19-36

G.R. No. 106108 February 23, 1995

CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and JOSE ALVIZ, SR.
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ, respondents.

REGALADO, J.:

A man said to the Universe,

Behold, I am born!
However, replied the Universe,
The fact does not create in me
A sense of obligation.

To most, these familiar verses express the article of faith for self-reliance. To the racist in some countries,
however, they mean that the world does not owe the Negroid or other colored people equal solicitude.
The neo-colonial in the Philippines would hold the Negrito or a member of indigenous cultural
communities to the same social bondage. But our Constitution and our laws were precisely formulated
under a sense of obligation to the marginalized and the under privileged. Under such mandates, this
Court has always accorded them scrupulous and compassionate attention. In now resolving their
predicament in the case at bar, it call once again on the old Castilian tenet: A él que la vida ha dado
menos, désele mas por la ley. 1

In this petition for certiorari, the resolution of the National Labor Relations Commission (hereafter, NLRC)
dated February 28, 1992 2 which dismissed the appeal of herein petitioners from the decision of the labor
arbiter 3 for failure to file a supersedeas bond, as well as its April 30, 1992 4 denying their motion for
reconsideration, are assailed for having been rendered with grave abuse of discretion.

The antecedents of the present recourse, as culled from the records, are that herein private respondent,
Fernando Sanchez, filed a complaint for illegal dismissal, non-payment of back wages and other benefits
on January 3, 1991 with Regional Office No. III of the Department of Labor and Employment in Olongapo
City originally docketed therein as NLRC Case No. RAB III 01-1931-91. The complaint, naming Cabalan
Pastulan Negrito Labor Association (CAPANELA, for brevity) and its president, Jose Alviz, Sr., as
respondents, alleged that the former was employed by CAPANELA as a foreman with a monthly salary of
P3,245.70 from March, 1977 until he was illegally dismissed on January 1, 1990. 5

Said complaint was later amended on February 22, 1991 to introduce the correction that private
respondent was illegally dismissed on March 27, 1990 (instead of January 1, 1990), and to further pray
for reinstatement without loss of seniority rights and payment of full back wages and moral and exemplary
damages. 6 As no amicable settlement was arrived at during the mandatory pre-conference despite efforts
exerted by the labor arbiter, the parties were required to simultaneously submit their respective position
papers and/or affidavits. 7 The case was submitted for resolution on March 11, 1991 on the bases of said
position papers and other evidence, but the parties were further allowed to submit their respective
memoranda, 8 after which the case was deemed submitted for decision on May 29, 1991. 9

A decision was rendered on June 24, 1991 in favor of herein private respondent, declaring his dismissal
illegal, and ordering herein petitioners, jointly and severally —
 1. To pay the backwages of complainant from March 24, 1990 until June 24, 1991 and for
15 months at P3,245.70 a month equals P48,685.50;

2. To immediately reinstate complainant to his former or equivalent position without loss

of seniority rights and other privileges, and for this purpose, respondents are hereby
ordered to submit proof of the physical or payroll reinstatement of the complainant within
five (5) working days from receipt hereof, provided further that should reinstatement (be)
not feasible due to any supervening event, respondents are further ordered to pay the
separation pay of complainant equivalent to one month salary for every year of service, a
fraction of at least six (6) months service considered as in addition to his respondents are
further one (1) whole year, in addition to his backwages; . . . .

but dismissing the claim for moral and exemplary damages for want of substantial evidence. 10

The records further reveal that private respondent subsequently filed a motion for the issuance of a writ of
11 This was opposed by execution on July 15, 1991. 11 This was opposed by CAPANELA 12 through its
new counsel, Atty. Isagani M. Jungco, who at the same time filed a memorandum of appeal 13 in its
behalf, although admittedly without posting a supersedeas bond because of want of funds of either
CAPANELA or its president and co-petitioner Alviz, Sr. Private respondent, in his answer to CAPANELA's
memorandum of, appeal 14 and reply to opposition to motion for execution, 15 was unconvinced and
adamantly insisted on the dismissal of the appeal due to non-perfection thereof for failure to comply with
the legal requirement of posting a cash or surety bond as a requisite for the perfection of an appeal.

A partial writ of execution 16 was issued by Labor Arbiter Saludares on August 15, 1991 ordering the
physical or payroll reinstatement of private respondent. The sheriff's return of November 4, 1991, signed
by Numeriano S. Reyes, Sheriff II of the NLRC Regional Arbitration Branch No. III, stated that the writ
expired without any indication of private respondent having been reinstated. 17

As stated at the outset, the NLRC dismissed the appeal on February 28, 1992 for failure of petitioners to
post the supersedeas bond required by law, stating that "(r)espondents' contention that it cannot post
bond because it is insolvent deserve(s) scant consideration not being accompanied by proof there(of),"
and denied petitioner's motion for reconsideration.

The present controversy raises as principal issues for resolution by the Court whether or not (1) the
dismissal of private respondent was legal, and; (2) the appeal was perfected despite failure to file a
supersedeas bond.

Anent the first issue, before we delve into the matter of the alleged illegal dismissal of private respondent
Sanchez by petitioner CAPANELA, it is evidently necessary to ascertain the existence of an employer-
employee relationship between them.

Petitioners asseverate that CAPANELA is an association composed of Negritos who worked inside the
American naval base in Subic Bay (hereinafter referred to as the Base). They initially received a daily
wage of P100.00 and thus earned, on the average, less than P3,000.00 per month. Said association
organized the system of employment of members of this cultural community who were accorded special
treatment concededly because of the occupancy of their ancestral lands as part of the operational area
and military facility used by the Base authorities.

CAPANELA, through its officers, saw to it that its members reported for work, recorded their attendance,
and distributed the workers' salaries paid by the Base at the end of a specific pay period, without gaining
any amount from such undertakings petitioner Alviz, Sr., for his part and as president of CAPANELA, was
himself only an employee at the Base. In other words, neither CAPANELA nor its president was the
employer of private respondent Sanchez; rather, it was the United States Government acting through the
military base authorities. 18
Contrarily, private respondent maintains that there existed an employer-employee relationship, as
allegedly supported by the evidence on record, and that petitioners CAPANELA and Alviz, Sr. exercised
control as employer over the means and methods by which the work was accomplished. He further
argues that since the determination of the existence of an employer-employee relationship is a factual
question, the findings of the labor officials thereon should be considered conclusive and binding upon and
respected by the appellate courts. 19

It is hence clearly apparent that the judgment of the labor arbiter, as affirmed by respondent commission,
declaring the dismissal of private respondent illegal and ordering the payment of back wages to him
together with his payroll or physical reinstatement, was premised on the finding that there was an existing
employer-employee relationship.

Indeed, findings of fact and conclusions of the labor arbiter, 20 as well as those of the NLRC, 21 or, for that
matter, any other adjudicative body which
can be considered as a trier of facts on specific matters within its field of expertise, 22 should be
considered as binding and conclusive upon the appellate courts. This is in addition to the fact that they
were in a better position to assess and evaluate the credibility of the contending parties and the validity of
their respective evidence. 23 However, these doctrinal strictures hold true only when such findings and
conclusions are supported by substantial evidence. 24

In the case at bar, we are hard put to find sufficient evidential support for public respondent's conclusion
on the putative existence of an employer-employee relationship between petitioners and private
respondent. We are accordingly persuaded that there is ample justification to disturb the findings of
respondent NLRC and to hold that a reconsideration of its challenged resolutions is in order.

A careful reevaluation of the documentary evidence of record belies the finding that CAPANELA, through
its president and co-petitioner, Jose Alviz, Sr., wielded control as an employer over private respondent. It
will be noted that in his affidavit dated March 4, 1991, 25 private respondent himself declared that through
the intervention of CAPANELA, by way of its June 13, 1389 letter 26 to Lt. Mark S. Kistner, he was cleared
of the charge of larceny of U.S. government property. Thereafter, in an indorsement dated July 11, 1989
from the Director of Security, U.S. Navy Public Works Center, the recommendation for his reinstatement
and the release of his gate pass to the Base was addressed to the Director, Investigation Section, U.S.
Facility Security Department via the Director of the Contracts Administration Division. 27

This only goes to show that CAPANELA had in fact no control over the continued employment of its
members working in the U.S. naval base. For, after conducting its own investigation, CAPANELA could
only intervene in behalf of its members facing charges through a recommendatory action request for
favorable consideration. It could not, on its own authority, exonerate such members from the charges,
much less effect their reinstatement without the approval of the Base authorities. Interestingly, in order to
comply with the labor arbiter's decision of June 24, 1991, CAPANELA even had to write to the Resident
Officer-in-Charge of the Facility Support Contracts at Subic Bay recommending the reinstatement of
private respondent to his former position. 28

Under their arrangement, CAPANELA, through its officers, could only impose disciplinary sanctions upon
its members for infractions of its own rules and regulations, to the extent of ousting a member from the
association when called for under the circumstances. Nonetheless, such called termination of
membership in the association, which could result in curtailment of the privilege of working at the Base
inasmuch as employment therein was conditioned upon membership in CAPANELA, is not equivalent to
the illegal dismissal from employment contemplated in our labor laws. Petitioners, not being the employer,
obviously could not arrogate unto themselves an employer's prerogatives of hiring and firing workers.

