Philippines to pay the complainants the corresponding salary differential due them to be computed for the last three (3) years

SECOND DIVISION G.R. Nos. 100376-77 June 17, 1994 DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, GODOFREDO MORILLO, JR., SUNDAY BACEA, ALFREDO COS and ROGELIO VILLANUEVA, respondents. Vicente T. Cuison for petitioner. Tamondong, Wong, Cos, & Associates for private respondent. PADILLA, J.: This petition for review on certiorari (here treated as a petition for certiorari under Rule 65, Rules of Court) seeks to reverse and set aside the Resolution dated 11 June 1991 of respondent National Labor Relations Commission ("NLRC") in NLRC NCR Case Nos. 00-09-03383-87 and 00-10-03562-87, denying petitioners motion for reconsideration, the dispositive part of which reads: Accordingly, the Banks motion for reconsideration is hereby denied. The responsible officers of the Bank and its counsel are hereby warned, under pain of contempt, that we shall not tolerate their further delaying the execution of the subject award. 1 Private respondents Godofredo Morillo, Sunday Bacea, Alfredo Cos and Rogelio Villanueva were hired as security guards by Confidential Investigation and Security Corporation ("CISCOR") on 19 May 1981, 21 August 1984, 22 January 1985, and 27

from the time they stopped working with the respondents sometime in August 1987. Confidential Investigation and Security Corporation is further ordered to return to the complainants their respective cash bond cited in this decision within a period of ten (10) days from receipt hereof. 2 From the above decision, CISCOR and Medina appealed to the NLRC. Petitioner likewise filed its Motion for Reconsideration/Appeal and prayed for the Labor Arbiter to modify his decision and make CISCOR and Medina solely liable for the claims of private respondents, and to declare the award for salary differentials as null and void. In its Resolution of 24 January 1991, the NLRC held the petitioner DBP, CISCOR and Medina, as jointly and severally liable, the pertinent part of which reads: WHEREFORE, the decision appealed from is hereby modified. All the respondents (Confidential Investigation and Security Corporation, Ernesto Medina and the Development Bank of the Philippines) are hereby adjudged jointly and severally liable to the admitted claims for 13th month pay, 5 days incentive leave, and refund of cash bond, and accordingly, immediate execution is hereby directed against any of the aforesaid respondents without prejudice to their having lawful recourse against each other. Anent the award of wage differential and the claim for rest day and legal holiday pay, the same are hereby remanded to the Arbitration Branch of origin for further hearing with the directive that it be completed in 20 days from the Arbitration Branchs receipt of this Order. 3 Hence, this petition for review on certiorari, with petitioner DBP raising the following issues: 1. Whether or not the DBP is really liable for any of the claims of private respondents; 2. Whether or not the NLRC (or the Labor Arbiter) correctly applied Article 106 of the Labor Code; and 3. Whether or not the wage differential, rest day and legal holiday pay could and should be adjudicated in this case. The threshold and, in the ultimate analysis, the decisive issue raised by the present petition is whether petitioner was correctly held jointly and severally liable, alongside CISCOR and Medina, for the payment of the private respondents salary differentials, 13th month pay, service incentive leave pay, rest day pay, legal holiday pay, and the refund of their cash deposit. Petitioner posits that it is not the employer of private respondents and should thus not be held liable for the latters claims. In addition, it avers that it was not properly impleaded as it was CISCOR and Medina who filed the motion to implead petitioner, and not the private respondents, as complainants therein. Petitioner even goes further by countering that, assuming arguendo, it was the indirect employer of private respondents, Article 106 of the Labor Code 4 cannot be applied to the present case as there was no failure on the part of CISCOR and Medina, as direct employer, to pay the claims of private respondents, but only a failure on the part of the latter to present the proper clearance to pave the way for the payment of the claims. It emphasizes that the term "fails" in Article 106 of the Labor Code implies insolvency or unwillingness of the direct employer to pay, which cannot be said of CISCOR and Medina as they have manifested their willingness to pay private respondents claims after they have presented proper clearance from accountability. We are not persuaded by petitioners arguments. Petitioners interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several liability of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and severally liable with the contractor. The statutory basis for this joint and several liability is set forth in Articles 107 5 and 109 6 in relation to Article 106 of the Labor Code. 7 There is no doubt that private respondents are entitled to the cash benefits due them. The petitioner is also,

no doubt, liable to pay such benefits because the law mandates the joint and several liability of the principal and the contractor for the protection of labor. In Eagle Security Agency, Inc. vs. NLRC, this Court, explaining the aforesaid liability, held: This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor Code]. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractors employees for purposes of paying the employees their wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3]. 8 Neither may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims of private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent Commissions holding that: Anent the Banks first issue, what we actually have here is a "Third-Party Complaint", defined by Section 12, Rule 6 of the Rules of Court as "a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim" (emphasis ours). Since Rule I, Section 3 of our 1986 Revised NLRC Rules adopts suppletorily the Rules of Court "in the interest of expeditious labor justice and whenever practicable and convenient" with the Security Agencys impleading the Bank for indemnity and subrogation considering that the complainants worked with the Bank "to safeguard their premises, properties and their person" (Record, p. 76), such a third-party complaint would therefore be proper. That the bank has not disputed liability on the admitted claims, but professes merely subsidiary, instead of solidary liability, we find its position here all the more, untenable. 9 Finally, petitioner submits that wage differential, rest day and legal holiday pay should not be adjudicated in this case. The respondent Commission, however, observed: Regarding the question of wage differential, we note that the complaint (Record, p. 1), as well as the complainants Position Paper (Record, pp. 5-10) do not mention about any wage differential claim. We do not therefore see any basis with which we may, on sight, affirm the said award. We note though that complainants position paper save technical arguments (that after all are not binding to us in this jurisdiction), sufficiently claims rest day and legal holiday pay, claims that were not strongly refuted by respondents. Impressed, although not convincingly, that the award on wage differential could have referred to the complainants claim for rest day and legal holiday pay, we therefore see the need to have the said claims subjected to further hearing but for a limited period of 20 days. 10 We note that in the present case, there is no claim for wage differentials either in the complaints or in the position paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter. We, however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive leave pay for 1989). Private respondents position paper submitted before the labor arbiter properly raised the two (2) issues (rest and holiday pay) and included the same in their prayer for relief. The computation of the amount due each individual security guard can be made during the additional hearings ordered by the Commission. WHEREFORE, premises considered, the questioned resolution of the respondent NLRC is hereby AFFIRMED with the modification that the additional hearing ordered by the NLRC shall not include wage differentials but shall be confined to legal holiday and rest day pay. Execution shall forthwith proceed as to the NLRC awards of 13th month pay, service incentive leave pay and return of private respondents cash bond. Petitioner and CISCOR/Medina are ORDERED to pay jointly and severally

the claims of private respondents, as finally awarded by the NLRC, without prejudice to the right of reimbursement which petitioner or CISCOR/Medina may have against each other. SO ORDERED. Narvasa, C.J., Regalado, Puno and Mendoza, JJ., concur.

for a four hour overtime while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis and P808.60 for the 4-hour overtime. Wage Orders increasing the minimum wage in 1983 were complied with by the defendant. On June 16, 1984, Wage Order No. 5 was promulgated directing an increase of P3.00 per day on the minimum wage of workers in the private sector and a P5.00 increase on the ECOLA. This was followed on November 1, 1984 by Wage Order No. 6 which further increased said minimum wage by P3.00 on the ECOLA. Both Wage Orders contain the following provision: "In the case of contract for construction projects and for security, janitorial and similar services, the increase in the minimum wage and allowances rates of the workers shall be borne by the principal or client of the construction/service contractor and the contracts shall be deemed amended accordingly, subject to the provisions of Sec. 3 (b) of this order" (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6, respectively). Plaintiff demanded that its Guard Service Contract with defendant be upgraded in compliance with Wage Order Nos. 5 and 6. Defendant refused. Their Contract expired on June 6, 1986 without the rate adjustment called for Wage Order Nos. 5 and 6 being implemented. By the time of the filing of plaintiff's Complaint, the rate adjustment payable by defendant amounted to P462,346.25. Defendant opposed the Complaint by raising the following defenses: (1) the rate adjustment is the obligation of the plaintiff as employer of the security guards; (2) assuming its liability, the sum it should pay is less in amount; and (3) the Wage Orders violate the impairment clause of the Constitution. The trial court decided in favor of the plaintiff. It held: xxx xxx xxx

THIRD DIVISION G.R. No. 112139 January 31, 2000

LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS (Former Eighth Division) and COMMANDO SECURITY SERVICE AGENCY, INC., respondents. GONZAGA-REYES, J.: Before us is a Petition for Review on Certiorari of the decision1 of the Court of Appeals2 in CA-G.R. CV No. 33893 entitled COMMANDO SECURITY SERVICE AGENCY, INCORPORATED vs. LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION which affirmed the decision3 of the Regional Trial Court, 11th Judicial Region, Branch 9, Davao City in Civil Case No. 19203-88. The pertinent facts as found by the Court of Appeals are as follows: The evidence shows that in June 1986, plaintiff Commando Security Service Agency, Inc., and defendant Lapanday Agricultural Development Corporation entered into a Guard Service Contract. Plaintiff provided security guards in defendant's banana plantation. The contract called for the payment to a guard of P754.28 on a daily 8-hour basis and an additional P565.72

However, in order for the security agency to pay the security guards, the Wage Orders made specific provisions to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. (Eagle Security Agency, Inc. vs. NLRC, Phil. Tuberculosis Society, Inc. vs. NLRC, et al., May 18, 1989).1wphi1.nt The Wage Orders require the amendment of the contract as to the consideration to cover the service contractor's payment of the increases mandated. However, in the case at bar, the contract for security services had earlier been terminated without the corresponding amendment. Plaintiff now demands adjustment in the contract price as the same was deemed amended by Wage Order Nos. 5 and 6. Before the plaintiff could pay the minimum wage as mandated by law, adjustments must be paid by the principal to the security agency concerned. Given these circumstances, if PTS pays the security guards, it cannot claim reimbursements from Eagle. But if its Eagle that pays them, the latter can claim reimbursement from PTS in lieu of an adjustment, considering that the contract had expired and had not been renewed. (Eagle Security Agency vs. NLRC and Phil. Tuberculosis Society, Inc. vs. NLRC, et al., 18 May 1989). "As to the issue that Wage Orders Nos. 5 and 6 constitute impairments of contracts in violation of constitutional guarantees, the High Court ruled" The Supreme Court has rejected the impairment of contract argument in sustaining the validity and constitutionality of labor and

social legislation like the Blue Sunday Law, compulsory coverage of private sector employees in the Social Security System, and the abolition of share tenancy enacted pursuant to the police power of the state (Eagle Security Agency, Inc. vs. National Labor Relation Commission and Phil. Tuberculosis Society, Inc. vs. NLRC, et al., May 18, 1989). Petitioner's motion for reconsideration was denied;4 hence this petition where petitioner cites the following grounds to support the instant petition for review: 1. THE WAGE INCREASES PROVIDED FOR IN THE WAGE ORDERS WERE DUE TO THE GUARDS AND NOT THE SECURITY AGENCY; 2. A SECURITY AGENCY WHO DID NOT PAY WAGE INCREASE TO ITS GUARDS IT HAD ALREADY TERMINATED AND WITHOUT THEIR AUTHORIZATION CANNOT INSTITUTE AN ACTION TO RECOVER SAID WAGE INCREASE FOR ITS BENEFIT; 3. IN THE ABSENCE OF BAD FAITH AND WITHOUT THE TRIAL COURT CORRECTLY ESTABLISHING THE BASIS FOR ATTORNEY'S FEES, THE SAME MAY NOT BE AWARDED. 4. THE NATIONAL LABOR RELATIONS (SIC) IS THE PROPER FORUM THAT HAS THE JURISDICTION TO RESOLVE THE ISSUE OF WHETHER OR NOT THE PETITIONER IS LIABLE TO PAY THE PRIVATE RESPONDENT THE WAGE AND ALLOWANCE INCREASES MANDATED UNDER WAGE ORDER NOS. 5 AND 6.5 Reiterating its position below, petitioner asserts that private respondent has no factual and legal basis to collect the benefits under subject Wage Order Nos. 5 and 6 intended for the security guards without the authorization of the security guards concerned. Inasmuch as the services of the forty-two (42) security guards were already terminated at the time the complaint was filed on August 15, 1988, private respondent's complaint partakes of the nature of an action for recovery of what was supposedly due the guards under said Wage Orders, amounts that they claim were never paid by private respondent and therefore not collectible by the latter from the petitioner. Petitioner also assails the award of attorney's fees in the amount of P115,585.31 or 25% of the total adjustment claim of P462,341.25 for lack of basis and for being unconscionable. Moreover, petitioner submits that it is the National Labor Relations Commission (NLRC) and not the civil courts that has jurisdiction to resolve the issue involved in this case for it refers to the enforcement of wage adjustment and other benefits due to private respondent's security guards mandated under Wage Order Nos. 5 and 6. Considering that the RTC has no jurisdiction, its decision is without force and effect.6 On the other hand, private respondent contends that the basis of its action against petitioner-appellant is the enforcement of the Guard Service Contract entered into by them, which is deemed amended by Section 6 of Wage Order No. 5 and Section 9 of Wage Order No. 6; that pursuant to their amended Guard Service Contract, the increases/adjustments in wages and ECOLA are due to private respondent and not to the security guards who are not parties to the said contract. It is therefore immaterial whether or not private respondent paid its security guards their wages as adjusted by said Wage Orders and that since the forty-two (42) security guards are not parties to the Guard Service Contract, there is no need for them to authorize the filing of, or be joined in, this suit. As regards the award to private respondent of the amount of P115,585.31 as attorney's fees, private respondent maintains that there is enough evidence and/or basis for the grant thereof, considering that the adamant attitude of the petitioner (in implementing the questioned Wage Orders) compelled the herein private respondent, to litigate in court. Furthermore, since the legal fee payable by private

respondent to its counsel is essentially on contingent basis, the amount of P115,583.31 granted by the trial court which is 25% of the total claim is not unconscionable. As regards the jurisdiction of the RTC, private respondent alleges that the suit filed before the trial court is for the purpose of securing the upgrading of the Guard Service Contract entered into by herein petitioner and private respondent in June 1983. The enforcement of this written contract does not fall under the jurisdiction of the NLRC because the money claims involved therein did not arise from employer-employee relations between the parties and is intrinsically a civil dispute. Thus, jurisdiction lies with the regular courts. Private respondent further contends that petitioner is estopped or barred from raising the question of jurisdiction for the first time before the Supreme Court after having voluntarily submitted to the jurisdiction of the regular courts below and having lost its case therein.7 We resolve to grant the petition. We resolve first the issue of jurisdiction. We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction.8 In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts.9 While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists. Article 217 of the Labor Code as amended vests upon the labor arbiters exclusive original jurisdiction only over the following: 1. Unfair labor practices; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral exemplary and other form of damages arising from employeremployee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite;10 and there is none in this case. On the merits, the core issue involved in the present petition is whether or not petitioner is liable to the private respondent for the wage adjustments provided under Wage Order Nos. 5 and 6 and for attorney's fees.

Private respondent admits that there is no employer-employee relationship between it and the petitioner. The private respondent is an independent/job contractor11 who assigned security guards at the petitioner's premises for a stipulated amount per guard per month. The Contract of Security Services expressly stipulated that the security guards are employees of the Agency and not of the petitioner.12 Articles 106 and 107 of the Labor Code provides the rule governing the payment of wages of employees in the event that the contractor fails to pay such wages as follows: Art. 106. Contractor or sub contractor. Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. xxx xxx xxx

Premises considered, the security guards' immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contracts as to the consideration to cover the service contractors' payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal. In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be held solidarily liable with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in consideration to cover the increases payable to the security guards.17 It is clear also from the foregoing that it is only when contractor pays the increases mandated that it can claim an adjustment from the principal to cover the increases payable to the security guards. The conclusion that the right of the contractor (as principal debtor) to recover from the principal as solidary co-debtor) arises only if he has paid the amounts for which both of them are jointly and severally liable is in line with Article 1217 of the Civil Code which provides: Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made payment may claim from his codebtors only the share which corresponds to each, with interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. . . . Pursuant to the above provision, the right of reimbursement from a co-debtor is recognized in favor of the one who paid. It will be seen that the liability of the petitioner to reimburse the respondent only arises if and when respondent actually pays its employees the increases granted by Wage Order Nos. 5 and 6. Payment, which means not only the delivery of money but also the performance, in any other manner, of the obligation,18 is the operative fact which will entitle either of the solidary debtors to seek reimbursement for the share which corresponds to each of the debtors. The records show that judgment was rendered by Labor Arbiter Newton R. Sancho holding both petitioner and private respondent jointly and solidarily liable to the security guards in a Decision19 dated October 17, 1986 (NLRC Case No. 2849-MC-XI-86).20 However, it is not disputed that the private respondent has not actually paid the security guards the wage increases granted under the Wage Orders in question. Neither is it alleged that there is an extant claim for such wage adjustments from the security guards concerned, whose services have already been terminated by the contractor. Accordingly, private respondent has no cause of action against petitioner to recover the wage increases. Needless to stress, the increases in wages are intended for the benefit of the laborers and the contractor may not assert a claim against the principal for salary wage adjustments that it has not actually paid. Otherwise, as correctly put by the respondent, the contractor would be unduly enriching itself by recovering wage increases, for its own benefit. Finally, considering that the private respondent has no cause of action against the petitioner, private respondent is not entitled to attorney's fees.1wphi1.nt

Art. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. It will be seen from the above provisions that the principal (petitioner) and the contractor (respondent) are jointly and severally liable to the employees for their wages. This Court held in Eagle Security, Inc. vs. NLRC 13 and Spartan Security and Detective Agency, Inc. vs. NLRC 14 that the joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance with the provisions therein including the minimum wage. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor's employees to secure payment of their wages should the contractor be unable to pay them.15 Even in the absence of an employer-employee relationship, the law itself establishes one between the principal and the employees of the agency for a limited purpose i.e. in order to ensure that the employees are paid the wages due them. In the above-mentioned cases, the solidary liability of the principal and contractor was held to apply to the aforementioned Wage Order Nos. 5 and 6.16 In ruling that under the Wage Orders, existing security guard services contracts are amended to allow adjustment of the consideration in order to cover payment of mandated increases, and that the principal is ultimately liable for the said increases, this Court stated: The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client. "To be borne", however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards' contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista vs. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665]. On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the security services provided by the latter. In return, the security agency collects from its client payment for its security services. This payment covers the wages for the security guards and also expenses for their supervision and training, the guards bonds, firearms with ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary for the maintenance of a security force.

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

On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a Complaint 3 which sought the lifting of the levy over, and annulment of the sale of, the Tipolo properties. The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to Branch 8 of the trial court. Petitioners therein alleged that: they are the owners of the Lot 109; they entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract provided that, except for machineries and equipment, all improvements introduced in the leased premises shall automatically be owned by the Lessor (petitioners) upon the expiration/termination of the contract; 4 the lease agreement was terminated by petitioners in November, 1980 due to non-payment of rentals by Inductocast Cebu; 5 thereafter, petitioners took actual possession of and occupied the Tipolo properties. Petitioners likewise alleged in their Complaint that they became aware of the labor dispute involving Inductocast only after the impugned public auction sale. 6 Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to dismiss on the ground that the trial court had no jurisdiction over the case. The buyers of the Tipolo properties, as intervenors, also filed a motion to dismiss on the same ground. Both motions, which were opposed by petitioners, were denied. The intervenors, however, moved for reconsideration of the denial. In an Order dated April 18, 1989, the trial court granted the motion and dismissed Civil Case No. Ceb-6917. It held that the civil case "is actually in the nature of a quashal of the levy and the certificate of sale, a case arising out of a dispute that was instituted by the previous employees of Inductocast before the Department of Labor and Employment, Region 7." 7 Citing Pucan vs. Bengzon, 155 SCRA 692 (1987), it held it had no jurisdiction over the case since the levy and sale "are connected with the case within the exclusive jurisdiction of the Department of Labor and Employment." 8 Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals, through a petition for certiorari and preliminary injunction. 9 The appellate court, in its impugned Decision, denied the petition as it held: To Our minds, the issue on what forum the case must be tried or heard is a settled one. The Department of Labor is the agency upon which devolves the jurisdiction over disputes emanating from and in relation with labor controversies to the exclusion of the regular courts. The issue in the case at bar concerns the levy of a property in pursuance to a writ of execution, arising out of labor disputes. There can be no doubt that jurisdiction pertains to the Department of Labor. xxx xxx xxx In the light of the factual antecedents and incidents that transpired in the hearing of this case at bar, the (trial court) correctly ruled that indeed the Department of Labor has jurisdiction over the case. Consequently, WE see no abuse of discretion let alone a grave one, amounting to lack or in excess of its jurisdiction correctible with a writ of certiorari. Indeed, the issue of granting or denying a motion to dismiss is addressed to the sound discretion of the court, and in the absence of a capricious and whimsical exercise of power, certiorari will not lie. Thus, this appeal where petitioners contend:

SECOND DIVISION G.R. No. 92598 May 20, 1994 PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C. YBANEZ, petitioners, vs. THE COURT OF APPEALS, ET AL., respondents. Rufino L. Remoreras for petitioners. Danilo L. Pilapil for private respondents. PUNO, J.: This is an appeal by certiorari from the Decision of the Court of Appeals, dated November 16, 1989, denying due course to and dismissing the petition in CA-G.R. SP NO. 18017. 2 The case at bench finds its roots in the Decision of the Department of Labor and Employment (Region VII), ordering Inductocast Cebu, a partnership based in Mandaue City, to pay its former employees a total of P232,908.00. As a consequence of the judgment, the labor department's regional sheriff levied the buildings and improvements standing on Lot 109, Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter referred to as the "Tipolo properties") were subsequently sold at public auction to said employees.
1

THE RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE SUBJECT MATTER AND NATURE OF THE CASE AS AGAINST THE CIVIL COURT. We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does not have jurisdiction over the case filed by petitioners. It is at once evident that the Civil Case No. Ceb-6917 is not a labor case. No employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement. Neither can we characterize petitioner's action before the trial court as arising out of a labor dispute. It was not brought to reverse or modify the judgment of the Department of Labor and Employment (DOLE). Neither did it question the validity of, or pray for, the quashal of the writ of execution against Inductocast. What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo properties. Clearly, it is the RTC and not the labor department which can take cognizance of the case, as provided by B.P. Blg. 129 ("An Act Reorganizing the Judiciary, Appropriating Funds Therefor, and For Other Purposes"), thus: Sec. 19. Jurisdiction in civil case. Regional Trial Courts shall exercise exclusive original jurisdiction: xxx xxx xxx (2) In all civil actions which involve the title to, or possession of real property, or any interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; xxx xxx xxx The action taken by petitioners before the RTC asserting their ownership over the levied properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and again, we have held that: Under Section 17, Rule 39, a third person who claims property levied upon on execution may vindicate such claim by action. . . . The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third-party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action. 10 Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No. Ceb-6917 without interfering with the writ of attachment and writ of execution of a co-equal body. It is settled that the levy and sale of property by virtue of a writ of attachment is lawful only when the levied property indubitably belongs to the defendant. If property other than those of the defendant is attached and sold by the sheriff, he acts beyond the limits of his and the court's authority. 11 In this regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191 SCRA 275 (1991) that: The main issue in this case is whether or not properties levied and seized by virtue of a writ of attachment and later by a writ of execution, were under custodia legis and

therefore not subject to the jurisdiction of another co-equal court where a third party claimant claimed ownership of the same properties. The issue has long been laid to rest in the case of Manila Herald Publishing Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the Court ruled that while it is true that property in custody of the law may not be interfered with, without the permission of the proper court, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interests. But when the Sheriff, acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another court's order of attachment. Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.: The general rule that no court has the power to interfere by injunction with the judgments or decrees of another court with concurrent or coordinate jurisdiction possessing equal power to grant injunctive relief, applies only when no third-party claimant is involved. . . . When a third party, or stranger to the action, asserts a claim over the property levied upon, the claimant may vindicate his claim by an independent action in the proper civil court which may stop the execution of the judgment on property not belonging to the judgment debtor (Citations omitted.) Finally, it must be noted that the Pucan case relied upon by respondent court is inapplicable to the case at bench which involves a third-party claim over property levied on execution. In Pucan, we enjoined the Regional Trial Court from acting on the petition for damages and prohibition against the enforcement of the writ of execution issued by the NCR director of the then Ministry of Labor and Employment in a labor case for the following reason: A perusal of the petition for damages and prohibition filed by Saulog Transit, Inc., in the lower court reveals that basically, what was being questioned was the legality or propriety of the alias writ of execution dated March 1, 1985, as well as the acts performed by the Ministry officials in implementing the same. In other words, the petition was actually in the nature of a motion to quash the writ; and with respect to the acts of the Ministry officials, a case growing out of a labor dispute, as the acts complained of, were perpetrated during the execution of a decision of the then Minister of Labor and Employment. However characterized, jurisdiction over the petition pertains to the Labor Ministry, now Department and not the regular courts. This conclusion is evident, not only from the provisions of Article 224(b) of the Labor Code, but also of Article 218, as amended by Batas Pambansa Blg. 227 in connection with Article 255 of the same Code. xxx xxx xxx Apparently, Saulog Transit, Inc. was misled by its own prayer for actual, moral and exemplary damages. It believed that such additional cause of action could clothe the petition with the mantle of a regular action cognizable by the regular courts. It was, of course, mistaken for the fact remains that the acts complained of are mere incidents of a labor dispute. Such prayer therefore did not alter the complexion of the case as one arising from a labor dispute, but was subsumed by the nature of the main case, over which the regular courts had no jurisdiction, much less the power to issue a temporary or permanent injunction or restraining order. . . . 12

In fine, we prohibited the action before the trial court in Pucan because it attacked the regularity of the issuance of the alias writ of execution in the labor case, which is but an incident of the labor dispute. This is not so in the case at bench where the civil case filed by petitioners does not even collaterally attack the validity of the DOLE's writ of attachment. On the contrary, petitioners in Civil Case No. Ceb6917 pray for the trial court's ruling that the DOLE's judgment could not be validly executed on the Tipolo properties, which allegedly do not belong to Inductocast. IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of Appeals in CAG.R. SP No. 18017, dated November 16, 1989, is REVERSED and SET ASIDE. The Regional Trial Court of Cebu City, Branch 8 is ordered to try Civil Case Ceb-6917 on its merit. No costs. SO ORDERED. Padilla, Quiason and Vitug, JJ., concur. Narvasa, C.J. and Regalado, JJ., are on leave.

Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid. Despite demand, private respondent Romana failed to settle her obligation with petitioner. On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment of commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a Complaint for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC Arbitration Branch (Manila). 3 The two cases were consolidated. On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss the Complaint. This was opposed by petitioner. On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss. She held, viz: Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to the whims and caprices of the parties. Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision, the following cases involving all workers, whether agricultural or nonagricultural: (4) claims for actual, moral, exemplary and other forms of damages arising from an employer-employee relations.

SECOND DIVISION G.R. No. 109272 August 10, 1994 GEORG GROTJAHN GMBH & CO., petitioner, vs. HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents. A.M. Sison, Jr. & Associates for petitioner. Pedro L. Laso for private respondents. PUNO, J.: Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of jurisdiction and lack of capacity to sue. The records show that petitioner is a multinational company organized and existing under the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC) for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218. The application was approved by the Board of Investments (BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration and License to petitioner. 2

xxx xxx xxx (6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether or not accompanied with a claim for reinstatement. In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by defendant (private respondent herein) Romana Lanchinebre while the latter was in the employ of the former. Obviously the said cash advances were made pursuant to the employer-employee relationship between the (petitioner) and the said (private respondent) and as such, within the original and exclusive jurisdiction of the National Labor Relations Commission. Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner) by the Securities and Exchange Commission was merely "for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218 and its implementing rules and regulations." It does not include a license to do business in the Philippines. There is no allegation in the complaint moreover that (petitioner) is suing under an isolated transaction. It must be considered that under Section 4, Rule 8 of the Revised Rules of Court, facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party must be averred. There is no averment in the complaint regarding (petitioner's) capacity to sue or be sued.

Finally, (petitioner's) claim being clearly incidental to the occupation or exercise of (respondent) Romana Lanchinebre's profession, (respondent) husband should not be joined as party defendant. 4 On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion for Reconsideration. Petitioner now raises the following assignments of errors: I THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE GENERAL CIVIL LAW. II THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION TO SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN THE COUNTRY AND THAT IT HAS CONTINUOUSLY OPERATED AS SUCH FOR THE LAST NINE (9) YEARS. III THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT. IV THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS A DEFENDANT IN A COMPLAINT AGAINST THE WIFE. There is merit to the petition. Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true that the loan and cash advances sought to be recovered by petitioner were contracted by private respondent Romana Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code covers their relationship. Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement. In this regard, we held in the earlier case of Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485 (1984), viz: Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had jurisdiction over "all other cases arising from employer-employee relation, unless expressly excluded by this Code." Even then, the principal followed by this Court was that, although a controversy is between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in negating jurisdiction of the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated: The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. xxx xxx xxx And in Singapore Airlines Limited vs. Pao, 122 SCRA 671, 677, the following was said:

Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. xxx xxx xxx In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the Medina, Singapore Airlines, and Molave Motors cases, thus: . . . The important principle that runs through these three (3) cases is that where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolutions of the dispute requires expertise, not in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears. Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but recovery of a sum of money based on our civil laws on obligation and contract. Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law defines "doing business," as follows: . . . shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. 5 There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or "transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstances. 6 In the case at bench, petitioner does not engage in commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was established. 7 Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center for its home office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the country. Moreover, private respondents are estopped from assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals , 211 SCRA 824, 837 (1992): The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny

corporate existence applies to foreign as well as to domestic corporations;" "one who has dealth with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity." The principle "will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract, . . . (Citations omitted.) Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a basic rule that "(m)isjoinder or parties is not ground for dismissal of an action." 8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the Revised Rules of Court, which provides: A married woman may not . . . be sued alone without joining her husband, except . . . if the litigation is incidental to the profession, occupation or business in which she is engaged, Whether or not the subject loan was incurred by private respondent as an incident to her profession, occupation or business is a question of fact. In the absence of relevant evidence, the issue cannot be resolved in a motion to dismiss. IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits. No costs. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.

short), for its part, defends the Writ on the ground of absence of any employer-employee relationship between it and the contractual workers employed by the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent said workers for purposes of collective bargaining. The Solicitor General agrees with the position of SanMig. The antecedents of the controversy reveal that: Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are independent contractors duly licensed by the Department of Labor and Employment (DOLE). SanMig entered into those contracts to maintain its competitive position and in keeping with the imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was expressly understood and agreed that the workers employed by the contractors were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig. There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other. Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized representative of the monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary, probationary, or contract employees and workers are excluded from the bargaining unit and, therefore, outside the scope of this Agreement." In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite workers had signed up for union membership and sought the regularization of their employment with SMC. The Union alleged that this group of employees, while appearing to be contractual workers supposedly independent contractors, have been continuously working for SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither casual nor seasonal as they are performing work or activities necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting situation. It was then demanded that the employment status of these workers be regularized. On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex D, Petition). On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F, Petition). As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2) notices of strike were consolidated and several conciliation conferences were held to settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G, Petition). Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in various SMC plants and offices. On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin the Union from: a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of collective bargaining;

SECOND DIVISION G.R. No. 87700 June 13, 1990 SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES, MARCELA PURIFICACION, ET AL., petitioners, vs. HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN MIGUEL CORPORATION, respondents. Romeo C. Lagman for petitioners. Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents. MELENCIO-HERRERA, J.: Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als." Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig. for

b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...; d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred to in the CBA ...; f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex H, Petition) Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order for the purpose of maintaining the status quo, and set the application for Injunction for hearing. In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989. After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever damages petitioners may sustain by reason thereof. In issuing the Injunction, respondent Court rationalized: The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance. The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What could be discerned is that there is

no employer-employee relationship between plaintiff and the contractual workers employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the question of the existence of employer-employee relationship has already been made. To finally resolve this dispute, the court must extensively consider and delve into the manner of selection and engagement of the putative employee; the mode of payment of wages; the presence or absence of a power of dismissal; and the Presence or absence of a power to control the putative employee's conduct. This necessitates a full-blown trial. If the acts complained of are not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of injunction does not necessarily expose defendants to irreparable damages. Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo) Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued by respondent Court. The Union construed this to mean that "we can now strike," which it superimposed on the Order and widely circulated to entice the Union membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo). In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants and offices. On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and discussion on their other demands, such as wage distortion and appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to work. After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the parties to submit their memoranda simultaneously, the last of which was filed on 9 January 1990. The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the present controversy and properly issued the Writ of Preliminary Injunction to the resolution of that question, is the matter of whether, or not the case at bar involves, or is in connection with, or relates to a labor dispute. An affirmative answer would bring the case within the original and exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts. Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out of a labor dispute and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction. That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).

On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of strike staged by petitioner union and its officers herein complained of," for the reasons that: A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and thereby create an employment relationship with contractual workers, especially were the contractual workers were recognized by the union, under the governing collective bargaining agreement, as excluded from, and therefore strangers to, the bargaining unit. B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in a labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to hire strangers or workers outside the unit, in the hope the latter will help re-elect them. C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476, Rollo). We find the Petition of a meritorious character. A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee." While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among others, the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and employee. That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further, the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83).

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues. The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as in that case there was no controversy over terms, tenure or conditions, of employment or the representation of employees that called for the application of labor laws. In that case, what the petitioning union demanded was not a change in working terms and conditions, or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis of those facts unique to that case, that such a demand could hardly be considered a labor dispute. As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all workers including "1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the plain command of the law. The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing between the parties and would have to be ventilated before the administrative machinery established for the expeditious settlement of those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice (Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321). We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to determine whether it should contract out the performance of some of its work to independent contractors. However, the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be placed in proper perspective and equilibrium. WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any further action in Civil Case No. 57055 except for the purpose of dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs. SO ORDERED. Paras and Regalado, JJ., concur.

Padilla, Sarmiento, JJ., took no part.

The private respondents were employed by the petitioner either as sales representatives or medical representatives. By reason of the nature of their work they were each allowed to avail of the company's car loan policy. Under that policy, the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary, the company retaining the ownership of the motor vehicle until it shall have been fully paid for. All of the private respondents availed of the petitioner's car loan policy. On September 14, 1987, private respondents Nuez, Villanueva, Villena and Armas were dismissed from the service for having participated in an illegal strike. On December 26, 1987, respondents Kua and Solidum were also dismissed for certain irregularities. All the private respondents filed complaints for illegal dismissal in the Arbitration Branch of the NLRC. The Labor Arbiter dismissed their complaints and upheld the legality of their dismissal. They appealed to the NLRC where their appeals are still pending. In the Notices of Dismissal which they received from Nestl, the private respondents had been directed to either settle the remaining balance of the cost of their respective cars, or return them to the company for proper disposition. As they failed and refused to avail of either option, the company filed in the Regional Trial Court of Makati a civil suit to recover possession of the cars. The Court issued an Order dated March 7, 1988 directing the Deputy Sheriff to take the motor vehicles into his custody. The private respondents sought a temporary restraining order in the NLRC to stop the company from cancelling their car loans and collecting their monthly amortizations pending the final resolution of their appeals in the illegal dismissal case. On May 27, 1988, the NLRC en banc, issued a resolution granting their petition for injunction. Its order reads: FIRST DIVISION Acting on the Urgent Petition for the Issuance of a Temporary Restraining Order, the Commission sitting en banc after deliberation, Resolved to hold in abeyance the cancellation of the petitioners' car loans and the payment of the monthly amortizations thereof pending resolution of their illegal dismissal cases. (p. 5, Rollo.) The company filed a motion for reconsideration, but it was denied for tardiness. Hence, this petition for certiorari alleging that the NLRC acted with grave abuse of discretion amounting to lack of jurisdiction when it issued a labor injunction without legal basis and in the absence of any labor dispute related to the same. The private respondents, in their comment on the petition, alleged that there is a labor dispute between the petitioner and the private respondents and that their default in paying the amortizations for their cars was brought about by their illegal dismissal from work by the petitioner as punishment for their participation in the illegal strike of the Union of Filipro Employees of which they are members. If they had not participated in the strike, they would not have been dismissed from work and they would not have defaulted in the payment of their amortizations. Private respondents admitted their civil obligation to the petitioner. The Office of the Solicitor General filed a manifestation on June 13, 1989, stating that "after judicious scrutiny of the records, . . . and in consonance with the applicable law and jurisprudence on the matter, the Office of the Solicitor General is convinced that it cannot, without violating the law, sustain the findings of the National Labor Relations Commission in the case at bar. So as not to prejudice NLRC's

G.R. No. 85197 March 18, 1991 NESTL PHILIPPINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, EUGENIA C. NUNEZ, LIZA T. VILLANUEVA, EMMANUEL S. VILLENA, RUDOLPH C. ARMAS, RODOLFO M. KUA and RODOLFO A. SOLIDUM, respondents. Siguion Reyna, Montecillo & Ongsiako for petitioner. Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondents. GRIO-AQUINO, J.: This petition for certiorari seeks a review of the resolutions dated May 28, 1988 and September 1, 1988 of the National Labor Relations Commission (NLRC) in Injunction Case No. 1582 granting the injunction prayed for by the private respondents, to hold in abeyance the cancellation of their car loans and payments of the monthly amortizations thereon pending the resolution of their complaints for illegal dismissal.

case, the OSG deems it best to refrain from filing its Comment, even as it begs leave of the Honorable Court to be excused from further appearing in behalf of the NLRC in this particular case" (p. 173, Rollo). Filing its own comment, the NLRC argued that as the illegal dismissal case is a labor dispute which is still pending resolution before it, "it is clothed with authority to issue the contested resolutions because under the law, PD 442, otherwise known as the Labor Code of the Philippines as amended, it is vested with the authority to resolve labor disputes" (p. 252, Rollo). The power of the NLRC to issue writs of injunction is found in Article 218 of the Labor Code, which provides: Art. 218 Powers of the Commission. The Commission shall have the power and authority: xxx xxx xxx (e) To enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require the performance of a particular act in any labor dispute which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party: . . . (Emphasis ours.) That power, as the statute provides, can only be exercised in a labor dispute. Paragraph (1) of Article 212 of the Labor Code defines a labor dispute as follows: (1) "Labor dispute" includes any controversy or matters concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee. Nestl's demand for payment of the private respondents' amortizations on their car loans, or, in the alternative, the return of the cars to the company, is not a labor, but a civil, dispute. It involves debtorcreditor relations, rather than employee-employer relations. Petitioner Nestl Philippines, Inc., correctly pointed out that: The twin directives contained in petitioner's letters to the private respondents to either (1) settle the remaining balance on the value of their assigned cars under the company car plan or return the cars to the company for proper disposition; or (2) to pay all outstanding accountabilities to the company are matters related to the enforcement of a civil obligation founded on contract. It is not dependent on or related to any labor aspect under which a labor injunction can be issued. Whether or not the private respondents remain as employees of the petitioner, there is no escape from their obligation to pay their outstanding accountabilities to the petitioner; and if they cannot afford it, to return the cars assigned to them. As noted, the options given to the private respondents are civil in nature arising from contractual obligations. There is no labor aspect involved in the enforcement of those obligations. (p. 7, Rollo.)

The NLRC gravely abused its discretion and exceeded its jurisdiction by issuing the writ of injunction to stop the company from enforcing the civil obligation of the private respondents under the car loan agreements and from protecting its interest in the cars which, by the terms of those agreements, belong to it (the company) until their purchase price shall have been fully paid by the employee. The terms of the car loan agreements are not in issue in the labor case. The rights and obligations of the parties under those contracts may be enforced by a separate civil action in the regular courts, not in the NLRC. WHEREFORE, the petition for certiorari is granted. The questioned resolution dated May 27, 1988 of the NLRC in Injunction Case No. 1582 (Annex A) is hereby annulled and set aside. Costs against the private respondents. SO ORDERED. Narvasa, Gancayco and Medialdea, JJ., concur. Cruz, J., took no part.

The important terms of the agreement are: (1) both parties agree that during the pendency of the case there shall be no dismissal, suspension or lay-off without permission or authority of the court; (2) after the termination of the case, prior to any dismissal, lay-off or suspension, the company shall give the union an opportunity to be heard, giving it three days notice; (3) during the pendency of the case, a laborer may be suspended, but if exonerated he shall be reinstated with back pay; and (4) if a laborer is found committing a crime, the company can suspend him immediately, but if found not guilty he shall be reinstated with back pay. The above amicable settlement was reduced to writing and signed by both parties and having been submitted to the Court of Industrial Relations it was approved on July 28, 1950. On July 29, 1955, the company filed a notice with the industrial court informing it that it was terminating the effectiveness of the order approving the agreement pursuant to Section 17 of Commonwealth Act No. 103, as amended. On August 11, 1955, the union filed a petition with the Court of Industrial Relations praying for the reinstatement of its president Avelino Morales who was dismissed without investigation in violation of the compromise agreement, which petition was tacked as an incident of the previous case and docketed as Case No. 430-V (2). The company filed a motion to dismiss on the ground that since the main case was already terminated and there was no other dispute between plaintiff and defendant pending before the Court of Industrial Relations, said court had no jurisdiction to entertain the incidental petition for reinstatement. The court upheld the motion and dismissed the petition for lack of jurisdiction. 1wph1.t The union took the matter to the Supreme Court on a petition for review which, on May 20, 1957, rendered decision holding that the amicable settlement reached by plaintiff and defendant was in the nature of a contract which under the Civil Code has the force of law between the parties, which means that neither party may unilaterally and upon his own exclusive volition escape his obligations under the contract, unless the other party has assented thereto, or unless for causes sufficient in law and pronounced adequate by a competent tribunal." As a consequence, it set aside the order of dismissal of the Court of Industrial Relations. Subsequently, or on February 10, 1958, based on the allegation that a mutual mistake has been committed by the parties as to the legal effect of the settlement of their dispute in their main case because their purpose was not exactly to enter into a contract but merely a settlement terminable pursuant to Section 17 of Commonwealth Act No. 103, the company commenced the present action before the Court of First Instance of Manila seeking to annul the contract on the ground that its consent thereto has been vitiated by mistake. EN BANC G.R. No. L-13918 April 25, 1962 Defendant union moved to dismiss the complaint on the ground of lack of jurisdiction in that it involves a matter that comes under the exclusive jurisdiction of the Court of Industrial Relations. It contended that the compromise settlement which the company now tries to nullify was upheld by the Supreme Court on appeal taken by the union wherein it declared the same valid, binding and subsisting between the parties and that because of that decision the present case should be deemed barred under the principle of res judicata. This motion having been upheld, the company interposed the present appeal. The lower court, in refusing to take cognizance of the present case, made the following comment: . It appearing from the above ruling and directive of the Supreme Court that the contract, which plaintiff now seeks to be invalidated, is binding and effective; that the Court of Industrial Relations could entertain complaints for its violation, and that the Court of Industrial Relations should give due course to the petition filed with the latter court by herein defendant on August 11, 1955, pursuant to the said contract -it follows that the Court of Industrial Relations has jurisdiction to hear CIR Case No. 430-V (2), and this Court, out of deference to the said decision of the Supreme Court, cannot take cognizance of the plaintiff's complaint, lest in so doing, its action on the present case might conflict with, or frustrate, the aforesaid ruling and directive of the Supreme Court. We find no error in the foregoing comment. It should be recalled that the present case stems from an incident that arose between the company and the union relative to a compromise agreement which was entered into between them and approved by the Court of Industrial Relations in Case No. 430-V. In that agreement it was stipulated, among other things, that pending

CALTEX (PHILIPPINES), INC., plaintiff-appellant, vs. KATIPUNAN LABOR UNION, defendant-appellee. Ross, Selph and Carrascoso for plaintiff-appellant. Ernesto T. Morales, Agusto Saguin and Filemon B. Barria for defendant-appellee. BAUTISTA ANGELO, J.: On March 13, 1950, the members of the Katipunan Labor Union employed in Caltex (Philippines) Inc. declared a strike against the offices of the latter in the province of Cebu which was referred to the Court of Industrial Relations for appropriate action. The case was docketed as Case No. 430-V. Through the mediation of its presiding Judge Arsenio Roldan, the case, after series of conferences, was amicably settled, the parties reaching a compromise agreement.

the termination of the main case the company will not dismiss, lay-off or suspend any employee without giving the union an opportunity to be heard or without permission from the court. Then the company dismissed from the service the president of the union Avelino Morales without notice or investigation in violation of the agreement and so it filed in the same case a petition for his reinstatement, and when this petition was dismissed because of the contention that the compromise agreement was already unilaterally terminated, the union took the case to the Supreme Court which rendered a revocatory decision and remanded the case to the industrial court for further proceedings. But instead of raising therein the issue that said agreement cannot be enforced because the consent thereto of the company was vitiated by mistake, it chose to file the present action. It is, therefore, a matter that comes under the exclusive jurisdiction of the Court of Industrial Relations. In the same manner that the company could ask for its termination because the period of three years has already expired pursuant to law, it could likewise seek the same purpose by advancing the theory that the agreement is ineffective because its consent thereto is vitiated by mistake. If said court could approve it, it could also nullify it on a good, valid and legal ground. There was, therefore no need for the company to bring the matter to a regular court for relief. At any rate, the mistake invoked by the company is one of law and not of fact which cannot be a ground for nullification. It is a matter that concerns an interpretation of the nature of the award in the light of Section 17 of Commonwealth Act No. 103. On this point it is well to recall that this Court has already interpreted the scope of the privilege that the above provision gives to the company relative to the termination of an award, in the sense that while that privilege is given, it can, however, only be exercised after due notice to the other party. From the import of our decision it may be inferred that whether the award partakes of the nature of a contract or otherwise notice to the party is necessary before effective action thereon can be taken. The absence of such notice will nullify the decision. Thus, in National Waterworks and Sewerage Authority v. Court of Industrial Relations, G.R. No. L-13161, February 25, 1960, this Court held:. ... Since an award is made as a result of a controversy and is binding upon both parties it would appear logical that its effectivity cannot be terminated ex parte unless the period of its duration is specified therein. The reason is obvious: since the award is made in favor of the employee, it is but fair and just that he be heard before his right thereto is terminated, otherwise the employer might act arbitrarily or to his prejudice. That is why the law requires that notice of termination be given to the court. This requirement is not merely pro forma. This is to give the court the right to intervene in order that the interest of labor may not be jeopardized. WHEREFORE, the order appealed from is affirmed, with costs against appellant. Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, and Dizon, JJ., concur. EN BANC G.R. No. L-16672 October 31, 1960

collective bargaining agreement with the United Free Workers Union wherein it recognized the said union as the exclusive bargaining representative of the workers in the arrastre service. On January 27, 1960, the Associated Labor Union, which is also a legitimate labor organization composed of dock workers formerly affiliated with the United Free Workers Union and employed in the loading and unloading of the cargoes of the Sweet Lines, wrote a letter to said firm and the Besaez and Caete Arrastre Service, requesting them to enter into a collective bargaining contract with it because it represents the majority of the regular and permanent workers in the arrastre job. But instead of acceding to the request, the Besaez and Caete Arrastre Service, thru its capataz and/or foreman, allegedly coerced the members of petitioning union to join the United Free Workers Union with the result that those who refused were not allowed to work. Such act impelled the petitioner to send letters of protest to respondent Sweet Lines and the arrastre company furnishing copies thereof to the Conciliation Service of the Department of Labor. As a consequence, a conference was held among the parties thru the initiative of the Conciliation Service in an effort to settle their differences, but as no concrete agreement was reached the solution of the matter was held in abeyance until further notice. Since then the relation of the parties became so strained that the members of petitioning union numbering approximately 135 struck on February 22, 1960 filing at the same time a charge of unfair labor practice with the Court of Industrial Relations against the Sweet Lines and the Besaez and Caete Arrastre Service. Because of the picketing put up by the members of the union against the Sweet Lines a conference was again called by the Conciliation Service in an attempt to settle the conflict, but on February 23, 1960, the shipping firm filed the present complaint before the Court of First Instance of Cebu praying (1) to declare the picketing illegal and unlawful; (2) to order defendant (petitioner herein) to pay plaintiff (respondent herein) the amount of P55,000.00 as damaged and attorney's fees; and (3) to issue, without notice, a writ of preliminary injunction prohibiting the union from picketing plaintiff's offices and vessels (Case No. 126492). Upon posting by plaintiff of a bond in the amount P2,000.00, respondent judge, on February 23, 1960, granted the writ prayed for. The following day the union filed an urgent motion to lift the writ of preliminary injunction. Plaintiff filed its opposition thereto, but before the trial court could act thereon, the union filed the present petition for certiorari. The only issue posed by petitioner is whether or not respondent judge has jurisdiction to take cognizance of the case and, in the affirmative, whether he acted properly in issuing against it, ex parte, the writ of preliminary injunction prayed for. Petitioner contends that the present case falls within the exclusive jurisdiction of the Court of Industrial Relations because of the unfair labor practice charge filed with said court prior to the institution of this case before respondent court; that as this case stems from a labor dispute the law that should govern is Republic Act 875; and that peaceful picketing cannot be enjoined it being part of the freedom of speech guaranteed by the Constitution. Respondent, on the other hand, avers that there being no employer-employee relationship, or labor dispute, between the parties, the case is recognized by the regular courts and the procedure that should be observed in the issuance of the writ of preliminary injunction is the one prescribed by our Rules of Court and not by Republic Act No. 875. While it may be admitted that there is no contractual relation between petitioner and respondent regarding the loading and unloading of cargoes coming from the latter's vessels because the arrastre contract was entered into between respondent and the Besaez and Caete Arrastre Service, we cannot subscribe to the view that there is no labor relation existing between them for it cannot be denied that the members of petitioning union are actually working for the benefit of the shipping firm by loading and unloading the cargoes coming from its vessels. In fact, the picketing undertaken by the members of said union had so affected the interest of that firm that to avoid damages to its property it instituted the present action. As this Court has aptly said, "a labor dispute exists "regardless of whether the disputants stand in the proximate relation of employer and employee", for to constitute a labor dispute only an indirect interests is necessary in order to include a party within its meaning. (Associated Watchmen and Security Union [PTWO], et al. vs. 101 Phil., 896; 54 Off. Gaz. [31] 7397; See also Houston and North Texas Motor Freight Lines vs. Local Union No. 886 of International Brotherhood of Teamsters, Chauffers, Stablement and Helpers of America, D.C. Okl. 1938, 24 F. Supp. 619; 29 USCA p. 86.) We believe, however, that this case does not fall with in the jurisdiction of the regular courts it appearing that there is already pending between the same parties before the Court of Industrial Relations a case involving an unfair labor practice when the

ASSOCIATED LABOR UNION, petitioner, vs. THE HONORABLE JUDGE, JOSE S. RODRIGUEZ, ETC., ET AL., respondents. J.C. Espinas and D. Mendoza for petitioner. E. Reyes for respondent. BAUTISTA ANGELO, J.: This is a petition for certiorari and prohibition with preliminary injunction seeking to enjoin respondent judge from further proceeding with the case filed before him and to nullify the preliminary injunction he issued for want of jurisdiction. It appears that respondent Sweet Lines is a general co-partnership engaged in coast-wise shipping and doing business in the Philippines under the firm name Limpo and Sons. On April 15, 1957, it entered into a contract with the Besaez and Caete Arrastre Service whereby it was agreed that the loading and unloading of the cargoes of respondent's vessels at the port of Cebu will be handled by said arrastre Company. On January 14, 1960, the Besaez and Caete Arrastre Service in turn entered into a

shipping firm initiated the present case before the Court of First Instance of Cebu. 1 And even if we admit, as the record seemingly shows, that when the shipping firm started this case the special prosecutor of the industrial court eliminated said firm from the formal charge of unfair labor practice and only included the arrastre company, still it may be said that the trial court issued illegally the preliminary injunction against the members of the striking union it appearing that in acting on the matter the court did not follow the procedure laid down by Republic Act 875 but instead it applied what is provided for in our Rules of Court. In other words, in a case which involves a labor dispute, as in the present, the court before acting on motion for preliminary injunction shall set the same for hearing, giving notice to the parties, with an opportunity to cross examine the witnesses, and must make a statement that the other conditions required by law as prerequisites for the granting of relief have been complied with. [Section 9 (d), Republic Act 875; Philippine Association of Free Labor Unions (PAFLU), et al. vs. Tan, et al., 99 Phil., 854; Reyes, et al., vs. Tan, et al., 99 PHil., 880; 52 Off. Gaz., No. 14, 6187; Allied Free Workers' Union, et al., vs. Apostol, et al. 102 Phil., 292. That this procedure has not been followed may be seen from the order of the trial court which we quote hereunder for reference: A verified complaint has been filed today by plaintiff, praying among other things, for a writ of preliminary injunction restraining or enjoining the defendant from committing or causing to be committed all acts of picketing plaintiff's office, vessels and premises, until such time that the legality of such pickets is finally determined by this court. Finding the complaint in order and in accordance with the Rules of Court, let a writ of preliminary injunction be issued against the defendant, its members, subordinates, representatives, agents and employees restraining them from performing the acts described above previous to the filing, by the plaintiff, of a bond in the amount of Two thousand Pesos (P2,000.00). Wherefore, petition is granted. The writ of preliminary injunction issued by respondent judge is set aside. The writ of injunction issued by this Court is declared permanent. No costs. Paras, C.J., Bengzon, Padilla, Labrador, Reyes, J.B.L., Barrera, Gutierrez David and Paredes, JJ., concur.

resulting to the termination of the services of herein respondent Dr. Cesar Meris as Chief thereof, was valid. On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris (Dr. Meris),[4] one of its stockholders,[5] as in charge of its Industrial Service Unit (ISU) at a monthly salary of P10,270.00. Until the closure of the ISU on April 30, 1992,[6] Dr. Meris performed dual functions of providing medical services to Capitols more than 500 employees and health workers as well as to employees and workers of companies having retainer contracts with it.[7] On March 31, 1992, Dr. Meris received from Capitols president and chairman of the board, Dr. Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the managements decision to close or abolish the ISU and the consequent termination of his services as Chief thereof, effective April 30, 1992.[8] The notice reads as follows: March 31, 1992 Dr. Cesar E. Meris Chief, Industrial Service Unit Capitol Medical Center Dear Dr. Meris: Greetings! Please be formally advised that the hospital management has decided to abolish CMCs Industrial Service Unit as of April 30, 1992 in view of the almost extinct demand for direct medical services by the private and semi-government corporations in providing health care for their employees . Such a decision was arrived at, after considering the existing trend of industrial companies allocating their health care requirements to Health Maintenance Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and designated hospitals.

THIRD DIVISION CAPITOL MEDICAL CENTER, INC. NAVARETTE-CLEMENTE, - versus DR. CESAR E. MERIS, Respondent. and DR. THELMA

Petitioners,

As a consequence thereof, all positions in the unit will be decommissioned at the same time industrial services [are] deactivated. In that event, you shall be entitled to return to your private practice as a consultant staff of the institution and will become eligible to receive your retirement benefits as a former hospital employee. Miss Jane Telan on the other hand will be transferred back to Nursing Service for reassignment at the CSR. We wish to thank you for your long and faithful service to the institution and hope that our partnership in health care delivery to our people will continue throughout the future. Best regards.

G.R. No. 155098 September 16, 2005 DECISION CARPIO MORALES, J.: Subject of the present appeal is the Court of Appeals Decision[1] dated February 15, 2002 reversing the NLRC Resolution[2] dated January 19, 1999 and Labor Arbiter Decision[3] dated April 28, 1998 which both held that the closure of the Industrial Service Unit of the Capitol Medical Center, Inc.,

Very truly yours, (SGD.) DR. THELMA NAVARETTE-CLEMENTE[9] supplied) (Emphasis and underscoring

Dr. Meris, doubting the reason behind the managements decision to close the ISU and believing that the ISU was not in fact abolished as it continued to operate and offer services to the client companies with Dr. Clemente as its head and the notice of closure was a mere ploy for his ouster in view of his refusal to retire despite Dr. Clementes previous prodding for him to do so, [10] sought his reinstatement but it was unheeded. Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for illegal dismissal and reinstatement with claims for backwages, moral and exemplary damages, plus attorneys fees.[11] Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was a valid and lawful exercise of management prerogatives and there was convincing evidence to show that ISU was being operated at a loss.[12] The decretal text of the decision reads: WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are however ordered to pay complainant all sums due him under the hospital retirement plan. SO ORDERED.[13] (Emphasis supplied) On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the Labor Arbiters decision. It held that in the exercise of Capitols management prerogatives, it had the right to close the ISU even if it was not suffering business losses in light of Article 283 of the Labor Code and jurisprudence.[14] And the NLRC set aside the Labor Arbiters directive for the payment of retirement benefits to Dr. Meris because he did not retire. Instead, it ordered the payment of separation pay as provided under Article 283 as he was discharged due to closure of ISU, to be charged against the retirement fund.[15]

IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set aside, and another one entered 1 declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of respondent Medical Center; 2 ordering respondents to pay petitioner a) backwages from the date of his separation in April 1992 until this decision has attained finality; b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for every year of service with a fraction of at least six (6) months being considered as one year; c) other benefits due him or their money equivalent; d) moral damages in the sum of P50,000.00; e) exemplary damages in the sum of P50,000.00; and f) attorneys fees of 10% of the total monetary award payable to petitioner. SO ORDERED.[22] Hence, the present petition for review assigning to the appellate court the following errors: I . . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER. II . . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND THE NATIONAL LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS NOT INCURRING LOSSES AND THAT IT WAS NOT IN FACT ABOLISHED. III . . . IN NOT UPHOLDING PETITIONERS MANAGEMENT PREROGATIVE TO ABOLISH THE INDUSTRIAL SERVICE UNIT (ISU). IV . . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES AS WELL AS DAMAGES AND ATTORNEYS FEES.[23] Capitol questions the appellate courts deciding of the petition of Dr. Meris on the merits, instead of merely determining whether the administrative bodies acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for review[16] which, in the interest of substantial justice, was treated as one for certiorari.[17] Discrediting Capitols assertion that the ISU was operating at a loss as the evidence showed a continuous trend of increase in its revenue for three years immediately preceding Dr. Meriss dismissal on April 30, 1992,[18] and finding that the ISUs Analysis of Income and Expenses which was prepared long after Dr. Meriss dismissal, hence, not yet available, on or before April 1992, was tainted with irregular entries, the appellate court held that Capitols evidence failed to meet the standard of a sufficient and adequate proof of loss necessary to justify the abolition of the ISU.[19] The appellate court went on to hold that the ISU was not in fact abolished, its operation and management having merely changed hands from Dr. Meris to Dr. Clemente; and that there was a procedural lapse in terminating the services of Dr. Meris, no written notice to the Department of Labor and Employment (DOLE) of the ISU abolition having been made, thereby violating the requirement embodied in Article 283.[20] The appellate court, concluding that Capitol failed to strictly comply with both procedural and substantive due process, a condition sine qua non for the validity of a case of termination,[21] held that Dr. Meris was illegally dismissed. It accordingly reversed the NLRC Resolution and disposed as follows:

The province of a special civil action for certiorari under Rule 65, no doubt the appropriate mode of review by the Court of Appeals of the NLRC decision,[24] is limited only to correct errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction.[25] In light of the merits of Dr. Meris claim, however, the relaxation by the appellate court of procedural technicality to give way to a substantive determination of a case, as this Court has held in several cases,[26] to subserve the interest of justice, is in order. Capitol argues that the factual findings of the NLRC, particularly when they coincide with those of the Labor Arbiter, as in the present case, should be accorded respect, even finality.[27] For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded respect, if not finality, however, the same must be sufficiently supported by evidence on record.[28] Where there is a showing that such findings are devoid of support, or that the judgment is based on a misapprehension of facts,[29] the lower tribunals factual findings will not be upheld. As will be reflected in the following discussions, this Court finds that the Labor Arbiter and the NLRC overlooked some material facts decisive of the instant controversy. Capitol further argues that the appellate courts conclusion that the ISU was not incurring losses is arbitrary as it was based solely on the supposed increase in revenues of the unit from 1989-1991, without taking into account the Analysis of Income and Expenses of ISU from July 1, 1990 to July 1, 1991 which shows that the unit operated at a loss;[30] and that the demand for the services of ISU became almost extinct in view of the affiliation of industrial establishments with HMOs such as Fortunecare, Maxicare, Health Maintenance, Inc. and Philamcare and of tripartite arrangements with medical insurance carriers and designated hospitals,[31] and the trend resulted in losses in the operation of the ISU. Besides, Capitol stresses, the health care needs of the hospital employees had been taken over by other units without added expense to it;[32] the appellate courts decision is at best an undue interference with, and curtailment of, the exercise by an employer of its management prerogatives;[33] at the time of the closure of the ISU, Dr. Meris was already eligible for retirement under the Capitols retirement plan; and the appellate court adverted to the alleged lack of notice to the DOLE regarding Dr. Meriss dismissal but the latter never raised such issue in his appeal to the NLRC or even in his petition for review before the Court of Appeals, hence, the latter did not have authority to pass on the matter. [34] Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. Employers are also accorded rights and privileges to assure their self-determination and independence and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employers privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking. The right to close the operation of an establishment or undertaking is explicitly recognized under the Labor Code as one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

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. In case of termination due to the installation of labor saving devices or redundancy, the worker affected shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis and underscoring supplied) The phrase closures or cessation of operations of establishment or undertaking includes a partial or total closure or cessation.[35] x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees there assigned is a matter that is left to the determination of the employer in the good faith exercise of its management prerogatives. The applicable law in such a case is Article 283 of the Labor Code which permits closure or cessation of operation of an establishment or undertaking not due to serious business losses or financial reverses, which, in our reading includes both the complete cessation of operations and the cessation of only part of a companys business. (Emphasis supplied)

And the phrase closures or cessation x x x not due to serious business losses or financial reverses recognizes the right of the employer to close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their length of service.[36] It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in managements prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss.[37] As long as the companys exercise of the same is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement, such exercise will be upheld.[38] Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business losses but it cannot be an unbridled prerogative to suit the whims of the employer. The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in character.[39] And the burden of proving such falls upon the employer.[40] In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU. From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to the almost extinct demand for direct medical service by the private and semi-government corporations

in providing health care for their employees; and that such extinct demand was brought about by the existing trend of industrial companies allocating their health care requirements to Health Maintenance Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and designated hospitals. The records of the case, however, fail to impress that there was indeed extinct demand for the medical services rendered by the ISU. The ISUs Annual Report for the fiscal years 1986 to 1991, submitted by Dr. Meris to Dr. Clemente, and uncontroverted by Capitol, shows the following: Fiscal Year No. of Industrial Patients 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991 466 580 676 571 759 11 17 14 16 18 No of No. of Capitol Companies 1445 1707 1888 2731 2320[41] Employees

At all events, the claimed losses are contradicted by the accounting records of Capitol itself which show that ISU had increasing revenue from 1989 to 1991. Year 1989 1990 1991 In-Patient Out-Patient Total Income

P230,316.38 P278,438.10 P305,126.35

P 79,477.50 P124,256.65 P152,920.15

P309,793.88 P402,694.75 P458,046.50[45]

The foregoing disquisition notwithstanding, as reflected above, the existence of business losses is not required to justify the closure or cessation of establishment or undertaking as a ground to terminate employment of employees. Even if the ISU were not incurring losses, its abolition or closure could be justified on other grounds like that proffered by Capitol extinct demand. Capitol failed, however, to present sufficient and convincing evidence to support such claim of extinct demand. In fact, the employees of Capitol submitted a petition[46] dated April 21, 1992 addressed to Dr. Clemente opposing the abolition of the ISU. The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on termination of employment. The termination of the services of Dr. Meris not having been premised on a just or authorized cause, he is entitled to either reinstatement or separation pay if reinstatement is no longer viable, and to backwages. Reinstatement, however, is not feasible in case of a strained employer-employee relationship or when the work or position formerly held by the dismissed employee no longer exists, as in the instant case.[47] Dr. Meris is thus entitled to payment of separation pay at the rate of one (1) month salary for every year of his employment, with a fraction of at least six (6) months being considered as one(1) year, [48] and full backwages from the time of his dismissal from April 30, 1992 until the expiration of his term as Chief of ISU or his mandatory retirement, whichever comes first. The award by the appellate court of moral damages,[49] however, cannot be sustained, solely upon the premise that the employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to warrant the grant of moral damages under the Civil Code, such as that the act of dismissal was attended by bad faith or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy; and of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.[50] Such circumstances, however, do not obtain in the instant case. More specifically on bad faith, lack of it is mirrored in Dr. Clementes offer to Dr. Meris to be a consultant of Capitol, despite the abolition of the ISU. There being no moral damages, the award of exemplary damages does not lie.[51] The award for attorneys fees, however, remains.[52] WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is hereby AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering Capitol Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month salary for every year of his employment, with a fraction of at least Six (6) Months being considered as One (1) Year, full

If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente purport to convey, why the number of client companies of the ISU increased from 11 to 18 from 1986 to 1991, as well as the number of patients from both industrial corporations and Capitol employees, they did not explain. The Analysis of Income and Expenses adduced by Capitol showing that the ISU incurred losses from July 1990 to February 1992, to wit: July 1, 1990 to June 30, 1991 July 1, 1991 to

February 29, 1992

INCOME TOTAL EXPENSES

P16, 772.00 P225, 583.70

P35, 236.00 P169,244.34

NET LOSS

P(208,811.70)

P(134,008.34),[42]

was prepared by its internal auditor Vicenta Fernandez,[43] a relative of Dr. Clemente, and not by an independent external auditor, hence, not beyond doubt. It is the financial statements audited by independent external auditors which constitute the normal method of proof of the profit and loss performance of a company.[44]

backwages from the time of his dismissal from April 30, 1992 until the expiration of his term as Chief of the ISU or his mandatory retirement, whichever comes first; other benefits due him or their money equivalent; and attorneys fees. Costs against petitioners. SO ORDERED.

In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a Code of Discipline among employees is a shared responsibility of the employer and the employees. On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code was circulated among the employees and was immediately implemented, and some employees were forthwith subjected to the disciplinary measures embodied therein. Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by Management" ( Rollo, p. 41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the Code had been circulated in limited numbers; that being penal in nature the Code must conform with the requirements of sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that implementation of the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that employees dismissed under the Code be reinstated and their cases subjected to further hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14, Record.) PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and regulations regarding employess' conduct in carrying out their duties and functions, and alleging that by implementing the Code, it had not violated the collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated. In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as defective for, respectively, running counter to the construction of penal laws and making punishable any offense within PAL's contemplation. These provisions are the following: Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and regulations of the company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures and standards, including standards of quality, productivity and behaviour, as issued and promulgated by the company through its duly authorized officials. Any violations thereof shall be punishable with a penalty to be determined by the gravity and/or frequency of the offense. Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The penalty for an offense shall be determined on the basis of his past record of offenses of any nature or the absence thereof. The more habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an employee may be dismissed if the number of his past offenses warrants such penalty in the judgment of management even if each offense considered separately may not warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the other hand, due regard shall be given to the length of time between commission of individual offenses to determine whether the employee's conduct may indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a pattern of incorrigibility. Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was "not totally fault free" considering that while the issuance of rules and regulations governing the conduct of employees is a "legitimate management prerogative" such rules and regulations must meet the test of "reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing provision that makes punishable any

THIRD DIVISION G.R. No. 85985 August 13, 1993 PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents. Solon Garcia for petitioner. Adolpho M. Guerzon for respondent PALEA. MELO, J.:

offense one can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-39, Rollo.) The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that PAL's assertion that it had furnished all its employees copies of the Code is unsupported by documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition of penalties on employees who thought all the while that the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance . . . finds application only after it has been conclusively shown that the law was circulated to all the parties concerned and efforts to disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She thereupon disposed: WHEREFORE, premises considered, respondent PAL is hereby ordered as follows: 1. Furnish all employees with the new Code of Discipline; 2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand the same for further hearing; and 3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision. All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit. SO ORDERED. (p. 40, Rollo.) PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations: Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall govern the conduct of its employees would result in the erosion and deterioration of an otherwise harmonious and smooth relationship between them as did happen in the instant case. There is no dispute that adoption of rules of conduct or discipline is a prerogative of management and is imperative and essential if an industry, has to survive in a competitive world. But labor climate has progressed, too. In the Philippine scene, at no time in our contemporary history is the need for a cooperative, supportive and smooth relationship between labor and management more keenly felt if we are to survive economically. Management can no longer exclude labor in the deliberation and adoption of rules and regulations that will affect them. The complainant union in this case has the right to feel isolated in the adoption of the New Code of Discipline. The Code of Discipline involves security of tenure and loss of employment a property right! It is time that management realizes that to attain effectiveness in its conduct rules, there should be candidness and openness by Management and participation by the union, representing its members. In fact, our Constitution has recognized the principle of "shared responsibility" between employers and workers and has likewise recognized the right of workers to participate in "policy and decision-making process affecting their rights . . ." The latter provision was interpreted by the Constitutional Commissioners to mean participation in "management"' (Record of the Constitutional Commission, Vol. II). In a sense, participation by the union in the adoption of the code if conduct could have accelerated and enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the Code. In fact, labormanagement cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.) Respondent Commission thereupon disposed: WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of Discipline. The pending cases adverted to in the appealed decision if still in the arbitral level,

should be reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained. SO ORDERED. (p. 5, NLRC Decision.) PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.) As stated above, the Principal issue submitted for resolution in the instant petition is whether management may be compelled to share with the union or its employees its prerogative of formulating a code of discipline. PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of responsibility therefor between employer and employee. Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the participation of workers in decision and policy-making processes affecting the rights, duties and welfare." However, even in the absence of said clear provision of law, the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's prerogatives must be without abuse of discretion. In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's right to implement a new system of distributing its products, but gave the following caveat: So long as a company's management prerogatives are 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 or under valid agreements, this Court will uphold them. (at p. 28.) All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative being invoked is clearly a managerial one. A close scrutiny of the objectionable provisions of the Code reveals that they are not purely business-oriented nor do they concern the management aspect of the business of the company as in the San Miguel case. The provisions of the Code clearly have repercusions on the employee's right to security of tenure. The implementation of the provisions may result in the deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on infringement of constitutional rights, we must uphold the constitutional requirements for the protection of labor and the promotion of social justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (Employees Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635). Verily, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of the employees. In treating the latter, management should see to it that its employees are at least properly informed of its decisions or modes action. PAL asserts that all its employees have been furnished copies of the Code. Public respondents found to the contrary, which finding, to say the least is entitled to great respect. PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the functions of

management without having to discuss the same with PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement: The Association recognizes the right of the Company to determine matters of management it policy and Company operations and to direct its manpower. Management of the Company includes the right to organize, plan, direct and control operations, to hire, assign employees to work, transfer employees from one department, to another, to promote, demote, discipline, suspend or discharge employees for just cause; to lay-off employees for valid and legal causes, to introduce new or improved methods or facilities or to change existing methods or facilities and the right to make and enforce Company rules and regulations to carry out the functions of management. The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful manner. Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights to participate in the deliberation of matters which may affect their rights and the formulation of policies relative thereto. And one such mater is the formulation of a code of discipline. Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To promote the enlightenment of workers concerning their rights and obligations . . . as employees." This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the "obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious labor-management relationship and the then already existing state policy of enlightening workers concerning their rights as employees demand no less than the observance of transparency in managerial moves affecting employees' rights. Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in the absence of full cooperation of the employees. Such cooperation cannot be attained if the employees are restive on account, of their being left out in the determination of cardinal and fundamental matters affecting their employment. WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is made as to costs. SO ORDERED. Feliciano, Bidin, Romero and Vitug, JJ., concur. FIRST DIVISION G.R. No. L-53515 February 8, 1989 SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs. HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents. Lorenzo F. Miravite for petitioner. Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIO-AQUINO, J.: This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the "Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaint for unfair labor practice. On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31, 1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows: Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basic monthly compensation plus commission based on their respective sales. (p. 6, Annex A; p. 113, Rollo.) In September 1979, the company introduced a marketing scheme known as the "Complementary Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguel's sales offices. The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme whereby the Route Salesmen were assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer products from them, not from the company. It was alleged that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement because the introduction of the CDS would reduce the take-home pay of the salesmen and their truck helpers for the company would be unfairly competing with them. The complaint filed by the petitioner against the respondent company raised two issues: (1) whether the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of busting the union. In its order of February 28, 1980, the Minister of Labor found: ... We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new sales scheme was designed to discourage union organization or diminish its influence, but rather it is undisputable that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the same time gain profit to the highest. While it may be admitted that the introduction of new sales plan somewhat disturbed the present set-up, the change however was too insignificant as to convince this Office to interpret that the innovation interferred with the worker's right to self-organization. Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the plan's viability and effectiveness. It is like saying that the plan will not work out to the workers' [benefit] and therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact that corollary to the adoption of the assailed marketing technique is the effort of the company to compensate whatever loss the workers may suffer because of the new plan over and above than what has been provided in the collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any anti-union hues. (pp. 24-25, Rollo.) The dispositive part of the Minister's Order reads: WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay an

additional three (3) months back adjustment commissions over and above the adjusted commission under the complementary distribution system. (p. 26, Rollo.) The petition has no merit. Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives: Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.) (Emphasis ours.) Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled: ... Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. So long as a company's management prerogatives are 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 or under valid agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the members of its sales force who will be adversely affected by the implementation of the CDS by paying them a so-called "back adjustment commission" to make up for the commissions they might lose as a result of the CDS proves the company's good faith and lack of intention to bust their union. WHEREFORE, the petition for certiorari is dismissed for lack of merit. SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

This refers to a petition for review of the decision of the then Secretary of Labor Blas Ople handed down on February 7, 1975 which set aside the decision of the Arbitrator ordering reinstatement with backwages, and instead adjudged the payment of separation pay; and the resolution dated July 24, 1975 denying petitioner's motion for reconsideration for lack of merit. The undisputed facts as found by the Secretary of Labor are as follows: . . . Complainants Agapito Duro, Alfredo Torio, and Rustico Javillonar, were dismissed from their employment after an application for clearance to terminate them was approved by the Secretary of Labor on December 19, 1972. Respondent's application for clearance was premised on "willful violation of Company regulations, gross insubordination and refusal to submit to a Company investigation . . . ." Prior events leading to the dismissal of complainants are recited in the Arbitrator's decision, which we quote: It appears that the Company is operating on three (3) shifts namely: morning, afternoon and night shifts. The workers in the third shift normally work from Monday to Saturday, the last working day being Friday or forty (40) hours a week or from Monday to Friday. Sometime in July 1972, there seems to be a change in the working schedule from Monday to Friday as contained in the collective bargaining agreement aforecited to Sunday thru Thursday. The change became effective July 5, 1972. The third shift employees were required to start the new work schedule from Sunday thru Thursday. On November 6, 1972, the night shift employees filed a demand to maintain the old working schedule from Monday thru Friday. (Letter of November 6, 1972 addressed to the Committee on Labor Relation, UCLU). The demand was referred to the Labor Management Relation Committee and discussed from November 15, up to November 24, 1972. In the discussions had, it was arrived at that all night shift operating personnel were allowed to start their work Monday and on Saturday. This excepted the employees in the maintenance and preparation crews whose work schedule is presumed to be maintained from Sunday to Thursday. The work schedule between management representatives and the alleged officers of the Union (Varias group) was approved and disseminated to take effect November 26, 1972. (Exh. "2" Respondent). In manifestation of their dissention to the new work schedule, the three respondents Duro, Torio, and Javillonar did not report for work on November 26, 1972 which was a Sunday since it was not a working day according to the provisions of the Collecrtive Bargaining Agreement. (Exh. "A" Complainant). Their absence caused their suspension for fourteen (14) days. (pp. 29-30, Rollo). On May 4, 1973, the Arbitrator rendered a decision ordering the reinstatement with backwages of the complainants. On June 8, 1973, the National Labor Relations Commission dismissed respondent company's appeal for having been filed out of time. A motion for reconsideration which was treated as an appeal was then filed by respondent company before the Secretary of Labor, resulting in the modification of the Arbitrator's decision by awarding complainants separation pay. A motion for reconsideration subsequently filed by the petitioner was denied for lack of merit. Hence, this petition.