As succinctly pointed out by the Solicitor General:

 True, there was a stipulation to the effect that Fernando Sanchez was employed by
petitioner CAPANELA, but the real employer was the United States government and
petitioner was just a "labor-only contractor." Annexes "G" and "H" of CAPANELA's
Memorandum on Appeal show that the award or contract of work was between
CAPANELA and the United States government through the U.S. Navy. The same
contract likewise clearly stipulated that CAPANELA was "to provide labor and material to
perform trash sorting services in the Base period for all work specified in Section C."
Annex "A" of complainant Fernando Sanchez' Answer to petitioner's Memorandum on
Appeal itself proves that the negotiation was between CAPANELA and the U.S. Navy,
with the former supplying the labor and the U.S. government paying the wages. Since
CAPANELA merely provided the labor force, it cannot be deduced therefrom that
CAPANELA should also compensate the laborers; it is a case of non sequitur. In other
words, the actual mechanical act of making payments was done by CAPANELA, but the
monies therefor were provided and disbursements made by the disbursing officer of the
U.S. Naval Supply Depot, Subic Bay (see Annexes "G" and "H").

Moreover, ingress and egress in the work premises were controlled not by CAPANELA
but by the U.S. Base authorities who could even reject entry of CAPANELA members
then duly employed as part of the project, and impose disciplinary sanctions against
them. Annex "1" of petitioners' Position Paper as respondent in the NLRC Case No. RAB-
III-01-193 1-91, which was the letter of Lt. M.E. Kistner of the U.S. Navy, clearly proves
this. 29 (Emphasis in the original text.)

Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the
selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the
means and methods by which the work is to be accomplished, with the power of control being the most
determinative factor. 30

The Solicitor General pertinently illustrates the glaring absence of these elements in the present case:

. . . , as aforeshown, CAPANELA had no control of the premises as it was the U.S. naval
authorities who had the power to issue passes or deny their issuance. In fact,
CAPANELA did not have absolute control on the disciplinary measures to be imposed on
its members employed in the Base. Annex "1" of CAPANELA's Position Paper submitted
before the NLRC Regional Arbitration Branch established the U.S. Navy's right to impose
disciplinary measures for violations or infractions of its rules and regulations as well as
the right to recommend suspensions or dismissals of the workers. Moreover, it was not
shown that CAPANELA had control of the means and methods or manner by which the
workers were to go about their work. These are indeed strong indicia of the U.S. Navy's
right of control over the workers as direct employer.

Third, there is evidence to prove that payment of wages was merely done through
CAPANELA, but the source of payment was actually the U.S. government paying
workers according to the volume of work accomplished on rates agreed upon between
CAPANELA and the U.S. government. . . . 31

It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of private
respondent. Considering that petitioners cannot legally be considered as the employer of herein private
respondent, it follows that it cannot be made liable as such nor be required to bear the responsibility for
the legal consequences of the charge of illegal dismissal. Granting arguendo that private respondent was
illegally dismissed, the action should properly be directed against the U.S. government which, through the
Base authorities, was the true employer in this case.
Neither can petitioners be deemed to have been engaged in permissible job contracting under the law, for
failure to satisfy the following prescribed conditions:

1. The contractor carries on an independent business and undertakes the contract work
on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with performance of the work except as to the results thereof; and

2. The contractor has 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. 32

In the present case, the setup was such that CAPANELA was merely tasked with organizing the Negritos
to facilitate the orderly administration of work made available to them at the base facilities, that is, sorting
scraps for recycling. CAPANELA recorded the attendance of its members and submitted the same to the
Base authorities for the determination of wages due them and the preparation of the payroll. Payment of
wages was coursed through CAPANELA but the funds therefor came from the coffers of the Base. Once
inside the Base, control over the means and methods of work was exercised by the Base authorities.
Accordingly, CAPANELA functioned as just an administrator of its Negrito members employed at the
Base.

From the legal standpoint, CAPANELA's activities may at most be considered akin to that of labor-only
contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely
acted as an agent or intermediary of the employer. 33

The Solicitor General ramifies this aspect:

. . . , petitioner CAPANELA could not be classified as an "independent contractor"

because it was not shown that it has substantial capital or investments to qualify as such
under the law. On the other hand, it was apparent that the premises, tools, equipment,
and other paraphernalia used by the workers were all supplied by the U.S. government
through the U.S. Navy. What CAPANELA supplied was only the local labor force,
complainant Fernando Sanchez among them. It is therefore clear that CAPANELA had
no capital outlay involved in the business or in the maintenance thereof. 34

While it is not denied that an association or a labor organization or union can at times be an employer
insofar as people hired by it to dispose of its business are concerned, 35 the situation in this case is
altogether different. A proper and necessary distinction should be made between the employees of
CAPANELA who actually attended to its myriad functions as an association and its members who were
employed in the jobsite inside the Base vis-a-vis CAPANELA's relative position as the employer of the
former and a mere administrator with respect to the latter.

On the matter of the perfection of an appeal from the decision of the NLRC, petitioners plead for a more
considerate and humane application of the law as would allow their appeal to prosper despite non-posting
of a supersedeas bond on account of their insolvency. To dismiss the appeal for failure to post said bond,
petitioners aver, is tantamount to denial of the constitutionally guaranteed right of access to courts by
reason of poverty. 36 Private respondent, on the other hand, argues that perfection of an appeal within the
reglementary period and in compliance with all requirements of the law therefor is jurisdictional. That
petitioners do not have the funds for the premiums for posting a supersedeas bond or for a cash deposit,
disdainfully says private respondent, "is not in the least our problem." 37

We have no quarrel with the provision of Article 223 of the Labor Code which, in part and among others,
requires that in case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the commission in the amount equivalent to the monetary award in the judgment appealed
from. Perfection of an appeal within the period and in the manner prescribed by law is jurisdictional 38 and
non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final
and executory. 39

However, in a number of recent cases, 40 the Court has eased the requirement of posting a bond, as a
condition for perfection of appeals in labor cases, when to do so would bring about the immediate and
appropriate resolution of controversies on the merits without over-indulgence in technicalities, 41 ever
mindful of the underlying spirit and intention of the Labor Code to ascertain the facts of each case
speedily and objectively without regard to technical rules of law and procedure, all in the interest of due
process. 42 Punctilious adherence to stringent technical rules may be relaxed in the interest of the working
man, 43 and should not defeat the complete and equitable resolution of the rights and obligations of the
parties. 44 Moreover, it is the duty of labor officials to consider their decisions and inquire into the
correctness of execution, as supervening events may affect such execution. 45

The Solicitor General realistically assesses the situation, thus:

. . . As aforestated, above the technical consideration on whether failure to post a

supersedeas bond was fatal to petitioners' appeal is the importance of first resolving
whether there was indeed an employer-employee relationship in this case so as not to
render the execution of the NLRC's resolution unenforceable or impossible to
implement. . . . Besides, it is of public notice that the U.S. Navy had withdrawn from the
Subic Base in view of the termination of the Bases Treaty. Even if CAPANELA were
ordered to reinstate complainant Fernando Sanchez, this is obviously an impossible thing
to perform as there is no longer any work to be done inside the Base. Nor is petitioner
CAPANELA in a position to pay Sanchez's back wages considering that it was the U.S.
Navy that paid his wages. . . . 46

In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to
this dispute, i.e., to reconsider public respondent's resolution of February 28, 1992 and April 30, 1992 and
reinstate petitioner's appeal to give the latter a chance to prove CAPANELA's insolvency or poverty, or to
reverse the decision of the labor arbiter on the ground that there was no employer-employee relationship
between petitioner CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts
of this case with the greater interests of social justice, and considering that the parties involved are those
upon whose socio-economic status we prefaced this opinion, we opt for the latter.

While this Court, when it finds that a lower court or quasi-judicial body is in error, may simply and
conveniently nullify the challenged decision, resolution or order and remand the case thereto for further
appropriate action, it is well within the conscientious exercise of its broad review powers to refrain from
doing so and instead choose to render judgment on the merits when all material facts have been duly laid
before it as would buttress its ultimate conclusion, in the public interest and for the expeditious
administration of justice, such as where the ends of justice would not be subserved by the remand of the
case. 47

IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February 28, 1992 and April 30, 1992
of respondent National Labor Relations Commission are accordingly ANNULLED, and the adjudgment of
Labor Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is hereby REVERSED and
SET ASIDE.

SO ORDERED.

Narvasa, C.J., Bidin, Puno and Mendoza, JJ., concur.

G.R. No. L-43825 May 9, 1988

CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and
RODITO NASAYAO, respondents.

Benito P. Fabie for petitioners.

Narciso C. Parayno, Jr. for respondents.

PADILLA, J.:

In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to
annul and set aside the decision rendered by the respondent Arbitrator Jose T. Collado, dated 29
December 1975, in NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental
Marble Corp. and Felipe David, respondents," and the resolution issued by the respondent Commission,
dated 7 May 1976, which dismissed herein petitioners' appeal from said decision.

In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime in
May 1974, he was appointed plant manager of the petitioner corporation, with an alleged compensation of
P3,000.00, a month, or 25% of the monthly net income of the company, whichever is greater, and when
the company failed to pay his salary for the months of May, June, and July 1974, Rodito Nasayao filed a
complaint with the National Labor Relations Commission, Branch IV, for the recovery of said unpaid
varies. The case was docketed therein as NLRC Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as plant
manager with a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the
parties was a joint venture, a sort of partnership, wherein Rodito Nasayao was to keep the machinery in
good working condition and, in return, he would get the contracts from end-users for the installation of
marble products, in which the company would not interfere. In addition, private respondent Nasayao was
to receive an amount equivalent to 25% of the net profits that the petitioner corporation would realize,
should there be any. Petitioners alleged that since there had been no profits during said period, private
respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the herein respondent Jose T.
Collado as voluntary arbitrator. In the course of the proceedings, however, the herein petitioners
challenged the arbitrator's capacity to try and decide the case fairly and judiciously and asked him to
desist from further hearing the case. But, the respondent arbitrator refused. In due time, or on 29
December 1975, he rendered judgment in favor of the complainant, ordering the herein petitioners to pay
Rodito Nasayao the amount of P9,000.00, within 10 days from notice. 1

Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations Commission
on grounds that the labor arbiter gravely abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and that the appealed decision is not
supported by evidence. 2

On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the decision
of the voluntary arbitrator is final, unappealable, and immediately executory; 3 and, on 23 March 1976, he
filed a motion for the issuance of a writ of execution. 4

Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the
appeal on the ground that the decision appealed from is final, unappealable and immediately executory,
and ordered the herein petitioners to comply with the decision of the voluntary arbitrator within 10 days
from receipt of the resolution. 5

The petitioners are before the Court in the present recourse. As prayed for, the Court issued a temporary
restraining order, restraining herein respondents from enforcing and/or carrying out the questioned
decision and resolution. 6

The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as plant
manager of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its
monthly income, whichever is greater, as claimed by said respondent, or entitled to receive only an
amount equivalent to 25% of net profits, if any, that the company would realize, as contended by the
petitioners.

The respondent arbitrator found that the agreement between the parties was for the petitioner company to
pay the private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and, consequently, ordered
the company to pay Rodito Nasayao the amount of P9,000.00 covering a period of three (3) months, that
is, May, June and July 1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is
final, unappealable and immediately executory, and may not be reviewed by the Court. His contention is
based upon the provisions of Art. 262 of the Labor Code, as amended.

The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of
discretion, the rule on unappealability of awards of a voluntary arbitrator becomes flexible and it is the
inherent power of the Courts to maintain the people's faith in the administration of justice." The question
of the finality and unappealability of a decision and/or award of a voluntary arbitrator had been laid to rest
in Oceanic Bic Division (FFW) vs. Romero, 7 and reiterated in Mantrade FMMC Division Employees and
Workers Union vs. Bacungan. 8 The Court therein ruled that it can review the decisions of voluntary
arbitrators, thus-

We agree with the petitioner that the decisions of voluntary arbitrators must be given the
highest respect and as a general rule must be accorded a certain measure of finality.
This is especially true where the arbitrator chosen by the parties enjoys the first rate
credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P. Law Center
and an academician of unquestioned expertise in the field of Labor Law. It is not correct,
however, that this respect precludes the exercise of judicial review over their decisions.
Article 262 of the Labor Code making voluntary arbitration awards final, inappealable,
and executory except where the money claims exceed P l 00,000.00 or 40% of paid-up
capital of the employer or where there is abuse of discretion or gross incompetence
refers to appeals to the National Labor Relations Commission and not to judicial review.

Inspite of statutory provisions making 'final' the decisions of certain administrative

agencies, we have taken cognizance of petitions questioning these decisions where want
of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of the law were brought to our attention. There is no
provision for appeal in the statute creating the Sandiganbayan but this has not precluded
us from examining decisions of this special court brought to us in proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity. There
is no reason why herdecisions involving interpretation of law should be beyond this
Court's review. Administrative officials are presumed to act in accordance with law and
yet we do hesitate to pass upon their work where a question of law is involved or where a
 showing of abuse of authority or discretion in their official acts is properly raised in
petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known as
the Arbitration Law, which provides:

Sec. 29. Appeals — An appeal may be taken from an order made in a proceeding under
this Act, or from a judgment entered upon an award through certiorari proceedings, but
such appeals shall be limited to questions of law. The proceedings upon such an appeal,
including the judgment thereon shall be governed by the Rules of Court in so far as they
are applicable.

The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also claims that the case is
premature for non-exhaustion of administrative remedies. He contends that the decision of the
respondent Commission should have been first appealed by petitioners to the Secretary of Labor, and, if
they are not satisfied with his decision, to appeal to the President of the Philippines, before resort is made
to the Court.

The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be invoked
in this case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor
Relations Commission, 10 the Court said:

As is well known, no law provides for an appeal from decisions of the National Labor
Relations Commission; hence, there can be no review and reversal on appeal by higher
authority of its factual or legal conclusions. When, however, it decides a case without or
in excess of its jurisdiction, or with grave abuse of discretion, the party thereby adversely
affected may obtain a review and nullification of that decision by this Court through the
extraordinary writ of certiorari. Since, in this case, it appears that the Commission has
indeed acted without jurisdiction and with grave abuse of discretion in taking cognizance
of a belated appeal sought to be taken from a decision of Labor Arbiter and thereafter
reversing it, the writ of certiorari will issue to undo those acts, and do justice to the
aggrieved party.

We also find no merit in the contention of Rodito Nasayao that only questions of law, and not findings of
fact of a voluntary arbitrator may be reviewed by the Court, since the findings of fact of the voluntary
arbitrator are conclusive upon the Court.

While the Court has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator 11
and administrative agencies which have acquired expertise in their respective fields, like the Labor
Department and the National Labor Relations Commission, 12 their findings of fact and the conclusions
drawn therefrom have to be supported by substantial evidence. ln that instant case, the finding of the
voluntary arbitrator that Rodito Nasayao was an employee of the petitioner corporation is not supported
by the evidence or by the law.

On the other hand, we find the version of the petitioners to be more plausible and in accord with human
nature and the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire
the private respondent Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount
which they could ill-afford to pay, considering that the business was losing, at the time he was hired, and
that they were about to close shop in a few months' time.

Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an
employee of the petitioner corporation. He was not included in the company payroll, nor in the list of
company employees furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs.
Zamora, 13 the Court enumerated the factors in determining whether or not an employer-employee
relationship exists, to wit:

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. It is the so-called "control test" that is the most important element
(Investment Planning Corp. of the Phils. vs. The Social Security System, 21 SCRA 924;
Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA
72).<äre||anº•1àw>

In the instant case, it appears that the petitioners had no control over the conduct of Rodito Nasayao in
the performance of his work. He decided for himself on what was to be done and worked at his own
pleasure. He was not subject to definite hours or conditions of work and, in turn, was compensated
according to the results of his own effort. He had a free hand in running the company and its business, so
much so, that the petitioner Felipe David did not know, until very much later, that Rodito Nasayao had
collected old accounts receivables, not covered by their agreement, which he converted to his own
personal use. It was only after Rodito Nasayao had abandoned the plant following discovery of his wrong-
doings, that Felipe David assumed management of the plant.

Absent the power to control the employee with respect to the means and methods by which his work was
to be accomplished, there was no employer-employee relationship between the parties. Hence, there is
no basis for an award of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-6151,
entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents,"
on 29 December 1975, and the resolution issued by the respondent National Labor Relations
Commission in said case on 7 May 1976, are REVERSED and SET ASIDE and another one entered
DISMISSING private respondent's complaints. The temporary restraning order heretofore isued by the
Court is made permanent. Without costs.

SO ORDERED.

Yap, C.J, Melencio-Herrera, Paras and Sarmiento, JJ, concur.

G.R. No. L-16600 December 27, 1961

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,

vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.

Luis G. Hofileña for petitioner.

J. T. de Leon for respondents.

PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora
Fabrigar (common-law wife) and their children, filed a claim for compensation with the Workmen's
Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants, vs.
Iloilo Chinese Commercial School, Respondent." In this claim, it was alleged that the cause of death was
" pulmonary tuberculosis contracted during and as a result of his employment as janitor." The Hearing
Officer of the WCC denied the claim and dismissed the case, finding that the claimant failed to prove the
casual effect of employment and death; nothing was shown that the disease was contracted in line of
duty; that whatever evidence claimant presented about the cause of death was only a mere suggestion
that progressively developed from tuberculosis with heart trouble to a sudden fatal turn, ending up for the
cause of "beriberi adult" at the time of death, as per certification of Sanitary Inspector Dr. P. E. Labitoria,
of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation Commission
which, on November 12, 1959, rendered judgment reversing the decision of its Hearing Officer, making
the following findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of the
respondent Iloilo Chinese Commercial School, his work consisting of sweeping and scrubbing the floors,
cleaning the classrooms and the school premises, and other janitorial chores; on March 11, 1956,
preparatory to graduation day, he carried desks and chairs from the classrooms to the auditorium, set the
curtains and worked harder and faster than usual; that although he felt shortness of breath and did not
feel very well that day, he continued working at the request of the overseer of respondent, that on the
following day he reported for work, but on March 13, he spat blood and stopped working; that from April
29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico Villareal "for far advanced pulmonary
tuberculosis and for heart disease"; and that previous to said treatment, he was attended by Dr. Jaranilla
for pulmonary tuberculosis. The Commission concluded that the short period of intervention between his
last day of work (March 13, 1956) when he spat blood and his death on June 28, 1956, due to pulmonary
tuberculosis, indicated that he had been suffering from such disease even during the time he was
employed by the respondent and considering the strenuous work he performed, his employment as janitor
aggravated his pre-existing illness; that although here is a discrepancy between the cause of death
"beriberi adult," as appearing in the death Certificate and the testimony of Dr. Villareal, the latter deserves
more credence, because the information (cause of death) was given by the sanitary inspector who did
not, in any way, examine the deceased before or after his death. The Commission, therefore, ordered the
respondent Chinese Commercial School, Inc., in said case —

1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito,
Gloria, Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND FOUR
HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as Death benefits; and

2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428,
as amended.