THIRD DIVISION G.R. NO. 41314 November 13, 1992 UNION CARBIDE LABOR UNION (NLU), petitioner, vs. UNION CARBIDE PHILIPPINES, INC. AND THE HON. SECRETARY OF LABOR, respondents. MELO, J.:

The main issue in this case is whether or not the complainants could be validly dismissed from their employment on the ground of insubordination for refusing to comply with the new work schedule. Petitioner alleges that the change in the company's working schedule violated the existing Collective Bargaining Agreement of the parties. Hence, complainants cannot be dismissed since their refusal to comply with the re-scheduled working hours was based on a provision of the Collective Bargaining Agreement. Petitioner further contends that the dismissal of the complainants violated Section 9, Article II of the 1973 Constitution which provides "the right of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work." The petition has no merit. Although Article XIX of the CBA provides for the duration of the agreement, which We quote: This agreement shall become effective on September 1, 1971 and shall remain in full force and effect without change until August 31, 1974. Unless the parties hereto agree otherwise, negotiation for renewal, or renewal and modification, or a new agreement may not be initiated before July 1, 1974. this does not necessarily mean that the company can no longer change its working schedule, for Section 2, Article II of the same CBA expressly provides that: Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole and exclusive right and power, among other things, to direct the operations and the working force of its business in all respects; to be the sole judge in determining the capacity or fitness of an employee for the position or job to which he has been assigned; to schedule the hours of work, shifts and work schedules; to require work to be done in excess of eight hours or Sundays or holidays as the exigencies of the service may require; to plan, schedule, direct, curtail and control factory operations and schedules of production; to introduce and install new or improved methods or facilities; to designate the work and the employees to perform it; to select and hire new employees; to train new employees and improve the skill and ability of employees from one job to another or form one shift to another; to classify or reclassify employees; and to make such changes in the duties of its employees as the COMPANY may see fit or convenient for the proper conduct of its business. Verily and wisely, management retained the prerogative, whenever exigencies of the service so require, to change the working hours of its employees. And as long as such prerogative is 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 or under valid agreements, this Court will uphold such exercise (San Miguel Brewery Sales Force Union (PTGWO) vs. Ople, 170 SCRA 25 [1989]). Thus, in the case of Abbott Laboratories (Phil.), Inc. vs. NLRC (154 SCRA 713 [1987]), We ruled: . . . Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. (p.717) Further, the incident complained of took place sometime in 1972, so there is no violation of the 1973 Constitution to speak of because the guarantee of security of tenure embodied under Section 9, Article

II may not be given a retroactive effect. It is the basic norm that provisions of the fundamental law should be given prospective application only, unless legislative intent for its retroactive application is so provided. As pointed out by Justice Isagani Cruz, to wit: Finally, it should be observed that the provisions of the Constitution should be given only a prospective application unless the contrary is clearly intended. Were the rule otherwise, rights already acquired or vested might be unduly disturbed or withdrawn even in the absence of an unmistakable intention to place them within the scope of the Constitution. (p.10, Constitutional Law, Isagani Cruz, 1991 Edition) We agree with the findings arrived at by both Arbitrator and the Secretary of Labor that there is no unfair labor practice in this case. Neither was there gross and habitual neglect of complainants' duties. Nor did the act of complainants in refusing to follow the new working hours amount to serious misconduct or willful disobedience to the orders of respondent company. Although no serious objections may be offered to the Arbitrator's conclusion to order reinstatement with backwages of the complainants, We now refrain from doing so considering that reinstatement is no longer feasible due to the fact that the controversy started more than 20 years ago aside from the obviously strained relations between the parties. WHEREFORE, the decision appealed from is hereby AFFIRMED. SO ORDERED. Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

NATIONAL LABOR RELATIONS COMMISSION and VICTORIAS MILLING COMPANY, INC. respondents. Legaspi, Rufon, Necesario & Asso. Law Office for petitioner. Decena, Tabat, Jardaleza & Taoso Law Office for private respondent. QUIASON, J.: This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the Decision of the Fourth Division of the National Labor Relations Commission (NLRC) in Case No. 06-0210081-89 which dismissed petitioners appeal and its Resolution dated March 20, 1992, which denied petitioners motion for reconsideration. We dismiss the petition. I Petitioner retired from the service of private respondent upon reaching the age of sixty under its regular retirement program. He was granted an extention of service by the Board of Directors of private respondent under a "Special Contract of Employment." The contract provided, inter alia, that its term was for a period of one year commencing on August 1, 1988; that petitioner was employed as Head of the Warehousing, Sugar, Shipping and Marine Department; and that he was to receive a basic salary of P6,941.00 per month. Private respondent issued Memorandum No. 1012-PS dated December 12, 1988 and Memorandum No. 1028-PS dated January 16, 1989, both providing for a rotation of the personnel and other organizational changes. Pursuant to the memoranda, petitioner was transferred to the Sugar Sales Department. Petitioner protested his transfer and requested a reconsideration thereof, which was denied. Consequently, on February 27, 1989, petitioner filed a complaint for illegal dismissal, contending that he was constructively dismissed from his employment (RAB IV Case No. 06-02-10081-89). In support of his decision holding that there was no constructive dismissal of petitioner, the Labor Arbiter said that: (1) petitioner was transferred to the Sugar Sales Department from the Warehousing, Sugar, Shipping and Marine Department, both of which are under the Sugar Sales Area; (2) petitioners transfer was without change in rank or salary; (3) petitioners designation in either department was the same; (4) the personnel rotation was pursuant to organizational changes done in the valid exercise of management prerogatives; (5) there was no bad faith in the transfer of petitioner, as other employees similarly situated as he were likewise affected; and (6) petitioner failed to show that he was prejudiced by the changes or transferred to a demeaning or humiliating position. Petitioner appealed to the NLRC which, in a resolution dated January 13, 1992, affirmed the Labor Arbiters decision. In a resolution dated March 20, 1992, the NLRC denied petitioners motion for reconsideration. II In this petition, petitioner contends that there was no valid exercise of management prerogative because: (1) his transfer violated the "Special Contract of Employment" which was the law between the parties; and (2) said transfer was unreasonable and caused inconvenience to him.

FIRST DIVISION G.R. No. 106107 June 2, 1994 AGUSTIN CHU, petitioner, vs.

Petitioner argues that private respondents prerogative to transfer him was limited by the "Special Contract of Employment," which was the "law" between the parties. Thus, petitioner urges that private respondent, by employing him specifically as Head of the Warehousing, Sugar, Shipping, and Marine Department, waived its prerogative to reassign him within the term of the contract to another department. We disagree. An owner of a business enterprise is given considerable leeway in managing his business because it is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes certain rights as inherent in the management of business enterprises. These rights are collectively called management prerogatives or acts by which one directing a business is able to control the variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as the freedom to administer the affairs of a business enterprise such that the costs of running it would be below the expected earnings or receipts. In short, the elbow room in the quest for profits" (Fernandez and Quiason, The Law on Labor Relations, 1963 ed., p. 43). One of the prerogatives of management, and a very important one at that, is the right to transfer employees in their work station. In Philippine Japan Active Carbon Corporation v. National Labor Relations Commission, 171 SCRA 164 (1989), we held: It is the employers prerogative, based on its assessment and perception of its employees qualifications, aptitudes, and competence to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employees right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. In Abbot Laboratories (Phils.) Inc. v. NLRC, 154 SCRA 713 (1987), we also held in referring to the prerogative of transfer of employees, that: This is a function associated with the employers inherent right to control and manage effectively its enterprise. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. Of course, like other prerogatives, the right to transfer or re-assign is subject to limitations arising under the law, contract or general principles of fair play and justice (Abbot Laboratories (Phil.) Inc. v. NLRC, 154 SCRA 713 [1987]). Jurisprudence proscribes transfers or re-assignments of employees when such acts are unreasonable and cause inconvenience or prejudice to them (Philippine Japan Active Carbon Corporation v. NLRC, supra). We find nothing in the "Special Contract of Employment" invoked by petitioner wherein private respondent had waived its right to transfer or re-assign petitioner to any other position in the company. Before such right can be deemed to have been waived or contracted away, the stipulation to that effect must be clearly stated so as to leave no room to doubt the intentions of the parties. The mere specification in the employment contract of the position to be held by the employee is not such stipulation.

As held in Philippine Japan Active Carbon Corporation v. National Labor Relations Commission, supra: An employees right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogatives to change his assignment or transfer him where he will be most useful. Petitioners bare assertion that the transfer was unreasonable and caused him inconvenience cannot override the fact, as found by the Labor Arbiter and respondent Commission, that the rotation was made in good faith and was not discriminatory, and that there was no demotion in rank or a diminution of his salary, benefits and privileges. WHEREFORE, the petition for certiorari is DISMISSED. SO ORDERED. Davide, Jr., Bellosillo and Kapunan, JJ., concur. Cruz, J., is on leave.

CALTEX REFINERY EMPLOYEES ASSOCIATION (CREA) and ARNELIO M. CLARETE, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (Third Division), CALTEX PHILIPPINES, INC. and/or EDGARDO C. CATAQUIS, respondents. QUIASON, J.: This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse the Resolution dated August 30, 1991 of the National Labor Relations Commission (NLRC) in NLRC Case No. L-000063 and its Resolution dated October 15, 1991 denying the motion for reconsideration of the decision. I Petitioner Arnelio M. Clarete was hired by respondent Caltex Philippines, Inc. (Caltex) as Mechanic C on November 3, 1981. He was later promoted to the position of Mechanic B and assigned to the Mechanical/Metal Grades Section of respondent Caltex's refinery in San Pascual, Batangas. According to Clarete, at about 4:00 p.m. on April 13, 1989, on his way to the refinery's main gate after completing a day's work at the Maintenance Area IV, he saw on a pile of rubbish a bottle of lighter fluid, which mechanics use to remove grease from their hands. He picked up the bottle and placed it in the basket attached to the handlebar of his bicycle with the intention of asking the security guard at the gate to allow him to bring it home. Upon reaching the gate, he took the bottle of lighter fluid from the basket, punched out his time card at the bundy clock and then asked Juan de Villa, the security guard on duty, permission to take home the bottle. Replying that he was not authorized to grant the permission sought, de Villa referred Clarete to Dominador Castillo, the security supervisor. When so approached, however, Castillo told Clarete to leave the bottle in his office. Clarete complied and left for home. Respondent Caltex gave a different version of the incident: On said date, de Villa noticed a black bag which Clarete did not submit for inspection. When requested by de Villa to open the same for inspection, Clarete retorted that it was not necessary to inspect the bag as it contained only dirty clothes. Unconvinced, de Villa opened the bag and found a one-liter sample bottle filled with lighter fluid surreptitiously hidden inside in the sleeves of Clarete's working clothes, which, in turn, were covered by other clothes. When asked if he had a gate pass to bring the bottle out of the premises, Clarete replied that he did not secure a gate pass as the lighter fluid was for his personal use. On April 18, 1989, Clarete received a letter from his immediate supervisor, requiring him to explain in writing why he should not be subjected to disciplinary action for violation of company rules and regulations. In his written explanation of April 20, 1989, Clarete stated: (1) that he had no intention of bringing the bottle of lighter fluid out of the company premises without the guard's permission; (2) that he did seek permission but was denied; and (3) that he left the bottle behind with the guard when told to do so. On August 16, 1989, Clarete was charged with the crime of theft before the Municipal Trial Court of San Pascual, Batangas (Criminal Case No. 3331). On October 19, 1989, he received a letter from Antonio Z. Palad, Section Head, Mechanical/Metal Section, requiring him to explain why his services should not be terminated for cause in view of Criminal Case No. 3331 and his violation of the "policy on disciplinary action per G.M. Circular No. 484 of August 28, 1974, specifically '(f) Removing or attempting to remove Company property from the Refinery without authorization.'" (Rollo, p. 58). FIRST DIVISION In reply, Clarete requested time to consult his lawyer, which request respondent Caltex granted on November 14, 1989. Clarete was given up to November 30, 1989 to submit his explanation. However, instead of submitting a written explanation, petitioner served a letter on Palad, requesting a formal investigation of the allegations against him, at the same time, invoking his right to be represented by the Union and his legal counsel. The request was granted and a hearing was scheduled on January 5, 1990. Said hearing, as well as a subsequent one, was however deferred upon the request of Clarete.

G.R. No. 102993 July 14, 1995

Believing that Clarete has been given enough time to consult his lawyer and to prepare his explanation, a final meeting was scheduled on February 27, 1990. At the said meeting, Clarete, through counsel, requested a formal trial-type investigation of the case. A letter reiterating that request was addressed by Clarete's counsel to Palad on March 12, 1990. In his letter dated April 26, 1990, Palad denied the request on the ground that a trial-type hearing and confrontation of witnesses were not applicable to the company's administrative fact-finding investigation. Clarete was then given only up to May 4, 1990 to submit his written explanation. He finally did so on May 3, 1990. In the meantime, on April 19, 1990, a decision was rendered in Criminal Case No. 3331, acquitting Clarete of the crime charged based on the insufficiency of the evidence to establish his guilt beyond reasonable doubt. On August 20, 1990, Clarete was informed that his services were being terminated effective August 24, 1990 for "serious misconduct and loss of trust and confidence resulting from your having violated a lawful order of the Company, i.e., GM Circular No. 484 of 8-28-74 which gave notice that the Company considers 'removing or attempting to remove Company property from the Refinery without authorization' to be sufficiently serious that the erring employee be dismissed." (Rollo, p. 63). Clarete was placed under preventive suspension with pay upon notice up to the termination of his services on August 24, 1990. On August 27, 1990, Clarete filed a complaint for illegal dismissal against private respondents Caltex and/or Edgardo C. Cataquio, in his capacity as Vice President of the Company with the Regional Arbitration Branch IV of the National Labor Relations Commission. On January 15, 1991, Labor Arbiter Joaquin A. Tanodra rendered a decision, finding Clarete neither culpable of theft nor of violating GM Circular No. 484 of August 28, 1974 as "his purpose in going to security guard de Villa was precisely to ask the latter's permission to bring out the lighter fluid from the Refinery Compound." ( Rollo, p. 27). He, therefore, directed the reinstatement of Clarete with full back wages which then totaled P40,081.60, without loss of seniority rights and other privileges. On appeal by private respondents, NLRC rendered judgment on August 20, 1991, vacating the decision of the Labor Arbiter and entering a new one dismissing the complaint for lack of merit. NLRC gave credence to the version of respondent Caltex of the incident. It found no reason to doubt the veracity of the narration of the security guard, who was simply doing his job of protecting the property of private respondent and who was not shown to hold a personal grudge or ill motive to testify falsely against Clarete. Nonetheless, NLRC awarded Clarete financial assistance equivalent to one month salary for every year of service in the amount of P76,752.00. Both parties moved for reconsideration Clarete, on the ground that his dismissal was without valid cause as there was no violation of company rules, and private respondents on the ground that Clarete was not entitled to the award of financial assistance pursuant to the ruling in Philippine Long Distance Telephone Company v. National Labor Relations Commission, 164 SCRA 671 (1988). Hence, this petition filed by Clarete and The Caltex Refinery Employees Association, the exclusive bargaining representative of all rank and file employees of respondent Caltex. II Petitioners contend that NLRC acted with grave abuse of discretion calling for the exercise of this Court's corrective power. They maintain that Clarete's version of the incident is more in accord with logic and common experience. They further allege that loss of confidence, to be valid ground for dismissal, must be based on just and duly substantiated causes. Since Clarete's position as mechanic is not one of trust and does not involve the production, safekeeping or even the handling of lighter fluid, his act of picking up the bottle of lighter fluid with the intention of asking permission to bring it home, cannot serve as basis for loss of confidence. Respondent Caltex, on the other hand, asserts that G.M. Circular No. 484 was issued pursuant to its management prerogative to prescribe rules and regulations necessary for the conduct of its business and specifically to put a stop to rampant pilferages of company property by its employees, which has resulted not only in substantial losses in its operations but also in the

perceptible breakdown in employee discipline. The findings of fact of NLRC, which are supported by evidence on record, show that petitioner Clarete attempted to remove a bottle of lighter fluid owned by respondent Caltex from the company premises; therefore, Clarete committed not only a serious misconduct but also a willful breach of trust and confidence reposed upon him in the performance of his duties. The loss of trust and confidence is not precluded by the fact that Clarete's position does not require the safekeeping or handling a lighter fluid. If this were the rule, an employee may then help himself to his employer's property without fear of disciplinary action as long as the property taken was not entrusted to his care or is not related to his function. III The prerogative of employers to regulate all aspects of employment subject to the limitation of special laws is recognized. A valid exercise of management prerogative encompasses hiring, work assignments, working methods, time, place and manner of work, tools to be used, procedure to be followed, supervision of workers, working regulations, transfer of employees, discipline, dismissal and recall of workers. (San Miguel Corporation v. Ubaldo, 218 SCRA 293 [1993]). This prerogative must, however, be exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating the rights of the employees granted by law or contract. (Garcia v. Manila Times, 224 SCRA 399 [1993]). There are restrictions to guide the employers in the exercise of management prerogatives, particularly the right to discipline or dismiss employees, for both the Constitution and the law guarantee employees' security of tenure. Thus, employees may be dismissed only in the manner provided by law. (Radio Communications of the Phil., Inc. v. National Labor Relations Commission, 223 SCRA 656 [1993]). The right of the employer must not be exercised arbitrarily and without just cause. Otherwise, the constitutional mandate of security of tenure of the workers would be rendered nugatory. (China City Restaurant Corporation v. National Labor Relations Commission, 217 SCRA 443 [1993]). We concur in NLRC's conclusion that the version of respondent Caltex of the incident under consideration is more credible. As correctly pointed out by NLRC, there is no reason to doubt the veracity of the Report of Security Guard Juan de Villa dated April 14, 1989 and his Sinumpaang Salaysay dated April 21, 1989 as "he simply did what he was primarily tasked to do to protect the company property and to apprehend misdeeds committed thereat neither ill motive nor personal grudge against complainant-appellee (Clarete) was attributed to him to falsely testify against the former" (Rollo, p. 36). Undoubtedly, the lighter fluid is a property of private respondent and to take the same out of its premises without the corresponding gate pass is a violation of company rules on theft and pilferage of company property. But while Clarete may be guilty of violation of company rules, we find the penalty of dismissal imposed upon him by respondent Caltex too harsh and unreasonable. As enunciated in Radio Communications of the Philippines, Inc. v. National Labor Relations Commission, supra, "such a penalty (of dismissal) must be commensurate with the act, conduct or omission imputed to the employee and imposed in connection with the employer's disciplinary authority" (at p. 667). Even when there exist some rules agreed upon between the employer and employee on the subject of dismissal, we have ruled in Gelmart Industries Phils., Inc. v. National Labor Relations Commission, 176 SCRA 295 (1989), that the same cannot preclude the State from inquiring on whether its rigid application would work too harshly on the employee. Of the same mind is the Solicitor General who, invoking Gelmart Industries, prayed in his Manifestation, in lieu of Comment, that the assailed decision of NLRC be set aside and reinstatement of petitioner Clarete be ordered. Indeed, considering that Clarete has no previous record in his eight years of service; that the value of the lighter fluid, placed at P8.00, is very minimal compared to his salary of P325.00 a day; that after his dismissal, he has undergone mental torture; that respondent Caltex did not lose anything as the bottle of lighter fluid was retrieved on time; and that there was no showing that Clarete's retention in the service would work undue prejudice to the viability of employer's operations or is patently inimical to its interest, we hold that the penalty of dismissal imposed on Clarete is unduly harsh and grossly disproportionate to the reason for terminating his employment. Hence, we find that the preventive suspension imposed upon private respondent is a sufficient penalty for the misdemeanor committed by petitioner. (Gelmart Industries Phils., Inc. v. National Labor Relations Commission, supra).

Since the dismissal took place on August 24, 1990, or after the passage of R.A. No. 6715, Clarete is entitled to reinstatement without loss of seniority rights and other privileges and his full back wages 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. (Maranaw Hotels and Resorts Corporation v. Court of Appeals, 215 SCRA 501 [1992]). As in the case of Pines City v. National Labor Relations Commission, 224 SCRA 110 (1993) and Pines City Educational Center v. National Labor Relations Commission, 227 SCRA 655 (1993), the Court stated that in ascertaining the total amount of back wages payable to them, we go back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. (Itogon-Suyoc Mines, Inc. v. Sangilo-Itogon Workers' Union, et al., 24 SCRA 873 [1968]). Inasmuch as petitioner received pay during his preventive suspension, the same must also be deducted from the monetary awards to be received by him. WHEREFORE, the Resolution of National Labor Relations Commission dated August 30, 1991 is REVERSED and SET ASIDE. Respondent Caltex Phil., Inc. is ORDERED to reinstate petitioner Clarete to his former position of Mechanic B without loss of seniority rights and to pay him his full back wages inclusive of allowances, and other benefits or their monetary equivalent pursuant to Art. 279 of the Labor Code, as amended by Section 34 of R.A. No. 6715, computed from the time his compensation was withheld from him up to the time of his actual reinstatement deducting therefrom the amount received by petitioner during his preventive suspension and any income earned elsewhere during the period of dismissal if any. No pronouncement as to costs. SO ORDERED. Davide, Jr. and Kapunan, JJ., concur. Bellosillo, J., is on leave.

WILTSHIRE FILE CO., INC., petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents. Angara, Abello, Concepcion, Regala & Cruz for petitioner. Jose R. Millares & Associates for private respondent. FELICIANO, J.: Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc. ("Wiltshire") from 16 March 1981 up to 18 June 1985. As such, he received a monthly salary of P14,375.00 excluding commissions from sales which averaged P5,000.00 a month. He also enjoyed vacation leave with pay equivalent to P7,187,50 per year, as well as hospitalization privileges to the extent of P10,000.00 per year. On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad, he was informed by the President of petitioner Wiltshire that his services were being terminated. Private respondent maintains that he tried to get an explanation from management of his dismissal but to no avail. On 18 June 1985, when private respondent again tried to speak with the President of Wiltshire, the company's security guard handed him a letter which formally informed him that his services were being terminated upon the ground of redundancy. Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal dismissal alleging that his position could not possibly be redundant because nobody (save himself) in the company was then performing the same duties. Private respondent further contended that retrenching him could not prevent further losses because it was in fact through his remarkable performance as Sales Manager that the Company had an unprecedented increase in domestic market share the preceding year. For that accomplishment, he continued, he was promoted to Marketing Manager and was authorized by the President to hire four (4) Sales Executives five (5) months prior to his termination. In its answer, petitioner company alleged that the termination of respondent's services was a cost-cutting measure: that in December 1984, the company had experienced an unusually low volume of orders: and that it was in fact forced to rotate its employees in order to save the company. Despite the rotation of employees, petitioner alleged; it continued to experience financial losses and private respondent's position, Sales Manager of the company, became redundant. On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a letter 1 addressed to the Regional Director of the then Ministry of Labor and Employment, notified that official that effective 2 January 1987, petitioner would close its doors permanently due to substantial business losses. In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private respondent's services illegal and ordered petitioner to pay private respondent backwages in the amount of P299,000.00, unpaid salaries in the amount of P22,352.11, accumulated sick and vacation leaves in the amount of P12,543.91, hospitalization benefit package in the amount of P10,000.00, unpaid commission in the amount of P57,500,00, moral damages in the amount of P100,000.00 and attorney's fees in the amount of P51,639.60. On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC") affirmed in toto on 9 February 1988 the decision of the Labor Arbiter. The NLRC held that: The termination letter clearly spelled out that the main reason in terminating the services of complainant is REDUNDANT and not retrenchment. The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is absent that would justify redundancy. . . . On the claim for moral damages, the NLRC pointed out that the effective date of private respondent's termination was 18 July 1985, although it was only 18 June 1985 that he received the letter of termination, and concluded that he was not given any

G.R. No. 82249 February 7, 1991

opportunity to explain his position on the matter. The NLRC held that the termination was attended by malice and bad faith on the part of petitioner, considering the manner of private respondent was ordered by the President to pack up and remove his personal belongings from the office. Private respondent was said to have been embarrassed before his immediate family and other acquaintance due to his inability to explain the reasons behind the termination of his services. In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified and not illegal. Petitioner maintains that it had been incurring business losses beginning 1984 and that it was compelled to reduce the size of its personnel force. Petitioner also contends that redundancy as a cause for termination does not necessarily mean duplication of work but a "situation where the services of an employee are in excess of what is demanded by the needs of an undertaking . . ." Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner had serious financial difficulties before, during and after the termination of the services of private respondent. For one thing, the audited financial statements of the petitioner for its fiscal year ending on 31 July 1985 prepared by a firm of independent auditors, showed a net loss in the amount of P4,431,321.00 and a total deficit or capital impairment at the end of year of P6,776,493.00. 2 In the preceding fiscal year (1983-1984), while the company showed a net after tax income of P843,506.00, it actually suffered a deficit or capital impairment of P2,345,172.00. Most importantly, petitioner Wiltshire finally closed its doors and terminated all operations in the Philippines on January 1987, barely two (2) years after the termination of private respondent's employment. We consider that finally shutting down business operations constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court finds it very difficult to suppose that petitioner Wiltshire would take the final and irrevocable step of closing down its operations in the Philippines simply for the sole purpose of easing out a particular officer or employee, such as the private respondent. Turning to the legality of the termination of private respondent's employment, we find merit in petitioner's basic argument. We are unable to sustain public respondent NLRC's holding that private respondent's dismissal was not justified by redundancy and hence illegal. In the first place, we note that while the letter informing private respondent of the termination of his services used the word "redundant", that letter also referred to the company having "incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to prevent further losses". 3 Thus, what the letter was in effect saying was that because of financial losses, retrenchment was necessary, which retrenchment in turn resulted in the redundancy of private respondent's position. In the second place, we do not believe that 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 the 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 our 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. 4 The employer has no legal obligation to keep in its payroll more employees than are necessarily for the operation of its business. In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its volume of sales and in order to cut down its operating expenses, effected some changes in its organization by abolishing some positions and thereby effecting a reduction of its personnel. Thus, the position of Sales Manager was abolished and the duties previously discharged by the Sales Manager simply added to the duties of the General Manager, to whom the Sales Manager used to report. It is of no legal moment that the financial troubles of the company were not of private respondent's making. Private respondent cannot insist on the retention of his position upon the ground that he had not contributed to the financial problems of Wiltshire. The characterization of private respondent's services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of business judgment on the part of petitioner company. The wisdom or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown. It should also be noted that the position held

by private respondent, Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v. National Labor Relations Commission, 5 the Court held: An employer has a much wider discretion in terminating the employment relationship of managerial personnel as compared to rank and file employees. However, such prerogative of management to dismiss or lay off an employee must be made without abuse of discretion, for what is at stake is not only the private respondent's position but also his means of livelihood . . . . 6 The determination of the continuing necessity of a particular officer or position in a business corporation is management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown. 7 On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal was done in bad faith. Petitioner argues that it had complied with the one-month notice required by law; that there was no need for private respondent to be heard in his own defense considering that the termination of his services was for a statutory or authorized cause; and that whatever humiliation might have been suffered by private respondent arose from a lawful cause and hence could not be the basis of an award of moral damages. Termination of an employee's services because of retrenchment to prevent further losses or redundancy, is governed by Article 283 of the Labor Code which provides as follows: 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. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. Termination of services for any of the above described causes should be distinguished from termination of employment by reason of some blameworthy act or omission on the part of the employee, in which case the applicable provision is Article 282 of the Labor Code which provides as follows: Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing. Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to Implement the Labor Code" read as follows: Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice shall be served at the worker's last known address.

xxx xxx xxx Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires. (emphasis supplied) We note that Section 2 of Rule XIV quoted above requires the notice to specify "the particular acts or omissions constituting the ground for his dismissal", a requirement which is obviously applicable where the ground for dismissal is the commission of some act or omission falling within Article 282 of the Labor Code. Again, Section 5 gives the employee the right to answer and to defend himself against "the allegations stated against him in the notice of dismissal". It is such allegations by the employer and any counter-allegations that the employee may wish to make that need to be heard before dismissal is effected. Thus, Section 5 may be seen to envisage charges against an employee constituting one or more of the just causes for dismissal listed in Article 282 of the Labor Code. Where, as in the instant case, the ground for dismissal or termination of services does not relate to a blameworthy act or omission on the part of the employee, there appears to us no need for an investigation and hearing to be conducted by the employer who does not, to begin with, allege any malfeasance or non-feasance on the part of the employee. In such case, there are no allegations which the employee should refute and defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private respondent would have had the right to be present, on the business and financial circumstances compelling retrenchment and resulting in redundancy, would be to impose upon the employer an unnecessary and inutile hearing as a condition for legality of termination. This is not to say that the employee may not contest the reality or good faith character of the retrenchment or redundancy asserted as grounds for termination of services. The appropriate forum for such controversion would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by the employer itself. It is precisely for this reason that an employer seeking to terminate services of an employee or employees because of "closure of establishment and reduction of personnel", is legally required to give a written notice not only to the employee but also to the Department of Labor and Employment at least one month before effectivity date of the termination. In the instant case, private respondent did controvert before the appropriate labor authorities the grounds for termination of services set out in petitioner's letter to him dated 17 June 1985. We hold, therefore, that the NLRC's finding that private respondent had not been accorded due process, is bereft of factual and legal bases. The award of moral damages that rests on such ground must accordingly fall. While private respondent may well have suffered personal embarrassment by reason of termination of his services, such fact alone cannot justify the award of moral damages. Moral damages are simply a species of damages awarded to compensate one for injuries brought about by a wrongful act. 8 As discussed above, the termination of private respondent's services was not a wrongful act. There is in this case no clear and convincing evidence of record showing that the termination of private respondent's services, while due to an authorized or statutory cause, had been carried out in an arbitrary, capricious and malicious manner, with evident personal ill-will. Embarrassment, even humiliation, that is not proximately caused by a wrongful act does not constitute a basis for an award of moral damages. Private respondent is, of course, entitled to separation pay and other benefits under Act 283 of the Labor Code and petitioner's letter dated 17 June 1985. ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The Resolutions of the National Labor Relations Commission dated 9 February 1988 and 7 March 1988 are hereby SET ASIDE and NULLIFIED. The Temporary Restraining Order issued by this Court on 21 March 1988 is hereby made PERMANENT. No pronouncement as to costs. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur. SECOND DIVISION G.R. No. 73287 May 18, 1987

INTERNATIONAL HARVESTER MACLEOD, INC., petitioner, vs. HON. INTERMEDIATE APPELLATE COURT & DIOSDADO L. JOSON, respondents. Siguion Reyna, Montecilto & Ongsiako Law Office for petitioner. Atienza, Tabora, Del Rosario & Castillo Law Office for private respondent JosonPARAS, J.: This is a petition for review on certiorari of the decision * of the Court of Appeals dated December 9, 1985 in AC-G.R. CV No. 67923 entitled Diosdado L. Joson v. Richard Quinlan, Eduard Lim and International Harvester Macleod, Inc. (IHMI) which affirmed the decision ** of the Court of First Instance of Manila in Civil Case No. 110444 finding that plaintiff (private respondent herein) has no cause of action against defendant Richard Quinlan and Eduard Lim, both having acted merely as officers of the corporation but has a legitimate cause against defendant IHMI, and that the position of private respondent had not become redundant so that his termination was illegal, and his acceptance of his retirement benefits did not operate as a bar against his suit for damages. The dispositive portion of the trial court's decision reads: WHEREFORE, in view of the findings of the Court, judgment is hereby rendered in favor of the plaintiff and defendant IHMI is hereby ordered to pay the plaintiff moral damages in the sum of P800,000.00; exemplary damages, in the sum of P200,000.00; attorney's fees and expenses of litigation in the amount of P30,000.00 and to pay the costs. The case against defendants Richard Quinlan and Eduard Lim is hereby dismissed and their counterclaim is likewise dismissed. (Amended Record on Appeal, p. 238). The antecedent facts of this case as found by the trial court and by the Court of Appeals are as follows: Petitioner, International Harvester Macleod, Inc. (hereinafter referred to as IHMI) first employed Diosdado L. Joson (herein private respondent) in July 1960 as assistant attorney in its Legal Department with a monthly salary of P300.00. In 1968, plaintiff was promoted as Area Credit and Collection Manager with a correspondent increase in his salary. In 1970, plaintiff was promoted to Staff Assistant to the Credit and Collection Manager and his salary was increased to P2,000.00 a month. Finally, in May 1975, private respondent was appointed in the Government Sales Department' of defendant (petitioner herein) IHMI as Government Relations Officer with a monthly salary of P2,500.00. However, on July 25, 1977, Eduard Lim Vice President of petitioner IHMI, called private respondent and informed him that he was being transferred to the Fleet Account Sales Department as a Fleet Account Salesman with a salary of P1,000.00 a month, without allowance but he was entitled to commissions. Plaintiff was taken completely by surprise at his sudden demotion and he asked Eduard Lim the reason for such action taken against him by the company. Management answered plaintiff stating that his position as Government Relations Officer had become redundant in view of the appointment of the International Heavy Equipment Corporation (herein referred to as IHEC) as the Company's Dealer with the Government. Subsequently, the petitioner IHMI handed private respondent a cheek for ?39,594.82 representing his termination pay (as plaintiff had refused to accept his transfer, and defendant IHMI had accordingly advised private respondent to resign instead). Plaintiff accepted the check with the following notation:

I am accepting this check since I am entitled to it but without prejudice and with reservations, to take whatever necessary actions which I deem fit under the circumstances to protect my interest. Private respondent signed a voucher indicating that said cheek was in payment of his termination pay. Private respondent, Diosdado L. Joson filed a complaint for damages for his illegal termination, CivilCase No. 110444 with the Court of First Instance of Manila, Branch XXXVI, against petitioner IHMI, Richard Quinlan and Eduard Lim (Amended Record on Appeal, pp. 13-19). A motion to dismiss the complaint was filed by IHMI on September 13, 1977 contending that the lower court has no jurisdiction over the subject of the action which arises from an employer-employee relationship, and which properly falls under the exclusive jurisdiction of the Labor Arbiter and the National Labor Relations Commission on Appeal (Amended Record on Appeal, pp. 20-25). On October 4, 1977, private respondent in his Opposition to the Motion to Dismiss countered that the suit is an ordinary claim for damages arising from the manner and circumstances of his dismissal, bereft of any claim for labor benefits and is a civil dispute, triable by ordinary courts (Amended Record on Appeal, pp. 26-30). After the reply by IHMI and a rejoinder to reply by private respondent, the lower court on October 26, 1977, denied the Motion to Dismiss on the ground that the case is principally a civil dispute, not a labor dispute, hence jurisdiction pertains to the lower court and not to the NLRC (Amended Record on Appeal, pp. 44-45). The lower court, by its order dated December 7, 1977 set the pre-trial for December 15, 1977 (Amended Record on Appeal, pp. 61-63), at which, on motion of private respondent the lower court in its order dated December 29, 1977 declared said petitioner in default for failure to appear at the pre-trial conference and allowed private respondent to present his evidence ex parte (Amended Record on Appeal, pp. 68-69). However, a motion to set aside the order of default filed by the petitioner was granted by the trial court in its Order dated March 17, 1978, declaring however, that the testimonies of the witnesses of the private respondent presented ex parte should stay and setting the date for trial in order to enable petitioner to cross-examine the witnesses (Amended Record on Appeal, pp. 100-101). A motion for reconsideration of said Order was denied by the lower court on April 20, 1978 (Amended Record on Appeal, pp. 109-1 1 0). On April 27, 1978, the lower court ordered that in view of the position of the defendant (petitioner herein) on the crossexamination of the witnesses who had testified ex parte, the former is deemed to have waived said cross-examination (Amended Record on Appeal, p. 111). Petitioner filed before the Intermediate Appellate Court a Petition for certiorari and Prohibition questioning the delegation by the trial judge to the Clerk of Court, the reception of evidence ex parte and the jurisdiction of the trial judge to try the civil case in question. A temporary restraining order was issued by the Appellate Court on June 20, 1978. In its decision, the Intermediate Appellate Court denied the aforestated petition on September 1, 1978 declaring that as ruled by the Supreme Court, the trial court may authorize the Clerk of Court to receive evidence and that P.D. No. 1367 explicitly provides in effect that actions for damages fan within the jurisdiction of the CFI (Amended Record on Appeal, pp. 128-140). Petitioner moved for reconsideration of the decision which motion was denied in the Resolution of December 4, 1978.

After a protracted trial on the merits, the trial court on February 11, 1980 rendered the above-cited decision finding private respondent's termination to be illegal and ordering petitioner to pay damages. Unable to get a reconsideration, petitioner appealed. Private respondent then moved for an immediate execution of the decision pending appeal which motion was opposed by petitioner but the trial court denied the motion and approved petitioner's amended record on appeal and ordered the transmittal of the records to the Court of Appeals in its Order dated October 23, 1980 (Record on Appeal, p. 325). On Appeal, respondent Appellate Court affirmed the decision *** of the trial court on December 9, 1985 (Rollo, pp. 4954). Hence, this petition. In the resolution dated July 16, 1986, the Second Division of this Court, without giving due course to the petition required private respondent to comment thereon (Rollo, p. 87). Private respondent filed his comment dated July 29, 1986 (Rollo, pp. 88-96), to which petitioner filed a reply on September 3, 1986 (Rollo, pp. 99-106) in compliance with the resolution of August 20, 1986 (Rollo, p. 98). In the Resolution of October 13, 1986, the Court gave due course to the petition, and required both parties to file their respective memoranda (Rollo, p. 107). A memorandum was filed by herein respondent on November 13, 1986 (Rollo, pp. 114-131), while petitoner filed its memorandum on November 25, 1986 (Rollo, pp. 135-170). Petitioner, both in its petition and memorandum, raised the following issues: I WHETHER THE RESPONDENT COURT COMMITTED AN ERROR IN DRAWING A MANIFESTLY ERRONEOUS INFERENCE FROM THE FACTS OF THE CKSE WHEN ITFOUND THAT THERE WAS NO MATERIAL CHANGE IN IHMI'S GOVERNMENT SALES OPERATIONS SO THAT THE PRIVATE FESPONDENT'S POSITION HAD NOT BECOME REDUNDANT, AN ERROR WHICH Is CORRECTIBLE BY THIS HONORABLE COURT UNDER THE RULING IN LINA V. LINATOC, 74 PHIL. 15. II WHETHER THE RESPONDENT COURT ERRED IN IG. NORING THE LEGAL EFFECTS OF THE REDUNDANCY OF PRIVATE RESPONDENT'S POSITION, A CONCLUSION THAT IS AFFECTED BY PETITIONER'S BENEVOLENT ACT OF OFFERING HIM ANOTHER POSITION IN THE COMPANY. III WHETHER THE RESPONDENT COURT ERRED IN RELYING ON A BASELESS SURMISE OR SPECULATION WHEN IT RULED THAT PRIVATE RESPONDENT ACCEPTED THE CHECK FROM IHMI BECAUSE HE, HAD A FAMILY TO SUPPORT AND THUS, THE COURT WXNORED THE EXISTENCE OF A COMPROMISE BETWEEN ITHE PARTIES. IV WHETHER THE RESPONDENT COURT ERRED IN AFFIRMING THE GRANT OF MORAL AND EXEMPLARY DAMAGES, ATTORNFY'S FEES AND COSTS OF SUIT, THERE BEING NO PROOF AT ALL THAT PETITIONER ACTED FRAUDULENTLY OR IN BAD FAITH OR WITH GROSS NEGLIGENCE, BUT ON THE CONTRARY IT WAS PRIVATE RESPONDENT WHO ACTED IN BAD FAITH AND WITH MALICE ABIBUSHED PETITIONER INTO AGREEING TO HIS RETIREMENT, AND IMPROVING ON WHAT OTHERWISE HE WOULD RECEIVED, AND EVEN ASSUMING ARGUENDO

THAT THERE IS BASIS THEREFOR, THE AWARD IS EXCESSIVE AND NOT WARRANTED UNDER THE CIRCUMSTANCES HEREIN PREVAILING. V WHETHER THE LOWER COURT ERRED IN NOT FINDING PETITIONERS'S COUNTERCLAIM TO BE MERITORIOUS. The main issue in this case is, who determines the need for the existence of a department in the employer corporation and the reduction of personnel therein. Article 284 of the Labor Code reads: 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 closing or cessation of operation of the estabhshment or undertaking unless the closing is for the purpose of circumventing the provisions of this title, by preserving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices on redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his ond (l) month pay or to at least one (1) month pay for every year of service, whichever is higher ... There is no dispute that as claimed by petitioner, the sole function of its Government Sales Department of which private respondent is the Government Relations Officer, a managerial position, was to take charge of sales of international trucks, equipment and spare parts to the government of the Republic of the Philippines including government owmed or controlled corporations; that such function, origiwlly handled by the Asia Pacific Corporation as Special Government Dealer, was taken over by International Heavy Equipment Corporation with bigger manpower and resources and that eventually, the Government Sales Department was phased out and private respondent was offered a lesser position in the fleet account sales with less salary and without allowance, although with commission, on the ground that his position hes become redundant. Private respondent refused to transfer, which refusal resulted in the termination of his services under the cumstances above described. Well established is the rule that while it is true that to .dismiss or lay off an employee is management's prerogative, it must be done without abuse of discretion, for what is at stake is not only petitioner's position but also his means of livelihood (Kapisanan ng Manggagawa sa Camara Shoes v. Camara Shoes, 111 SCRA 482 [1982]; Bachiller v. NLRC, 98 SCRA 393 [1980]; Remerco Garments Manufacturing v. Minister of Labor & Employment, 135 SCRA 167; Hope Christian High School v. NLRC, 135 SCRA 251 [1985]; D.M. Consunji v. NLRC, 143 SCRA 204 [1986]). Equally without question is the fact that International HeavY Equipment Corporation can ably handle the functions in question without the help of petitioner's Government Sales Department and of private respondent in particular and that it would be more economical for petitioner company to transfer its government sales activities to IHEC than to hire the services of the latter and at the same time maintain a department for the same purpose but only in certain isolated cases. Nonetheless, private respondent insists that his position has not become redundant and that the assailed termination of services is a clever scheme on the part of management to maneuver private respondent's elimination from his position. Thus the trial court held petitioner liable for damages due to its "bad faith."