The above decision is now before Us for Review on a Writ of Certiorari, after the motion for
reconsideration had been denied, petitioner alleging that the Commission erred:

1. In disregarding completely the evidentiary value of the death certificate of the attending
physician which was presented as evidence by both claimants and respondent (Exhibits C & 4) to
prove the cause of death;

2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was
contracted during and as a result of the nature of his employment;

3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and

4. In not holding that the herein petitioner is exempt from the scope of the Workmen's
Compensation Law.lawphil.net

Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in
its favor. Considering the doctrine that the Commission, like the Court of Industrial Relations, is bound not
by the rule of preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence
(Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188;
Secs. 43 & 46 Rep. Act No. 772, W.C. Act), petitioner's pretension is without merit. Substantial evidence
supports the decision of the Commission. While seemingly there exists an inconsistency in the cause of
death, as appearing in the death certificate by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact
found by the Commission, that the Sanitary Inspector did not examine the deceased before and after his
death. "Undoubtedly," says the Commission, "the information that he died of beriberi adult, as appearing
in the death certificate was given because it appears that the deceased had also edema of the extremities
(swollen legs)." The evidence of record sustains the following findings of the Commission, is Fabrigar's
cause of death to wit —

The short period of time intervening between his last day of work (March 13, 1956) when he spat
blood and his death June 28, 1956 due to pulmonary tuberculosis indicates that he had been
suffering from the disease even during the time that he was employed by the respondent.
Considering the strenuous work that he performed while in the service of the respondents and the
unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m.
or 7:00 p.m.) beyond the normal and legal working hours, we find that his employment
aggravated his pre-existing illness and brought about his death. Moreover, our conclusion finds
support in the fact that immediately preceding his last day of work with the respondent, he had an
unusually hard day lifting desks and other furnitures and assisting in the preparations for the
graduation exercises of the school. Considering also his complaints during that day (March 11),
among which was "shortness of breath", we may also say that his work affected an already
existing heart ailment.

We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the
present appeal by certiorari.

It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese
Chamber of Commerce which was the one that furnished the janitor service in the premises of its
buildings, including the part thereof occupied by the petitioner; that the Chamber of Commerce paid the
salaries of janitors, including the deceased; that the petitioner could not afford to pay rentals of its
premises and janitor due to limited finances depended largely on funds raised among its Board of
Directors, the Chinese Chamber of Commerce and Chinese nationals who helped the school. In other
words, it is pretended that the deceased was not an employee of the school but of the Chinese Chamber
of Commerce which should be the one responsible for the compensation of the deceased. On one hand,
according to the Commission, there is substantial proof to the effect that Fabrigar was employed by and
rendered service for the petitioner and was an employee within the purview of the Workmen's
Compensation Law. On the other hand, the most important test of employer-employee relation is the
power to control the employee's conduct. The records disclose that the person in charge (encargado) of
the respondent school supervised the deceased in his work and had control over the manner he
performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry
within the meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt from
the scope of the same law. Considering that this factual question has not been properly put in issue
before the Commission, it may not now be entertained in this appeal for the first time (Atlantic Gulf, etc.
vs. CIR, et al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon. Martinez, et al., L-
15560, Dec. 31, 1960). The decision of the Commission does not show that the matter was taken up. We
are at a loss to state whether the issue was raised in the motion for reconsideration filed with the
Commission, because the said motion is not found in the record before us. And the resolution to the
motion for reconsideration does not touch this question.

IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from
is affirmed, with costs against the herein petitioner.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and De Leon, JJ.,
concur.
Padilla, J., took no part.

G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge
of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN, SR.,
respondents.

Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision
rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA
477) reviewing the appellate court's conclusion that there exists an employer-employee relationship
between the petitioner and its co-defendant Funtecha. The Court ruled that the petitioner is not liable for
the injuries caused by Funtecha on the grounds that the latter was not an authorized driver for whose acts
the petitioner shall be directly and primarily answerable, and that Funtecha was merely a working scholar
who, under Section 14, Rule X, Book III of the Rules and Regulations Implementing the Labor Code is not
considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the
application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner. The
private respondents maintain that under Article 2180 an injured party shall have recourse against the
servant as well as the petitioner for whom, at the time of the incident, the servant was performing an act in
furtherance of the interest and for the benefit of the petitioner. Funtecha allegedly did not steal the school
jeep nor use it for a joy ride without the knowledge of the school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the
Court reconsiders its decision. We reinstate the Court of Appeals' decision penned by the late Justice
Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and Serafin E. Camilon. Applying
Civil Code provisions, the appellate court affirmed the trial court decision which ordered the payment of
the P20,000.00 liability in the Zenith Insurance Corporation policy, P10,000.00 moral damages, P4,000.00
litigation and actual expenses, and P3,000.00 attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner
Filamer. He was, in relation to the school, an employee even if he was assigned to clean the school
premises for only two (2) hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take
over the vehicle while the latter was on his way home one late afternoon. It is significant to note that the
place where Allan lives is also the house of his father, the school president, Agustin Masa. Moreover, it is
also the house where Funtecha was allowed free board while he was a student of Filamer Christian
Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp
dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's
testimony, a fast moving truck with glaring lights nearly hit them so that they had to swerve to the right to
avoid a collision. Upon swerving, they heard a sound as if something had bumped against the vehicle, but
they did not stop to check. Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan
who was walking in his lane in the direction against vehicular traffic, and hit him. Allan affirmed that
Funtecha followed his advise to swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in
Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school. He
further said that there was no specific time for him to be off-duty and that after driving the students home
at 5:00 in the afternoon, he still had to go back to school and then drive home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is
an act in furtherance of the interest of the petitioner-school. Allan's job demands that he drive home the
school jeep so he can use it to fetch students in the morning of the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep was
routinely driven home for the said purpose. Moreover, it is not improbable that the school president also
had knowledge of Funtecha's possession of a student driver's license and his desire to undergo driving
lessons during the time that he was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely
was not having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his
own" but ultimately, for the service for which the jeep was intended by the petitioner school. (See L.
Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932]; See also Association of Baptists for
World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is
constrained to conclude that the act of Funtecha in taking over the steering wheel was one done for and
in behalf of his employer for which act the petitioner-school cannot deny any responsibility by arguing that
it was done beyond the scope of his janitorial duties. The clause "within the scope of their assigned tasks"
for purposes of raising the presumption of liability of an employer, includes any act done by an employee,
in furtherance of the interests of the employer or for the account of the employer at the time of the
infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow,
the employee driving the vehicle derived some benefit from the act, the existence of a presumptive liability
of the employer is determined by answering the question of whether or not the servant was at the time of
the accident performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW
643, 50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors
its defense, was promulgated by the Secretary of Labor and Employment only for the purpose of
administering and enforcing the provisions of the Labor Code on conditions of employment. Particularly,
Rule X of Book III provides guidelines on the manner by which the powers of the Labor Secretary shall be
exercised; on what records should be kept; maintained and preserved; on payroll; and on the exclusion of
working scholars from, and inclusion of resident physicians in the employment coverage as far as
compliance with the substantive labor provisions on working conditions, rest periods, and wages, is
concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The Court,
thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is not the decisive
law in a civil suit for damages instituted by an injured person during a vehicular accident against a
working student of a school and against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an alleged
employee and an alleged employer. It invokes a claim brought by one for damages for injury caused by
the patently negligent acts of a person, against both doer-employee and his employer. Hence, the
reliance on the implementing rule on labor to disregard the primary liability of an employer under Article
2180 of the Civil Code is misplaced. An implementing rule on labor cannot be used by an employer as a
shield to avoid liability under the substantive provisions of the Civil Code.

There is evidence to show that there exists in the present case an extra-contractual obligation arising
from the negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a
legal fiction, to other(s) who are in a position to exercise an absolute or limited control over (him)." (Bahia
v. Litonjua and Leynes, 30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's
position in order that the petitioner may be held responsible for his grossly negligent act, it being sufficient
that the act of driving at the time of the incident was for the benefit of the petitioner. Hence, the fact that
Funtecha was not the school driver or was not acting within the scope of his janitorial duties does not
relieve the petitioner of the burden of rebutting the presumption juris tantum that there was negligence on
its part either in the selection of a servant or employee, or in the supervision over him. The petitioner has
failed to show proof of its having exercised the required diligence of a good father of a family over its
employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the
guidance of its employees and the issuance of proper instructions intended for the protection of the public
and persons with whom the employer has relations through his employees. (Bahia v. Litonjua and
Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the
performance of any act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would
prohibit any one of its employees from taking control over its vehicles if one is not the official driver or
prohibiting the driver and son of the Filamer president from authorizing another employee to drive the
school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions or warned its
employees against the use of its vehicles by persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by
which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the
absence of evidence that the petitioner had exercised the diligence of a good father of a family in the
supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of its
employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran
Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court, 178 SCRA 331
[1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of the employer is,
under Article 2180, primary and solidary. However, the employer shall have recourse against the
negligent employee for whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant
in the civil case for damages. This is quite understandable considering that as far as the injured
pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the one driving the
vehicle and presumably was one authorized by the school to drive. The plaintiff and his heirs should not
now be left to suffer without simultaneous recourse against the petitioner for the consequent injury caused
by a janitor doing a driving chore for the petitioner even for a short while. For the purpose of recovering
damages under the prevailing circumstances, it is enough that the plaintiff and the private respondent
heirs were able to establish the existence of employer-employee relationship between Funtecha and
petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his
own but in furtherance of the business of his employer. A position of responsibility on the part of the
petitioner has thus been satisfactorily demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby
GRANTED. The decision of the respondent appellate court affirming the trial court decision is
REINSTATED.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

G.R. No. L-21278 December 27, 1966

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 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 further proceeding in the premises (Cases Nos. 41-IPA, 1183-
MC and V-30 of the Court of Industrial Relations)."1 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 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 disrupt the effectivity of the order of March 30,1963, pending the
final resolution of the same."2 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 V-30. 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. L-21500. 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

"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 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. L-13748, 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 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 University itself admits that it has declared dividends.3
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 also 1 to 1-F, 2-x 3-x and 4-x)"4 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 educational institutions that are not operated for profit are not within the
purview of Republic Act No. 875.5
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 registered labor organization and this fact is admitted by counsel for
the University.5a

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 for certification
election, Case No. 1183-MC, was filed by the Faculty Club in the CIR.6 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 Compañia 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-to-work 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 above-quoted 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.

Far Eastern University vs. Commissioner of Internal Revenue 5 SCRA 1077

G.R. No. L-17620 August 31, 1962

FAR EASTERN UNIVERSITY, petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS, PHILIPPINE ASSOCIATION OF COLLEGES AND
UNIVERSITY PROFESSORS (PACUP) and TOMAS N. AGUIRRE, respondents.

Crispin D. Baizas & Associates for petitioner.

Mariano B. Tuason for respondent Court of Industrial Relations.
Eulogio R. Lerum for the other respondents.

CONCEPCION, J.:

Appeal by certiorari, taken by the Far Eastern University, hereafter referred to as the University, from
resolution of the Court of Industrial Relations sitting en banc, modifying a decision of one of the Judges of
said Court. The main facts are set forth in said decision, from which we quote:

From the evidence on record, it appears that Tomas N. Aguirre became a faculty member of the
respondent in 1948. He was first employed at the rate of P6.00 per hour and then was contracted
to teach in the Boys' High School Department in the same university at the rate of P30.00 per
class, earning an average of P500.00 to P600.00 a month. Aguirre joined the PACUP, a
legitimate labor organization in June 1953. In July or August, 1953, upon orders of the president
of the PACUP, Jose M. Hernandez, Aguirre began to campaign and recruit members for the
PACUP. As a result of his efforts in campaigning for membership, he was able to influence seven
members from the faculty of the university (Exhibits "B", "B-1" to "B-6", inclusive). In his campaign
for membership, he approached practically all of the faculty members of the respondent's Institute
of Education and some from the Arts and Sciences, Business Administration and Finance, but
most of them were afraid to join the union. They were afraid of any retaliation that the respondent
may make because of their joining the union.
In the year 1953, respondent formed a committee to classify all faculty members and determine
the rates of their backpay and assignments. Ninety-six of the more than four hundred faculty
members were classified as full time instructors. Aguirre was one of those who was classified by
the said committee as full time instructor in the respondent's Institute of Education, with a fixed
compensation of P450.00 a month, effective September 1, 1953.

During the months of December, 1953 up to May, 1954, for teaching in the Far Eastern
University, respondent herein, Aguirre was paid the following: December, 1953-P210.00;
January, 1954 — P302.40; February, 1954 — P313.20; March, 1954 — P249.00. In June, 1954,
respondent stopped giving him teaching assignments.

Aguirre claims that in June, 1954, he was no longer given an assignment because of his union
activities while respondent claims that Aguirre was not given assignment because of decreased
enrollment in the university. He further avers that after recruiting some members, his classification
as full time instructor changed to reserved full time instructor and his teaching load was
decreased to two hours a day. Hence, his reduced earnings from December, 1953 to May, 1954
as previously mentioned. His salary as a full time instructor was P5,400.00 per annum or P450.00
per month, irrespective of his teaching load. Respondent, thru its witness, the dean in the Institute
of Education where Aguirre was teaching, testified and admitted that the reason for Aguirre's not
receiving any teaching assignment in June, 1954 was because enrollment in the Institute of
Education was going down steadily in the Filipino Language class where Aguirre was teaching.
Among the other Filipino Language instructors are Baldomero de Jesus, Teodoro Gener, Rosario
Bernards, Dolores Gupit, Inigo Regalado, and Flordeliza Mendoza who are older members of the
faculty than Aguirre except Regalado, Bernards and Mendoza. The dean of the Institute of
Education, Luz A. Zafra, admitted also that in the assignment of subjects to faculty members,
length of service, experience, preparation and professional growth as well as student-faculty
relation were taken into consideration. Hence if these above-mentioned factors, particularly length
of service and experience, were really taken into consideration, Aguirre a full time professor
should have been given the assignment in stead of Regalado and Mendoza who were only part
time professors and who started teaching after him. The other Tagalo instructors (professors
under the classification) who were given assignments when Aguirre was not, are not members of
the PACUP. It should also be noted that since before the last war, Aguirre had been teaching in
the University of the Philippines.

It is true that there were charges brought by respondent against Aguirre but the same had been
investigated and found to be groundless. On the other hand, Aguirre brought charge against the
respondent before the Department of Education when his teaching load was reduced and the
Director of Private Schools, in his decision of November 9, 1954, directed the respondent to pay
the salary differential which Aguirre fail to earn from December 1, 1953 to 1954 and to give
Aguirre assignment in the college department during the first semester of the current school year
under the same condition before his teaching load was reduced. The Secretary of Education, in
his decision, dated June 22, 1955, affirmed the decision of the Director of Private Schools and on
December 8, 1956, the Executive Secretary, by authority of the President of the Philippines
affirmed the decision of the Director of Private School as well as the Secretary of Education's
decision, previously mentioned. Of course, those proceedings in no way could considered as
controlling or affecting the case at bar. At best, they may serve as a grim reminder of the actions,
of the governmental entity that could do something to bolster the relationship between the
university and the faculty members. The allegation of respondent to the effect that it suffered
reduce enrollment in 1953-1954, hence necessitating the laying off of Aguirre, cannot be taken
into consideration after a careful examination of the balance sheet submitted by the respondent in
relation to its motion to dismiss. Said balance sheet shows that in the 1952-1953 fiscal year,
respondent made a net profit of P158,035.25 and in 1953-1954, P258,619.98, while in 1954-
1955, a net profit of P707,003.70 and in 1955-1956, P999,766.88. The figures show that
respondent from 1952 to 1956, has been steadily increasing its income until in 1958-1959 when it
made net income of P1,511,293.42. And even on the assumption the enrollment in the
 department where Aguirre was teaching reduced, still the Court cannot validly reconcile the fact
that Aguirre who was a full time professor receiving a fixed monthly salary could not any further
be given assignment the time professors and whose length of service in the university cannot
compare with that of Aguirre were given assignment and suffered no reeducating in salary.
Undoubtedly, this Court cannot but conclude that when the respondent changed status of Aguirre
from a full time professor at P450.00 a month to that of a reserved full time professor with a
teaching load of two hours and finally got no assignments in June, 1964, it was motivated other
than decreased enrollment, especially in the case of the evidence that Aguirre campaigned for
union membership among the professors, instructors and teachers of the respondent and the
further fact, that other full time instructors similarly situated but are not union members did not
suffer the same facts of abrupt reduction in their teaching load and salary. As indicated, Aguirre
was later deprived of any teaching load in the Institute of Education. Even part time professors as
Panganiban, Mendoza and Regalado had assignments to the exclusion of Aguirre who was a full
time professor. This eventuality, was apparently, the fear of most of the faculty members who
refused to join the PACUP when Aguirre asked them to become members.

Ordinarily, back wages are granted whenever there is a finding of a commission of unfair labor
practices. However, in this particular case the testimony of Aguirre, himself as well as the
documentary evidence on the record show that since June, 1958, Aguirre began teaching at the
Philippine College of Commerce with an income of P100.00 a month and on November 17, 1955,
he began working as a permanent employee in the Central Bank of the Philippines with a
compensation of P3,000.00 per annum. On September 5, 1956, his salary was raised to
P3,600.00 per annum. The permanent employment obtained by Aguirre in the Central Bank of the
Philippines as well as in the Philippine College of Commerce is substantial and under the concept
of the Industrial Peace Act, his employment elsewhere in a permanent capacity is sufficient to bar
his reinstatement to his former position in the respondent. While it may be true that his earnings
with the Central Bank may be less than that he was receiving from the Far Eastern University, yet
his status with the Central Bank, is permanent and he could teach as a sideline in any school, as
in fact he is connected with the Philippine College of Commerce, a fact that could not happen if
he were still connected with the Far Eastern University.

At the instance of the Philippine Association of Colleges and University Professors, hereafter referred to
as the PACUP, and/or Tomas N. Aguirre, on September 28, 1954, an Acting Prosecutor of the Court of
Industrial Relations filed a complaint for unfair labor practice against the University, which later moved on
November 17, 1954, to dismiss the complaint. Subsequently, or on February 4, 1955, the complainant
and/or the offended party, Tomas N. Aguirre filed a motion to withdraw said complaint upon the ground
that there was a decision of the Director of Private Schools ordering his reinstatement and the payment of
back wages, as well as wage differential, and that the University was "using the pendency" of the case
"as a ground for not complying with the said decision". Acting upon this latter motion, on March 29, 1955,
the Court dismissed said complaint. However, on August 30, 1955 the order of dismissal was, on motion
of the complainant dated April 22, 1955, set aside for the reason that the expected amicable settlement of
the case had not materialized. On October 16, 1955, the University filed a "supplemental pleading" to its
motion to dismiss of November 17, 1954 both of which were denied by the Court on June 23, 1956. Later
on the University filed its answer and, the issue having been joined, the case was tried, after which Judge
Arsenio L. Martinez of said Court rendered the aforementioned decision finding the University guilty of
unfair labor practice and sentencing said institution to pay to Aguirre the salary differential due him from
December 1, 1953 to May 31, 1954, based on Aguirre's salary of P450.00 a month, as well as back
wages at the same rate, from June 1, 1954 to November 17, 1955, after deducting therefrom the
compensation paid to him by the Philippine College of Commerce from June 1, 1955 to November 17,
1955, as well as to cease and desist from further committing unfair labor practices. However, said Judge
did not order the reinstatement of Aguirre in the University, upon the ground that his employment in the
Central Bank of the Philippines, is, within the purview of the Industrial Peace Act, a substantial equivalent
of his position as full time instructor in said University.
On motion for reconsideration filed by the complainant, a majority of the judges of said Court sitting en
banc, affirmed the decision of Judge Martinez, insofar as the commission of unfair labor practice charged
and the payment of the salary differential and back wages are concerned, but held that Aguirre's
employment in the Central Bank and the Philippine College of Commerce are not the substantial
equivalent of his aforementioned position as full time instructor in the University, and, accordingly,
modified said decision by, likewise, sentencing the University to reinstate Tomas N. Aguirre, in addition to
paying him the aforementioned wages differential and back wages plus "other emoluments". Hence this
appeal by certiorari taken by the University. The Court of Industrial Relation, as one of the appellees
herein, has filed a motion, which we consider as its answer, to dismiss the appeal for lack of merit upon
the ground that appellant raises no question of law.