That such conclusion is precipitate and speculative is readily apparent and brings to the fore, the essential issue as to who should determine the need for the phasing out of a department and the services of private respondent. This issue has been squarely settled by the Supreme Court in the case of Bordoc v. People's Bank and Trust Co. (103 SCRA 599[1981]) where it was held that as petitioner occupied a managerial position, his stay therein depended on his retention of the trust and confidence of the management and where there was any need for his services. "Although some vindictive motivation might have impelled the abolition of his position, yet, it is undeniable that the bank's board of directors possessed the power to remove him and to determine whether the interest of the bank justified the existence of his department." In an evident reiteration of the employer's right and prerogative to manage its affairs, the Court in a much later case ruled: An employer has a much wider discretion in terminating the employment relationship of managerial personnel as compared to rank-and-file employees. However, such prerogative of management to dismiss or lay-off an employee must be made without abuse of discretion, for what is at stake is not only the private respondent's position but also his means of livelihood ... (D.M. Consunji Inc. v. NLRC, 143 SCRA 204205[1986]). In fact, under Policy Instructions No. 8 of the Secretary of Labor "The employer is not required to obtain a previous written clearance to terminate managerial employees in order to enable him to manage effectively." A managerial employee can be suspended or dismissed without prior clearance from the Secretary of Labor (Bondoc v. People's Bank and Trust Co. supra, Associated Citizens Bank v. Ople, 103 SCRA 135 [1981]). Reverting to the case at bar, a searching review of the records fails to show that petitioner in demoting private respondent and later terminating his services acted OPpressively, unjustly or arbitrarily. The lower court observing that the phasing out of the department in question was preceded by a bitter discussion between private respondent and his superiors, alluded to the latter as the probable cause of the alleged illegal dismissal. But such is only a surmise, in the absence of any concrete evidence that the reorganization being undertaken by petitioner company is for any other purpose than its declared objective as a labor and cost saving device. Indeed, there is no argument against the fact that with the hiring of IHEC, it was no longer economical to retain the services of private respondent; so much so that despite the findings of the trial court that on many occasions, petitioner compar-y undertook direct sales to the Philippine Government despite engagement of the Asia Pacific Corporation as government dealer, it is not precluded from adopting a new policy conducive to a more economical and effective management. Similarly, evidence on record fails to show bad faith on the part of the employer. On the contrary, it is manifest that from the outset, it had been candid with private respondent, it is not disputed that before the final contract was signed by and between IHMI and IHEC, the former conferred with private respondent informing him of the management decision and the rationale behind it and although not required by law offered him a position in the fleet account sales which although lesser in basic pay and without allowance, has more opportunities of fetching a bigger income in the form of commissions. Obviously, what is being required of him is the exertion of more effort in exchange for a bigger "take home pay." He refused and considered the demotion as a forced resignation. He cannot now be heard to complain in having been phased out from his position which ceased to exist apart from the fact that he has been given his due under Article 284 of the Labor Code of one (1) month pay for every year of service plus the money equivalent of his unused sick and vacation leave (Rollo, p. 188).

Moreover, the issue as to whether or not his employer has the right to demote him has been laid to rest in Petrophil v. NLRC (143 SCRA 704 [1986]), where the Supreme Court quoted with approval the,ruling of the Labor Arbiter in this regard: Time and again, this Office has sustained tho view that it is management prerogative to transfer, demote, discipline and even to dismiss an employee to protect its business, provided it is not tainted with unfair labor practice. Neither can he complain of arbitrariness because even his senior officer Enrique Gomez, has been transferred to head the Sales Project Department, after which the department in question ceased to operate (Rollo, pp. 135-137). Thus, although well-settled is the nile that findings of fact of the trial court and the Court of Appeals WW not as a general rule be disturbed by the Supreme Court, in the case at bar, where unfair labor practice is evidently absent, no plausible reason could be found to support the conclusion of an illegal termination of services nor a legal basis to warrant what is obviously an exorbitant award of damages. PREMISES CONSIDERED, the appealed decision of respondent Court of Appeals holding petitioner liable to private respondent Diosdado L. Joson is hereby SET ASIDE, and a new one is hereby rendered absolving petitioner from such liability. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur.

CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY, JOSE HICETA, REGINA ILON, GILDERBRANDO GISON, EPIFANIO MUYCO, EMILIANO OQUINA, ET AL., respondents. Allan L. Zamora for petitioner. Edmundo G. Manlapao for private respondents. PUNO, J.: Private respondents are employees of petitioner, an electric cooperative company. They have worked for petitioner from a high of four and one half (4 1/2) years to a low of ten (10) months. Their work forms an integral part of the business of petitioner. Despite the length of their service, they were extended permanent appointments only on July 13, 1988, retroactive to June 16, 1988. Petitioner has a collective bargaining agreement with its employees' union for a duration of three (3) years from April 1, 1987 up to March 31, 1990. Article VII of the agreement provides for the following wage increase: Sec. 1. The Electric Cooperative hereby agrees to grant all employees covered by this agreement across the board increase on the basic monthly salary of P350.00 for the first year, effective April 1, 1987, in the following manner: 1. Partial payment of P200.00 monthly to start July 1, 1987 to March 31, 1988. 2. Differentials of : a. P350.00, for the period covering April 1, 1987 to June 30, 1987 plus and/or the additional of b. P150.00 for the period covering July 1, 1987 to March 31, 1988 shall be paid in three successive monthly installments starting April 1988. The collective bargaining agreement covers the following employees: ARTICLE I COVERAGE All the permanent employees and workers of the Central Negros Electric Cooperative, Inc. (CENECO), hereinafter referred to as the Electric Cooperative, as covered, except the following: 1. Those performing managerial functions, confidential employees regardless of status and those whom the Electric Cooperative and the Union may individually agree upon to be excluded. 2. Temporary and probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. Though they were made permanent in 1988, private respondents demanded payment of the three hundred fifty pesos (P350.00) wage increase for the year 1987 as provided by the above collective bargaining agreement. Petitioner denied their demand.

ECOND DIVISION G.R. No. 106246 September 1, 1994

As called for by the parties' collective bargaining agreement, the demand was treated as a grievance. The grievance remained unsettled until their collective bargaining agreement expired on April 1, 1990. Private respondents then filed their complaint with the Labor Arbiter on May 18, 1990. Labor Arbiter Cesar D. Sideno of the Regional Arbitration Branch No. VI, Bacolod City

dismissed the complaint for lack of merit on March 12, 1991. His Decision was, however, reversed by the NLRC, 4th Division, Cebu City, on September 18, 1991. 1 It held that: (1) private respondents became regular employees six (6) months after hiring, and hence, entitled to the across-the-board wage increase for the first year of the collective bargaining agreement starting from April 1, 1987 to March 1988; and (2) private respondents' complaint has not prescribed. In this petition for certiorari, petitioner raises the following issues: 1. WHETHER OR NOT THE PRIVATE RESPONDENTS WERE COVERED BY THE WAGE INCREASES OF P350.00 A MONTH DURING THE FIRST YEAR OF THE COLLECTIVE BARGAINING AGREEMENT; 2. WHETHER OR NOT ARTICLES 280 AND 281 OF THE LABOR CODE WILL APPLY; 3. WHETHER OR NOT THE CAUSE OF ACTION OF THE PRIVATE RESPONDENTS HAS ALREADY PRESCRIBED; 4. WHETHER OR NOT THE PRIVATE RESPONDENTS FAILED TO EXHAUST THE REQUIRED REMEDIES AVAILABLE TO THEM PURSUANT TO THE GRIEVANCE PROCEDURE AS STIPULATED IN THE COLLECTIVE BARGAINING AGREEMENT. Petitioner contends that its collective bargaining agreement clearly excludes "temporary or probationary employees . . ." It stresses that private respondents were extended appointments as permanent workers only on July 13, 1988 retroactive to June 16, 1988. The contention overlooks Articles 280 and 281 of the Labor Code, viz.: Art. 280. Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season . An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) Art. 281. Probationary employment Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. It cannot be denied that private respondents attained the status of regular employees even before 1988. Firstly, they perform activities which are necessary or desirable in the usual business of the petitioner as an electric cooperative. They are meter inspectors, PABX operators, utility men, disconnectors, linemen, messengers, secretaries, clerks, typists, plumbers, mechanics, draftsmen, HRD personnel, collectors and electricians. Indeed, their appointments would not have been regularized if their jobs were not indispensable in the daily operation of the petitioner's business. Secondly, they had worked for petitioner for more than six (6) months before they were given regular appointments. They had been hired on various dates starting from 1984. Petitioner's insistence that private respondents became regular employees only when they were extended appointments on July 13, 1988 is deplorable. Articles 280 and 281 of our Labor Code, supra, put an end to the pernicious practice of making

permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum. Thus, Article 281, supra, placed a ceiling on probationary employment, i.e., not to exceed six (6) months from the date the employee started working. On the other hand, Article 280, supra, defined when an employment shall be regular notwithstanding any written agreement to the contrary. In other words, the graduation of an employee from casual or probationary to regular does not depend on the arbitrary will of his employer. Rightly so, for if there is any group of employees that needs robust protection from the exploitation of employers, it is the casuals and probationaries. Usually the lowliest of the lowly, they are most vulnerable to abuses of management for they would rather suffer in silence than risk losing their jobs. The Labor Code has come to their succor by stopping schemes to eternalize their temporary status. Petitioner's too niggard a regard to the rights of its employees becomes more evident with its contention that even if private respondents were to be considered regular employees under Article 280 of the Labor Code, still, they can only claim security of tenure but not the benefits of the said collective bargaining agreement. Petitioner's contention does not convince for it will result in an anomalous situation where we have to categorize regular employees into two (2) kinds one entitled to security of tenure plus the benefits of the parties' collective bargaining agreement, and the other, entitled to security of tenure alone. Such a classification finds no sanction under the Labor Code for it distinguishes where there is no difference. Not even the collective bargaining agreement of the parties justifies the submission. For reasonably read and interpreted, the parties collective bargaining agreement excludes only three classes, viz.: 1. Those performing managerial functions, confidential employees regardless of status and those whom the ELECTRIC COOPERATIVE and the UNION may individually agree upon to be excluded. 2. Temporary or probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. 3. Casuals and Extra Laborers. Private respondents do not belong to the excluded categories. Their employments had been regularized. There is no reason to deny them the benefits granted by their collective bargaining agreement when they contributed to the profits of management through their labors. Petitioner also clings to the contention that the claim of private respondents has already prescribed. It is alleged that the cause of action of private respondents accrued on April 1, 1987, the date of the effectivity of the collective bargaining agreement while their complaint was filed only on May 18, 1990. Our attention is called to Article 291 of the Labor Code which provides that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued. We hold that the claim has not prescribed. Within the three-year prescriptive period, private respondents submitted their claim to the grievance committee as provided for in their collective bargaining agreement and as called for by our laws. Thus Articles 260 and 261 of the Labor Code provide, to wit: Art. 260. Grievance Machinery and Voluntary Arbitration. The parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances arising from the interpretation or implementation of their Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel policies. All grievances submitted to the grievance machinery which are not settled within seven (7) calendar days from the date of its submission shall automatically be referred to voluntary arbitration prescribed in the Collective Bargaining Agreement. xxx xxx xxx

Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel policies referred to in the immediately preceding article. Accordingly, violations of Collective Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement. The Commission, its Regional Offices and the Regional Directors of the Department of Labor and Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining Agreement. Likewise, Rule XI, Omnibus Rules Implementing the Labor Code, provides: Sec. 1. Jurisdiction of voluntary arbitrator or panel of voluntary arbitrators. The voluntary arbitrator or panel of voluntary arbitrators named in the collective bargaining agreement shall have exclusive and original jurisdiction to hear and decide all grievances arising from the implementation or interpretation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies which remain unresolved after exhaustion of the grievance procedure. The voluntary arbitrator or panel of voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practice and bargaining deadlocks. Sec. 2. Referral of cases to voluntary arbitration. All grievances unsettled or unresolved within seven (7) calendar days from the date of its submission for resolution to the last step of the grievance machinery shall automatically be referred to voluntary arbitration prescribed in the collective bargaining agreement. The Commission, its regional branches and the Regional Directors of the Department of Labor and Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators and shall immediately dispose and refer the same to the appropriate grievance machinery or voluntary arbitration provided in the collective bargaining agreement. In case issues arising from the interpretation or implementing of the collective bargaining agreement or those arising from the interpretation or enforcement of company personnel policies are raised in notices of strikes or lockouts or requests for preventive mediation, the regional branch of the Board shall advise the parties to submit the issue/s to voluntary arbitration. As noted by public respondent, the grievance of private respondents remained unsettled until the parties' collective bargaining agreement expired on April 1, 1990. With the expiration of their collective bargaining agreement, its provision requiring the parties to resort to voluntary arbitration ceased to have any effect at all. Consequently, private respondents lost no time in filing their complaint with the labor arbiter on May 18, 1990. It is obvious that private respondents did not sleep on their right for more than three years as alleged by the petitioner and, hence, prescription will not lie against them. IN VIEW WHEREOF, the petition is dismissed there being no grave abuse of discretion on the part of public respondent in its Decision of September 18, 1991. Costs against petitioner. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.

SECOND DIVISION G.R. No. 105538 September 5, 1994 FERROCHROME PHILIPPINES, INC., REINHOLD SCHOLSNAGEL and ENGR. WELHELM WEBER, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION) and HORST BARTSCH, respondents. Lucenario, Margate, Mogpo, Tiongco & Acejas III Law Offices for petitioners. Arcol, Musni and Musni for private respondent. PUNO, J.: In this petition for certiorari, we are asked to annul two (2) Resolutions of the National Labor Relations Commission (NLRC), dated July 31, 1991 and May 13, 1992, holding that private respondent Horst Bartsch was illegally dismissed by petitioner. Private respondent Horst Bartsch was initially employed as a consultant-engineer of the Austrian company Voest-Alpine. While thus employed, Bartsch was assigned to the Philippines as a consultant-engineer of petitioner Ferrochrome, a subsidiary of Voest-Alpine. His contract of employment 1 provided that he would be employed at Ferrochrome for a period of three (3) months, i.e., from February 15, 1988 to May 15, 1988, extendible for a term mutually agreeable to the parties. After Bartsch's employment expired on May 15, 1988, his services were still engaged by petitioner Ferrochrome. However, his continued employment was no longer covered by any written contract. From July 12-15, 1988, Bartsch was confined at the Capitol College General Hospital in Misamis Oriental for treatment of a psychological disorder. On July 15, 1988, Bartsch was transferred to the Makati Medical Center where he was confined until July 29, 1988. Thereafter, petitioner granted Bartsch a vacation leave. Bartsch returned to the Philippines on September 28, 1988. On October 1, 1988, he assumed his former position at Ferrochrome. Ferrochrome terminated his services in a letter, dated January 30, 1989, 2 which was served on Bartsch on February 13, 1989. It reads: Regret to inform you that during discussions with the plant management, it became apparent that your services as consultant to the Senior VP-Operations are presently no longer needed and a discontinuation in the meantime was agreed upon. It is our intention to avail of your services again when the equipment for the new dedusting facility is ready for installation and other projects have arrived at the implementation stage. We wish to thank you for your valuable contribution during the past 12 months and hope that we can resume a similarly fruitful cooperation when our projects are ready. Thus, on June 5, 1989, Bartsch filed a complaint against petitioners for unpaid salary, non-payment of vacation leave, separation pay and 13th month pay, plus damages and attorney's fees before the NLRC, Regional Arbitration Branch No. X, Cagayan de Oro City. 3 After hearing, Executive Labor Arbiter Zosimo T. Vasallo dismissed the complaint 4 but granted a ten thousand peso (P10,000.00) financial assistance in favor of private respondent Bartsch. The labor arbiter ruled that: Bartsch was fully paid his salary from February 15, 1988 until the termination of his consultancy contract on February 1989; that Bartsch's employment

expired on May 15, 1988, as per the Consultancy Agreement between the parties; that since there was no evidence on record which showed that Bartsch's employment period was extended for a definite term, his continued employment with Ferrochrome acquired a contractual character, renewable of a monthly basis. Thus, it was the prerogative of Ferrochorme to terminate Bartsch's consultancy services whenever the former deemed necessary. On appeal, public respondent NLRC reversed the decision of the labor arbiter and ruled that Bartsch was illegally dismissed by Ferrochrome. 5 Hence this petition where the following issues are raised: I NLRC COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT FERROCHROME ILLEGALLY DISMISSED BARTSCH FOR IT HAD NO JURISDICTION TO RESOLVE THE QUESTION OF LEGALITY OF TERMINATION BECAUSE IT IS AN ISSUE WHICH WAS NEVER RAISED IN THE COMPLAINT, POSITION PAPER AND IN THE PROCEEDINGS BEFORE THE LABOR ARBITER. II ASSUMING IN ARGUENDO THAT THE LEGALITY OF DISMISSAL IS A PROPER ISSUE BEFORE THE LABOR ARBITER WHICH MAY SUBSEQUENTLY BE REVIEWED BY THE NLRC, THE LATTER NEVERTHELESS ACTED IN GRAVE ABUSE OF DISCRETION WHEN IT REVERSED THE FINDING OF THE LABOR ARBITER THAT THE DISMISSAL OF BARTSCH IS LAWFUL IS ALREADY FINAL AND COULD NOT BE THE SUBJECT TO REVIEW BY THE NLRC UNDER SECTION 5(C), RULE VIII, REVISED RULES OF THE NLRC. III THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN AWARDING BACKWAGE, SEVERANCE PAY CHRISTMAS BONUS, SALARY BONUS AND ATTORNEY'S FEES TO BARTSCH. In support of the first assigned error, petitioner urges that public respondent NLRC committed grave abuse of discretion when it ruled that Bartsch was illegally dismissed from service for the issue of illegal dismissal was never raised by Bartsch in his complaint or position paper filed with the labor arbiter. We disagree. The issues presented in the complaint filed by Bartsch before the labor arbiter for non-payment of salary, vacation leave, separation pay and 13th month pay necessarily involve the determination of whether or not complaint was illegally dismissed. His right to receive these monetary benefits primarily hinges on the resolution of this issue. Thus, the NLRC defines the issues to be resolved, viz: First, whether or not an employer-employee relationship existed between respondents and complainant prior to the dismissal of the latter from the service; Second, whether or not the dismissal of complainant from the service is legal; Third, whether or not complainant is entitled to labor standards benefits as a result of his dismissal from the service of respondents. Indeed, even the labor arbiter, from whose decision petitioner did not appeal, deemed it necessary to first pass upon the nature of employment of Bartsch with petitioner. Moreover, in the proceedings before the labor arbiter, petitioner itself claimed as a defense that Bartsch was not one of its regular employees but was engaged in a specific job-consultancy. In his position paper, 6 Bartsch raised as an issue the legality of his dismissal. He contended that: Exhibit "C" (the termination letter) showed that the dismissal of complainant from his services without any valid reason whatsoever. It should be noted and emphasized here that respondent did not refer, even vaguely, to complainant's illness in the said termination letter.

And considering that complainant was already working on the second month of the fourth quarter of his employment, the termination of his services indicates a clear proof of malice and bad faith. Clearly, then, the nature of Bartsch's employment with petitioner and the legality of his employment's termination therein were put in issue for they were determinative of his right to receive the monetary benefits he was claiming. Thus, the NLRC did not act with grave abuse of discretion in passing upon the issue as to the legality of his dismissal. In its second assigned error, petitioner claims that granting that the legality of Bartsch's dismissal was a proper issue to be resolved by the NLRC, still, the latter committed grave abuse of discretion in reversing the finding of the labor arbiter that the dismissal was valid. Petitioner claims that Bartsch, in his Memorandum of Appeal, 7 did not question this finding of the labor arbiter's ruling as to the legality of Bartsch's dismissal was raised by the latter only in his Supplemental Memorandum of Appeal which was filed nine (9) months after his period to appeal has expired. Thus, failing to raise such issue in his Memorandum of Appeal, the ruling of the labor arbiter insofar as the validity of Bartsch's termination has already become final and executory. The contention has no merit. An examination of Bartsch's Memorandum of Appeal 8 would debunk petitioner's claim. In page 6 of Bartsch's Memorandum, 9 Bartsch raised the issue as to the legality of his dismissal, thus: Be it recalled that the letter of respondent which purportedly is the termination of his employment did not state, even vaguely, as the reason or cause of his separation from employment. Even if it was the supposed illness that was the reason for termination, the respondent cannot rightfully dismiss the complainant even if it complied with all the requirements of notice because the illness was not voluntary on the part of the complainant. xxx xxx xxx Finally, petitioners contend that in view of NLRC's lack of jurisdiction to resolve the issue of illegal dismissal, it follows that its award of backwages, severance pay, Christmas bonus, salary bonus and attorney's fees to Bartsch was likewise made in grave abuse of discretion. As discussed earlier, it was within the province of the NLRC to pass upon the issue as to the legality of Bartsch's dismissal from service. As to NLRC's award of backwages, severance pay, Christmas bonus and attorney's fees, we find the same to be in order. The award of backwages and severance pay to Bartsch was predicated on the finding of the NLRC that Bartsch was employed as a regular employee. As defined unbder the law, 10 an employment shall be deemed regular if the employee performs activities usually necessary or desirable in the usual business and trade of the employer OR if the employee has rendered at least one (1) year of service, whether the service be continuous or broken. Applying these two (2) tests, we find that contrary to the suppositions of petitioner, Bartsch was a regular employee of the latter. As found by the NLRC: . . . While the designation of complainant in the service is denominated as Consultant Engineer, yet the description of his duties states otherwise. Due consideration is accorded on the following specific duties, among others: xxx xxx xxx 2.1 Undertake such duties in relation to the Company and its business as the President of the Company shall from time to time assign to or vest in him. The President may delegate his authority or part of it to the SVP Operations/Resident Manager. 2.2 In the discharge of such duties and in the exercise of such powers, observe and comply with all Company resolutions, regulations and directions. 2.3 Devote substantially the whole of his time and attention during business hours to the discharge of his duties. (Emphasis supplied)

xxx xxx xxx . . . (T)he complainant under the definition of his power and duties has been an ordinary technical staff employee. The term "consultant" is merely more of a matter of nomenclature as he is required under the contract to observe regular office hours. It therefore precludes the hiring of a mere "consultant" who is supposed to render part-time service to the principal employer. Respondents (petitioner herein) could have terminatted complainant from the service after the lapse of the three (3) months period stipulated in the Contract of Employment. But management found itself in dire need of the expertise of complainant that it decided to extend the services of the latter for an indefinite period which lasted until February 13, 1989 when one W. Weber representing respondents delivered to complainant the letter of termination dated January 30, 1989 . . . . When he was terminated from the service, complainant had more than qualified to be a regular employee . . . xxx xxx xxx . . . (T)he extent of complainant's services with respondent cover(ed) substantially a period of one (1) year, more or less, as admitted by respondents in the (termination) letter of January 30, 1989 . . . when it stated: "We wish it (sic) to thank you for your valuable contribution during the past 12 months and hope that we can resume a similarly fruitful cooperation when our projects are ready" . . . has invested in him the status of a regular employee under the second paragraph of Article 280 of the Labor Code, as amended. . . . Being a regular employee, private respondent is entitled to security of tenure and his services may be terminated only for causes provided by law. In the case at bench, we are confounded as to the real reason why the services of private respondent were terminated. In the termination letter 11 served by petitioner, the latter claims that the services of private respondent were no longer needed and that management intends to hire him again "when the equipment for the new dedusting facility is ready for installation and other projects have arrived at the implementation stage." It would thus appear that at the time the termination letter was made, petitioner company did not consider private respondent Bartsch as one of its regular employees. Hence, it would appear from said letter that Bartsch's services were terminated for they were no longer deemed necessary. However, during the proceedings before the labor arbiter, petitioner company alleged a new ground for terminating Bartsch's employment. Petitioner claimed that the "real" reason for Bartsch's dismissal was the latter's psychological illness. It is this vacillating position of petitioner corporation regarding the cause of private respondent's termination which worked against it. As correctly found by the NLRC, petitioner's wavering stance showed its bad faith in terminating the services of private respondent. Thus, under the circumstances, petitioner should have complied with the due process requirements of notice and hearing before terminating the services of private respondent. An employee should be notified of his employer's intent to dismiss him and the true reasons therefor. 12 Unfortunately, these basic requisites were not met. It was not shown that private respondent was informed of the alleged "real" reason for his dismissal. Neither was he given an opportunity to air his side and defend himself. In view of the illegality of private respondent's dismissal from service, the latter is entitled to the award of Christmas bonus and salary bonus for the year 1988 given by petitioner to all its other regular employees. WHEREFORE, premises considered, the appealed Resolutions of public respondent NLRC are hereby AFFIRMED in toto. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur. G.R. No. 71664 February 28, 1992

FIRST DIVISION

BAGUIO COUNTRY CLUB CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR UNION (ALU) and JIMMY CALAMBA, respondents. Guillermo B. Bandonill and A.N. Bolinao, Jr. for petitioner. Jose C. Evangelista for Jimmy Calamba. MEDIALDEA, J.: This petition for certiorari seeks to annul and set aside the resolution issued by the respondent National Labor Relations Commission dated June 10, 1985 dismissing the appeal of petitioner for lack of merit and affirming in toto the decision of the Executive Labor Arbiter dated September 15, 1982 declaring private respondent Calamba as a regular employee entitled to reinstatement to the position of gardener without loss of seniority and with full backwages, benefits and privileges from the time of his dismissal up to reinstatement including 13th month pay. The antecedent facts are as follows: Petitioner Baguio Country Club Corporation (corporation) is a recreational establishment certified by the Ministry of Labor and Employment as an" entertainment-service" establishment. Respondent National Labor Relations Commission (Commission) is a government instrumentality created by law, impleaded in its official capacity, while private respondent Associated Labor Union (union) is a duly registered labor organization and private respondent Jimmy Calamba is an employee of the petitioner corporation as laborer, dishwasher, and gardener. Private respondent Jimmy Calamba was employed on a day to day basis in various capacities as laborer and dishwasher for a period of ten (10) months from October 1, 1979 to July 24, 1980. On September 1, 1980 to October 1, 1980, private respondent Calamba was hired as a gardener and rehired as such on November 15, 1980 to January 4, 1981 when he was dismissed by the petitioner corporation. (see Rollo, pp. 28-36) On August 3, 1981, private respondent Jimmy Calamba assisted by private respondent union instituted a complaint against petitioner corporation with the Ministry of Labor (now Department of Labor and Employment), Baguio District Office, Baguio City for unfair labor practice, illegal dismissal and non-payment of 13th month pay for 1979 and 1980. The Executive Labor Arbiter Sotero L. Tumang rendered a decision on September 15, 1982 declaring private respondent Calamba as a regular employee and ordering petitioner to reinstate private respondent to the position of gardener without loss of seniority and with full backwages, benefits and privileges from the time of his dismissal up to reinstatement including 13th month pay. Labor Arbiter Tumang found as follows: After a careful perusal of the facts presented by the parties, we find the complaint for illegal dismissal and non-payment of thirteenth (13th) month pay, meritorious for the following reasons: 1. Complainant Jimmy Calamba has attained regular status as an employee of the Club on account of the nature of the job he was hired, to perform continuously and on staggered basis for a span of thirteen months. True that there were employment contracts executed between the Club and the complainant indicating the period or the number of days the complainant is being needed but what is to be considered is not the agreement, written or otherwise, of the

parties in determining the regularity or casualness of job but it should be the nature of the job. Clearly, the work of a gardener is not a seasonal or for a specific period undertaking but it is a whole year round activity. We must not lose sight of the fact that the Baguio Country Club Corporation is an exclusive Club with sustaining members who avails (sic) of its facilities the whole year round and it is necessary, is has been observed and of common knowledge, that the gardens including the green of its golf course where the complainant was assigned must be properly kept and maintained. 2. Being a regular employee with more than one (1) year length of service with the respondent, Jimmy Calamba could not be terminated without a just or valid cause. This is so explicit in our Constitution that the security of tenure of a worker must be safeguarded and protected and Jimmy Calamba should enjoy no less protection. 3. Jimmy Calamba was dismissed without any written clearance from the Ministry of Labor and Employment prior to his termination. Worse, the respondent fired the complainant from his job due to the a (sic) alleged expiration of his employment contract ten (10) times but not even a single report of his dismissal as mandated by law was submitted to the Ministry of Labor and Employment. 4. The Company did not refute the claim of Jimmy Calamba for payment of his thirteenth (13th) month pay under P.D. 851 nor presented any report of compliance to that effect with the Ministry of Labor and Employment and, therefore, he must be paid correspondingly. (Rollo, pp. 39-40) Hence, the petitioner interposed an appeal to the respondent Commission. On June 10, 1985, after finding that there existed no sufficient justification to disturb the appealed decision, the respondent Commission rendered a resolution dismissing the appeal for lack of merit. Hence, this present petition raising four (4) assignments of errors, which are as follows: I THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT PRIVATE RESPONDENT JIMMY CALAMBA WAS A "CASUAL" EMPLOYEE AND HAD ATTAINED THE STATUS OF A REGULAR EMPLOYEE, DESPITE THE INCONTROVERTIBLE FACT THAT SAID PRIVATE RESPONDENT WAS A CONTRACTUAL AND SEASONAL EMPLOYEE. II THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT THE CONCLUSIONS OF THE EXECUTIVE LABOR ARBITER WERE FULLY SUPPORTED BY THE EVIDENCE AND IN UPHOLDING THE REINSTATEMENT OF PRIVATE RESPONDENT JIMMY CALAMBA. III THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT THE DISMISSAL OF PRIVATE RESPONDENT JIMMY CALAMBA REQUIRED PRIOR CLEARANCE FROM THE MINISTRY OF LABOR AND EMPLOYMENT EACH TIME HIS CONTRACT OF EMPLOYMENT EXPIRED. IV THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN NOT HOLDING THAT PRIVATE RESPONDENT ASSOCIATED LABOR UNION HAS NO LEGAL PERSONALITY TO FILE THIS CASE FOR PRIVATE RESPONDENT JIMMY CALAMBA BEFORE THE REGIONAL OFFICE OF THE NATIONAL LABOR RELATIONS COMMISSION, AS SAID PRIVATE RESPONDENT BEING A CONTRACTUAL EMPLOYEE IS EXPRESSLY EXCLUDED FROM THE BARGAINING UNIT UNDER THE COLLECTIVE BARGAINING AGREEMENT (Rollo, pp. 98-99) Petitioner maintains that private respondent Calamba was a contractual employee whose employment was for a fixed and specific period as set forth and evidenced by the private respondent's contracts of employment, the pertinent portions of which are quoted as follows: xxx xxx xxx

. . . the employment may be terminated any time without liability to the Baguio Country Club other than for salary actually earned up to and including the date of last service. His/her employment shall be on a day to day BASIS for a temporary period . . . subject to termination at any time at the discretion of the Baguio Country Club Corporation. xxx xxx xxx (Rollo, p. 7) In addition, petitioner stresses that there was absolutely no oral or documentary evidence to support the conclusion of the Executive Labor Arbiter which was subsequently affirmed by the respondent Commission that private respondent Calamba has rendered thirteen (13) months of continuous service. On the contrary, respondent Commission through the Solicitor General argues that private respondent Calamba, having rendered services as laborer, gardener and dishwasher for more than one (1) year, was a regular employee at the time his employment was terminated. Moreover, the nature of private respondent Calamba's employment as laborer, gardener, and dishwasher pertains to a regular employee because they are necessary or desirable in the usual business of petitioner as a recreational establishment. The pivotal issue therefore in whether or not the private respondent Jimmy Calamba has acquired the status of a regular employee at the time his employment was terminated. After a careful review of the records of this case the Court finds no merit in the petition and holds that the respondent Commission did not gravely abuse its discretion when it affirmed in toto the decision of the labor arbiter. The law on the matter is Article 280 of the Labor Code which defines regular and casual employment as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. This provision reinforces the Constitutional mandate to protect the interest of labor. Its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient. Thus, contrary agreements notwithstanding, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. Not considered regular are the so-called "project employment" the completion or termination of which is more or less determinable at the time of employment, such as those employed in connection with a particular construction project, and seasonal employment which by its nature is only desirable for a limited period of time. However, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity he performed and while such activity actually exits.

The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. (De Leon v. National Labor Relations Commission, G.R. No. 70705, August 21, 1989. 176 SCRA 615, 620-621) In the case at bar, the petitioner corporation, which is certified by the Ministry of Labor and Employment as an "entertainmentservice" establishment, claims that private respondent was contracted for a fixed and specific period. However, the records are that the private respondent was repeatedly re-hired to perform tasks ranging from dishwashing and gardening, aside from performing maintenance work. Such repeated rehiring and the continuing need for his service are sufficient evidence of the necessity and indispensability of his service to the petitioner's business or trade. The law demands that the nature and entirety of the activities performed by the employee be considered. It is not tenable to argue that the aforementioned tasks of private respondent are not necessary in petitioner's business as a recreational establishment, just as it cannot be said that only those who are directly involved in providing entertainment service may be considered as necessary employees. Otherwise, there would have been no need for the regular maintenance section of petitioner corporation. Furthermore, the private respondent performed the said tasks which lasted for more than one year, until early January, 1981 when he was terminated. Certainly, by this fact alone he is entitled by law to be considered a regular employee. Owing to private respondent's length of service with the petitioner corporation, he became a regular employee, by operation of law, one year after he was employed. It is more in consonance with the intent and spirit of the law to rule that the status of regular employment attaches to the casual employee on the day immediately after the end of his first year of service. To rule otherwise is to impose a burden on the employee which is not sanctioned by law. (see Kimberly Independent Labor Union for Solidarity, Activism and Nationalism in Line Industries and Agriculture v. Drilon, G.R. No. 77629, May 9, 1990, 185 SCRA 190, 203-204) It is of no moment that private respondent was told when he was hired that his employment would only be "on a day to day basis for a temporary period" and may be terminated at any time subject to the petitioner's discretion. Precisely, the law overrides such conditions which are prejudicial to the interest of the worker. Evidently, the employment contracts entered into by private respondent with the petitioner have the purpose of circumventing the employee's security of tenure. The Court therefore, rigorously disapproves said contracts which demonstrate a clear attempt to exploit the employee and deprive him of the protection sanctioned by the Labor Code. It is noteworthy that what determines whether a certain employment is regular or casual is not the will and word of the employer, to which the desperate worker often accedes. It is the nature of the activities performed in relation to the particular business or trade considering all circumstances, and in some cases the length of time of its performance and its continued existence. (see De Leon v. NLRC, Ibid) All premises considered, the Court is convinced that the assailed resolution of the respondent Commission is not tainted with arbitrariness that would amount to grave abuse of discretion or lack of jurisdiction and therefore, We find no reason to disturb the same. ACCORDINGLY, the petition is DISMISSED for lack of merit. SO ORDERED.