Appellant's contention is that the employment of Aguirre in the Central Bank and his teaching load in the
Philippine College of Commerce are substantially equivalent to his former position in the University. Upon
the other hand, the resolution appealed reached the opposite conclusion for the following reasons:

(a) Aguirre's work in the respondent university is that of a professor, ]while his work in the Central
Bank is clerical in nature;

(b) As professor Aguirre's maximum teaching period is five (5) hours daily; while in the bank he
works eight (8) hours a day;

(c) Although his work in the bank allows him to teach part time in the Philippine College of
Commerce for one hour, he could also do the same work even if he were employed in the
university; and

(d) Aguirre was receiving from the respondent university P5,400.00 a year, while he receives from
the Central Bank P3,000.00 a year only. This alone fact decides the issue, namely, that Aguirre's
position in the Central Bank is not substantially equivalent to his position in the Far Eastern
University. "Any employment at lower wage rate is not substantially equivalent employment"
[Willard, Inc. (1937 2 NLRB 1094, Moorseville Cotton Mills vs. NLRB (CCA-4, 1940), 2. Labor
Cases. 18.576; 110 fed. (2d) 79; Puleski Veneer Corn. (1938) 10 NLRB 136; Quidnick Dye
Works, Inc. (1937) 2 NLRB 963].

Although Mr. Aguirre was, not a professor, but a full time instructor in the University, we agree with the
opinion of the lower court, sitting en banc. In addition to the circumstances relied upon by the latter, one
important factor, not mentioned in the resolution appealed from, is decisively in favor of the conclusion
therein reached, and that is that Mr. Aguirre is an instructor in Tagalog, and that, as such, his position as
researcher in the Central Bank has no future for him. The situation would perhaps have been different
had his line been economics. Inasmuch, however, as Mr. Aguirre has especialized in the Tagalog dialect,
his work as a researcher in the Central Bank is inferior to his job as full time instructor in the University,
not so much because his salary in the latter is substantially bigger, even if we add thereto his emoluments
in the Philippine College of Commerce, but, specially, because of the future his position as instructor in
the University offers him as a career, which is non-existent in the Central Bank.

WHEREFORE, the resolution appealed from is hereby affirmed, with costs against petitioner. It is so
ordered..1äwphï1.ñët

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Parades, Dizon, Regala and
Makalintal, JJ., concur.

G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations
dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970
affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the
unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their
respective dates of dismissal until fully reinstated without loss to their right of seniority
and of such other rights already acquired by them and/or allowed by law. 1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial
Relations:

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND

TUDLA WERE EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND

TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY

COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF
DISCRIMINATION BY THE PETITIONER HEREIN.

IV

RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR

LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO

THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF
DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF
SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM
AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3
by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their
union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial
Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its
members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that
Solano was not his employee because the latter came to the establishment only when there was work
which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy
Keh Beng countered with a special defense of simple extortion committed by the head of the labor union,
Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court
of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh
Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis.
4
The issue therefore centered on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano
and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and
that except in the event of illness, their work with the establishment was continuous although their
services were compensated on piece basis. Evidence likewise showed that at times the establishment
had eight (8) workers and never less than five (5); including the complainants, and that complainants
used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then that
Dy went to his address in Caloocan and fetched him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. , 7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not
employees under Republic Act 875, where an employee 8 is referred to as

shall include any employee and shag 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.

while an employer 9
 includes 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
anyone acting in the capacity of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the
control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-
13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an
understanding between the parties that one is to render personal services to or for the
benefit of the other and recognition by them of the right of one to order and control the
other in the performance of the work and to direct the manner and method of its
performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that petitioner
had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that
petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.

While this Court upholds the control test 11 under which 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, " it finds no merit with petitioner's
arguments as stated above. 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, not the actual exercise of the right. 12 Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since
the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court
agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just a

method of compensation and does not define the essence of the relation. Units of time ...
and units of work are in establishments like respondent (sic) just yardsticks whereby to
determine rate of compensation, to be applied whenever agreed upon. We cannot
construe payment by the piece where work is done in such an establishment so as to put
the worker completely at liberty to turn him out and take in another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who
penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518,
523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as
generally practiced in our country, is, in fact, a labor contract -between employers and
employees, between capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial
Relations abused its discretion when it concluded that the findings of fact made by the Hearing Examiner
were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor
practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme
Court, if supported by substantial evidence. This provision has been put into effect in a long line of
decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations
when they were supported by substantial evidence. 14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed, 15 and that the decision being appealed ordered the payment of backwages
to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this
connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated
sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to
three years, "subject to deduction where there are mitigating circumstances in favor of the employer but
subject to increase by way of exemplary damages where there are aggravating circumstances. 17
Considering there are no such circumstances in this case, there is no reason why the Court should not
apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to
an award of backwages for three years without qualification and deduction at the respective rates of
compensation the employees concerned were receiving at the time of dismissal. The execution of this
award is entrusted to the National Labor Relations Commission. Costs against petitioner.

SO ORDERED.

Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.

G.R. No. L-9417 December 22, 1958

ISABELO DOCE, petitioner,

vs.
WORKMEN'S COMPENSATION COMMISSION and DADO JADAO, respondents.

Apacible, Suanes and Associates for petitioner.

Cipriano Manansala for respondent Dado Jadao.

BAUTISTA ANGELO, J.:

Dado Jadao filed with the Workmen's Compensation Commission a claim for compensation against Isabelo Doce
for injuries he suffered in an accident that occurred on June 11, 1953 in the City of Manila while working as a
conductor of a bus belonging to the latter under a boundary system. Doce interposed the defense that there was no
employer-employee relationship between him and Jadao and hence the Commission has no jurisdiction to act on the
claim.

The claim was assigned to a referee for hearing who, after receiving the evidence, rendered decision holding that a
conductor who works under the boundary system in the operation of the bus of another is considered an employee of
the latter within the meaning of the law and as such Doce is responsible to pay to Jadao the compensation prescribed
in the Workmen's Compensation Act. Consequently, the referee ordered Doce to pay Jadao a compensation of
P757.43, plus the cost of the medical and surgical expenses incurred by the latter, and to pay the Commission the
amount of P8.00 as fees in accordance with the law. This decision was affirmed by the Commission on July 2, 1955.
Doce interposed the present petition for review.
The facts as found by the Commission are: Dado Jadao was a conductor of Bus No. 9 of the B-Twelve Liner owned
and operated by Isabelo Doce who was paid under the boundary system. His average daily earnings as conductor
was P4.00, working five days a week. On June 11, 1953, while acting as such conductor, Jadao was pinned by two
buses on Quezon Boulevard, Manila, suffering injuries on the right leg, head and left ear. He was treated in the
North General Hospital and in the National Orthopedic Hospital, and as a result he suffered temporary total
disability from June 11, 1953 to May 10, 1954 and a partial loss of the use of his right leg.

It was also proven that under the boundary system adopted by petitioner and respondent, the driver and conductor of
the bus gave to the owner a fixed amount out of the daily earnings derived from its operation. In this case, the
conductor and the driver used to give to respondent P15.00 daily. The owner supplied the gasoline at the beginning
but its cost is later reimbursed out of the earnings of the day. After deducting the cost of the gasoline and the rental
of P15.00, the remainder is divided between the conductor and the driver.lawphil.net

The issue to be determined is whether the employer-employee relationship existed between the owner of the bus and
the conductor considering that the latter worked under a boundary system as explained above and is not paid directly
by the former.

This case falls squarely within our ruling in National Labor Union vs. Dinglasan, 52 Off. Gaz., No. 4, 1933,
wherein this Court held that a driver of a jeep who operates the same under the boundary system is considered an
employee within the meaning of the law and as such the case comes under the jurisdiction of the Court of Industrial
Relations. In that case, Benedicto Dinglasan was the owner and operator of TPU jeepneys which were driven by
petitioners under verbal contracts that they will pay P7.50 for 10 hours use under the so-called "boundary system."
The drivers did not receive salaries or wages from the owner. Their day's earning were the excess over the P7.50
they paid for the use of the jeepneys. In the event that they did not earn more, the owner did not have to pay them
anything. In holding that the employer-employee relationship existed between the owner of the jeepneys and the
driven even if the latter worked under the boundary system, this court said:

The only features that would make the relationship of lessor and lessee between the respondent,
owner of the jeeps, and the drivers, members of the petitioner union, are the fact that he does not
pay them any fixed wage but their compensation is the excess of the total amount of fares earned
or collected by them over and above the amount of P7.50 which they agreed to pay to the
respondent, and the fact that the gasoline burned by the jeeps is for the account of the drivers.
These two features are not, however, sufficient to withdraw the relationship between them from
that of employer-employee, because the estimated earnings for fares must be over and above the
amount they agreed to pay to the respondent for a ten-hour shift or ten-hour a day operation of the
jeeps. Not having any interest in the business because they did not invest anything in the
acquisition of the jeeps and did not participate in the management thereof, their service as drivers
of the jeeps being their only contribution to the business, the relationship of lessor and lessee
cannot be sustained.

The contention of petitioner that the relation that existed between him and the respondent is only one of lessor and
lessee cannot therefore be sustained.

Wherefore, the decision appealed from is affirmed, with costs against petitioner.

Paras, C. J., Bengzon, Padilla, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ., concur.

.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.