Narvasa, C.J., Cruz and Grio-Aquino, JJ., concur. SECOND DIVISION G.R. No. L-77629 May 9, 1990 KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVISM AND NATIONALISMORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE (KILUSANOLALIA), ROQUE JIMENEZ, MARIO C. RONGALEROS and OTHERS, petitioners, vs. HON. FRANKLIN M. DRILON, KIMBERLY-CLARK PHILIPPINES, INC., RODOLFO POLOTAN, doing business under the firm name "Rank Manpower Co." and UNITED KIMBERLY-CLARK EMPLOYEES UNION-PHILLIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (UKCEU-PTGWO), respondents. KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM AND NATIONALISMOLALIA (KILUSAN-OLALIA), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA. ESTRELLA ALDA, CAPT. REY L. LANADA, COL. VIVENCIO MANAIG and KIMBERLY-CLARK PHILIPPINES, INC., respondents. REGALADO, J.: Before us are two consolidated petitions for certiorari filed by the above-named petitioner union (hereinafter referred to as KILUSAN-OLALIA, for conciseness) and individual complainants therein, to wit (a) G.R. 77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the resolution, dated January 9, 1987, 2 respectively handed down by the two former Ministers of Labor, both rendered in BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of the resolutions of the National Labor Relations Commission, dated May 25, 1987 3 and June 19,1987 4 issued in Injunction Case No. 1442 thereof. Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective bargaining agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport and General Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986. Within the 60-day freedom period prior to the expiration of and during the negotiations for the renewal of the aforementioned CBA, some members of the bargaining unit formed another union called "Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized Labor Association in Line Industries and Agriculture (KILUSAN-OLALIA)." On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in Regional Office No. IV, Ministry of Labor and Employment (MOLE), docketed as Case No. RO4-OD-M-415-86. 5 KIMBERLY and (UKCEU-PTGWO) did not object to the holding of a certification election but objected to the inclusion of the so-called contractual workers whose employment with KIMBERLY was coursed through an independent contractor, Rank Manpower Company (RANK for short), as among the qualified voters. Pending resolution of the petition for certification election by the med-arbiter, KILUSAN-OLALIA filed a notice of strike on May 7, 1986 with the Bureau of Labor Relations, docketed as BLR Case No. NS-5164-86, 6 charging KIMBERLY with unfair labor practices based on the following alleged acts: (1) dismissal of union members (KILUSAN-OLALIA); (2) non-regularization of casuals/contractuals with over six months service; (3) non-implementation of appreciation bonus for 1982 and 1983; (4) non-

payment of minimum wages; (5) coercion of employees; and (6) engaging in CBA negotiations despite the pendency of a petition for certification election. This was later amended to withdraw the charge of coercion but to add, as new charges, the dismissal of Roque Jimenez and the non-payment of backwages of the reinstated Emerito Fuentes . 7 Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared a strike at KIMBERLY's premises in San Pedro, Laguna on May 23, 1986. On May 26, 1986, KIMBERLY petitioned MOLE to assume jurisdiction over the labor dispute. On May 30, 1986, finding that the labor dispute would adversely affect national interest, then Minister Augusto S. Sanchez issued an assumption order, the dispositive portion whereof reads: Wherefore, premises considered, immediately upon receipt of this order, the striking union and its members are hereby enjoined to lift the picket and remove all obstacles to the free ingress to and egress from the company premises and to return to work, including the 28 contractual workers who were dismissed; likewise, the company is directed to resume its operations immediately thereafter and to accept all the employees back under the same terms and conditions of employment prevailing prior to the industrial action. Further, all issues in the notice of strike, as amended, are hereby assumed in this assumption order, except for the representation issue pending in Region IV in which the Med-Arbiter is also enjoined to decide the same the soonest possible time. 8 In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing activities effective June 1, 1986 after a compliance agreement was entered into by it with KIMBERLY. 9 On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election case (RO4-OD-M-4-1586), issued an order 10 declaring the following as eligible to vote in the certification election, thus: 1. The regular rank-and-file laborers/employees of the respondent company consisting of 537 as of May 14, 1986 should be considered qualified to vote; 2. Those casuals who have worked at least six (6) months as appearing in the payroll months prior to the filing of the instant petition on April 21, 1986; and 3. Those contractual employees who are allegedly in the employ of an independent contractor and who have also worked for at least six (6) months as appearing in the payroll month prior to the filing of the instant petition on April 21, 1986. During the pre-election conference, 64 casual workers were challenged by KIMBERLY and (UKCEUPTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It was agreed by all the parties that the 64 voters shall be allowed to cast their votes but that their ballots shall be segregated and subject to challenge proceedings. The certification election was conducted on July I., 1986, with the following results: 11 1. KILUSAN-OLALIA = 246 votes 2. (UKCEU-PTGWO) = 266 votes 3. NO UNION = 1 vote

4. SPOILED BALLOTS = 4 votes 5. CHALLENGED BALLOTS = 64 votes TOTAL 581 votes On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and Count Challenged Votes" 12 on the ground that the 64 workers are employees of KIMBERLY within the meaning of Article 212(e) of the Labor Code. On July 7, 1986, KIMBERLY filed an opposition to the protest and motion, asserting that there is no employer-employee relationship between the casual workers and the company, and that the med-arbiter has no jurisdiction to rule on the issue of the status of the challenged workers which is one of the issues covered by the assumption order. The med-arbiter opted not to rule on the protest until the issue of regularization has been resolved by MOLE. 13 On November 13, 1986, then Minister Sanchez rendered a decision in BLR Case No. NS-5-164-86, 14 the disposition wherein is summarized as follows: 1. The service contract for janitorial and yard maintenance service between KIMBERLY and RANK was declared legal; 2. The other casual employees not performing janitorial and yard maintenance services were deemed labor-only contractual and since labor-only contracting is prohibited, such employees were held to have attained the status of regular employees, the regularization being effective as of the date of the decision; 3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as the exclusive bargaining representative of KIMBERLY's employees; 4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered; 5. Roque Jimenez was ordered reinstated without backwages, the period when he was out of work being considered as penalty for his misdemeanor; 6. The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes with backwages was declared as already final and unappealable; and 7. KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983. On November 25, 1986, KIMBERLY flied a motion for reconsideration with respect to the regularization of contractual workers, the appreciation bonus and the reinstatement of Roque Jimenez. 15 In a letter dated November 24, 1986, counsel for KILUSAN-OLALIA demanded from KIMBERLY the implementation of the November 13, 1986 decision but only with respect to the regularization of the casual workers. 16 On December 11, 1986, KILUSAN-OLALIA filed a motion for reconsideration questioning the authority of the Minister of Labor to assume jurisdiction over the representation issue. In the meantime, KIMBERLY and UKCEU-PTGWO continued with the negotiations on the new collective bargaining agreement (CBA), no restraining order or junctive writ having been issued, and on December 18, 1986, a new CBA was concluded and ratified by 440 out of 517 members of the bargaining unit. 17

In an order dated January 9, 1987, former Labor Minister Franklin Drilon denied both motions for reconsideration filed by KIMBERLY and KILUSAN-OLALIA. 18 On March 10, 1987, the new CBA executed between KIMBERLY and UKCEU-PTGWO was signed. On March 16, 1987, KILUSAN-OLALIA filed a petition for certiorari in this Court docketed as G.R. No. 77629, seeking to set aside the aforesaid decision, dated November 13, 1986, and the order, dated January 9, 1987, rendered by the aforesaid labor ministers. On March 25, 1987, this Court issued in G.R. No. 77629 a temporary restraining order, enjoining respondents from enforcing and/or carrying out the decision and order above stated, particularly that portion (1) recognizing respondent UKCEU-PTGWO as the exclusive bargaining representative of all regular rank-and-file employees in the establishment of respondent company, (2) enforcing and/or implementing the alleged CBA which is detrimental to the interests of the members of the petitioner union, and (3) stopping respondent company from deducting monthly dues and other union assessments from the wages of all regular rank-and-file employees of respondent company and from remitting the said collection to respondent UKCEU-PTGWO issued in BLR Case No. NS-5-164-86, entitled, "In Re: Labor Dispute at Kimberly-Clark Philippines, Inc.," of the Department of Labor and Employment, Manila, 19 In its comment, 20 respondent company pointed out certain events which took place prior to the filing of the petition in G.R. No. 77629, to wit: 1. The company and UKCEU-PTGWO have concluded a new collective bargaining agreement which had been ratified by 440 out of 517 members of the bargaining unit; 2. The company has already granted the new benefits under the new CBA to all its regular employees, including members of petitioner union who, while refusing to ratify the CBA nevertheless readily accepted the benefits arising therefrom; 3. The company has been complying with the check-off provision of the CBA and has been remitting the union dues to UKCEU-PTGWO 4. The company has already implement the decision of November 13, 1986 insofar as the regularization of contractual employees who have rendered more than one (1) year of service as of the filing of the Notice of Strike on May 7, 1986 and are not engaged in janitorial and yard maintenance work, are concerned 5. Rank Manpower Company had already pulled out, reassigned or replaced the contractual employees engaged in janitorial and yard maintenance work, as well as those with less than one year service; and 6. The company has reinstated Roque Jimenez as of January 11, 1987. In G.R. No. 78791, the records 21 disclose that on May 4, 1987, KILUSAN-OLALIA filed another notice of strike with the Bureau of Labor Relations charging respondent company with unfair labor practices. On May 8, 1987, the bureau dismissed and considered the said notice as not filed by reason of the pendency of the representation issue before this Court in G.R. No. 77629. KILUSAN-OLALIA moved to reconsider said order, but before the bureau could act on said motion, KILUSAN-OLALIA declared a strike and established a picket on respondent company's premises in San Pedro, Laguna on May 17, 1987.

On May 18, 1987, KIMBERLY filed a petition for injunction with the National Labor Relations Commission (NLRC), docketed as Injunction Case No. 1442. A supplement to said petition was filed on May 19, 1987. On May 26, 1987, the commission en banc issued a temporary restraining order (TRO) on the basis of the ocular inspection report submitted by the commission's agent, the testimonies of KIMBERLY's witnesses, and pictures of the barricade. KILUSAN-OLALIA moved to dissolve the TRO on the ground of lack of jurisdiction. Immediately after the expiration of the first TRO on June 9, 1987, the striking employees returned to their picket lines and reestablished their barricades at the gate. On June 19, 1987, the commission en banc issued a second TRO. On June 25, 1987, KILUSAN-OLALIA filed another petition for certiorari and prohibition with this Court, docketed as G.R. No. 78791, questioning the validity of the temporary restraining orders issued by the NLRC on May 26, 1987 and June 19, 1987. On June 29, 1987, KILUSAN-OLALIA filed in said case an urgent motion for a TRO to restrain NLRC from implementing the questioned orders. An opposition, as well as a reply thereto, were filed by the parties. Meanwhile, on July 3, 1987, KIMBERLY filed in the NLRC an urgent motion for the issuance of a writ of preliminary injunction when the strikers returned to the strike area after the second TRO expired. After due hearing, the commission issued a writ of preliminary injunction on July 14, 1987, after requiring KIMBERLY to post a bond in the amount of P20,000.00. Consequently, on July 17, 1987, KILUSAN-OLALIA filed in G.R. No. 78791 a second urgent motion for the issuance of a TRO by reason of the issuance of said writ of preliminary injunction, which motion was opposed by KIMBERLY. Thereafter, in its memorandum 22 filed on December 28, 1989 and in its motion for early resolution 23 filed on February 28, 1990, both in G.R. No. 78791, KILUSAN-OLALIA alleged that it had terminated its strike and picketing activities and that the striking employees had unconditionally offered to return to work, although they were refused admission by KIMBERLY. By reason of this supervening development, the petition in G.R. No. 78791, questioning the propriety of the issuance of the two temporary restraining orders and the writ of injunction therein, has been rendered moot and academic. In G.R. No. 77629, the petition of KILUSAN-OLALIA avers that the respondent Secretary of Labor and/or the former Minister of Labor have acted with grave abuse of discretion and/or without jurisdiction in (1) ruling on the issue of bargaining representation and declaring respondent UKCEU-PTGWO as the collective bargaining representative of all regular rank-and-file employees of the respondent company; (2) holding that petitioners are not entitled to vote in the certification election; (3) considering the regularization of petitioners (who are not janitors and maintenance employees) to be effective only on the date of the disputed decision; (4) declaring petitioners who are assigned janitorial and yard maintenance work to be employees of respondent RANK and not entitled to be regularized; (5) not awarding to petitioners differential pay arising out of such illegal work scheme; and (6) ordering the mere reinstatement of petitioner Jimenez. The issue of jurisdiction actually involves a question of whether or not former Minister Sanchez committed a grave abuse of discretion amounting to lack of jurisdiction in declaring respondent UKCEUPTGWO as the certified bargaining representative of the regular employees of KIMBERLY, after ruling that the 64 casual workers, whose votes are being challenged, were not entitled to vote in the certification election. KILUSAN-OLALIA contends that after finding that the 64 workers are regular employees of KIMBERLY, Minister Sanchez should have remanded the representation case to the med-arbiter instead of declaring

UKCEU-PTGWO as the winner in the certification election and setting aside the med-arbiter's order which allowed the 64 casual workers to cast their votes. Respondents argue that since the issues of regularization and representation are closely interrelated and that a resolution of the former inevitably affects the latter, it was necessary for the former labor minister to take cognizance of the representation issue; that no timely motion for reconsideration or appeal was made from his decision of November 13, 1986 which has become final and executory; and that the aforesaid decision was impliedly accepted by KILUSAN-OLALIA when it demanded from KIMBERLY the issuance of regular appointments to its affected members in compliance with said decision, hence petitioner employees are now stopped from questioning the legality thereof. We uphold the authority of former Minister Sanchez to assume jurisdiction over the issue of the regularization of the 64 casual workers, which fact is not even disputed by KILUSAN-OLALIA as may be gleaned from its request for an interim order in the notice of strike case (BLR-NS-5-164-86), asking that the regularization issue be immediately resolved. Furthermore, even the med-arbiter who ordered the holding of the certification election refused to resolve the protest on the ground that the issue raised therein correctly pertains to the jurisdiction of the then labor minister. No opposition was offered by KILUSAN-OLALIA. We hold that the issue of regularization was properly addressed to the discretion of said former minister. However, the matter of the controverted pronouncement by former Minister Sanchez, as reaffirmed by respondent secretary, regarding the winner in the certification election presents a different situation. It will be recalled that in the certification election, UKCEU-PTGWO came out as the winner, by garnering a majority of the votes cast therein with the exception of 64 ballots which were subject to challenge. In the protest filed for the opening and counting of the challenged ballots, KILUSAN-OLALIA raised the main and sole question of regularization of the 64 casual workers. The med-arbiter refused to act on the protest on the ground that the issue involved is within the jurisdiction of the then Minister of Labor. KILUSAN-OLALIA then sought an interim order for an early resolution on the employment status of the casual workers, which was one of the issues included in the notice of strike filed by KILUSAN-OLALIA in BLR Case No. NS-5-164-86. Consequently, Minister Sanchez rendered the questioned decision finding that the workers not engaged in janitorial and yard maintenance service are regular employees but that they became regular only on the date of his decision, that is, on November 13, 1986, and, therefore, they were not entitled to vote in the certification election. On the basis of the results obtained in the certification election, Minister Sanchez declared UKCEU-PTGWO as the winner. The pivotal issue, therefore, is when said workers, not performing janitorial or yard maintenance service, became regular employees of KIMBERLY. We find and so hold that the former labor minister gravely abused his discretion in holding that those workers not engaged in janitorial or yard maintenance service attained the status of regular employees only on November 13, 1986, which thus deprived them of their constitutionally protected right to vote in the certification election and choose their rightful bargaining representative. The Labor Code defines who are regular employees, as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary not withstanding 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 activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or under the completion or termination of which has been determined at the

time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. The individual petitioners herein who have been adjudged to be regular employees fall under the second category. These are the mechanics, electricians, machinists machine shop helpers, warehouse helpers, painters, carpenters, pipefitters and masons It is not disputed that these workers have been in the employ of KIMBERLY for more than one year at the time of the filing of the Petition for certification election by KILUSAN-OLALIA. Owing to their length of service with the company, these workers became regular employees, by operation of law, one year after they were employed by KIMBERLY through RANK. While the actual regularization of these employees entails the mechanical act of issuing regular appointment papers and compliance with such other operating procedures as may be adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to instead make their regularization dependent on the happening of some contingency or the fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by law. That the first stated position is the situation contemplated and sanctioned by law is further enhanced by the absence of a statutory limitation before regular status can be acquired by a casual employee. The law is explicit. As long as the employee has rendered at least one year of service, he becomes a regular employee with respect to the activity in which he is employed. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction should be drawn. The submission that the decision of November 13, 1986 has become final and executory, on the grounds that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly acceded thereto, is untenable. Rule 65 of the Rules of Court allows original petitions for certiorari from decisions or orders of public respondents provided they are filed within a reasonable time. We believe that the period from January 9, 1987, when the motions for reconsideration separately filed by KILUSAN-OLALIA and KIMBERLY were denied, to March 16, 1987, when the petition in G.R. No. 77629 was filed, constitutes a reasonable time for availing of such recourse. We likewise do not subscribe to the claim of respondents that KILUSAN-OLALIA has impliedly accepted the questioned decision by demanding compliance therewith. In the letter of KILUSAN-OLALIA dated November 24, 1986 24 addressed to the legal counsel of KIMBERLY, it is there expressly and specifically pointed out that KILUSAN-OLALIA intends to file a motion for reconsideration of the questioned decision but that, in the meantime, it was demanding the issuance of regular appointments to the casual workers who had been declared to be regular employees. The filing of said motion for reconsideration of the

questioned decision by KILUSAN-OLALIA, which was later denied, sustains our position on this issue and denies the theory of estoppel postulated by respondents. On the basis of the foregoing circumstances, and as a consequence of their status as regular employees, those workers not perforce janitorial and yard maintenance service were performance entitled to the payment of salary differential, cost of living allowance, 13th month pay, and such other benefits extended to regular employees under the CBA, from the day immediately following their first year of service in the company. These regular employees are likewise entitled to vote in the certification election held in July 1, 1986. Consequently, the votes cast by those employees not performing janitorial and yard maintenance service, which form part of the 64 challenged votes, should be opened, counted and considered for the purpose of determining the certified bargaining representative. We do not find it necessary to disturb the finding of then Minister Sanchez holding as legal the service contract executed between KIMBERLY and RANK, with respect to the workers performing janitorial and yard maintenance service, which is supported by substantial and convincing evidence. Besides, we take judicial notice of the general practice adopted in several government and private institutions and industries of hiring a janitorial service on an independent contractor basis. Furthermore, the occasional directives and suggestions of KIMBERLY are insufficient to erode primary and continuous control over the employees of the independent contractor. 25 Lastly, the duties performed by these workers are not independent and integral steps in or aspects of the essential operations of KIMBERLY which is engaged in the manufacture of consumer paper products and cigarette paper, hence said workers cannot be considered regular employees. The reinstatement of Roque Jimenez without backwages involves a question of fact best addressed to the discretion of respondent secretary whose finding thereon is binding and conclusive upon this Court, absent a showing that he committed a grave abuse in the exercise thereof. WHEREFORE, judgment is hereby rendered in G.R. No. 77629: 1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged votes, and that the union with the highest number of votes be thereafter declared as the duly elected certified bargaining representative of the regular employees of KIMBERLY; 2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with respect to minimum wage, cost of living allowance, 13th month pay, and benefits provided for under the applicable collective bargaining agreement from the time they became regular employees. All other aspects of the decision appealed from, which are not so modified or affected thereby, are hereby AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made permanent. The petition filed in G.R. No. 78791 is hereby DISMISSED. SO ORDERED. Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

THIRD DIVISION G.R. No. 70705 August 21, 1989 MOISES DE LEON, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and LA TONDE;A INC., respondents. Amorito V. Canete for petitioner. Pablo R. Cruz for private respondent. FERNAN, C.J.: This petition for certiorari seeks to annul and set aside: (1) the majority decision dated January 28, 1985 of the National Labor Relations Commission First Division in Case No. NCR- 83566-83, which reversed the Order dated April 6,1984 of Labor Arbiter Bienvenido S. Hernandez directing the reinstatement of petitioner Moises de Leon by private respondent La Tonde;a Inc. with payment of backwages and other benefits due a regular employee; and, (2) the Resolution dated March 21, 1985 denying petitioner's motion for reconsideration. It appears that petitioner was employed by private respondent La Tonde;a Inc. on December 11, 1981, at the Maintenance Section of its Engineering Department in Tondo, Manila. 1 His work consisted mainly of painting company building and equipment, and other odd jobs relating to maintenance. He was paid on a daily basis through petty cash vouchers. In the early part of January, 1983, after a service of more than one (1) year, petitioner requested from respondent company that lie be included in the payroll of regular workers, instead of being paid through petty cash vouchers. Private respondent's response to this request was to dismiss petitioner from his employment on January 16, 1983. Having been refused reinstatement despite repeated demands, petitioner filed a complaint for illegal dismissal, reinstatement and payment of backwages before the Office of the Labor Arbiter of the then Ministry now Department of Labor and Employment. Petitioner alleged that he was dismissed following his request to be treated as a regular employee; that his work consisted of painting company buildings and maintenance chores like cleaning and operating company equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and that weeks after his dismissal, he was re-hired by the respondent company indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor agency of respondent company, and was made to perform the tasks which he used to do. Emiliano Tanque Jr. corroborated these averments of petitioner in his affidavit. 2 On the other hand, private respondent claimed that petitioner was not a regular employee but only a casual worker hired allegedly only to paint a certain building in the company premises, and that his work as a painter terminated upon the completion of the painting job. On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision 3 finding the complaint meritorious and the dismissal illegal; and ordering the respondent company to reinstate petitioner with full backwages and other benefits. Labor Arbiter Hernandez ruled that petitioner was not a mere casual employee as asserted by private respondent but a regular employee. He concluded that the dismissal of petitioner from the service was prompted by his request to be included in the list of regular employees and to be paid through the payroll and is, therefore, an attempt to circumvent the legal obligations of an employer towards a regular employee. Labor Arbiter Hernandez found as follows: After a thorough examination of the records of the case and evaluation of the evidence and versions of the parties, this Office finds and so holds that the dismissal of complainant is illegal. Despite the impressive attempt of respondents to show that the complainant was hired as casual and for the work on

particular project, that is the repainting of Mama Rosa Building, which particular work of painting and repainting is not pursuant to the regular business of the company, according to its theory, we find differently. Complainant's being hired on casual basis did not dissuade from the cold fact that such painting of the building and the painting and repainting of the equipment and tools and other things belonging to the company and the odd jobs assigned to him to be performed when he had no painting and repainting works related to maintenance as a maintenance man are necessary and desirable to the better operation of the business company. Respondent did not even attempt to deny and refute the corroborating statements of Emiliano Tanque Jr., who was regularly employed by it as a maintenance man doing same jobs not only of painting and repainting of building, equipment and tools and machineries or machines if the company but also other odd jobs in the Engineering and Maintenance Department that complainant Moises de Leon did perform the same odd jobs and assignments as were assigned to him during the period de Leon was employed for more than one year continuously by Id respondent company. We find no reason not to give credit and weight to the affidavit and statement made therein by Emiliano Tanque Jr. This strongly confirms that complainant did the work pertaining to the regular business in which the company had been organized. Respondent cannot be permitted to circumvent the law on security of tenure by considering complainant as a casual worker on daily rate basis and after working for a period that has entitled him to be regularized that he would be automatically terminated. ... . 4 On appeal, however, the above decision of the Labor Arbiter was reversed by the First Division of the National Labor Relations Commission by virtue of the votes of two members 5 which constituted a majority. Commissioner Geronimo Q. Quadra dissented, voting "for the affirmation of the well-reasoned decision of the Labor Arbiter below." 6 The motion for reconsideration was denied. Hence, this recourse. Petitioner asserts that the respondent Commission erred and gravely abuse its discretion in reversing the Order of the Labor Arbiter in view of the uncontroverted fact that the tasks he performed included not only painting but also other maintenance work which are usually necessary or desirable in the usual business of private respondent: hence, the reversal violates the Constitutional and statutory provisions for the protection of labor. The private respondent, as expected, maintains the opposite view and argues that petitioner was hired only as a painter to repaint specifically the Mama Rosa building at its Tondo compound, which painting work is not part of their main business; that at the time of his engagement, it was made clear to him that he would be so engaged on a casual basis, so much so that he was not required to accomplish an application form or to comply with the usual requisites for employment; and that, in fact, petitioner was never paid his salary through the regular payroll but always through petty cash vouchers. 7 The Solicitor General, in his Comment, recommends that the petition be given due course in view of the evidence on record supporting petitioner's contention that his work was regular in nature. In his view, the dismissal of petitioner after he demanded to be regularized was a subterfuge to circumvent the law on regular employment. He further recommends that the questioned decision and resolution of respondent Commission be annulled and the Order of the Labor Arbiter directing the reinstatement of petitioner with payment of backwages and other benefits be upheld. 8 After a careful review of the records of this case, the Court finds merit in the petition as We sustain the position of the Solicitor General that the reversal of the decision of the Labor Arbiter by the respondent Commission was erroneous. The law on the matter is Article 281 of the Labor Code which defines regular and casual employment as follows: Art. 281. Regular and casual employment. The provisions of a 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 activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the

time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. This provision reinforces the Constitutional mandate to protect the interest of labor. Its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient. Thus, contrary agreements notwithstanding, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. Not considered regular are the so-called "project employment" the completion or termination of which is more or less determinable at the time of employment, such as those employed in connection with a particular construction project 9 and seasonal employment which by its nature is only desirable for a limited period of time. However, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity he performed and while such activity actually exists. The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. In the case at bar, the respondent company, which is engaged in the business of manufacture and distillery of wines and liquors, claims that petitioner was contracted on a casual basis specifically to paint a certain company building and that its completion rendered petitioner's employment terminated. This may have been true at the beginning, and had it been shown that petitioner's activity was exclusively limited to painting that certain building, respondent company's theory of casual employment would have been worthy of consideration. However, during petitioner's period of employment, the records reveal that the tasks assigned to him included not only painting of company buildings, equipment and tools but also cleaning and oiling machines, even operating a drilling machine, and other odd jobs assigned to him when he had no painting job. A regular employee of respondent company, Emiliano Tanque Jr., attested in his affidavit that petitioner worked with him as a maintenance man when there was no painting job. It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company did not even attempt to negate the above averments of petitioner and his co- employee. Indeed, the respondent company did not only fail to dispute this vital point, it even went further and confirmed its veracity when it expressly admitted in its comment that, "The main bulk of work and/or activities assigned to petitioner was painting and other related activities. Occasionally, he was instructed to do other odd things in connection with maintenance while he was waiting for materials he would need in his job or when he had finished early one assigned to him. 10 The respondent Commission, in reversing the findings of the Labor Arbiter reasoned that petitioner's job cannot be considered as necessary or desirable in the usual business or trade of the employer because, "Painting the business or factory building is not a part of the respondent's manufacturing or distilling process of wines and liquors. 11 The fallacy of the reasoning is readily apparent in view of the admitted fact that petitioner's activities included not only painting but other maintenance work as well, a fact which even the respondent Commission, like the private respondent, also expressly

recognized when it stated in its decision that, 'Although complainant's (petitioner) work was mainly painting, he was occasionally asked to do other odd jobs in connection with maintenance work. 12 It misleadingly assumed that all the petitioner did during his more than one year of employment was to paint a certain building of the respondent company, whereas it is admitted that he was given other assignments relating to maintenance work besides painting company building and equipment. It is self-serving, to say the least, to isolate petitioner's painting job to justify the proposition of casual employment and conveniently disregard the other maintenance activities of petitioner which were assigned by the respondent company when he was not painting. The law demands that the nature and entirety of the activities performed by the employee be considered. In the case of petitioner, the painting and maintenance work given him manifest a treatment consistent with a maintenance man and not just a painter, for if his job was truly only to paint a building there would have been no basis for giving him other work assignments In between painting activities. It is not tenable to argue that the painting and maintenance work of petitioner are not necessary in respondent's business of manufacturing liquors and wines, just as it cannot be said that only those who are directly involved in the process of producing wines and liquors may be considered as necessary employees. Otherwise, there would have been no need for the regular Maintenance Section of respondent company's Engineering Department, manned by regular employees like Emiliano Tanque Jr., whom petitioner often worked with. Furthermore, the petitioner performed his work of painting and maintenance activities during his employment in respondent's business which lasted for more than one year, until early January, 1983 when he demanded to be regularized and was subsequently dismissed. Certainly, by this fact alone he is entitled by law to be considered a regular employee. And considering further that weeks after his dismissal, petitioner was rehired by the company through a labor agency and was returned to his post in the Maintenance Section and made to perform the same activities that he used to do, it cannot be denied that as activities as a regular painter and maintenance man still exist. It is of no moment that petitioner was told when he was hired that his employment would only be casual, that he was paid through cash vouchers, and that he did not comply with regular employment procedure. Precisely, the law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining position needs the support of the State. That determines whether a certain employment is regular or casual is not the will and word of the employer, to which the desperate worker often accedes, much less the procedure of hiring the employee or the manner of paying his salary. It is the nature of the activities performed in relation to the particular business or trade considering all circumstances, and in some cases the length of time of its performance and its continued existence. Finally, considering its task to give life and spirit to the Constitutional mandate for the protection of labor, to enforce and uphold our labor laws which must be interpreted liberally in favor of the worker in case of doubt, the Court cannot understand the failure of the respondent Commission to perceive the obvious attempt on the part of the respondent company to evade its obligations to petitioner by dismissing the latter days after he asked to be treated as a regular worker on the flimsy pretext that his painting work was suddenly finished only to rehire him indirectly weeks after his dismissal and assign him to perform the same tasks he used to perform. The devious dismissal is too obvious to escape notice. The inexplicable disregard of established and decisive facts which the Commission itself admitted to be so, in justifying a conclusion adverse to the aggrieved laborer clearly spells a grave abuse of discretion amounting to lack of jurisdiction. WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the National Labor Relations Commission are hereby annulled and set aside. The Order of Labor arbiter Bienvenido S. Hernandez dated April 6, 1984 is reinstated. Private respondent is ordered to reinstate petitioner as a regular maintenance man and to pay petitioner 1) backwages equivalent to three years from January 16,1983, in accordance with the Aluminum Wage Orders in effect for the period covered, 2) ECOLA 3) 13th Month Pay, 4) and other benefits under pertinent Collective Bargaining Agreements, if any. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

SECOND DIVISION G.R. No. L-44360 March 31, 1977 REGINA S. BIBOSO, NENITA B. BISO, FE CUBIN, MAGELENDE H. DEMEGILLDO, EMERITA O. PANALIGAN, NILDA P. TAYO, NELDA TORMON, ARDE M. VALENCIANO, MA. LINDA E. VILLA and the VICMICO SUPERVISORY EMPLOYEES ASSOCIATION (VICSEA), petitioners, vs. VICTORIAS MILLING COMPANY, INC. and the OFFICE OF THE PRESIDENT OF THE PHILIPPINES, respondents. FERNANDO, J.:t.hqw The present Constitution of expanding the mandate of protection to labor specifically casts on the State the obligation to assure workers security of tenure. 1 The decisive question in the controversy now before this Court is wether the mantle of such guarantee covers the case of the nine petitioners, whose employment admittedly were on a basis. It was the rulling of the respondent Presidential Executive Assistant Jacobo C. Clave that its benificent effects could not be invoked by them that is assailed before this Court. While they are pleading by captioned petition for review, this Court considered it as a cetiorari proceeding in view on his part, the issue of an alleged unfair labor pratice indulged in by private respondent public official, who acted serious accusation against respondent public, who acted on behalf of the Office of the President. The petition is not impressed with the merit. The order of respondent Jacobo C. Clave, who asss Presidential Executive Assistant acted on an appeal by private respondent from a decision of the Secretary of Labor dismissed the complaint of petitioners for reinstatement. He noted at the outset of such challenged order: "Individual complainants herein were employed by respondent as academic teachers in respondent's school, the St. Mary Mazzarello School, which is operated by respondent. On or about April 14, 1973, complainants were notified by the school Directress that they (complainants) were not going to be rehired for the school year 1973-74.sllF The necessary report for such action was filed by respondent with the Department of Labor on May 28, 1973, informing that complainants' services were thus terminated after the business hours on June 30, 1973. 2 He then pointed out that petitioners were quite successful with the Arbitrator, the former National Labor Relations Commission under Presidential Decree No. 21, and the Secretary of Labor. It was private respondent that appealed to the Office of the President. After which, his order went into the basic issue thus: "This Office had examined and analyzed the various contracts Identified during the hearing below and admitted by the complainants to have been signed by them which clearly show that the complainants were hired as teachers of the school on a year-to-year basis and that they reapplied before the expiration of the contracts and/or signed new ones, as the case may be, if the school decided to renew the same. None of the complainants who testified disputed the fact that they all signed Identical contracts of employment which provided for a definite period of employment which provided for a definite period of employment expiring June 30 of the particular school year. Thus, under 'Status of Employment' of said contracts, the complainants were hired as 'temporary as and when required until June 30, 1973,' or whatever year the contract is supposed to terminate. To he specific, Exhs. '4', '5' and '6' signed by complainant Arde Valenciano show that she was hired on a yearly basis for school year 1970-71, and 1971-72. The same is true with Exhs. '13' and '14' signed by Linda Villa; Exhs. '16', '17','18' and '19', signed by Emerita 0. Panaligan; and Exhs.'22' and '23', signed by Magelinde Demegillo all showing that they were hired on a year-to-year basis. 3 Reference was then made to "the official stand of the Department of Labor respecting recognition by the Labor Code of the policy of the Bureau of Private Schools settling the maximum probationary period for teachers at three years. Of pertinence hereto is the official letter dated March 12, 1975, of Undersecretary of Labor Amado G. Inciong to the President of the Coordinating Council of Private

Educational Associations touching on the probationary period for teachers at three years, to wit: ... This refers to your letter of 5 March 1975 in connection with the probationary period for teachers. The Labor Code does not set the maximum probationary period at six months. Under the Labor Code, the probationary period is the period required to learn a skill, trade. occupation or profession. In other words, the Labor Code recognizes the policy of the Bureau of Private Schools settling the maximum probationary period for teachers at three years. 4 It was likewise made plain therein that as regards the allegation of unfair labor practice, the Office of the President "finds the same untenable. 5 The petition, as noted at the outset, cannot proper. 1. It is to be noted that in Philippine Air Lines, Inc. v. Philippine Air Lines Employees Association, 6 after reference was made to the specific provision in the present Constitution not found in the 1935 Charter requiring the State to assure workers security of tenure, it was stressed that there should be fealty to [such] constitutional command. 7 Such a mandate was construed in the subsequent case of Almira v. B. F. Goodrich Philippines, Inc., 8 that even in cases affording justification for disciplinary action to be taken by management against an employee, "where a penalty less punitive [than dismissal] would suffice, whatever missteps may be committed by [the latter ought not to be visited with a consequence so severe." 9 The opinion then went on to state: "It is not only because of the law's concern for the workingman. There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided if there be acceptance of the view that under all the circumstance of this case, petitioners should not be deprived of their means of livelihood. Nor is this to condone what had been paid. From the strictly juridical standpoint, it cannot be too strongly stressed, to follow Davis in his masterly work, Discretionary Justice, that were a decision may be made to rest on informed judgment rather than rigid rules, all the equities of the case must be accorded their due weight. Finally, labor law determinations, to quote from Bultmann, should be not secundum rationem but also secundum caritatem. " 10 That is a doctrine to which this case is whether it applies to the case of petitioner. The Office of the President answered in the negative. Thus it exercised its discretion. It cannot be said that an abuse could rightfully be imputed by it, much less one that is of such gravity that calls fir judicial correction. What is decisive is that petitioners were well aware all the time that their tenure was for a limited duration. Upon its termination, both parties to the employment relationship were free to renew it or to let it lapse. It was the decision of private respondent that it should cease. The Office of the President could find nothing objectionable when it determined that the will of the parties as to the limited duration thereof should be respected. That was all that was decided. 2. This is by no means to assert that the security of tenure protection of the constitution does not apply t probationary employees. The Labor code has wisely provided for such a case thus: "The termination of employment of probationary employees and those employed with a fixed period shall be subject to such regulations as the Secretary of labor may priscribe to prevent the circum\vention of the right of the employees to be secured in their employment as provided herein." 11 There is no question here, as noted in the assailed order of Presidential Executive Assistant Clave, that petitioners did not enjoy a permanent status. During such period they could remian in their positions and any circumvention of their of the rights, in accordance with the statutory statutory scheme, subject to inquirey and therafter correction by the Department of Labor. Thus there was the safeguard as to the duration of their employment being respected. To that extent, their tenure was secure. The moment, however, the period expired in accordance with contracts freely entered into, they could no longer invoke the constitutional protection. To repeat, that was what transpired in this case.sllF The ruling of the Office of the President, now assailed, is not without support in law. 3. It would be a different matter of course had the failure to renew the contracts of petitioners been justly attributable to their joining petitioner labor union, Vicmico Supervisoyr Employees Association. That would be a clear case of an unfair labor practice. 12 There was such an allegation by them. The Office of

the President found "the same untenable." 13 Nor did it stop there. It explained why: "The records disclose, and it is a fact admitted by the union, that the teachers of Don Bosco Technical Institute, also run and operated by respondent, are all members of the VICSEA. The allegation that the Company refused re-employment of complainants simply because they joined the VICSEA isnegated by the fact that in a much bigger school, the Don bosco Technical Institute, respondent has allowed the members of the faculty to join the CIVSEA without any serious objection or reprisal. If at all the respondent had objected to the teachers of the St. Mary Mazzarello school being considered within the same bargaining unit as the otgher employees of the company, it was for the reason that the exemption from coverage of employes hired for a definite period of employment, like the complainants herein, who were indisputably shown that the term of their contract of employment prior to the time that they become permanent under the Manual of the Bureau of Private Schools, was temporary in nature or for a definite period." 14 In the comment submitted on behalf of respondent public official, reference was made to the admission by individual petitioners that before they joined such labor union, "they had serious differences with the school officials respecting their methods of teaching and conduct in school." 15 That was followed by a recital of what was testified to by some of the petitioners. Then came this portion of the comment: "The above-quoted testimonies of individual petitioners clearly show that their competence, efficiency, loyalty and integrity were in question long before they became members of petitioner union VICSEA and it was because of these failings on their part that their contracts to teach were not renewed. This also shown by Exhibit 39, ... (3) Some of the teachers retained to teach in the school were also members of petitioner union VICSEA.... If respondent VICMICO was against individual petitioners joining the union, why did it not terminate the employment of these two teachers as well? (4) Don Bosco of Bacolod City, another school run by respondent VICMICO, is manned by teachers who are members of petitioner union VICSEA ... Considering "he foregoing circumstances, it is difficult to believe the submission of individual petitioners that they were terminated from employment because they joined petitioner union VICSEA It would appear that it was the other way around. Knowing that their contracts were about to expire and that they would probably not be extended new ones, petitioners sought membership in petitioner union VICSEA to render it more difficult for respondent VICMICO to remove them from their teaching positions. This is indicated by the fact that petitioners became members of petitioner union VICSEA only in January, 1973. Before this date, individual petitioners were already being closely observed to gauge their performance for purposes of determining who shall be accorded permanent status. Thus, individual petitioners knew that they would either be made permanent or will be dropped from the faculty roster at the end of the school year 1972-73. So they joined the union. That the purpose of individual petitioners in joining the union is to avert their forthcoming removal from the faculty roster was impliedly admitted by one of the individual petitioners in her testimony: 'Q But according to you, precisely, the reason why you joined the union was because it would be very hard for the school toterminate you if you are already a member of the union, did you not say that? A I said it!" 16 The memorandum for petitioners did stress testimony coming from the Directress of the school in question to show that the refusal to retain them in employment was due to their membership in the union. Certainly, it cannot be assumed that the Office of the President in the evaluation of the conflicting evidence did not take it into consideration. The conclusion it reached was adverse to petitioners. It is now well-settled that the certiorari jurisdiction of this Tribunal extends only to a grave abuse of discretion. There must be the element of arbitrariness or caprice. In the light of what appears of record, the conclusion that the decision reached by it is tainted by such infirmity is unwarranted. WHEREFORE, the petition for certiorari is dismissed. Barredo, Antonio and Concepcion Jr., JJ., concur. Aquino, J, concur in the result.

G.R. No. 109114 September 14, 1993 HOLIDAY INN MANILA and/or HUBERT LINER and BABY DISQUITADO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (Second Division) and ELENA HONASAN, respondents. Inocentes, De Leon, Leogardo, Atienza, Manaye & Azucena Law Office for petitioners. Florante M. Yambot for private respondent. CRUZ, J.: The employer has absolute discretion in hiring his employees in accordance with his standards of competence and probity. This is his prerogative. Once hired, however, the employees are entitled to the protection of the law even during the probation period and more so after they have become members of the regular force. The employer does not have the same freedom in the hiring of his employees as in their dismissal. Elena Honasan applied for employment with the Holiday Inn and was on April 15, 1991, accepted for "on-the-job training" as a telephone operator for a period of three weeks. 1 For her services, she received food and transportation allowance. 2 On May 13, 1992, after completing her training, she was employed on a "probationary basis" for a period of six months ending November 12, 1991. 3 Her employment contract stipulated that the Hotel could terminate her probationary employment at any time prior to the expiration of the six-month period in the event of her failure (a) to learn or progress in her job; (b) to faithfully observe and comply with the hotel rules and the instructions and orders of her superiors; or (c) to perform her duties according to hotel standards. On November 8, 1991, four days before the expiration of the stipulated deadline, Holiday Inn notified her of her dismissal, on the ground that her performance had not come up to the standards of the Hotel. 4 Through counsel, Honasan filed a complaint for illegal dismissal, claiming that she was already a regular employee at the time of her separation and so was entitled to full security of tenure. 5 The complaint was dismissed on April 22, 1992 by the Labor Arbiter, 6 who held that her separation was justified under Article 281 of the Labor Code providing as follows: Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. On appeal, this decision was reversed by the NLRC, which held that Honasan had become a regular employee and so could not be dismissed as a probationer. 7 In its own decision dated November 27, 1992, the NLRC ordered the petitioners to reinstate Honasan "to her former position without loss of seniority rights and other privileges with backwages without deduction and qualification." Reconsideration was denied in a resolution dated January 26, 1993. 8 The petitioners now fault the NLRC for having entertained Honasan's appeal although it was filed out of time and for holding that Honasan was already a regular employee at the time of her dismissal, which was made 4 days days before the expiration of the probation period. The petition has no merit.