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.

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.

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 employer-employee 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.

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 employer-employee 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 boat-owner 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 10-calendar 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 10-calendar 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 Cortés, JJ., concur.

Feliciano, J., concurs in the result.

.R. No. L-21696 February 25, 1967

VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and RAFAEL XAUDARO,

petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS' ASSOCIATION (UWFA)
VENANCIO DANO-OG, BUENAVENTURA AGARCIO and 137 others, respondents.

Pelaez, Jalandoni & Jamir for petitioners.

Luis B. Presbiterio for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.

CONCEPCION, C.J.:

Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co. — hereinafter referred to as
the Company — and Rafael Xaudaro from an order of the Court of Industrial Relations the dispositive part
of which reads:

The Court, finding respondents guilty of unfair labor practice as charged, directs them to cease
and desist from such unfair labor practice and to reinstate the complainants, with back wages
from the date they were laid off until reinstated.

The Company is engaged in the loading and unloading of vessels, with a branch office in Hinigaran,
Negros Occidental, under the management of said Rafael Xaudaro. Its workers are supplied by the
United Workers and Farmers Association, a labor organization — hereinafter referred to as UWFA —
whose men (affiliated to various labor unions) have regularly worked as laborers of the Company during
every milling season since immediately after World War II up to the milling season immediately preceding
November 11, 1955, when the Company refused to engage the services of Venancio Dano-og,
Buenaventura, Agarcio and 137 other persons named in the complaint filed in case No. 62-ULP-Cebu of
the Court of Industrial Relations — and hereinafter referred to as the Complainants — owing, they claim,
to their union activities. At the behest of the UWFA and the Complainants, a complaint for unfair labor
practice was, accordingly, filed against the Company and Xaudaro with the Court of Industrial Relations
— hereinafter referred to as the CIR — in which it was docketed as Case No. 62-ULP-Cebu. In due
course, its Presiding Judge issued the order appealed from, which was affirmed by the CIR sitting en
banc. Hence this petition for review by certiorari.

The issues raised in this appeal, are (1) whether there is employer-employee relationship between the
Company and the Complainants; (2) whether the Company has been guilty of unfair labor practice; and
(3) whether the order of reinstatement of Complainants, with backpay, is a reversible error.1äwphï1.ñët

With respect to the first question, the Company maintains that it had never had an employer-employee
relationship with the Complainants, the latter's services having allegedly been engaged by the UWFA not
by the Company, and that, in any event, whatever contractual relation there may have been between the
Company and the Complainants had ceased at the end of each milling season, so that the Company can
not be guilty of unfair labor practice in refusing to renew said relation at the beginning of the milling
season in November, 1955.

This pretense is untenable. Although Complainants, through the labor union to which they belong, form
part of UWFA, there was no independent contract between the latter, as an organization, and the
Company. After the first milling season subsequently to the liberation of the Philippines, Complainants
merely reported for work, at the beginning of each succeeding milling season, and their services were
invariably availed of by the Company, although an officer of the UWFA or union concerned determined
the laborers who would work at a given time, following a rotation system arranged therefor.

In the performance of their duties, Complainants worked, however, under the direction and control of the
officers of the Company, whose paymaster, or disbursing officer paid the corresponding compensation
directly to said Complainants, who, in turn, acknowledged receipt in payrolls of the Company. We have
already held that laborers working under these conditions are employees of the Company,1 in the same
manner as watchmen or security guards furnished, under similar circumstances, by watchmen or security
agencies,2 inasmuch as the agencies and/or labor organizations involved therein merely performed the
role of a representative or agent of the employer in the recruitment of men needed for the operation of the
latter's business.3

As regards the alleged termination of employer-employee relationship between the Company and the
Complainants at the conclusion of each milling season, it is, likewise, settled that the workers concerned
are considered, not separated from the service, but, merely on leave of absence, without pay, during the
off-season, their employer-employee relationship being merely deemed suspended, not severed, in the
meanwhile.4

Referring to the unfair labor practice charge against the Company, we find, with the CIR, that said charge
is substantially borne out by the evidence of record, it appearing that the workers not admitted to work
beginning from November, 1955, were precisely those belonging to the UWFA and the Xaudaro, the
Company Branch Manager, had told them point-blank that severance of their connection with the UWFA
was the remedy, if they wanted to continue working with the Company.

As to the payment of back wages, the law5 explicitly vests in the CIR discretion to order the reinstatement
with back pay of laborers dismissed due to union activities, and the record does not disclose any cogent
reason to warrant interference with the action taken by said Court.6

Wherefore, the order and resolution appealed from are hereby affirmed, with costs against petitioners
herein. It is so ordered.

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

G.R. No. 109704 January 17, 1995

ALFREDO B. FELIX, petitioner,

vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, 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. 93-677 dated
February 3, 1993, hence this appeal, in which petitioner interposes the following assignments of errors:

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 post-graduate 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.
G.R. No. 76452 July 26, 1994

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and RAMON MONTILLA
PATERNO, JR., respondents.

Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.

Oscar Z. Benares for private respondent.

QUIASON, J.:

This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court, with
preliminary injunction or temporary restraining order, to annul and set aside the Order dated November 6,
1986 of the Insurance Commissioner and the entire proceedings taken in I.C. Special Case No. 1-86.

We grant the petition.

The instant case arose from a letter-complaint of private respondent Ramon M. Paterno, Jr. dated April
17, 1986, to respondent Commissioner, alleging certain problems encountered by agents, supervisors,
managers and public consumers of the Philippine American Life Insurance Company (Philamlife) as a
result of certain practices by said company.

In a letter dated April 23, 1986, respondent Commissioner requested petitioner Rodrigo de los Reyes, in
his capacity as Philamlife's president, to comment on respondent Paterno's letter.

In a letter dated April 29, 1986 to respondent Commissioner, petitioner De los Reyes suggested that
private respondent "submit some sort of a 'bill of particulars' listing and citing actual cases, facts, dates,
figures, provisions of law, rules and regulations, and all other pertinent data which are necessary to
enable him to prepare an intelligent reply" (Rollo, p. 37). A copy of this letter was sent by the Insurance
Commissioner to private respondent for his comments thereon.

On May 16, 1986, respondent Commissioner received a letter from private respondent maintaining that
his letter-complaint of April 17, 1986 was sufficient in form and substance, and requested that a hearing
thereon be conducted.

Petitioner De los Reyes, in his letter to respondent Commissioner dated June 6, 1986, reiterated his claim
that private respondent's letter of May 16, 1986 did not supply the information he needed to enable him to
answer the letter-complaint.

On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the validity of the
Contract of Agency complained of by private respondent.

In said hearing, private respondent was required by respondent Commissioner to specify the provisions of
the agency contract which he claimed to be illegal.

On August 4, private respondent submitted a letter of specification to respondent Commissioner dated

July 31, 1986, reiterating his letter of April 17, 1986 and praying that the provisions on charges and fees
stated in the Contract of Agency executed between Philamlife and its agents, as well as the implementing
provisions as published in the agents' handbook, agency bulletins and circulars, be declared as null and
void. He also asked that the amounts of such charges and fees already deducted and collected by
Philamlife in connection therewith be reimbursed to the agents, with interest at the prevailing rate
reckoned from the date when they were deducted.

Respondent Commissioner furnished petitioner De los Reyes with a copy of private respondent's letter of
July 31, 1986, and requested his answer thereto.

Petitioner De los Reyes submitted an Answer dated September 8, 1986, stating inter alia that:

(1) Private respondent's letter of August 11, 1986 does not contain any of the particular
information which Philamlife was seeking from him and which he promised to submit.

(2) That since the Commission's quasi-judicial power was being invoked with regard to
the complaint, private respondent must file a verified formal complaint before any further
proceedings.

In his letter dated September 9, 1986, private respondent asked for the resumption of the hearings on his
complaint.

On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986, and July 31,
1986.

In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant Vice-President and
Executive Assistant to the President, asked that respondent Commission first rule on the questions of the
jurisdiction of the Insurance Commissioner over the subject matter of the letters-complaint and the legal
standing of private respondent.

On October 27, respondent Commissioner notified both parties of the hearing of the case on November 5,
1986.

On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice on the following grounds;

1. The Subpoena/Notice has no legal basis and is premature because:

(1) No complaint sufficient in form and contents has been filed;

(2) No summons has been issued nor

received by the respondent De los
Reyes, and hence, no jurisdiction has
been acquired over his person;

(3) No answer has been filed, and

hence, the hearing scheduled on
November 5, 1986 in the
Subpoena/Notice, and wherein the
respondent is required to appear, is
premature and lacks legal basis.

II. The Insurance Commission has no jurisdiction over;

(1) the subject matter or nature of the action; and

 (2) over the parties involved (Rollo, p. 102).

In the Order dated November 6, 1986, respondent Commissioner denied the Motion to Quash. The
dispositive portion of said Order reads:

NOW, THEREFORE, finding the position of complainant thru counsel tenable and
considering the fact that the instant case is an informal administrative litigation falling
outside the operation of the aforecited memorandum circular but cognizable by this
Commission, the hearing officer, in open session ruled as it is hereby ruled to deny the
Motion to Quash Subpoena/Notice for lack of merit (Rollo, p. 109).

Hence, this petition.

II

The main issue to be resolved is whether or not the resolution of the legality of the Contract of Agency
falls within the jurisdiction of the Insurance Commissioner.

Private respondent contends that the Insurance Commissioner has jurisdiction to take cognizance of the
complaint in the exercise of its quasi-judicial powers. The Solicitor General, upholding the jurisdiction of
the Insurance Commissioner, claims that under Sections 414 and 415 of the Insurance Code, the
Commissioner has authority to nullify the alleged illegal provisions of the Contract of Agency.