On the timeliness of the appeal, it is well-settled that all notices which a party is entitled to receive must be coursed through his counsel of record. Consequently, the running of the reglementary period is reckoned from the date of receipt of the judgment by the counsel of the appellant. 9 Notice to the appellant himself is not sufficient notice. 10 Honasan's counsel received the decision of the Labor Arbiter on May 18, 1992. 11 Before that, however, the appeal had already been filed by Honasan herself, on May 8, 1992. 12 The petitioners claim that she filed it on the thirteenth but this is irrelevant. Even if the latter date was accepted, the appeal was nevertheless still filed on time, in fact even before the start of the reglementary period. On the issue of illegal dismissal, we find that Honasan was placed by the petitioner on probation twice, first during her on-thejob training for three weeks, and next during another period of six months, ostensibly in accordance with Article 281. Her probation clearly exceeded the period of six months prescribed by this article. Probation is the period during which the employer may determine if the employee is qualified for possible inclusion in the regular force. In the case at bar, the period was for three weeks, during Honasan's on-the-job training. When her services were continued after this training, the petitioners in effect recognized that she had passed probation and was qualified to be a regular employee. Honasan was certainly under observation during her three-week on-the-job training. If her services proved unsatisfactory then, she could have been dropped as early as during that period. But she was not. On the contrary, her services were continued, presumably because they were acceptable, although she was formally placed this time on probation. Even if it be supposed that the probation did not end with the three-week period of on-the-job training, there is still no reason why that period should not be included in the stipulated six-month period of probation. Honasan was accepted for on-the-job training on April 15, 1991. Assuming that her probation could be extended beyond that date, it nevertheless could continue only up to October 15, 1991, after the end of six months from the earlier date. Under this more lenient approach, she had become a regular employee of Holiday Inn and acquired full security of tenure as of October 15, 1991. The consequence is that she could no longer be summarily separated on the ground invoked by the petitioners. As a regular employee, she had acquired the protection of Article 279 of the Labor Code stating as follows: Art. 279. Security of Tenure In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. 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. The grounds for the removal of a regular employee are enumerated in Articles 282, 283 and 284 of the Labor Code. The procedure for such removal is prescribed in Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code. These rules were not observed in the case at bar as Honasan was simply told that her services were being terminated because they were found to be unsatisfactory. No administrative investigation of any kind was undertaken to justify this ground. She was not even accorded prior notice, let alone a chance to be heard. We find in the Hotel's system of double probation a transparent scheme to circumvent the plain mandate of the law and make it easier for it to dismiss its employees even after they shall have already passed probation. The petitioners had ample time to summarily terminate Honasan's services during her period of probation if they were deemed unsatisfactory. Not having done so, they may dismiss her now only upon proof of any of the legal grounds for the separation of regular employees, to be established according to the prescribed procedure. The policy of the Constitution is to give the utmost protection to the working class when subjected to such maneuvers as the one attempted by the petitioners. This Court is fully committed to that policy and has always been quick to rise in defense of the rights of labor, as in this case. WHEREFORE, the petition is DISMISSED, with costs against petitioners. It is so ordered. Grio-Aquino, Davide, Jr., Bellosillo and Quiason, JJ., concur.

THIRD DIVISION G.R. No. 72222 January 30, 1989 INTERNATIONAL CATHOLIC MIGRATION COMMISSION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BERNADETTE GALANG, respondents. FERNAN, C.J.: The issue to be resolved in the instant case is whether or not an employee who was terminated during the probationary period of her employment is entitled to her salary for the unexpired portion of her sixmonth probationary employment. The facts of the case are undisputed. Petitioner International Catholic Migration Commission (ICMC), a non-profit organization dedicated to refugee service at the Philippine Refugee Processing Center in Morong, Bataan engaged the services of private respondent Bernadette Galang on January 24, 1983 as a probationary cultural orientation teacher with a monthly salary of P2,000.00. Three (3) months thereafter, or on April 22, 1983, private respondent was informed, orally and in writing, that her services were being terminated for her failure to meet the prescribed standards of petitioner as reflected in the performance evaluation of her supervisors during the teacher evaluation program she underwent along with other newly-hired personnel. Despite her termination, records show that private respondent did not leave the ICMC refugee camp at Morong, Bataan, but instead stayed thereat for a few days before leaving for Manila, during which time, she was observed by petitioner to be allegedly acting strangely. On July 24, 1983, private respondent returned to Morong, Bataan on board the service bus of petitioner to accomplish the clearance requirements. In the evening of that same day, she was found at the Freedom Park of Morong wet and shivering from the rain and acting bizarrely. She was then taken to petitioner's hospital where she was given the necessary medical attention. Two (2) days later, or on July 26, 1983, she was taken to her residence in Manila aboard petitioner's service bus. Thru a letter, her father expressed appreciation to petitioner for taking care of her daughter. On that same day, her father received, on her behalf, the proportionate amount of her 13th month pay and the equivalent of her two week pay. On August 22, 1983, private respondent filed a complaint 1 for illegal dismissal, unfair labor practice and unpaid wages against petitioner with the then Ministry of Labor and Employment, praying for reinstatement with backwages, exemplary and moral damages. On October 8, 1983, after the parties submitted their respective position papers and other pleadings, Labor Arbiter Pelagio A. Carpio rendered his decision dismissing the complaint for illegal dismissal as well as the complaint for moral and exemplary damages but ordering the petitioner to pay private respondent the sum of P6,000.00 as payment for the last three (3) months of the agreed employment period pursuant to her verbal contract of employment. 2 Both parties appealed the decision to the National Labor Relations Commission. In her appeal, private respondent contended that her dismissal was illegal considering that it was effected without valid cause.

On the other hand, petitioner countered that private respondent who was employed for a probationary period of three (3) months could not rightfully be awarded P6,000.00 because her services were terminated for failure to qualify as a regular employee in accordance with the reasonable standards prescribed by her employer. On August 22, 1985, the NLRC, by a majority vote of Commissioners Guillermo C. Medina and Gabriel M. Gatchalian, sustained the decision of the Labor Arbiter and thus dismissed both appeals for lack of merit. Commissioner Miguel Varela, on the other hand, dissented and voted for the reversal of the Labor Arbiter's decision for lack of legal basis considering that the termination of services of complainant, now private respondent, was effected during her probationary period on valid grounds made known to her. 3 Dissatisfied, petitioner filed the instant petition. Petitioner maintains that private respondent is not entitled to the award of salary for the unexpired threemonth portion of the probationary period since her services were terminated during such period when she failed to qualify as a regular employee in accordance with the reasonable standards prescribed by petitioner; that having been terminated on valid grounds during her probationary period, or specifically on April 24, 1983, petitioner is not liable to private respondent for services not rendered during the unexpired three-month period, otherwise, unjust enrichment of her part would result; that under Article 282 (now Article 281) of the Labor Code, if the employer finds that the probationary employees does not meet the standards of employment set for the position, the probationary employee may be terminated at any time within the six-month period, without need of exhausting raid entire six-month term. 4 The Solicitor General, on the other hand, contends that a probationary employment for six (6) months, as in the case of herein private respondent, is an employment for a definite period of time and, as such, the employer is duty-bound to allow the probationary employee to work until the termination of the probationary employment before her re- employment could be refused; that when petitioner disrupted the probationary employment of private respondent, without giving her the opportunity to improve her method of instruction within the said period, it held itself liable to pay her salary for the unexpired portion of such employment by way of damages pursuant to the general provisions of civil law that he who in any manner contravenes the terms of his obligation without any valid cause shall be liable for damages; 5 that, as held in Madrigal v. Ogilvie, et al, 6 the damages so awarded are equivalent to her salary for the unexpired portion of her employment for a fixed period. 7 We find for petitioner. There is justifiable basis for the reversal of public respondent's award of salary for the unexpired threemonth portion of private respondent's six-month probationary employment in the light of its express finding that there was no illegal dismissal. There is no dispute that private respondent was terminated during her probationary period of employment for failure to qualify as a regular member of petitioner's teaching staff in accordance with its reasonable standards. Records show that private respondent was found by petitioner to be deficient in classroom management, teacher-student relationship and teaching techniques. 8 Failure to qualify as a regular employee in accordance with the reasonable standards of the employer is a just cause for terminating a probationary employee specifically recognized under Article 282 (now Article 281) of the Labor Code which provides thus: ART. 281. Probationary employment. Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employer who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employer in accordance with reasonable standard made known by the employer to the employer at the time of his

engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. (Emphasis supplied.) It must be noted that notwithstanding the finding of legality of the termination of private respondent, public respondent justified the award of salary for the unexpired portion of the probationary employment on the ground that a probationary employment for six (6) months is an employment for a "definite period" which requires the employer to exhaust the entire probationary period to give the employee the opportunity to meet the required standards. The legal basis of public respondent is erroneous. A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. 9 The word "probationary", as used to describe the period of employment, implies the purpose of the term or period, but not its length. 10 Being in the nature of a "trial period" 11 the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment. It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. The equality of right that exists between the employer and the employee as to the nature of the probationary employment was aptly emphasized by this Court in Grand Motor Parts Corporation v. Minister of Labor, et al., 130 SCRA 436 (1984), citing the 1939 case of Pampanga Bus. Co., Inc. v. Pambusco Employees Union, Inc. 68 Phil. 541, thus: The right of a laborer to sell his labor to such persons as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the Constitution. If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression. As the law now stands, Article 281 of the Labor Code gives ample authority to the employer to terminate a probationary employee for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. There is nothing under Article 281 of the Labor Code that would preclude the employer from extending a regular or a permanent appointment to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of the probationary period. Conversely, if the purpose sought by the employer is neither attained nor attainable within the said period, Article 281 of the Labor Code does not likewise preclude the employer from terminating the probationary employment on justifiable causes as in the instant case. We find unmeritorious, therefore, public respondents argument that the security of tenure of probationary employees within the period of their probation, as in the case of herein private respondent,

justified the award of salary for the unexpired portion of her probationary employment. The termination of private respondent predicated on a just cause negates the application in this case of the pronouncement in the case of Biboso v. Victories Milling Co., Inc., 12 on the right of security of tenure of probationary employees. Upon inquiry by the then Ministry of Labor and Employment as a consequence of the illegal dismissal case filed by private respondent before it, docketed as Case No. NLRC NCR-8-3786-83, it was found that there was no illegal dismissal involved in the case, hence, the circumvention of the rights of the probationary employees sought to be regulated as pointed out in Biboso v. Victorias Milling Co., Inc., 13 is wanting. There was no showing, as borne out by the records, that there was circumvention of the rights of private respondent when she was informed of her termination. Her dismissal does not appear to us as arbitrary, fanciful or whimsical. Private respondent was duly notified, orally and in writing, that her services as cultural orientation teacher were terminated for failure to meet the prescribed standards of petitioner as reflected in the performance evaluation conducted by her supervisors during the teacher evaluating program. The dissatisfaction of petitioner over the performance of private respondent in this regard is a legitimate exercise of its prerogative to select whom to hire or refuse employment for the success of its program or undertaking. More importantly, private respondent failed to show that there was unlawful discrimination in the dismissal. It was thus a grave abuse of discretion on the part of public respondent to order petitioner to pay private respondent her salary for the unexpired three-month portion of her six-month probationary employment when she was validly terminated during her probationary employment. To sanction such action would not only be unjust, but oppressive on the part of the employer as emphasized in Pampanga Bus Co., Inc., v. Pambusco Employer Union, Inc. 14 WHEREFORE, in view of the foregoing, the petition is GRANTED. The Resolution of the National Labor Relations Commission dated August 22, 1985, is hereby REVERSED and SET ASIDE insofar as it ordered petitioner to pay private respondent her P6,000.00 salary for the unexpired portion of her sixmonth probationary employment. No cost. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. L-63316 July 31, 1984 ILUMINADA VER BUISER, MA. CECILIA RILLOACUA and MA. MERCEDES P. INTENGAN, petitioners, vs. HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of the Ministry of Labor & Employment, and GENERAL TELEPHONE DIRECTORY, CO., respondents. Jimenez, Apolo & Leynes Law Office for petitioners. The Solicitor General for respondent Deputy Minister. Abad, Legayada & Associates for private respondent. GUERRERO, J.: This is a petition for certiorari seeking to set aside the Order of the Deputy Minister of Labor and Employment, affirming the Order of the Regional Director, National Capital Region, in Case No. NCR-STF-5-2851-81, which dismissed the petitioners' complainant for alleged illegal dismissal and unpaid commission. Petitioners were employed by the private respondent GENERAL TELEPHONE DIRECTORY COMPANY as sales representatives and charged with the duty of soliciting advertisements for inclusion in a telephone directory. The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P. Intengan entered into an "Employment Contract (on Probationary Status)" on May 26, 1980 with private respondent, a corporation engaged in the business of publication and circulation of the directory of the Philippine Long Distance Telephone Company. Petitioner Ma. Cecilia Rillo-Acuna entered into the same employment contract on June 11, 1980 with the private respondent. Among others, the "Employment Contract (On Probationary Status)" included the following common provisions: l. The company hereby employs the employee as telephone representative on a probationary status for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. It is understood that darung the probationary period of employment, the Employee may be terminated at the pleasure of the company without the necessity of giving notice of termination or the payment of termination pay. The Employee recognizes the fact that the nature of the telephone sales representative's job is such that the company would be able to determine his true character, conduct and selling capabilities only after the publication of the directory, and that it takes about eighteen (18) months before his worth as a telephone saw representative can be fully evaluated inasmuch as the advertisement solicited by him for a particular year are published in the directory only the following year. Corollary to this, the private respondent prescribed sales quotas to be accomplished or met by the petitioners. Failing to meet their respective sales quotas, the petitioners were dismissed from the service by the private respondent. The records show that the private respondent terminated the services of petitioners Iluminada Ver Buiser and Cecilia Rillo-Acuna on May 14, 1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for their failure to meet their sales quotas. Thus, on May 27, 1981, petitioners filed with the National Capital Region, Ministry of Labor and Employment, a complaint for illegal dismissal with claims for backwages, earned commissions and other benefits, docketed as Case No. NCR-STF-5-285181. The Regional Director of said ministry, in an Order dated September 21, 1982, dismissed the complaints of the petitioners, except the claim for allowances which private respondent was ordered to pay. A reconsideration of the Order was sought by

SECOND DIVISION

the petitioners in a motion filed on September 30, 1982. This motion, however, was treated as an appeal to the Minister of Labor. On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor issued an Order dated January 7, 1983, affirming the Regional Director's Order dated September 21, 1982, wherein it ruled that the petitioners have not attained permanent status since private respondent was justified in requiring a longer period of probation, and that the termination of petitioners' services was valid since the latter failed to meet their sales quotas. Hence, this petition for certiorari on the alleged ground that public respondent committed grave abuse of discretion amounting to lack of jurisdiction. Specifically, petitioners submit that: 1. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of discretion amounting to lack of jurisdiction in ruling that the probationary employment of petitioners herein is eighteen (18) months instead of the mandated six (6) months under the Labor Code, and in consequently further ruling that petitioners are not entitled to security of tenure while under said probation for 18 months. 2. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of discretion amounting to lack of jurisdiction in ruling that petitioners were dismissed for a just and valid cause. 3. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of discretion amounting to lack of jurisdiction in ruling that petitioners are not entitled to the commissions they have earned and accrued during their period of employment. Petitioners contend that under Articles 281-282 of the Labor Code, having served the respondent company continuously for over six (6) months, they have become automatically regular employees notwithstanding an agreement to the contrary. Articles 281-282 read thus: Art. 282. Probationary Employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it iscCovered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. (As amended by PD 850). Art. 281. Regular and Casual Employment. 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 activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceeding paragraph. Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (As amended by PD 850). It is petitioners' submission that probationary employment cannot exceed six (6) months, the only exception being apprenticeship and learnership agreements as provided in the Labor Code; that the Policy Instruction of the Minister of Labor and Employment nor any agreement of the parties could prevail over this mandatory requirement of the law; that this six months prescription of the Labor Code was mandated to give further efficacy to the constitutionally-guaranteed security of

tenure of workers; and that the law does not allow any discretion on the part of the Minister of Labor and Employment to extend the probationary period for a longer period except in the aforecited instances. Finally, petitioners maintain that since they are regular employees, they can only be removed or dismissed for any of the just and valid causes enumerated under Article 283 of the Labor Code. We reject petitioners' contentions. They have no basis in law. Generally, the probationary period of employment is limited to six (6) months. The exception to this general rule is When the parties to an employment contract may agree otherwise, such as when the same is established by company policy or when the same is required by the nature of work to be performed by the employee. In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of probationary employment, such as in the present case where the probationary period was set for eighteen (18) months, i.e. from May, 1980 to October, 1981 inclusive, especially where the employee must learn a particular kind of work such as selling, or when the job requires certain qualifications, skills, experience or training. Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts on the period of probationary employment. It states as follows: Probationary Employment has been the subject of misunderstanding in some quarter. Some people believe six (6) months is the probationary period in all cases. On the other hand employs who have already served the probationary period are sometimes required to serve again on probation. Under the Labor Code, six (6) months is the general probationary period ' but the probationary period is actually the period needed to determine fitness for the job. This period, for lack of a better measurement is deemed to be the period needed to learn the job. The purpose of this policy is to protect the worker at the same time enable the employer to make a meaningful employee selection. This purpose should be kept in mind in enforcing this provision of the Code. This issuance shall take effect immediately. In the case at bar, it is shown that private respondent Company needs at least eighteen (18) months to determine the character and selling capabilities of the petitioners as sales representatives. The Company is engaged in advertisement and publication in the Yellow Pages of the PLDT Telephone Directories. Publication of solicited ads are only made a year after the sale has been made and only then win the company be able to evaluate the efficiency, conduct, and selling ability of its sales representatives, the evaluation being based on the published ads. Moreover, an eighteen month probationary period is recognized by the Labor Union in the private respondent company, which is Article V of the Collective Bargaining Agreement, ... thus: Probationary Period New employees hired for regular or permanent shall undergo a probationary or trial period of six (6) months, except in the cases of telephone or sales representatives where the probationary period shall be eighteen (I 8) months. And as indicated earlier, the very contracts of employment signed and acquiesced to by the petitioners specifically indicate that "the company hereby employs the employee as telephone sales representative on a probationary status for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. This stipulation is not contrary to law, morals and public policy. We, therefore, hold and rule that the probationary employment of petitioners set to eighteen (18) months is legal and valid and that the Regional Director and the Deputy Minister of Labor and Employment committed no abuse of discretion in ruling accordingly.

On the second assignment of error that public respondent committed grave abuse of discretion in ruling that petitioners were dismissed for a just and valid cause, this is not the first time that this issue has been raised before this Court. Earlier, in the case of "Arthur Golez vs. The National Labor Relations Commission and General Telephone Directory Co. "G.R. No. L-64459, July 25, 1983, the petition for certiorari which raised the same issue against the herein private respondent was dismissed by this Court for lack of merit. The practice of a company in laying off workers because they failed to make the work quota has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners' failure to meet the sales quota assigned to each of them constitute a just cause of their dismissal, regardless of the permanent or probationary status of their employment. Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the alloted reasonable period, or by producing unsatisfactory results. This management prerogative of requiring standards availed of so long as they are exercised in good faith for the advancement of the employer's interest. Petitioners anchor their claim for commission pay on the Collective Bargaining Agreement (CBA) of September 1981, in support of their third assignment of error. Petitioners cannot avail of this agreement since their services had been terminated in May, 1981, at a time when the CBA of September, 1981 was not yet in existence. In fine, there is nothing in the records to show any abuse or misuse of power properly vested in the respondent Deputy Minister of Labor and Employment. For certiorari to lie, "there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative inaccordance with centuries of both civil and common law traditions." (Panaligan vs. Adolfo, 67 SCRA 176, 180). The "abuse of discretion must be grave and patent, and it must be shown that the discretion was exercised arbitrarily or despotically." (Palma and Ignacio vs. Q. & S., Inc., et al., 17 SCRA 97, 100; Philippine Virginia Tobacco Administration vs. Lucero, 125 SCRA 337, 343). WHEREFORE, the petition is DISMISSED for lack of merit. SO ORDERED. Makasiar (Chairman), Aquino, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.

FIRST DIVISION G.R. No. 93468 December 29, 1994 NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK SUPERVISORS CHAPTER, petitioner, vs. HON. RUBEN D. TORRES, SECRETARY OF LABOR AND EMPLOYMENT and REPUBLIC PLANTERS BANK, respondents. Filemon G. Tercero for petitioner. The Government Corporate Counsel for Republic Planters Bank. BELLOSILLO, J.: NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK SUPERVISORS CHAPTER seeks nullification of the decision of public respondent Secretary of Labor dated 23 March 1990, which modified the order of MedArbiter Manases T. Cruz dated 17 August 1989 as well as his order dated 20 April 1990 denying reconsideration. On 17 March 1989, NATU filed a petition for certification election to determine the exclusive bargaining representative of respondent Bank's employees occupying supervisory positions. On 24 April 1989, the Bank moved to dismiss the petition on the ground that the supposed supervisory employees were actually managerial and/or confidential employees thus ineligible to join, assist or form a union, and that the petition lacked the 20% signatory requirement under the Labor Code. On 17 August 1989, Med-Arbiter Manases T. Cruz granted the petition thus WHEREFORE, . . . let a certification election be ordered conducted among all the regular employees of the Republic Planters Bank occupying supervisory positions or the equivalent within 20 days from receipt of a copy of this Order. The choice shall be: (1) National Association of Trade Unions (NATU)-Republic Planters Bank Supervisors Chapter; and (2) No Union. The payroll three months prior to the filing of this petition shall be utilized in determining the list of eligible voters . . . . 1 Respondent Bank appealed the order to the Secretary of Labor on the main ground that several of the employees sought to be included in the certification election, particularly the Department Managers, Branch Managers/OICs, Cashiers and Controllers were managerial and/or confidential employees and thus ineligible to join, assist or form a union. It presented annexes detailing the job description and duties of the positions in question and affidavits of certain employees. It also invoked provisions of the General Banking Act and the Central Bank Act to show the duties and responsibilities of the bank and its branches. On 23 March 1990, public respondent issued a decision partially granting the appeal, which is now being challenged before us WHEREFORE, . . . the appeal is hereby partially granted. Accordingly, the Order dated 17 August 1989 is modified to the extent that Department Managers, Assistant Managers, Branch Managers, Cashiers and Controllers are declared managerial employees. Perforce, they cannot join the union of supervisors such as Division Chiefs, Accounts Officers, Staff Assistants and OIC's ( sic) unless the latter are regular managerial employees . . . . 2

NATU filed a motion for reconsideration but the same was denied on 20 April 1990. 3 Hence this recourse assailing public respondent for rendering the decision of 23 March 1990 and the order of 20 April 1990 both with grave abuse of discretion. The crucial issue presented for our resolution is whether the Department Managers, Assistant Managers, Branch Managers/OICs, Cashiers and Controllers of respondent Bank are managerial and/or confidential employees hence ineligible to join or assist the union of petitioner. NATU submits that an analysis of the decision of public respondent readily yields certain flaws that result in erroneous conclusions. Firstly, a branch does not enjoy relative autonomy precisely because it is treated as one unit with the head office and has to comply with uniform policies and guidelines set by the bank itself. It would be absurd if each branch of a particular bank would be adopting and implementing different policies covering multifarious banking transactions. Moreover, respondent Bank's own evidence clearly shows that policies and guidelines covering the various branches are set by the head office. Secondly, there is absolutely no evidence showing that bank policies are laid down through the collective action of the Branch Manager, the Cashier and the Controller. Thirdly, the organizational setup where the Branch Manager exercises control over branch operations, the Controller controls the Accounting Division, and the Cashier controls the Cash Division, is nothing but a proper delineation of duties and responsibilities. This delineation is a Central Bank prescribed internal control measure intended to objectively establish responsibilities among the officers to easily pinpoint culpability in case of error. The "dual control" and "joint custody" aspects mentioned in the decision of public respondent are likewise internal control measures prescribed by the Central Bank. Neither is there evidence showing that subject employees are vested with powers or prerogatives to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. The bare allegations in the affidavits of respondent Bank's Executive Assistant to the President 4 and the Senior Manager of the Human Resource Management Department 5 that those powers and prerogatives are inherent in subject positions are self-serving. Their claim cannot be made to prevail upon the actual duties and responsibilities of subject employees. The other evidence of respondent Bank which purports to show that subject employees exercise managerial functions even belies such claim. Insofar as Department Managers and Assistant Managers are concerned, there is absolutely no reason mentioned in the decision why they are managerial employees. Not even respondent Bank in its appeal questioned the inclusion of Assistant Managers among the qualified petitioning employees. Public respondent has deviated from the real issue in this case, which is, the determination of whether subject employees are managerial employees within the contemplation of the Labor Code, as amended by RA 6715; instead, he merely concentrated on the nature, conduct and management of banks conformably with the General Banking Act and the Central Bank Act. Petitioner concludes that subject employees are not managerial employees but supervisors. Even assuming that they are confidential employees, there is no legal prohibition against confidential employees who are not performing managerial functions to form and join a union. On the other hand, respondent Bank maintains that the Department Managers, Branch Managers, Cashiers and Controllers are inherently possessed of the powers enumerated in Art. 212, par. (m), of the Labor Code. It relies heavily on the affidavits of its Executive Assistant to the President and Senior Manager of the Human Resource Department. The Branch Managers, Cashiers and Controllers are vested not only with policy-making powers necessary to run the affairs of the branch, given the independence and relative autonomy which it enjoys in the pursuit of its goals and objectives, but also with the concomitant disciplinary authority over the employees. The Solicitor General argues that NATU loses sight of the fact that by virtue of the appeal of respondent Bank, the whole case is thrown open for consideration by public respondent. Even errors not assigned in the appeal, such as the exclusion by the Med-Arbiter of Assistant Managers from the managerial employees category, is within his discretion to consider as it is closely related to the errors properly assigned. The fact that Department Managers are managerial employees is borne out by the evidence of petitioner itself. Furthermore, while it assails public respondent's finding that subject employees are managerial employees, petitioner never questioned the fact that said officers also occupy confidential positions and thus remain prohibited from forming or joining any labor organization.

Respondent Bank has no legal personality to move for the dismissal of the petition for certification election on the ground that its supervisory employees are in reality managerial employees. An employer has no standing to question the process since this is the sole concern of the workers. The only exception is where the employer itself has to file the petition pursuant to Art. 258 of the Labor Code because of a request to bargain collectively. 6 Public respondent, invoking RA 6715 and the inherent functions of Department Managers, Assistant Managers, Branch Managers, Cashiers and Controllers, held that these officers properly fall within the definition of managerial employees. The ratiocination in his Decision of 23 March 1990 7 is that Republic Act No. 6715, otherwise known as the Herrera-Veloso Law, restored the right of supervisors to form their own unions while maintaining the proscription on the right to self-organization of managerial employees. Accordingly, the Labor Code, as amended, distinguishes managerial, supervisory and rank-and-file employees thus: Art. 212 (m) Managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions, if the exercise of such managerial authority is not routinary in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees (emphasis supplied). At first glance, pursuant to the above-definitions and based on their job descriptions as guideposts, there would seem to be no difficulty in distinguishing a managerial employee from that of a supervisor, or from that of a mere rank-and-file employee. Yet, this task takes on a different dimension when applied to banks, particularly the branches thereof. This is so because unlike ordinary corporations, a bank's organizational operation is governed and regulated by the General Banking Act and the Central Bank Act, both special laws . . . . As pointed out by the respondent, in the banking industry, a branch is the microcosm of a banking institution, uniquely autonomous and self-governing. This relative autonomy of a branch finds legal basis in Section 27 of the General Banking Act, as amended, thus: . . . . The bank shall be responsible for all business conducted in such branches to the same extent and in the same manner as though such business had all been conducted in the head office. For the purpose of this Act, a bank and its branches shall be treated as a unit (emphasis supplied). Conformably with the above, bank policies are laid down and/or executed through the collective action of the Branch Manager, Cashier and Controller at the branch level. The Branch Manager exercises over-all control and supervision over branch operation being on the top of the branch's pyramid structure. However, both the controller and the cashier who are called in banking parlance as "Financial Managers" due to their fiscal functions are given such a share and sphere of responsibility in the operations of the bank. The cashier controls and supervises the cash division while the controller that of the Accounting Division. Likewise, their assigned task is of great significance, without which a bank or branch for that matter cannot operate or function. Through the collective action of these three branch officers operational transactions are carried out like: The two (2)-signature requirement of the manager, on one hand, and that of the controller or cashier on the other hand as required in bank's issuances and releases. This is the so-called "dual control" through check-and-balance as prescribed by the Central Bank, per Section 1166.6, Book I, Manual of Regulations for Banks and Financial Intermediaries. Another is in the joint custody of the branch's cash in vault, accountable forms, collaterals, documents of title, deposit, ledgers and others, among the branch manager and at least two (2) officers of the

branch as required under Section 1166.6 of the Manual of Regulations for Banks and Other Financial Intermediaries. This structural set-up creates a triad of managerial authority among the branch manager, cashier and controller. Hence, no officer of the bank ". . . have (sic) complete authority and responsibility for handling all phases of any transaction from beginning to end without some control or balance from some other part of the organization" (Section 1166.3, Division of Duties and Responsibilities, Ibid). This aspect in the banking system which calls for the division of duties and responsibilities is a clear manifestation of managerial power and authority. No operational transaction at branch level is carried out by the singular act of the Branch Manager but rather through the collective act of the Branch Manager, Cashier/Controller (emphasis supplied). Noteworthy is the "on call client" set up in banks. Under this scheme, the branch manager is tasked with the responsibility of business development and marketing of the bank's services which place him on client call. During such usual physical absences from the branch, the cashier assumes the reins of branch control and administration. On those occasions, the "dual control system" is clearly manifest in the transactions and operations of the branch bank as it will then require the necessary joint action of the controller and the cashier. The grave abuse of discretion committed by public respondent is at once apparent. Art. 212, par. (m), of the Labor Code is explicit. A managerial employee is (a) one who is vested with powers or prerogatives to lay down and execute management policies, or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees; or (b) one who is vested with both powers or prerogatives. A supervisory employee is different from a managerial employee in the sense that the supervisory employee, in the interest of the employer, effectively recommends such managerial actions, if the exercise of such managerial authority is not routinary in nature but requires the use of independent judgment. Ranged against these definitions and after a thorough examination of the evidence submitted by both parties, we arrive at a contrary conclusion. Branch Managers, Cashiers and Controllers of respondent Bank are not managerial employees but supervisory employees. The finding of public respondent that bank policies are laid down and/or executed through the collective action of these employees is simply erroneous. His discussion on the division of their duties and responsibilities does not logically lead to the conclusion that they are managerial employees, as the term is defined in Art. 212, par. (m). Among the general duties and responsibilities of a Branch Manager is "[t]o discharge his duties and authority with a high sense of responsibility and integrity and shall at all times be guided by prudence like a good father of the family, and sound judgment in accordance with and within the limitations of the policy/policies promulgated by the Board of Directors and implemented by the Management until suspended, superseded, revoked or modified" (par. 5, emphasis supplied). 8 Similarly, the job summary of a Controller states: "Supervises the Accounting Unit of the branch; sees to the compliance by the Branch with established procedures, policies, rules and regulations of the Bank and external supervising authorities; sees to the strict implementation of control procedures (emphasis supplied). 9 The job description of a Cashier does not mention any authority on his part to lay down policies, either. 10 On the basis of the foregoing evidence, it is clear that subject employees do not participate in policymaking but are given approved and established policies to execute and standard practices to observe, 11 leaving little or no discretion at all whether to implement said policies or not. 12 It is the nature of the employee's functions, and not the nomenclature or title given to his job, which determines whether he has rank-and-file, supervisory or managerial status. 13 Moreover, the bare statement in the affidavit of the Executive Assistant to the President of respondent Bank that the Branch Managers, Cashiers and Controllers "formulate and implement the plans, policies and marketing strategies of the branch towards the successful accomplishment of its profit targets and objectives," 14 is contradicted by the following evidence submitted by respondent Bank itself: (a) Memorandum issued by respondent Bank's Assistant Vice President to all Regional Managers and Branch Managers giving them temporary discretionary authority to grant additional interest over the prescribed board rates for both short-term and long-term CTDs subject, however, to specific limitations and guidelines set forth in the same memorandum; 15

(b) Memorandum issued by respondent Bank's Executive Vice President to all Regional Managers and Branch Officers regarding the policy and guidelines on drawing against uncollected deposits (DAUD); 16 (c) Memorandum issued by respondent Bank's President to all Field Offices regarding the guidelines on domestic bills purchased (DBP); 17 and (d) Memorandum issued by the same officer to all Branch Managers regarding lending authority at the branch level and the terms and conditions thereof. 18 As a consequence, the affidavit of the Executive Assistant cannot be given any weight at all. Neither do the Branch Managers, Cashiers and Controllers have the power to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. The Senior Manager of the Human Resource Management Department of respondent Bank, in her affidavit, stated that "the power to hire, fire, suspend, transfer, assign or otherwise impose discipline among subordinates within their respective jurisdictions is lodged with the heads of the various departments, the branch managers and officers-incharge, the branch cashiers and the branch controllers. Inherent as it is in the aforementioned positions, the authority to hire, fire, suspend, transfer, assign or otherwise discipline employees within their respective domains was deemed unnecessary to be incorporated in their individual job descriptions; By way of illustration, on August 24, 1989, Mr. Renato A. Tuates, the Officer-in-Charge/Branch Cashier of the Bank's Dumaguete Branch, placed under preventive suspension and thereafter terminated the teller of the same branch . . . . Likewise, on February 22, 1989, Mr. Francis D. Robite, Sr., the Officer-in-Charge of International Department, assigned the cable assistant of the International Department as the concurrent FCDU Accountable Forms Custodian." 19 However, a close scrutiny of the memorandum of Mr. Tuates reveals that he does not have said managerial power because as plainly stated therein, it was issued "upon instruction from Head Office." 20 With regard to the memorandum of Mr. Robite, Sr., it appears that the power he exercised was merely in an isolated instance, taking into account the other evidence submitted by respondent Bank itself showing lack of said power by other Branch Managers/OICs: (a) Memorandum from the Branch Manager for the AVP-Manpower Management Department expressing the opinion that a certain employee, due to habitual absenteeism and tardiness, must be penalized in accordance with respondent Bank's Code of Discipline; and (b) Memorandum from a Branch OIC for the Assistant Vice President recommending a certain employee's promotional adjustment to the present position he occupies. Clearly, those officials or employees possess only recommendatory powers subject to evaluation, review and final action by higher officials. Therefore, the foregoing affidavit cannot bolster the stand of respondent Bank. The positions of Department Managers and Assistant Managers were also declared by public respondent as managerial, without providing any basis therefor. Petitioner asserts that the position of Assistant Manager was not even included in the appeal filed by respondent Bank. While we agree with the Office of the Solicitor General that it is within the discretion of public respondent to consider an unassigned issue that is closely related to an issue properly assigned, still, public respondent's error lies in the fact that his finding has no leg to stand on. Anyway, inasmuch as the entire records are before us, now is the opportunity to discuss this issue. We analyzed the evidence submitted by respondent Bank in support of its claim that Department Managers are managerial employees 21 and concluded that they are not. Like Branch Managers, Cashiers and Controllers, Department Managers do not possess the power to lay down policies nor to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. They occupy supervisory positions, charged with the duty among others to "recommend proposals to improve and streamline operations." 22 With respect to Assistant Managers, there is absolutely no evidence submitted to substantiate public

respondent's finding that they are managerial employees; understandably so, because this position is not included in the appeal of respondent Bank. As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and Controllers are confidential employees, having control, custody and/or access to confidential matters, e.g., the branch's cash position, statements of financial condition, vault combination, cash codes for telegraphic transfers, demand drafts and other negotiable instruments, 23 pursuant to Sec. 1166.4 of the Central Bank Manual regarding joint custody, 24 this claim is not even disputed by petitioner. A confidential employee is one entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer's property. 25 While Art. 245 of the Labor Code singles out managerial employees as ineligible to join, assist or form any labor organization, under the doctrine of necessary implication, confidential employees are similarly disqualified. This doctrine states that what is implied in a statute is as much a part thereof as that which is expressed, as elucidated in several cases 26 the latest of which is Chua v. Civil Service Commission 27 where we said: No statute can be enacted that can provide all the details involved in its application. There is always an omission that may not meet a particular situation. What is thought, at the time of enactment, to be an all-embracing legislation may be inadequate to provide for the unfolding events of the future. So-called gaps in the law develop as the law is enforced. One of the rules of statutory construction used to fill in the gap is the doctrine of necessary implication . . . . Every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex necessitate legis . . In applying the doctrine of necessary implication, we took into consideration the rationale behind the disqualification of managerial employees expressed in Bulletin Publishing Corporation v. Sanchez, 28 thus: ". . . if these managerial employees would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of interests. The Union can also become company-dominated with the presence of managerial employees in Union membership." Stated differently, in the collective bargaining process, managerial employees are supposed to be on the side of the employer, to act as its representatives, and to see to it that its interests are well protected. The employer is not assured of such protection if these employees themselves are union members. Collective bargaining in such a situation can become onesided. 29 It is the same reason that impelled this Court to consider the position of confidential employees as included in the disqualification found in Art. 245 as if the disqualification of confidential employees were written in the provision. If confidential employees could unionize in order to bargain for advantages for themselves, then they could be governed by their own motives rather than the interest of the employers. Moreover, unionization of confidential employees for the purpose of collective bargaining would mean the extension of the law to persons or individuals who are supposed to act "in the interest of" the employers. 30 It is not farfetched that in the course of collective bargaining, they might jeopardize that interest which they are duty-bound to protect. Along the same line of reasoning we held in Golden Farms, Inc. v. Ferrer-Calleja 31 reiterated in Philips Industrial Development, Inc. v. NLRC, 32 that "confidential employees such as accounting personnel, radio and telegraph operators who, having access to confidential information, may become the source of undue advantage. Said employee(s) may act as spy or spies of either party to a collective bargaining agreement." In fine, only the Branch Managers/OICs, Cashiers and Controllers of respondent Bank, being confidential employees, are disqualified from joining or assisting petitioner Union, or joining, assisting or forming any other labor organization. But this ruling should be understood to apply only to the present case based on the evidence of the parties, as well as to those similarly situated. It should not be understood in any way to apply to banks in general. WHEREFORE, the petition is partially GRANTED. The decision of public respondent Secretary of Labor dated 23 March 1990 and his order dated 20 April 1990 are MODIFIED, hereby declaring that only the Branch Managers/OICs, Cashiers and Controllers of respondent Republic Planters Bank are ineligible to join or assist petitioner National Association of Trade Unions (NATU)-Republic Planters Bank Supervisors Chapter, or join, assist or form any other labor organization. SO ORDERED. Davide, Jr., Quiason and Kapunan, JJ., concur.

EN BANC G.R. No. L-48494 February 5, 1990 BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE, respondents. Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners. Mauricio G. Domogon for respondent Alegre. NARVASA, J.: The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor Code, 2 as amended, 3 have anathematized "fixed period employment" or employment for a term. The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as those contained in the original contract of July 18, 1971. 5 Some three months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the termination of his services effective on July 16, 1976. The stated ground for the termination was "completion of contract, expiration of the definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract." However, at the investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre protested the announced termination of his employment. He argued that although his contract did stipulate that the same would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his employer , and his employment had lasted for five years, he had acquired the status of a regular employee and could not be removed except for valid cause. 6 The Regional Director considered Brent School's report as an application for clearance to terminate employment (not a report of termination), and accepting the recommendation of the Labor Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent employee," to his former position without loss of seniority rights and with full back wages. The Director pronounced "the ground relied upon by the respondent (Brent) in terminating the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the Bureau of Private Schools. 7 Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded the case to the Secretary of Labor for review. 8 The latter sustained the Regional Director. 9 Brent appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who could not be dismissed except for just cause, and expiration of the employment contract was not one of the just causes provided in the Labor Code for termination of services. 10 The School is now before this Court in a last attempt at vindication. That it will get here. The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did not come into effect until November 1, 1974,

some three years after the perfection of the employment contract, and rights and obligations thereunder had arisen and been mutually observed and enforced. At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787. 12 Basically, this statute provided that In cases of employment, without a definite period, in a commercial, industrial, or agricultural establishment or enterprise, the employer or the employee may terminate at any time the employment with just cause; or without just cause in the case of an employee by serving written notice on the employer at least one month in advance, or in the case of an employer, by serving such notice to the employee at least one month in advance or one-half month for every year of service of the employee, whichever is longer, a fraction of at least six months being considered as one whole year. The employer, upon whom no such notice was served in case of termination of employment without just cause, may hold the employee liable for damages. The employee, upon whom no such notice was served in case of termination of employment without just cause, shall be entitled to compensation from the date of termination of his employment in an amount equivalent to his salaries or wages corresponding to the required period of notice. There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also enumerated what it considered to be just causes for terminating an employment without a definite period, either by the employer or by the employee without incurring any liability therefor. Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also implicitly acknowledged the propriety of employment with a fixed period. Its Article 302 provided that In cases in which the contract of employment does not have a fixed period, any of the parties may terminate it, notifying the other thereof one month in advance. The factor or shop clerk shall have a right, in this case, to the salary corresponding to said month. The salary for the month directed to be given by the said Article 302 of the Code of Commerce to the factor or shop clerk, was known as the mesada (from mes, Spanish for "month"). When Article 302 (together with many other provisions of the Code of Commerce) was repealed by the Civil Code of the Philippines, Republic Act No. 1052 was enacted avowedly for the precise purpose of reinstating the mesada. Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is otherwise deducible therefrom. It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term were explicitly recognized as valid by this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31, 1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29, 1983. 14 The Thompson case involved an executive who had been engaged for a fixed period of three (3) years. Biboso involved teachers in a private school as regards whom, the following pronouncement was made: What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a limited duration. Upon its termination, both parties to the employment relationship were free to renew it or to let it lapse.

Under American law 15 the principle is the same. "Where a contract specifies the period of its duration, it terminates on the expiration of such period." 16 "A contract of employment for a definite period terminates by its own terms at the end of such period." 17 The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained explicit references to fixed period employment, or employment with a fixed or definite period. Nevertheless, obscuration of the principle of licitness of term employment began to take place at about this time Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment of probationary employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the employee to be secured in their employment as provided . . . (in the Code)." Article 321 prescribed the just causes for which an employer could terminate " an employment without a definite period." And Article 319 undertook to define "employment without a fixed period" in the following manner: 18 An employment shall be deemed to be without a definite period for purposes of this Chapter where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be "that which must necessarily come, although it may not be known when." 19 Seasonal employment, and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied. Of course, the term period has a definite and settled signification. It means, "Length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A time of definite length. . . . the period from one fixed date to another fixed date . . ." 20 It connotes a "space of time which has an influence on an obligation as a result of a juridical act, and either suspends its demandableness or produces its extinguishment." 21 It should be apparent that this settled and familiar notion of a period, in the context of a contract of employment, takes no account at all of the nature of the duties of the employee; it has absolutely no relevance to the character of his duties as being "usually necessary or desirable to the usual business of the employer," or not. Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were amended by Presidential Decree No. 850, effective December 16, 1975.

Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the reference to persons "employed with a fixed period," and was renumbered (becoming Article 271). The article 22 now reads: . . . Probationary employment.Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment. As revised, said article, renumbered 270, 23 now reads: . . . Regular and Casual Employment.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to he casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been added, to wit: "The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties . . ." The clause would appear to be addressed inter alia to agreements fixing a definite period for employment. There is withal no clear indication of the intent to deny validity to employment for a definite period. Indeed, not only is the concept of regular employment not essentially inconsistent with employment for a fixed term, as above pointed out, Article 272 of the Labor Code, as amended by said PD 850, still impliedly acknowledged the propriety of term employment: it listed the "just causes" for which "an employer may terminate employment without a definite period," thus giving rise to the inference that if the employment be with a definite period, there need be no just cause for termination thereof if the ground be precisely the expiration of the term agreed upon by the parties for the duration of such employment. Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa Bilang 130, 24 to eliminate altogether reference to employment without a definite period. As lastly amended, the opening lines of the article (renumbered 283), now pertinently read: "An employer may terminate an employment for any of the following just causes: . . . " BP 130 thus completed the elimination of every reference in the Labor Code, express or implied, to employment with a fixed or definite period or term. It is in the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixedperiod employment that the question posed in the opening paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy? On the one hand, there is the gradual and progressive elimination of references to term or fixed-period employment in the Labor Code, and the specific statement of the rule 25 that

. . . Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. 26 Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with pre-determined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination. Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor 27 implicitly recognize that certain company officials may be elected for what would amount to fixed periods, at the expiration of which they would have to stand down, in providing that these officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not re-elect them." There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly

susceptible is favored, which will avoid all objecionable mischievous, undefensible, wrongful, evil and injurious consequences. 28 Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That s a principle that does back to In re Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would lead to an absurdity is another argument for rejecting it. . . ." 29 . . . We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. 30 Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed period of employment as still good rule a rule reaffirmed in the recent case of Escudero vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her school a notice of termination following the expiration of the last of three successive fixed-term employment contracts, the Court held: Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be renewed. It is not a letter of termination. The interpretation that the notice is only a reminder is consistent with the court's finding in Labajo supra. ... 32 Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of termination, nor an application for clearance to terminate which needed the approval of the Department of Labor to make the termination of his services effective. In any case, such clearance should properly have been given, not denied. WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as to costs. SO ORDERED. Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Corts, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Fernan, C.J., took no part. THIRD DIVISION G.R. No. 61594 September 28, 1990 PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner, vs HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG, respondents. Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner. Ledesma, Saludo & Associates for private respondents. FELICIANO, J.: On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent portion as follows: 5. DURATION OF EMPLOYMENT AND PENALTY This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties. xxx xxx xxx 6. TERMINATION xxx xxx xxx Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. xxx xxx xxx 10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement. Respondents then commenced training in Pakistan. After their training period, they began discharging their job functions as flight attendants, with base station in Manila and flying assignments to different parts of the Middle East and Europe. On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising both that their services as flight stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]." 2

On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, docketed as NCR-STF-9515180, for illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the parties to submit their position papers and evidence supporting their respective positions. The PIA submitted its position paper, 3 but no evidence, and there claimed that both private respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of "personal effects"; and that PIA personnel at the Manila International Airport had been discreetly warned by customs officials to advise private respondents to discontinue that practice. PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the private respondents equivalent to their one-month salary. 4 The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of continued service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement with full backwages. On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5 In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's rights under the employment contracts with private respondents. 1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases. Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one (1) year of service without prior clearance from the Department of Labor and Employment: Art. 278. Miscellaneous Provisions . . . (b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the employment of employees with at least one year of service during the last two (2) years, whether such service is continuous or broken, without prior written authority issued in accordance with such rules and regulations as the Secretary may promulgate . . . (emphasis supplied) Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a termination without the necessary clearance, the Regional Director was authorized to order the reinstatement of the employee concerned and the payment of backwages; necessarily, therefore, the Regional Director must have been given jurisdiction over such termination cases:

Sec. 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without prior clearance shall be conclusively presumed to be termination of employment without a just cause. The Regional Director shall, in such case order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismissal until the time of reinstatement. (emphasis supplied) Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the jurisdiction of the Regional Director over termination of employment cases: Under PD 850, termination cases with or without CBA are now placed under the original jurisdiction of the Regional Director. Preventive suspension cases, now made cognizable for the first time, are also placed under the Regional Director. Before PD 850, termination cases where there was a CBA were under the jurisdiction of the grievance machinery and voluntary arbitration, while termination cases where there was no CBA were under the jurisdiction of the Conciliation Section. In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect to termination and preventive suspension cases are: 1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not, within ten days from receipt thereof. xxx xxx xxx (Emphasis supplied) 2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null and void because it had been issued in violation of petitioner's right to procedural due process . 6 This claim, however, cannot be given serious consideration. Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and Employment. 7 There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint was filed by private respondents on 21 September 1980 and at the time the Regional Director issued his questioned order on 22 January 1981, applicable regulation, as noted above, specified that a "dismissal without prior clearance shall be conclusively presumed to be termination of employment without a cause", and the Regional Director was required in such case to" order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the Regional Director did not even have to require submission of position papers by the parties in view of the conclusive (juris et de jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary proof however strong." 3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9 Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-months salary.

A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. 10 The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations. As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read as follows: Art. 280. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. Art. 281. Regular and Casual Employment. 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 activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After an extensive examination of the history and development of Articles 280 and 281, the Court reached the conclusion that a contract providing for employment with a fixed period was not necessarily unlawful: There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist e.g. where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non would an agreement fixing a period be essentially evil or illicit, therefore anathema Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to

which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided . The law must be given reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employers" using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. xxx xxx xxx Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. (emphasis supplied) It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, 13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee relationship between petitioner PIA and private respondents. We have already pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine

courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. 14 We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their reinstatement to their former or other substantially equivalent positions not be feasible in view of the length of time which has gone by since their services were unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one (1) month's salary for every year of service rendered by them, including the three (3) years service putatively rendered. ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)-month's salary for every year of service actually rendered by them and for the three (3) years putative service by private respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner. SO ORDERED. Fernan (C.J., Chairman), Gutierrez, Jr., Bidin and Corts, JJ., concur.

FIRST DIVISION G.R. No. 78693 January 28, 1991 ZOSIMO CIELO, petitioner, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HENRY LEI and/or HENRY LEI TRUCKING respondents. Francisco D. Alas for petitioner. Mateo G. Delegencia for private respondent. CRUZ, J.:p The petitioner is a truck driver who claims he was illegally dismissed by the private respondent, the Henry Lei Trucking Company. The Labor Arbiter found for him and ordered his reinstatement with back wages. 1 On appeal, the decision was reversed by the National Labor Relations Commission, which held that the petitioner's employment had expired under a valid contract. 2 The petitioner then came to us on certiorari under Rule 65 of the Rules of Court. Required to submit a Comment (not to file a motion to dismiss), the private respondent nevertheless moved to dismiss on the ground that the petition was filed sixty-eight days after service of the challenged decision on the petitioner, hence late. The motion was untenable, of course. Petitions for certiorari under Rule 65 may be instituted within a reasonable period, which the Court has consistently reckoned at three months.** In his own Comment, the Solicitor General defended the public respondent and agreed that the contract between the petitioner and the private respondent was a binding agreement not contrary to law, morals or public policy. The petitioner's services could be legally terminated upon the expiration of the period agreed upon, which was only six months. The petitioner could therefore not complain that he had been illegally dismissed. As an examination of the claimed agreement was necessary to the resolution of this case, the Court required its production by the petitioner. But he could not comply because he said he had not been given a copy by the private respondent. A similar requirement proved fruitless when addressed to the private respondent, which explained it could not locate the folder of the case despite diligent search. It was only on October 15, 1990, that the records of the case, including the subject agreement, were finally received by the Court from the NLRC, which had obtained them from its Cagayan de Oro regional office. 3 The said agreement reads in full as follows: AGREEMENT KNOW ALL MEN BY THESE PRESENTS: This Agreement made and executed by and between: HENRY LEI, of legal age, Filipino citizen, married, and a resident of Digos, Davao del Sur, now and hereinafter called the FIRST PARTY,

a n d ZOSIMO CIELO, of legal age, married, Filipino citizen, and a resident of Agusan, Canyon, Camp Philipps, now and hereinafter called the SECOND PARTY, WITNESSETH That the FIRST PARTY is an owner of some cargo trucks. WHEREAS, the SECOND PARTY desires to operate one of the said cargo trucks which he himself shall drive for income; NOW, THEREFORE, for the foregoing premises, the FIRST PARTY does hereby assign one cargo truck of his fleet to the SECOND PARTY under the following conditions and stipulations: 1. That the term of this Agreement is six (6) months from and after the execution hereof, unless otherwise earlier terminated at the option of either party; 2. That the net income of the said vehicle after fuel and oil shall be divided by and between them on ninety/ten percent (90/10%) basis in favor of the FIRST PARTY; 3. That there is no employer/employee relationship between the parties, the nature of this Agreement being contractual; 4. In the event the SECOND PARTY needs a helper the personnel so employed by him shall be to his personal account, who shall be considered his own employee; 5. That the loss of or damage to the said vehicle shall be to account of the SECOND PARTY; he shall return the unit upon the expiration or termination of this contract in the condition the same was received by him, fair wear and tear excepted. IN WITNESS WHEREOF, the parties hereunto affixed their signature on this 30th day of June, 1984, at Digos, Davao del Sur, Philippines. (Sgd.) HENRY LEI (Sgd.) ZOSIMO CIELO First Party Second Party SIGNED IN THE PRESENCE OF: (Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG The agreement was supposed to have commenced on June 30, 1984, and to end on December 31, 1984. On December 22, 1984, however, the petitioner was formally notified by the private respondent of the termination of his services on the ground of expiration of their contract. Soon thereafter, on January 22, 1985, the petitioner filed his complaint with the Ministry of Labor and Employment. In his position paper, the petitioner claimed he started working for the private respondent on June 16, 1984, and having done so for more than six months had acquired the status of a regular employee. As such, he could no longer be dismissed except for lawful cause. He also contended that he had been removed because of his refusal to sign, as required by the private respondent, an affidavit reading as follows:

AFFIDAVIT That I, ZOSIMO CIELO, Filipino, of legal age, married/single and a resident of Agusan Canyon, Camp Philipps, after having been duly sworn to in accordance with law, hereby depose and say: That I am one of the drivers of the trucks of Mr. HENRY LEI whose hauling trucks are under contract with the Philippine Packing Corporation; That I have received my salary and allowances from Mr. HENRY LEI the sum of P1,421.10 for the month of October 1984. That I have no more claim against the said Mr. Henry Lei. IN WITNESS WHEREOF, I have hereunto affixed my signature this 15th day of November 1984. ______________ Driver The private respondent rests its case on the agreement and maintains that the labor laws are not applicable because the relations of the parties are governed by their voluntary stipulations. The contract having expired, it was the prerogative of the trucking company to renew it or not as it saw fit. The writ will issue. While insisting that it is the agreement that regulates its relations with the petitioner, the private respondent is ensnared by its own words. The agreement specifically declared that there was no employer-employee relationship between the parties. Yet the affidavit the private respondent prepared required the petitioner to acknowledge that "I have received my salary and allowances from Mr. Henry Lei," suggesting an employment relationship. According to its position paper, the petitioner's refusal to sign the affidavit constituted disrespect or insubordination, which had "some bearing on the renewal of his contract of employment with the respondent." Of this affidavit, the private respondent had this to say: . . . Since October 1984, respondent adopted a new policy to require all their employees to sign an affidavit to the effect that they received their salaries. Copy of which is hereto attached as Annex "C," covering the months of October and November 1984. All other employees of the respondent signed the said affidavit, only herein complainant refused to do so for reasons known only to him. . . . It appears from the records that all the drivers of the private respondent have been hired on a fixed contract basis, as evidenced by the mimeographed form of the agreement and of the affidavit. The private respondent merely filled in the blanks with the corresponding data, such as the driver's name and address, the amount received by him, and the date of the document. Each driver was paid through individual vouchers 4 rather than a common payroll, as is usual in companies with numerous employees. The private respondent's intention is obvious. It is remarkable that neither the NLRC nor the Solicitor General recognized it. There is no question that the purpose behind these individual contracts was to evade the application of the labor laws by making it appear that the drivers of the trucking company were not its regular employees. Under these arrangements, the private respondent hoped to be able to terminate the services of the drivers without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements, which, significantly, were uniformly limited to a six-month period. No cause had to be established

because such renewal was subject to the discretion of the parties. In fact, the private respondent did not even have to wait for the expiration of the contract as it was there provided that it could be "earlier terminated at the option of either party." By this clever scheme, the private respondent could also prevent the drivers from becoming regular employees and thus be entitled to security of tenure and other benefits, such as a minimum wage, costof-living allowances, vacation and sick leaves, holiday pay, and other statutory requirements. The private respondent argues that there was nothing wrong with the affidavit because all the affiant acknowledged therein was full payment of the amount due him under the agreement. Viewed in this light, such acknowledgment was indeed not necessary at all because this was already embodied in the vouchers signed by the payee-driver. But the affidavit, for all its seeming innocuousness, imported more than that. What was insidious about the document was the waiver the affiant was unwarily making of the statutory rights due him as an employee of the trucking company. And employee he was despite the innocent protestations of the private respondent. We accept the factual finding of the Labor Arbiter that the petitioner was a regular employee of the private respondent. The private respondent is engaged in the trucking business as a hauler of cattle, crops and other cargo for the Philippine Packing Corporation. This business requires the services of drivers, and continuously because the work is not seasonal, nor is it limited to a single undertaking or operation. Even if ostensibly hired for a fixed period, the petitioner should be considered a regular employee of the private respondent, conformably to Article 280 of the Labor Code providing as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessarily or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) In Brent School, Inc. vs. Zamora, the Court affirmed the general principle that "where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc." Such circumstances have been sufficiently established in the case at bar and justify application of the following conclusions: Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure.

The agreement in question had such a purpose and so was null and void ab initio. The private respondent's argument that the petitioner could at least be considered on probation basis only and therefore separable at will is self-defeating. The Labor Code clearly provides as follows: Art. 281. Probationary employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. There is no question that the petitioner was not engaged as an apprentice, being already an experienced truck driver when he began working for the private respondent. Neither has it been shown that he was informed at the time of his employment of the reasonable standards under which he could qualify as a regular employee. It is plain that the petitioner was hired at the outset as a regular employee. At any rate, even assuming that the original employment was probationary, the Labor Arbiter found that the petitioner had completed more than six month's service with the trucking company and so had acquired the status of a regular employee at the time of his dismissal. Even if it be assumed that the six-month period had not yet been completed, it is settled that the probationary employee cannot be removed except also for cause as provided by law. It is not alleged that the petitioner was separated for poor performance; in fact, it is suggested by the private respondent that he was dismissed for disrespect and insubordination, more specifically his refusal to sign the affidavit as required by company policy. Hence, even as a probationer, or more so as a regular employee, the petitioner could not be validly removed under Article 282 of the Labor Code, providing as follows: Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing. In refusing to sign the affidavit as required by the private respondent, the petitioner was merely protecting his interests against an unguarded waiver of the benefits due him under the Labor Code. Such willful disobedience should commend rather than prejudice him for standing up to his rights, at great risk to his material security, against the very source of his livelihood.

The Court looks with stern disapproval at the contract entered into by the private respondent with the petitioner (and who knows with how many other drivers). The agreement was a clear attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary private transactions. They were not, to be sure. The agreement was in reality a contract of employment into which were read the provisions of the Labor Code and the social justice policy mandated by the Constitution. It was a deceitful agreement cloaked in the habiliments of legality to conceal the selfish desire of the employer to reap undeserved profits at the expense of its employees. The fact that the drivers are on the whole practically unlettered only makes the imposition more censurable and the avarice more execrable. WHEREFORE, the petition is GRANTED. The decision of the National Labor Relations Commission is SET ASIDE and that of the Labor Arbiter REINSTATED, with costs against the private respondents. SO ORDERED. Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

SECOND DIVISION G.R. No. 105033 February 28, 1994 PHILIPPINE VILLAGE HOTEL, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) AND TUPAS LOCAL CHAPTER NO. 1362, JUANITO ACUIN, MAMERTA MANGUBAT, RAUL SONON, ELGAR PEMIS, ORLANDO PARAGUISON, FERDINAND VELASCO, MIKE ASTULERO, MAGNO DECALSO, NENITA OROSEA, JOSE TIMING, ANTONIO MANALILI, RODELIO QUERIA and REYNALDO SANTOS, respondents. Ponce Enrile, Cayetano, Reyes Manalastas for petitioner. Tupaz & Associates and Alfredo L. Bentulan for private respondents. NOCON, J.: This is a petition for certiorari under Rule 65 of the Rules of Court with a prayer for the issuance of a temporary restraining order to annul and set aside the decision 1 promulgated November 7, 1991 by the National Labor Relations Commission (NLRC) of Manila reversing the decision dated December 19, 1989 of the Labor Arbiter Cornelio L. Linsangan. It appears on record that private respondents Juanito Acuin, Mamerta Mangubat, Raul Sonon, Elgar Pemis, Orlando Paraguison, Ferdinand Velasco, Mike Astulero, Magno Decalso, Nenita Orosea, Jose Timing, Antonio Manalili, Rodelio Queria and Reynaldo Santos were employees of petitioner Philippine Village Hotel. However, on May 19, 1986, petitioner had to close and totally discontinue its operations due to serious financial and business reverses resulting in the termination of the services of its employees. Thereafter, the Philippine Village Hotel Employees and Workers Union filed against petitioner a complaint for separation pay, unfair labor practice and illegal lock-out. On May 27, 1987, the Labor Arbiter issued and Order finding the losses suffered by petitioner to be actual, genuine and of such magnitude as to validly terminate the services of private respondents but directed petitioner "to give priority to the complainants (herein private respondents) in [the] hiring of personnel should they resume their business operations in the future." 2 On appeal, the NLRC affirmed the validity of the closure of petitioner but ordered petitioner to pay private respondent separation pay at the rate of 1/2 month pay every year of service. However, there is nothing in the records to show that private respondents received their separation pay as the decision of the NLRC remained unenforced as of this date. On February 1, 1989, petitioner decided to have a one (1) month dry-run operation to ascertain the feasibility of resuming its business operations. In order to carry out its dry-run operation, petitioner hired casual workers, including private respondents, for a one (1) month period, or from February 1, 1989 to March 1, 1989, as evidenced by the latter's Contract of Employment. 3 After evaluating the individual performance of all the employees and upon the lapse of the contractual one-month period or on March 2, 1989, petitioner terminated the services of private respondents.

On April 6, 1989, private respondents and Tupas Local Chapter No. 1362 filed a complaint against petitioner for illegal dismissal and unfair labor practice with the NLRC-NCR Arbitration Branch in NLRC Case No. 00-04-01665-89. On December 19, 1989, the Labor Arbiter rendered a decision, the dispositive portion of which reads, as follows: WHEREFORE, finding the above-entitled complaint to be without factual and legal basis, judgment is hereby rendered dismissing the same. 4 Thereafter, private respondents appealed to the public respondent NLRC. On November 7, 1991, public NLRC reversed the decision of the Labor Arbiter, the dispositive portion of which reads as follows: WHEREFORE, under the premises, let the decision appealed from be, as it is hereby reversed, and a new judgment rendered, hereby ordering the respondent Philippine Village Hotel to reinstate the above-named complainants to their former or substantially equivalent positions without loss of seniority rights plus full backwages from the time they were actually dismissed on 02 March 1989 up to the time of their actual reinstatement, but which period of time should not exceed three (3) years. The complaint for unfair labor practice is hereby dismissed for lack of adequate factual basis. 5 On March 5, 1992, petitioners Motion for Reconsideration was denied for lack of merit. Hence, this petition alleging grave abuse of discretion on the part of the public respondent NLRC in finding that private respondents are regular employees of petitioner considering that the latter's services were already previously terminated in 1986 and that their employment contracts specifically provided only for a temporary one-month period of employment. The petition is impressed with merit. An examination of the contents of the private respondents' contracts of employment shows that indeed private respondents voluntarily and knowingly agreed to be employed only for a period of one (1) month or from February 1, 1989 to March 1, 1989. The fact that private respondents were required to render services usually necessary or desirable in the operation of petitioner's business for the duration of the one (1) month dry-run operation period does not in any way impair the validity of the contractual nature of private respondents' contracts of employment which specifically stipulated that the employment of the private respondents was only for one (1) month. In upholding the validity of a contract of employment with a fixed or specific period, we have held that the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be that which must necessarily come, although it may not be known when. The term period was further defined to be the length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A

time of definite length or the period from one fixed date to another fixed date. 6 This ruling is only in consonance with Article 280 of the Labor Code which provides: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. Inasmuch as private respondents' contracts of employment categorically provided a fixed period and their termination had already been agreed upon at the time of their engagement, private respondents' employment was one with a specific period or day certain agreed upon by the parties. In Philippine National Oil Company-Energy Development Corporation vs. NLRC, 7 we held that: As can be gleaned from the said case (Brent School, Inc. vs. Zamora, 181 SCRA 702), the two guidelines by which fixed contracts of employments can be said NOT to circumvent security of tenure, are either: 1. The fixed period of employment was knowingly and voluntarily agreed upon by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or 2. It satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former on the latter." In the instant case, private respondents were validly terminated by the petitioner when the latter had to close its business due to financial losses. Following the directives of the NLRC to give priority in hiring private respondents should it resume its business, petitioner hired private respondents during their one (1) month dry-run operation. However, this does not mean that private respondents were deemed to have continued their regular employment status, which they had enjoyed before their aforementioned termination due to petitioner's financial losses. As stated by the Labor Arbiter in his decision: It should be borne in mind that when complainants were first terminated as a result of the company's cessation from operation in May, 1986 the employer-employee relationship between the parties herein was totally and completely severed. Such being the case, respondent acted well within its discretion when in rehiring the complainants (herein private respondents) it made them casual and for a specific period. The complainants are no better than the new employees of respondent (petitioner) for the matter of what status or designation to be given them exclusively rests in the discretion of management. 8

Besides, the previous decision of the public respondent NLRC in Case No. 8-3277-86 finding the termination of private respondents' employment to be valid has long become final and executory. Public respondent NLRC cannot anymore argue that the temporary cessation of the petitioner's operation due to financial reverses merely suspended private respondents' employment. The employee-employer relationship had come to an end when the employer had closed its business and ceased operations. The hiring of new employees when it re-opened after three (3) years is valid and to be expected. The prior employment which was terminated cannot be joined or tacked to the new employment for purposes of security of tenure. While it is true that security of tenure is a constitutionally guaranteed right of the employees, it does not, however, mean perpetual employment for the employee because our law, while affording protection to the employee, does not authorize oppression or destruction of an employer. It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. The right of a laborer to sell his labor to such persons as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have an equality of right guaranteed by the Constitution. If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression. 9 Thus, public respondent NLRC had indubitably committed grave abuse of discretion when it modified the final decision of the NLRC Case No. 8-3277-86 which remain unenforced as of this date. Private respondents' remedy is to file a motion for execution, if it is still within the reglementary 5-year period, or to file an action to enforce said decision. (Article 224(a), Labor Code) WHEREFORE, this petition for certiorari is GRANTED and the questioned of the public respondent NLRC is hereby SET ASIDE thereby dismissing the complaint against petitioner. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

FIRST DIVISION G.R. No. 82973 September 15, 1989 MARIO CARTAGENAS, JESUS N. MIRABALLES, VICTOR C. MONSOD and VICENTE BARROA, petitioners, vs. ROMAGO ELECTRIC COMPANY, INC., NATIONAL LABOR RELATIONS COMMISSION (Fifth Division), respondents. Isidro G. Pasana for petitioners. Constantino B. de Jesus & Associates for private respondent. GRINO-AQUIO, J.: he issue in this case is whether the petitioners are project employees of the private respondent Romago Electric Company, Inc., as found by the National Labor Relations Commission, or regular employees as found by the Labor Arbiter. The facts are recited in the decision of the NLRC as follows: Respondent Romago is a general contractor engaged in contracting and sub-contracting of specific building construction projects or undertaking such as electrical, mechanical and civil engineering aspects in the repair of buildings and from other kindred services. Individual complainants are employed by the respondent in connection with particular construction projects and they are as follows: 1. Jesus N. Miraballes Project Assigned Period Covered L. Towers 4/23/79-2/26/80 Nat'l Bookstore 2/26/80-8/28/80 PNRC-MHQ Bldg. 8/29/80-9/09/80 A. Payumo's Res. 9/10/80 State Center 3/05/81-7/13/81 FEBTC Bldg. 7/14/81-9/21/81 SMC Complex 9/22/81-9/10/84 PNB Finance Complex 9/11/84-7/12/86 (Annexes 1 to 25, respondent's Position Paper) 2. Victor C. Monsod Project Assigned Period Covered MMRH Project 4/13/76-2/02/80 Manila Hotel 2/03/80-7/19/81 PNB Project 7/20/81-7/16/84 Manila Hotel 7/17/84-7/02/84 PNB Finance Center 10/3/84-7/12/86 (Annexes 30 to 41, Ibid) 3. Vicente Barroa Project Assigned Period Covered SMC Hoc. Project 7/5/82-1/21/85 PNB Finance Complex 1/22/85-7/12/86 (Annexes 42 to 47, Ibid) 4. Mario Cartagenas Project Assigned Period Covered PNB Finance Complex 3/26/82-7/12/86

(Annexes 52 to 54, Ibid) Effective July 12,1986, individual complainants and Lawrence Deguit were temporarily laid-off by virtue of a memorandum issued by the respondent. In said memorandum they were also informed that a meeting regarding the resumption of operation will be held on July 16, 1986 and that they will be notified as to when they will resume work. On July 28, 1986, complainants filed the instant case for illegal dismissal but before the respondent could receive a copy of the complaint and the notification and summons issued by the NLRC National Capital Region (actually received only on August 22, 1986, page 4, records) individual complainants re-applied with the respondent and were assigned to work with its project at Robinson-EDSA, specifically on the following dates, to wit:

Personnel Manager 7/14/81 Date (Employment Application Form of MIRABALLES JESUS NIEVA dated July 14,1981, Annex 16; 16-A and 16-B, Ibid) Thereafter the hired employee is given by the respondent an assignment slip, an example of which reads: ASSIGNMENT SLIP DATE: July 14, 1981

1. Mirabelles and Monsod 2. Barroa 3. Cartagenas

August 2/86 August 11/86 August 4/86

Engr. C.A. Castro Project In-Charge FEFTC Name of Project The bearer, Mr. Jesus N. Miraballes will work under you as electrician effective 14 July 81. His employment will terminate upon completion/stoppage of the project or terminated earlier for cause. Signed GUDIOSO PLATA Chief Engineer CONFORME: SGD. JESUS N. MIRABALLES (Assignment slip of Jesus N. Miraballes, Annex 17, Ibid.) xxx xxx xxx ... Respondent introduced documentary exhibits that the complainant have invariably been issued appointment from project to projects and were issued notice of temporary lay-off when the PNB Finance Center project was suspended due to lack of funds and that when work was available particularly respondent's project at Robinson-EDSA they were rehired and assigned to this project. (pp. 16-19; 2122, Rollo.) The NLRC held that the complainants were project employees because their appointments were "co-terminus with the phase or item of work assigned to them in said project," It held further: The fact that the complainants worked for the respondent under different project employment contracts for so many years could not be made a basis to consider them as regular employees for they remain project employees regardless of the number of projects in which they have worked. (p. 22, Rollo.) Article 280 of the Labor Code provides: ART. 280. Regular and Casual Employment.- The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to

(Annexes 26 to 29-B; '39-4l'; 48 to 51 -B; '55 to 58-A', Ibid) In hiring the herein complainants to be assigned to a particular project they have to fill up an employment application form and are subjected to a pre-hiring examination. If evaluated to be qualified they sign at the end portion of their employment application form that: AGREEMENT I hereby agree to the foregoing conditions and accept my employment for a fixed period and from the above mentioned Project/Assignment only. The conditions of employment to which the complainant agreed are mentioned in the right upper portion of the same page of said application form, an example of which reads: Assigned to Position Effectivity Salary Conditions Approved: FEBTC G.P. FORMOSO Project Electrician 7-14-81 P18.50/day & allowance Hired for above project only Signed

be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists (Emphasis supplied). (p. 46, Rollo.) As an electrical contractor, the private respondent depends for its business on the contracts it is able to obtain from real estate developers and builders of buildings. Since its work depends on the availability of such contracts or "projects," necessarily the duration of the employment of its work force is not permanent but co-terminus with the projects to which they are assigned and from whose payrolls they are paid. It would be extremely burdensome for their employer who, like them, depends on the availability of projects, if it would have to carry them as permanent employees and pay them wages even if there are no projects for them to work on. We hold, therefore, that the NLRC did not abuse its discretion in finding, based on substantial evidence in the records, that the petitioners are only project workers of the private respondent. This case is similar to Sandoval Shipyards, Inc. vs. NLRC, 136 SCRA 675 (1985), where we held: We feel that there is merit in the contention of the applicant corporation. To our mind, the employment of the employees concerned were fixed for a specific project or undertaking. For the nature of the business the corporation is engaged into is one which will not allow it to employ workers for an indefinite period. "It is significant to note that the corporation does not construct vessels for sale or otherwise which will demand continuous productions of ships and will need permanent or regular workers. It merely accepts contracts for ship-building or for repair of vessels from third parties and, only, on occasion when it has work contract of this nature that it hires workers to do the job which, needless to say, lasts only for less than a year or longer. The completion of their work or project automatically terminates their employment, in which case, the employer is, under the law, only obliged to render a report on the termination of the employment. (P. 48, Rollo.) Petitioners' invocation of the resolution of this Court in Romago Electric Company, Inc, vs. Romago Electric United Workers Union-Christian Labor Organization, (REWU-CLOP), et al., G.R. No. 79774, February 1, 1988, where this Court dismissed the petition, is not well taken. As pointed out by the public respondent, the issue in that case was whether the members of the union may properly participate in the holding of a certification election. Since the petitioners in their complaint for illegal dismissal dated July 28, 1986 (Annex A of petition) averred that they do not belong to any union, the ruling in Romago vs, REWU-CLOP may not apply to them. In their Reply to the public respondents' Comment in this case, they disclosed that they are members and officers of a new union which they organized on March 13, 1988 (pp. 62-63, Rollo). That supervening fact, however, has no relevance to this case. We find no reason to depart from the well-settled rule that findings of fact of labor officials are generally conclusive and binding upon this Court when supported by substantial evidence, as in this case (Edi-Staff Builders International, Inc. vs, Leogardo, Jr., 152 SCRA 453; Asiaworld Publishing House, Inc. vs. Ople, 152 SCRA 219; National Federation of Labor Union vs. Ople, 143 SCRA 124; Dangan vs. NLRC, 127 SCRA 706; Special Events & Central Shipping Office Workers Union vs. San Miguel Corp., 122 SCRA 557; Mamerto vs. Inciong, 118 SCRA 265; Phil. Labor Alliance Council vs. Bureau of Labor Relations, 75 SCRA 162). WHEREFORE, the petition for certiorari is dismissed for lack of merit. No costs.

SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur. SECOND DIVISION G.R. No. L-65689 May 31, 1985 SANDOVAL SHIPYARDS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ROGELIO DIAMANTE, MANUEL PACRES, ROLANDO CERVALES, DIONISIO CERVALES and MACARIO SAPUTALO, respondents. G.R. No. L-66119 May 31, 1985 SANDOVAL SHIPYARDS, INC., petitioner, vs. VICENTE LEOGARDO, JR., Deputy Minister of Labor and Employment, DANILO DE LA CRUZ, RODRIGO VILLARUZ, RODRIGO PEREZ, AQUILINO TABILON, ARMANDO ESGLANDA, MANUEL MEDINA, FREDDIE ABADIEZ, FELICIANO TOLANG, ALFREDO DE LA CRUZ, NICOLAS MARIANO, VICENTE CEBUANO, ROLANDO ROLDAN, TEODORO ROLDAN, SOLOMON GEMINO, MARIO RICAFORT, ROLANDO LOPEZ and ANGEL SAMSON, respondents. Abad Santos, Sunga & Associates for petitioner. Neva Blancaver for private respondents. AQUINO, J: These cases are about the dismissal of alleged project workers. Sandoval Shipyards, Inc. has been engaged in the building and repair of vessels. It contends that each vessel is a separate project and that the employment of the workers is terminated with the completion of each project. The workers contend otherwise. They claim to be regular workers and that the termination of one project does not mean the end of their employment since they can be assigned to unfinished projects. In G.R. No. 65689, Rogelio Diamante, Manuel Pacres, Macario Saputalo, Rolando Cervales and Dionisio Cervales were assigned to the construction of the LCT Catarman, Project No. 7511. After three months of work, the project was completed on July 26, 1979. The five workers were served a termination notice. The termination was reported to the Ministry of Labor on August 3, 1979. They filed a complaint for illegal dismissal. The National Labor Relations Commission affirmed the decision of the Labor Arbiter ordering the reinstatement of the five complainants with backwages from July 27, 1979. In G.R. No. 66119, respondents Danilo de la Cruz, et al., 17 in all, were assigned to work in Project No. 7901 for the construction of a tanker ordered by Mobil Oil Philippines, Inc. There were 55 workers in that project. The tanker was launched on January 31, 1980. Upon the yard manager's recommendation, the personnel manager of Sandoval Shipyards terminated the services of the welders, helpers and construction workers effective February 4, 1980. The termination was duly reported to the Ministry of Labor and Employment. Three days later, or on February 7, twenty-seven out of the 55 workers were hired for a new project. The 27 included four of the 17 respondents who filed a complaint for illegal dismissal on February 6.

After hearing, the Director of the Ministry's Capital Region ordered the reinstatement of the complainants. The Deputy Minister of Labor affirmed that order. We hold that private respondents were project employees whose work was coterminous with the project for which they were hired. Project employees, as distinguished from regular or non-project employees, are mentioned in section 281 of the Labor Code as those "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." Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-employee relations in the construction industry, provides: Project employees are those employed in connection with a particular construction project. Non-project (regular) employees are those employed by a construction company without reference to any particular project. Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company. Moreover, the company is not required to obtain clearance from the Secretary of Labor in connection with such termination. The petitioner cited three of its own cases wherein the National Labor Relations Commission, Deputy Minister of Labor and Employment Inciong and the Director of the National Capital Region held that the layoff of its project employees was lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for Clearance to Terminate Employees, rendered the following ruling on February 26,1979: We feel that there is merit in the contention of the applicant corporation. To our mind, the employment of the employees concerned were fixed for a specific project or undertaking. For the nature of the business the corporation is engaged into is one which will not allow it to employ workers for an indefinite period. It is significant to note that the corporation does not construct vessels for sale or otherwise which will demand continuous productions of ships and will need permanent or regular workers. It merely accepts contracts for ship-building or for repair of vessels from third parties and, only, on occasion when it has work contract of this nature that it hires workers to do the job which, needless to say, lasts only for less than a Year or longer. The completion of their work or project automatically terminates their employment, in which case, the employer is, under the law, only obliged to render a report on the termination of the employment. (139-140, Rollo of G. R. No. 65689). In NLRC Case No. RB-IV-7743-76, Nicanor San Pedro, et. al. vs. Sandoval Shipyards, Inc., the NLRC in its resolution of May 16, 1978 held that the layoff of the 17 complainants (which include three respondents in G.R. No. 65689 and two respondents in G.R. No. 66119) after the construction of the tanker, M/T Oil Queen VII, in July, 1976 was justified because they were project employees (135-138, Rollo of G.R. No. 65689).

In Gaspar vs. Sandoval Shipyards, Inc., NCR-STF-3-184081, Director Estrella held in his order dated June 22, 1981 that two workers of the petitioner were project workers whose employment was terminated upon the completion of the Project eject. Respondent Deputy Minister Leogardo, Jr. himself on October 25, 1984 affirmed that finding. He ruled that the complainants "are project workers whose employments are coterminous with the completion of the project, regardless of the number of projects in which they have worked, as provided under Policy Instructions No. 20 of the Ministry of Labor and Employment" and "as their employment is one for a definite period, they are not entitled to separation pay." (187, Rollo of G.R. No. 65689) The public respondents in the instant two cases acted with grave abuse of discretion amounting to lack of jurisdiction in disregarding these precedents. WHEREFORE, the NLRC resolution dated July 29, 1983 and the order of Deputy Minister Leogardo, Jr., dated March 15, 1983 are reversed and set aside. The complaints for illegal layoff are dismissed. No costs. SO ORDERED. Escolin, Cuevas, De la Fuente and Alampay, JJ., concur. Justices Concepcion Jr. and Abad Santos, took no part. Makasiar (Chairman), J., reserves his vote. Justices de la Fuente and Alampay were designated to sit in the Second Division.

SECOND DIVISION G.R. No. 106090 February 28, 1994 RICARDO FERNANDEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and D. M. CONSUNJI, INC., respondents. Gaston V. Taquio for petitioner. Marcos S. Pagaspas for private respondent. NOCON, J.: Forming the crux of the matter in this petition for certiorari is the question of whether or not the National Labor Relations Commission acted with grave abuse of discretion in reversing the Labor Arbiter's decision by dismissing the complaints for illegal dismissal, one of which is petitioner's, on the finding that they were project employees. Petitioner was hired as a laborer at the D.M. Consunji, Inc., a construction firm, on November 5, 1974. He became a skilled welder and worked for private respondent until March 23, 1986 when his employment was terminated on the ground that the project petitioner had been assigned to was already completed and there was no more work for him to do. Skeptic of private respondent's reason, petitioner brought his plight before the Labor Arbiter who consolidated the same with three (3) other separate complaints for illegal dismissal and various money claims against private respondent. After filing their respective position papers and other documents pertinent to their causes/defenses, the parties agreed to submit the case for decision based on record. On May 12, 1988, Labor Arbiter Fernando V. Cinco rendered a decision, finding that complainants worked continuously in various projects ranging from five (5) to twenty (20) years and belonged to a work pool, the dispositive portion of which states as follows: WHEREFORE, premises considered, the terminations by respondent of herein complainants are hereby declared illegal. Consequently, respondent is ordered to reinstate the complainants, who have not yet reached the retirement age, to their former positions plus backwages of one (1) year. Anent complainants who have already reach the retirement age of sixty (60) years as of the date of this decision, respondent is thereby ordered to pay said complainants their retirement/separation benefits equivalent to one half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year. Moreover, respondent is ordered to pay all complainants their service incentive leave for the past three (3) years; and to pay complainants Ricardo Fernandez, Gaudencio Merhan and Rolando Serona their 13th month pay likewise for the past three (3) years. The complaints of Amador Borromeo, Jesus Espiritu and Ramon Celestial are hereby dismissed in view of their receipt of Separation pay and their execution of quitclaims in favor of herein respondent. The other claims are likewise dismissed for lack of merit. SO ORDERED. Metro Manila, Philippines. 12 May 1988. 1

Private respondent questioned on appeal the aforesaid decision of the Labor Arbiter on the ground that the complainants were all project employees who were hired on a project-to-project basis, depending on the availability of projects that the former was able to close with its clients. Respondent pointed to the gaps in complainants' respective employment histories to show that they were indeed hired on an "off-and-on" basis. In view of the lack of evidence on record to prove the continuous employment of complainants-appellees, and that on the contrary, what was proven was the intermittent nature of their work as shown by the different project contracts, the respondent Commission concluded that complainants-appellees were project employees. The dispositive portion of the decision dated September 29, 1989 of respondent Commission reads: WHEREFORE, the decision of the Labor Arbiter is hereby set aside and a new one entered dismissing the complaints filed by complainants-appellees for lack of merit. 2 From said decision, the complainants-appellees interposed a motion for reconsideration which was denied for lack of merit on July 19, 1991. Respondent Commission affirmed its finding that complainants-appellees were project employees. As such, the nature of their employment did not change by the number of projects in which they have rendered service. Respondent Commission also noted that the motion for reconsideration was filed only on January 29, 1990 which was beyond the ten-day reglementary period from date of receipt of the decision on November 13, 1989. Without any mention of the denial of said motion for reconsideration, petitioner alone comes before this Court on a petition filed on July 21, 1992 and assails the decision dated September 29, 1989 of respondent Commission contending that it is more in keeping with the intent and spirit of the law to consider him and the thirteen (13) other complainants in the consolidated cases as regular employees. At the outset, it is obvious that the petition was not filed within a reasonable time from receipt of the questioned decision on November 13, 1989 as the petition was filed only on July 21, 1992. Neither does the filing of the petition appear to be reasonable from the date of receipt of the denial of the motion for reconsideration on August 2, 1991. Reckoned from this later date, petitioner waited for almost one year before he availed of this extraordinary remedy of certiorari. We have consistently stated that "the yardstick to measure the timeliness of a petition for certiorari is the reasonableness of the duration of time that had expired from the commission of the acts complained of up to the institution of the proceedings to annul the same." 3 Without doubt, petitioner's negligence or indifference for such a long period of time has in the meantime rendered the questioned decision final and no longer assailable. Even if we were to dispense with the requirement that the petition should be filed within a reasonable time, the petition would still have to be dismissed on the merits. Private respondent presented material documents showing that petitioner was hired as a project employee with the specific dates of hiring, the duration of hiring, the dates of his lay-offs, including the lay-off reports and the termination reports submitted to the then Ministry of Labor and Employment. Such data covered the period from November 5, 1974 to March 23, 1986. Inasmuch as the documentary evidence clearly showed gaps of a month or months between the hiring of petitioner in the numerous projects wherein he was assigned, the ineluctable conclusion is that petitioner has not continuously worked with private respondent but only intermittently as he was hired solely for specific projects. As such, he is governed by Policy Instruction No. 20, the pertinent portions of which read as follows: Generally, there are two types of employees in the construction industry, namely 1) Project Employees and 2) Non-project Employees. Project employees are those employed in connection with a particular construction project. Non-project employees are those employed by a construction company without reference to a particular project.

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company. Petitioner cites Article 280 of the Labor Code as legal basis for the decision of the Labor Arbiter in his favor. The text of Article 280 states as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. Petitioner claims that the above-quoted proviso in Article 280 of the Labor Code supports his claim that he should be regarded as a regular employee. We disagree. The proviso in the second paragraph of Article 280 of the Labor Code has recently been explained in Mercado v. NLRC, 4 where it was held that said proviso deems as regular employees only those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. It is not applicable to "project" employees, who are specifically excepted therefrom. Thus, the Court therein said: The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or restrain or limit the generality of the clause that it immediately follows. (Statutory Construction by Ruben Agpalo, 1986 ed., p. 173). Thus, it has been held that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to the statute itself or to other sections thereof. (Chinese Flour Importers Association v. Price Stabilization Board, 89 Phil. 469 (1951); Arenas v. City of San Carlos, G.R. No. 24024, April 5, 1978, 82 SCRA 318 (1978). The only exception to the rule is where the clear legislative intent is to restrain or qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute or even the statute itself as a whole. (Commissioner of Internal Revenue v. Filipinas Compania de Seguros, 107 Phil. 1055 (1960) Indeed, a careful reading of the proviso readily discloses that the same relates to employment where the employee is engaged to perform activities that are usually necessary or desirable in the usual business or trade of the employer but hastens to qualify that project employment is specifically exempted therefrom. Finally, petitioner relies on Policy Instruction No. 20 which was issued by then Secretary Blas F. Ople to stabilize employeremployee relations in the construction industry to support his contention that workers in the construction industry may now be considered regular employees after their long years of service with private respondent. The pertinent provision of Policy Instruction No. 20 reads: Members of a work pool from which a construction company draws its project employees, if considered employees of the construction company while in the work pool, are non-project employees or employees for an indefinite period. If they are employed in a particular project, the completion of the project or of any phase thereof will not mean severance of employer-employee relationship.

Respondent Commission correctly observed in its decision that complainants, one of whom petitioner, failed to consider the requirement in Policy Instruction No. 20 that to qualify as member of a work pool, the worker must still be considered an employee of the construction company while in the work pool. In other words, there must be proof to the effect that petitioner was under an obligation to be always available on call of private respondent and that he was not free to offer his services to other employees. Unfortunately, petitioner miserably failed to introduce any evidence of such nature during the times when there were no project. Noteworthy in this case is the fact that herein private respondent's lay-off reports and the termination reports were duly submitted to the then Ministry of Labor and Employment everytime a project was completed in accordance with Policy Instruction No. 20, which provides: Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company. Moreover, the company is not required to obtain a clearance from the Secretary of Labor in connection with such termination. What is required of the company is a report to the nearest Public Employment Office for statistical purposes. The presence of this factor makes this case different from the cases decided by the Court where the employees were deemed regular employees. The cases of Ochoco v. National Labor Relations Commission, 5 Philippine National Construction Corporation v. National Labor Relations Commission, 6 Magante v. National Labor Relations Commission, 7 and Philippine National Construction Corporation v. National Labor Relations, et al., 8 uniformly held that the failure of the employer to report to the nearest employment office the termination of workers everytime a project is completed proves that the employees are not project employees. Contrariwise, the faithful and regular effort of private respondent in reporting every completion of its project and submitting the lay-off list of its employees proves the nature of employment of the workers involved therein as project employees. Given this added circumstance behind petitioner's employment, it is clear that he does not belong to the work pool from which the private respondent would draw workers for assignment to other projects at its discretion. WHEREFORE, the instant petition for certiorari is hereby DISMISSED in view of the foregoing reasons. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

EN BANC G.R. No. 109902 August 2, 1994 ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely: ENGR. ALAN G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H. FOOKSON, JR., ROMEO R. SARONA, RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR., LEONIDO ECHAVEZ, BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE G. GARGUENA, JR., OSIAS B. DANDASAN, and GERRY I. FETALVERO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION (NSC), respondents. Leonard U. Sawal for petitioners. Saturnino Mejorada for private respondent. FELICIANO, J.: In this Petition for Certiorari, petitioners assail the Resolution of the National Labor Relations Commission ("NLRC") dated 8 January 1993 which declared petitioners to be project employees of private respondent National Steel Corporation ("NSC"), and the NLRC's subsequent Resolution of 15 February 1993, denying petitioners' motion for reconsideration. Petitioners plead that they had been employed by respondent NSC in connection with its Five Year Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were separated from NSC's service: Employee Date Nature of Separated Employed Employment 1. Alan Barinque 5-14-82 Engineer 1 8-31-91 2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92 3. Edgar Bontuyan 11-03-82 Chairman to present 4. Osias Dandasan 9-21-82 Utilityman 1991 5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92 6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91 7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized 8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91 9. Russell Gacus 1-30-85 Engineer 1 6-30-92 10. Jose Garguena 3-02-81 Warehouseman to present 11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91 12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992 13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2 On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The complaints were consolidated and after hearing, the Labor Arbiter in a Decision dated 7 June 1991, declared petitioners "regular project employees who shall continue their employment as such for as long as such [project] activity exists," but entitled to the salary of a regular employee pursuant to the provisions in the collective bargaining agreement. It also ordered payment of salary differentials. 3

Both parties appealed to the NLRC from that decision. Petitioners argued that they were regular, not project, employees. Private respondent, on the other hand, claimed that petitioners are project employees as they were employed to undertake a specific project NSC's Five Year Expansion Program (FAYEP I & II). The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed the Labor Arbiter's holding that petitioners were project employees since they were hired to perform work in a specific undertaking the Five Years Expansion Program, the completion of which had been determined at the time of their engagement and which operation was not directly related to the business of steel manufacturing. The NLRC, however, set aside the award to petitioners of the same benefits enjoyed by regular employees for lack of legal and factual basis. Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed to show any grave abuse of discretion or any act without or in excess of jurisdiction on the part of the NLRC in rendering its questioned resolutions of 8 January 1993 and 15 February 1993. The law on the matter is Article 280 of the Labor Code which reads in full: Art. 280. Regular and Casual Employment The provisions of the written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, and employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are "necessary, desirable and work-related to private respondent's main business, steel-making"; and (ii) they have rendered service for six (6) or more years to private respondent NSC. 4 The basic issue is thus whether or not petitioners are properly characterized as "project employees" rather than "regular employees" of NSC. This issue relates, of course, to an important consequence: the services of project employees are coterminous with the project and may be terminated upon the end or completion of the project for which they were hired. 5 Regular employees, in contract, are legally entitled to remain in the service of their employer until that service is terminated by one or another of the recognized modes of termination of service under the Labor Code. 6 It is evidently important to become clear about the meaning and scope of the term "project" in the present context. The "project" for the carrying out of which "project employees" are hired would ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project" undertaking might not have an ordinary or normal relationship to the usual business of the employer. In this latter case, the determination of the scope and parameeters of the "project" becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely no relationship to the usual business of the company; thus, for instance, it would be an unusual steel-making company which would undertake the breeding and production of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization problem here presented to the Court, there should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the production of vegetables as "project employees," as distinguished from ordinary or "regular employees," so long as the duration and scope of the project were determined or specified at the time of engagement of the "project employees." 7 For, as is evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as "project employees" as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific

project or undertaking," the duration (and scope) of which were specified at the time the employees were engaged for that project. In the realm of business and industry, we note that "project" could refer to one or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this first type of project is a particular construction job or project of a construction company. A construction company ordinarily carries out two or more discrete identifiable construction projects: e.g., a twenty-five- storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as "project employees," and their services may be lawfully terminated at completion of the project. The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. The case at bar presents what appears to our mind as a typical example of this kind of "project." NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view of expanding the volume and increasing the kinds of products that it may offer for sale to the public. The Five Year Expansion Program had a number of component projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet SteelMaking Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals Project." 8 Instead of contracting out to an outside or independent contractor the tasks of constructing the buildings with related civil and electrical works that would house the new machinery and equipment, the installation of the newly acquired mill or plant machinery and equipment and the commissioning of such machinery and equipment, NSC opted to execute and carry out its Five Yeear Expansion Projects "in house," as it were, by administration. The carrying out of the Five Year Expansion Program (or more precisely, each of its component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC. Each component project, of course, begins and ends at specified times, which had already been determined by the time petitioners were engaged. We also note that NSC did the work here involved the construction of buildings and civil and electrical works, installation of machinery and equipment and the commissioning of such machinery only for itself. Private respondent NSC was not in the business of constructing buildings and installing plant machinery for the general business community, i.e., for unrelated, third party, corporations. NSC did not hold itself out to the public as a construction company or as an engineering corporation. Which ever type of project employment is found in a particular case, a common basic requisite is that the designation of named employees as "project employees" and their assignment to a specific project, are effected and implemented in good faith, and not merely as a means of evading otherwise applicable requirements of labor laws. Thus, the particular component projects embraced in the Five Year Expansion Program, to which petitioners were assigned, were distinguishable from the regular or ordinary business of NSC which, of course, is the production or making and marketing of steel products. During the time petitioners rendered services to NSC, their work was limited to one or another of the specific component projects which made up the FAYEP I and II. There is nothing in the record to show that petitioners were hired for, or in fact assigned to, other purposes, e.g., for operating or maintaining the old, or previously installed and commissioned, steelmaking machinery and equipment, or for selling the finished steel products. We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the petitioners were indeed "project employees:" It is well established by the facts and evidence on record that herein 13 complainants were hired and engaged for specific activities or undertaking the period of which has been determined at time of hiring or engagement. It is of public knowledge and which this Commission can safely take judicial notice that

the expansion program (FAYEP) of respondent NSC consist of various phases [of] project components which are being executed or implemented independently or simultaneously from each other . . . In other words, the employment of each "project worker" is dependent and co-terminous with the completion or termination of the specific activity or undertaking [for which] he was hired which has been pre-determined at the time of engagement. Since, there is no showing that they (13 complainants) were engaged to perform work-related activities to the business of respondent which is steel-making, there is no logical and legal sense of applying to them the proviso under the second paragraph of Article 280 of the Labor Code, as amended. xxx xxx xxx The present case therefore strictly falls under the definition of "project employees" on paragraph one of Article 280 of the Labor Code, as amended. Moreover, it has been held that the length of service of a project employee is not the controlling test of employment tenure but whether or not "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". (See Hilario Rada v. NLRC, G.R. No. 96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674 (1985). 9 Petitioners next claim that their service to NSC of more than six (6) years should qualify them as regular employees. We believe this claim is without legal basis. The simple fact that the employment of petitioners as project employees had gone beyond one (1) year, does not detract from, or legally dissolve, their status as project employees. 10 The second paragraph of Article 280 of the Labor Code, quoted above, providing that an employee who has served for at least one (1) year, shall be considered a regular employee, relates to casual employees, not to project employees. In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court ruled that the proviso in the second paragraph of Article 280 relates only to casual employees and is not applicable to those who fall within the definition of said Article's first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole. No such intent is observable in Article 280 of the Labor Code, which has been quoted earlier. ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED for lack of merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February 1993 are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Narvasa, C.J., Cruz, Padilla, Bidin, Regalado, Davide, Jr., Romero, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur. Bellosillo, J., is on leave.

SECOND DIVISION G.R. No. 79869 September 5, 1991 FORTUNATO MERCADO, SR., ROSA MERCADO, FORTUNATO MERCADO, JR., ANTONIO MERCADO, JOSE CABRAL, LUCIA MERCADO, ASUNCION GUEVARA, ANITA MERCADO, MARINA MERCADO, JULIANA CABRAL, GUADALUPE PAGUIO, BRIGIDA ALCANTARA, EMERLITA MERCADO, ROMEO GUEVARA, ROMEO MERCADO and LEON SANTILLAN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION; LABOR ARBITER LUCIANO AQUINO, RAB-III; AURORA L. CRUZ; SPOUSES FRANCISCO DE BORJA and LETICIA DE BORJA; and STO. NIO REALTY, INCORPORATED, respondents. Servillano S. Santillan for petitioners. Luis R. Mauricio for private respondents. PADILLA, J.:p Assailed in this petition for certiorari is the decision * of the respondent national Labor Relations Commission (NLRC) dated 8 August 1984 which affirmed the decision of respondent Labor Arbiter Luciano P. Aquino with the slight modification of deleting the award of financial assistance to petitioners, and the resolution of the respondent NLRC dated 17 August 1987, denying petitioners' motion for reconsideration. This petition originated from a complaint for illegal dismissal, underpayment of wages, non-payment of overtime pay, holiday pay, service incentive leave benefits, emergency cost of living allowances and 13th month pay, filed by above-named petitioners against private respondents Aurora L. Cruz, Francisco Borja, Leticia C. Borja and Sto. Nio Realty Incorporated, with Regional Arbitration Branch No. III, National Labor Relations Commission in San Fernando, Pampanga. 1 Petitioners alleged in their complaint that they were agricultural workers utilized by private respondents in all the agricultural phases of work on the 7 1/2 hectares of ace land and 10 hectares of sugar land owned by the latter; that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private respondents since 1949, Fortunato Mercado, Jr. and Antonio Mercado since 1972 and the rest of the petitioners since 1960 up to April 1979, when they were all allegedly dismissed from their employment; and that, during the period of their employment, petitioners received the following daily wages: From 1962-1963 P1.50 1963-1965 P2.00 1965-1967 P3.00 1967-1970 P4.00 1970-1973 P5.00 1973-1975 P5.00 1975-1978 P6.00 1978-1979 P7.00 Private respondent Aurora Cruz in her answer to petitioners' complaint denied that said petitioners were her regular employees and instead averred that she engaged their services, through Spouses Fortunato Mercado, Sr. and Rosa Mercado, their "mandarols", that is, persons who take charge in supplying the number of workers needed by owners of various farms, but only to do a particular phase of agricultural

work necessary in rice production and/or sugar cane production, after which they would be free to render services to other farm owners who need their services. 2 The other private respondents denied having any relationship whatsoever with the petitioners and state that they were merely registered owners of the land in question included as corespondents in this case.
3

WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino dated March 3, 1983 is hereby modified in that the award of P10,000.00 financial assistance should be deleted. The said Decision is affirmed in all other aspects. SO ORDERED. 11 Petitioners filed a motion for reconsideration of the Decision of the Third Division of the NLRC dated 8 August 1984; however, the NLRC denied tills motion in a resolution dated 17 August 1987. 12 In the present Petition for certiorari, petitioners seek the reversal of the above-mentioned rulings. Petitioners contend that respondent Labor Arbiter and respondent NLRC erred when both ruled that petitioners are not regular and permanent employees of private respondents based on the terms and conditions of their hiring, for said findings are contrary to the provisions of Article 280 of the Labor Code. 13 They submit that petitioners' employment, even assuming said employment were seasonal, continued for so many years such that, by express provision of Article 280 of the Labor Code as amended, petitioners have become regular and permanent employees. 14 Moreover, they argue that Policy Instruction No. 12 15 of the Department of Labor and Employment clearly lends support to this contention, when it states: PD 830 has defined the concept of regular and casual employment. What determines regularity or casualness is not the employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desirable to the main business of the employer, then employment is regular. If not, then the employment is casual. Employment for a definite period which exceeds one (1) year shall be considered re for the duration of the definite period. This concept of re and casual employment is designed to put an end to casual employment in regular jobs which has been abused by many employers to prevent so-called casuals from enjoying the benefits of regular employees or to prevent casuals from joining unions. This new concept should be strictly enforced to give meaning to the constitutional guarantee of employment tenure. 16 Tested under the laws invoked, petitioners submit that it would be unjust, if not unlawful, to consider them as casual workers since they have been doing all phases of agricultural work for so many years, activities which are undeniably necessary, desirable and indispensable in the rice and sugar cane production business of the private respondents. 17 In the Comment filed by private respondents, they submit that the decision of the Labor Arbiter, as aimed by respondent NLRC, that petitioners were only hired as casuals, is based on solid evidence presented by the parties and also by the Chief of the Special Task Force of the NLRC Regional Office and, therefore, in accordance with the rule on findings of fact of administrative agencies, the decision should be given great weight. 18 Furthermore, they contend that the arguments used by petitioners in questioning the decision of the Labor Arbiter were based on matters which were not offered as evidence in the case heard before the regional office of the then Ministry of Labor but rather in the case before the Social Security Commission, also between the same parties. 19 Public respondent NLRC filed a separate comment prepared by the Solicitor General. It submits that it has long been settled that findings of fact of administrative agencies if supported by substantial evidence are entitled to great weight. 20 Moreover, it argues that petitioners cannot be deemed to be

The dispute in this case revolves around the issue of whether or not petitioners are regular and permanent farm workers and therefore entitled to the benefits which they pray for. And corollary to this, whether or not said petitioners were illegally dismissed by private respondents. Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private respondents and held that petitioners were not regular and permanent workers of the private respondents, for the nature of the terms and conditions of their hiring reveal that they were required to perform phases of agricultural work for a definite period of time after which their services would be available to any other farm owner. 4 Respondent Labor Arbiter deemed petitioners' contention of working twelve (12) hours a day the whole year round in the farm, an exaggeration, for the reason that the planting of lice and sugar cane does not entail a whole year as reported in the findings of the Chief of the NLRC Special Task Force. 5 Even the sworn statement of one of the petitioners, Fortunato Mercado, Jr., the son of spouses Fortunato Mercado, Sr. and Rosa Mercado, indubitably show that said petitioners were hired only as casuals, on an "on and off" basis, thus, it was within the prerogative of private respondent Aurora Cruz either to take in the petitioners to do further work or not after any single phase of agricultural work had been completed by them. 6 Respondent Labor Arbiter was also of the opinion that the real cause which triggered the filing of the complaint by the petitioners who are related to one another, either by consanguinity or affinity, was the filing of a criminal complaint for theft against Reynaldo Mercado, son of spouses Fortunate Mercado, Sr. and Rosa Mercado, for they even asked the help of Jesus David, Zone Chairman of the locality to talk to private respondent, Aurora Cruz regarding said criminal case. 7 In his affidavit, Jesus David stated under oath that petitioners were never regularly employed by private respondent Aurora Cruz but were, on-and-off hired to work and render services when needed, thus adding further support to the conclusion that petitioners were not regular and permanent employees of private respondent Aurora Cruz. 8 Respondent Labor Arbiter further held that only money claims from years 1976-1977, 1977-1978 and 1978-1979 may be properly considered since all the other money claims have prescribed for having accrued beyond the three (3) year period prescribed by law. 9 On grounds of equity, however, respondent Labor Arbiter awarded petitioners financial assistance by private respondent Aurora Cruz, in the amount of Ten Thousand Pesos (P10,000.00) to be equitably divided among an the petitioners except petitioner Fortunato Mercado, Jr. who had manifested his disinterest in the further prosecution of his complaint against private respondent. 10 Both parties filed their appeal with the National Labor Relations Commissions (NLRC). Petitioners questioned respondent Labor Arbiter's finding that they were not regular and permanent employees of private respondent Aurora Cruz while private respondents questioned the award of financial assistance granted by respondent Labor Arbiter. The NLRC ruled in favor of private respondents affirming the decision of the respondent Labor Arbiter, with the modification of the deletion of the award for financial assistance to petitioners. The dispositive portion of the decision of the NLRC reads:

permanent and regular employees since they fall under the exception stated in Article 280 of the Labor Code, which reads: The provisions of written agreements 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 activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. 21 (emphasis supplied) The Court resolved to give due course to the petition and required the parties to submit their respective memoranda after which the case was deemed submitted for decision. The petition is not impressed with merit. The invariable rule set by the Court in reviewing administrative decisions of the Executive Branch of the Government is that the findings of fact made therein are respected, so long as they are supported by substantial evidence, even if not overwhelming or preponderant; 22 that it is not for the reviewing court to weigh the conflicting evidence, determine the credibility of the witnesses or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of the evidence; 23 that the administrative decision in matters within the executive's jurisdiction can only be set aside upon proof of gross abuse of discretion, fraud, or error of law. 24 The questioned decision of the Labor Arbiter reads: Focusing the spotlight of judicious scrutiny on the evidence on record and the arguments of both parties, it is our well-discerned opinion that the petitioners are not regular and permanent workers of the respondents. The very nature of the terms and conditions of their hiring reveal that the petitioners were required to perform p of cultural work for a definite period, after which their services are available to any farm owner. We cannot share the arguments of the petitioners that they worked continuously the whole year round for twelve hours a day. This, we feel, is an exaggeration which does not deserve any serious consideration inasmuch as the plan of rice and sugar cane does not entail a whole year operation, the area in question being comparatively small. It is noteworthy that the findings of the Chief of the Special Task Force of the Regional Office are similar to this. In fact, the sworn statement of one of the petitioners Fortunato Mercado, Jr., the son of spouses Fortunato Mercado, Sr. and Rosa Mercado, indubitably shows that said petitioners were only hired as casuals, on-and-off basis. With this kind of relationship between the petitioners and the respondent Aurora Cruz, we feel that there is no basis in law upon which the claims of the petitioners should be sustained, more specially their complaint for illegal dismissal. It is within the prerogative of respondent Aurora Cruz either to take in the petitioners to do further work or not after any single phase of agricultural work has been completed by them. We are of the opinion that the real cause which triggered the filing of this complaint by the petitioners who are related to one another, either by consanguinity or affinity was due to the filing of a criminal complaint by the respondent Aurora Cruz against Reynaldo Mercado, son of spouses Fortunato Mercado, Sr. and Rosa Mercado. In April 1979, according to Jesus David, Zone Chairman of the locality where the petitioners and respondent reside,

petitioner Fortunato Mercado, Sr. asked for help regarding the case of his son, Reynaldo, to talk with respondent Aurora Cruz and the said Zone Chairman also stated under oath that the petitioners were never regularly employed by respondent Aurora Cruz but were on-and-off hired to work to render services when needed. 25 A careful examination of the foregoing statements reveals that the findings of the Labor Arbiter in the case are ably supported by evidence. There is, therefore, no circumstance that would warrant a reversal of the questioned decision of the Labor Arbiter as affirmed by the National Labor Relations Commission. The contention of petitioners that the second paragraph of Article 280 of the Labor Code should have been applied in their case presents an opportunity to clarify the afore-mentioned provision of law. Article 280 of the Labor Code reads in full: Article 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. The first paragraph answers the question of who are employees. It states that, regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual business or trade of the employer, except for project employees. A project employee has been defined to be one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee, or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season 26 as in the present case. The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fan under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as regular employees those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280 is applicable to their case and that the Labor Arbiter should have considered them regular by virtue of said proviso. The contention is without merit. The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or restrain or limit the generality of the clause that it immediately follows. 27 Thus, it has been held that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to the statute itself or to other sections thereof. 28 The only

exception to this rule is where the clear legislative intent is to restrain or qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute or even the statute itself as a whole. 29 Policy Instruction No. 12 of the Department of Labor and Employment discloses that the concept of regular and casual employees was designed to put an end to casual employment in regular jobs, which has been abused by many employers to prevent called casuals from enjoying the benefits of regular employees or to prevent casuals from joining unions. The same instructions show that the proviso in the second paragraph of Art. 280 was not designed to stifle small-scale businesses nor to oppress agricultural land owners to further the interests of laborers, whether agricultural or industrial. What it seeks to eliminate are abuses of employers against their employees and not, as petitioners would have us believe, to prevent small-scale businesses from engaging in legitimate methods to realize profit. Hence, the proviso is applicable only to the employees who are deemed "casuals" but not to the "project" employees nor the regular employees treated in paragraph one of Art. 280. Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees, their employment legally ends upon completion of the project or the season. The termination of their employment cannot and should not constitute an illegal dismissal. 30 WHEREFORE, the petition is DISMISSED. The decision of the National Labor Relations Commission affirming that of the Labor Arbiter, under review, is AFFIRMED. No pronouncement as to costs. SO ORDERED. Melencio-Herrera (Chairperson), Paras and Regalado, JJ., concur. Sarmiento, J., on leave.

EN BANC G.R. No. 109704 January 17, 1995 ALFREDO B. FELIX, petitioner, vs. DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAEZ, JR., in his capacity as Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE COMMISSION, respondents. KAPUNAN, J.: Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to the general reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of the National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid reorganization. In Mendoza vs. Quisumbing 1 and the consolidated cases involving the reorganization of various government departments and agencies we held: We are constrained to set aside the reorganizations embodied in these consolidated petitions because the heads of departments and agencies concerned have chosen to rely on their own concepts of unlimited discretion and "progressive" ideas on reorganization instead of showing that they have faithfully complied with the clear letter and spirit of the two Constitutions and the statutes affecting reorganization. 2 In De Guzman vs. CSC 3, we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias 4 that a valid abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that "if the abolition is void, the incumbent is deemed never to have ceased to hold office," in sustaining therein petitioner's right to the position she held prior to the reorganization. The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal from a permanent position in the National Center for Mental Health as a result of the reorganization of the Department of Health was void. However, a closer look at the facts surrounding the instant petition leads us to a different conclusion. After passing the Physician's Licensure Examinations given by the Professional Regulation Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental Hospital) on May 26, 1980 as a Resident Physician with an annual salary of P15,264.00. 5 In August of 1983, he was promoted to the position of Senior Resident Physician 6 a position he held until the Ministry of Health reorganized the National Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119. Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary capacity immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to the Secretary of Health. 7 In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary Status), which position was renewed the following year. 8 In 1988, the Department of Health issued Department Order No. 347 which required board certification as a prerequisite for renewal of specialist positions in various medical centers, hospitals and agencies

of the said department. Specifically, Department Order No. 347 provided that specialists working in various hospitals and branches of the Department of Health be recognized as "Fellows" of their respective specialty societies and/or "Diplomates" of their specialty boards or both. The Order was issued for the purpose of upgrading the quality of specialties in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside) examinations given by recognized specialty boards, in keeping up with international standards of medical practice. Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then) Secretary of Health Alfredo Bengzon issued Department Order No. 347 providing for an extension of appointments of Medical Specialist positions in cases where the termination of medical specialist who failed to meet the requirement for board certification might result in the disruption of hospital services. Department Order No. 478 issued the following guidelines: 1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the Chief of Hospital requests for exemption, certifies that its application will result in the disruption of the delivery service together with the steps taken to implement Section 4, and submit a plan of action, lasting no more than 3-years, for the eventual phase out of non-Board certified medical specialties. 2. Medical specialist recommended for extension of appointment shall meet the following minimum criteria: a. DOH medical specialist certified b. Has been in the service of the Department at least three (3) years prior to December 1988. c. Has applied or taken the specialty board examination. 3. Each recommendation for extension of appointment must be individually justified to show not only the qualification of the recommendee, but also what steps he has taken to be board certified. 4. Recommendation for extension of appointment shall be evaluated on a case to case basis. 5. As amended, the other provisions of Department Order No. 34/s. 1988 stands. Petitioner was one of the hundreds of government medical specialist who would have been adversely affected by Department Order No. 347 since he was no yet accredited by the Psychiatry Specialty Board. Under Department Order No. 478, extension of his appointment remained subject to the guidelines set by the said department order. On August 20, 1991, after reviewing petitioner's service record and performance, the Medical Credentials Committee of the National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I, informing him of its decision on August 22, 1991. He was, however, allowed to continue in the service, and receive his salary, allowances and other benefits even after being informed of the termination of his appointment. On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters, the petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed out petitioner's poor performance, frequent tardiness and inflexibility as among the factors responsible for the recommendation not to renew his appointment. 9 With one exception, other department heads present in the meeting expressed the same opinion, 10 and the overwhelming

concensus was for non-renewal. The matter was thereafter referred to the Civil Service Commission, which on February 28, 1992 ruled that "the temporary appointment (of petitioner) as Medical Specialist I can be terminated at any time . . ." and that "[a]ny renewal of such appointment is within the discretion of the appointing authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by hospital authorities to vacate his cottage since he was no longer with said memorandum petitioner filed a petition with the Merit System Protection Board (MSPB) complaining about the alleged harassment by respondents and questioning the non-renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed petitioner's complaint for lack of merit, finding that: As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or after its expiration is a matter largely addressed to the sound discretion of the appointing authority. In this case, there is no dispute that Complainant was a temporary employee and his appointment expired on August 22, 1991. This being the case, his re-appointment to his former position or the renewal of his temporary appointment would be determined solely by the proper appointing authority who is the Secretary, Department of Health upon the favorable recommendation of the Chief of Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service Commission G.R. Nos. 80455-56 dated April 10, 1989, held as follows: The power of appointment is essentially a political question involving considerations of wisdom which only the appointing authority can decide. In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired temporary appointment much less invoke the aid of this Board cannot substitute its judgment to that of the appointing authority nor direct the latter to issue an appointment in the complainant's favor. Regarding the alleged Department Order secured by the complainant from the Department of Health (DOH), the Board finds the same inconsequential. Said Department Order merely allowed the extension of tenure of Medical Specialist I for a certain period but does not mandate the renewal of the expired appointment. The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that the subsistence, quarters and laundry benefits provided to the Complainant were in connection with his employment with the NCMH. Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits. Hence, the Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof, including the occupancy of the said cottage, after his cessation form office. In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal infirmity, thus rendering as baseless, this instant complaint. Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93677 dated February 3, 1993, hence this appeal, in which petitioner interposes the following assignments of errors: I THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS

TEMPORARY APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND ACCEPTANCE OF APPOINTMENT. II THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE PETITIONER'S RIGHT OF SECURITY OF TENURE. Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's temporary appointment after the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right of security of tenure; 13 2) petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to 1991; 14 and 3) the respondent Commission did not act with grave abuse of discretion in affirming the petitioner's non-renewal of his appointment at the National Center for Mental Hospital. 15 We agree. The patent absurdity of petitioner's posture is readily obvious. A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given field. A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit. acceptance to a first year residency program is no guaranty that the physician will complete the program. Attribution rates are high. Some programs are pyramidal. Promotion to the next postgraduate year is based on merit and performance determined by periodic evaluations and examinations of knowledge, skills and bedside manner. 17 Under this system, residents, specialty those in university teaching hospitals 18 enjoy their right to security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are concerned. While physicians (or consultants) of specialist rank are not subject to the same stringent evaluation procedures, 19 specialty societies require continuing education as a requirement for accreditation for good standing, in addition to peer review processes based on performance, mortality and morbidity audits, feedback from residents, interns and medical students and research output. The nature of the contracts of resident physicians meet traditional tests for determining employer-employee relationships, but because the focus of residency is training, they are neither here nor there. Moreover, stringent standards and requirements for renewal of specialist-rank positions or for promotion to the next post-graduate residency year are necessary because lives are ultimately at stake. Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be sent

back to high school and staying there. From the position of senior resident physician, which he held at the time of the government reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but because of the prestige and status which the promotion conferred upon him in the medical community. Such status, however, clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty rank, the responsibility of completing board certification requirements within a reasonable period of time. The evaluation made by the petitioner's peers and superiors clearly showed that he was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not even board-certified. It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I (temporary) in August of 1988, no objection was raised by him about the change of position or the temporary nature of designation. The pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years later, following the non-renewal of his position by the Department of Health. We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence to if not his unqualified acceptance of the promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change from the status of permanent senior resident physician to temporary senior physician were neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, 20 that he "either abandoned (his claim) or declined to assert it." There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil service, permanent, temporary of otherwise, or any claim to a violation of the constitutional provision on security of tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right to any position are strongly discouraged. 21 In the same token, the failure to assert a claim or the voluntary acceptance of another position in government, obviously without reservation, leads to a presumption that the civil servant has either given up his claim of has already settled into the new position. This is the essence of laches which is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 22 In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of petitioner's position from permanent resident physician status to that of a temporary resident physician pursuant to the government reorganization after the EDSA Revolution. What is unique to petitioner's averments is the fact that he hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at once apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by falsely claiming that petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second, by insisting on a right of claim clearly abandoned by his acceptance of the position of Medical Specialist I (Temporary), which is hence barred by laches.

The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue in the case at bench, we decline to make any further pronouncements relating to petitioner's contentions relating to the effect on him of the reorganization except to say that in the specific case of the change in designation from permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation whereby some government resident physicians were erroneously being classified as permanent resident physicians in spite of the inherently temporary nature of the designation. The attempts by the Department of Health not only to streamline these positions but to make them conform to current standards of specialty practice is a step in a positive direction. The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government physician of specialist rank: 1.) has completed all necessary requirements at least assure the public at large that those in government centers who claim to be specialists in specific areas of Medicine possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do their patients no harm. Primium non nocere. Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment (Medical Specialist I). As respondent Civil Service Commission has correctly pointed out 23, the appointment was for a definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of the petitioner's term. ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit. Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug and Mendoza, JJ., concur.