III

The general regulatory authority of the Insurance Commissioner is described in Section 414 of the
Insurance Code, to wit:

The Insurance Commissioner shall have the duty to see that all laws relating to
insurance, insurance companies and other insurance matters, mutual benefit
associations and trusts for charitable uses are faithfully executed and to perform the
duties imposed upon him by this Code, . . .

On the other hand, Section 415 provides:

In addition to the administrative sanctions provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion, to impose upon insurance
companies, their directors and/or officers and/or agents, for any willful failure or refusal to
comply with, or violation of any provision of this Code, or any order, instruction, regulation
or ruling of the Insurance Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as may be determined by the the
Insurance Commissioner, the following:

(a) fines not in excess of five hundred pesos a day; and

(b) suspension, or after due hearing,

removal of directors and/or officers
and/or agents.

A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority
to regulate the business of insurance, which is defined as follows:
 (2) The term "doing an insurance business" or "transacting an insurance business,"
within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and
not as merely incidental to any other legitimate business or activity of the surety; (c)
doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code; (d)
doing or proposing to do any business in substance equivalent to any of the foregoing in
a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2[2];
Emphasis supplied).

Since the contract of agency entered into between Philamlife and its agents is not included within the
meaning of an insurance business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction
over the same to the Insurance Commissioner. Expressio unius est exclusio alterius.

With regard to private respondent's contention that the quasi-judicial power of the Insurance
Commissioner under Section 416 of the Insurance Code applies in his case, we likewise rule in the
negative. Section 416 of the Code in pertinent part, provides:

The Commissioner shall have the power to adjudicate claims and complaints involving
any loss, damage or liability for which an insurer may be answerable under any kind of
policy or contract of insurance, or for which such insurer may be liable under a contract of
suretyship, or for which a reinsurer may be used under any contract or reinsurance it may
have entered into, or for which a mutual benefit association may be held liable under the
membership certificates it has issued to its members, where the amount of any such loss,
damage or liability, excluding interest, costs and attorney's fees, being claimed or sued
upon any kind of insurance, bond, reinsurance contract, or membership certificate does
not exceed in any single claim one hundred thousand pesos.

A reading of the said section shows that the quasi-judicial power of the Insurance Commissioner is limited
by law "to claims and complaints involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, . . ." Hence, this power does not cover the
relationship affecting the insurance company and its agents but is limited to adjudicating claims and
complaints filed by the insured against the insurance company.

While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the Insurance
Code, the provisions of said Chapter speak only of the licensing requirements and limitations imposed on
insurance agents and brokers.

The Insurance Code does not have provisions governing the relations between insurance companies and
their agents. It follows that the Insurance Commissioner cannot, in the exercise of its quasi-judicial
powers, assume jurisdiction over controversies between the insurance companies and their agents.

We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989),
and Investment Planning Corporation of the Philippines v. Social Security Commission, 21 SCRA 904
(1962), that an insurance company may have two classes of agents who sell its insurance policies: (1)
salaried employees who keep definite hours and work under the control and supervision of the company;
and (2) registered representatives, who work on commission basis.

Under the first category, the relationship between the insurance company and its agents is governed by
the Contract of Employment and the provisions of the Labor Code, while under the second category, the
same is governed by the Contract of Agency and the provisions of the Civil Code on the Agency. Disputes
involving the latter are cognizable by the regular courts.
WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the Insurance
Commission is SET ASIDE.

SO ORDERED.

Cruz, Davide, Jr. and Kapunan, JJ., concur.

G.R. No. L-37790 March 25, 1976

MAFINCO TRADING CORPORATION, petitioner,

vs.
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR
RELATIONS COMMISSION RODRIGO REPOMANTA and REY MORALDE, respondents.

Tanada, Sanchez, Tanada & Tanada for petitioner.

Jose T. Maghari for private respondents.

Solicitor General Estelito P. Mendoza for all other respondents.

AQUINO, J.:

Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of certiorari and prohibition
in order to annul the decision of the Secretary of Labor dated April 16, 1973. In that decision the
Secretary reversed an order of the old National Labor Relations Commission (NLRC) and held that the
NLRC had jurisdiction over the complaint lodged by the Federacion Obrera de la Industria Tabaquera y
Otros Trabajadores de Filipinas (FOITAF) against Mafinco for having dismissed Rodrigo Repomanta and
Rey Moralde (NLRC Case No. LR-086). The voluminous record reveals the following facts:

Peddling contracts and their termination. — On April 30, 1968 Cosmos Aerated Water Factory, Inc.,
hereinafter called Cosmos, a firm based at Malabon, Rizal, appointed Mafinco as its sole distributor of
Cosmos soft drinks in Manila. On May 31, 1972 Rodrigo Repomanta and Mafinco executed a peddling
contract whereby Repomanta agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a
similar contract. The contracts were to remain in force for one year unless sooner terminated by either
party upon five days notice to the other. 1 The contract with Repomanta reads as follows:

PEDDLING CONTRACT

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT, entered into by and between:

The MAFINCO TRADING CORPORATION, a domestic corporation duly organized and

existing under the laws of the Philippines, doing business at Rm. 715 Equitable Bank
Bldg., Juan Luna St., Manila, under the style MAFINCO represented in this act by its
General Manager, SALVADOR C. PICA, duly authorized for the purpose and hereinafter
referred to as MAFINCO, and RODRIGO REPOMANTA, married/single, of legal age, and
a resident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal hereinafter referred
to as PEDDLER, WITNESSETH:
 WHEREAS, MAFINCO has been appointed as the exclusive distributor of 'COSMOS'
Soft Drink Products for and within the City of Manila;

WHEREAS, the PEDDLER is desirous of buying and selling in Manila the 'COSMOS' Soft
Drink Products handled by MAFINCO;

NOW THEREFORE, for and in consideration of the foregoing premises and the
covenants and conditions hereinafter set forth, the parties hereto has agreed as follows:

1. That in consideration of the competence of the PEDDLER and his ability to promote mutual benefits for
the parties hereto, MAFINCO shall provide the PEDDLER with a delivery truck with which the latter shall
exclusively peddle the soft drinks of the former, under the terms set forth herein;

2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations, drive the truck
furnished him by MAFINCO or should he employ a driver or helpers such driver or helpers shall be his
employees under his direction and responsibility and not that of MAFINCO, and their compensation
including salaries, wages, overtime pay, separation pay, bonus or other remuneration and privileges shall
be for the PEDDLER'S own account; The PEDDLER shall likewise bind himself to comply with the
provisions of the Social Security Act and all the applicable labor laws in relation to his employees;

3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or
damage to the truck used by him caused by his own acts or omission or that of his driver and helpers;

4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips, bear the cost of
maintenance and repairs of the said truck arising from ordinary wear and tear;

5. The PEDDLER shall secure at his own expense all necessary licenses and permits required by law or
ordinance and shall bear any and all expenses which may be incurred by him in the sales of the soft drink
products covered by the contract;

6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per case of 24 bottles, ex-
warehouse; PROVIDED, However, that if the PEDDLER purchases a total of not less than 250 cases a
day, he shall be entitled further to a Peddler's Discount of P11.00;

7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the amount of P1,500.00
against which MAFINCO shall charge the PEDDLER with any unpaid account at the end of each day or
with any damage to the truck of other account which is properly chargeable to the PEDDLER; within 30
days after the termination of this contract, the cash bond, after deducting proper charges, shall be
returned to the PEDDLER;

8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized representative at the
end of each day, and his failure to do so shall subject his cash bond at once to answer for any
unliquidated accounts;

9. This contract shall be effective up to May 31, 1973 and supersedes any or all other previous contracts,
if any, that may have been entered into between the parties; However, either of the parties may terminate
the same upon five (5) days prior notice to the other;

10. Upon the. termination of this contract, unless the same is renewed, the delivery truck and such other
equipment furnished by MAFINCO to the PEDDLER shall be returned by the latter in good order and
workable condition, ordinary wear and tear excepted, und shall promptly settle his outstanding account if
any, with MAFINCO;
11. To assure performance by the PEDDLER of his obligation to his employees under the Social Security
Act, the applicable labor laws and for damages suffered by third persons, PEDDLER shall furnish a
performance bond of P1,000.00 in favor of MAFINCO from a SURETY COMPANY acceptable to
MAFINCO.

IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City of
Manila, Philippines, this May 31, 1972.

MAFINCO TRADING CORPORATION

By:

(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA

Peddler General Manager

(Witnesses and notarial acknowledgment are omitted)

On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the same. The notice to
Repomanta reads as follows:

Dear Mr. Repomanta:

This has reference to the Peddling Contract you executed with the Mafinco Trading
Corporation on May 31, 1972. Please be informed that in accordance with the provisions
of paragraph 9 of the said peddling contract, we are hereby serving notice of termination
thereof effective on December 12, 1972.

Yours truly,

(Sgd.) SALVADOR C. PICA

General Manager

Complaints of Repomanta and Moralde and NLRCs dismissal thereof. — Four days later or on December
11, 1972 Repomanta and Moralde, through their union, the FOITAF, filed a complaint with the NLRC,
charging the general manager of Mafinco with having violated Presidential Decree No. 21, issued on
October 14, 1972, which created the NLRC and which was intended "to promote industrial peace,
maximize productivity and secure social justice for all". The brief complaint reads as follows:

Hon. Amado Gat Inciong, Chairman

National Labor Relations Commission

Phoenix Bldg., Intramuros,

Manila

Sir:

Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a
complaint against SALVADOR C. PICA, General Manager of MAFINCO TRADING
 CORP. located at Room 715, Equitable Bank Bldg., Juan Luna, Manila, for terminating
union officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde, which is a violation of
the above mentioned decree.

Notice of termination is herewith attach (sic).

We anticipate your due attention and assistance.

Respectfully yours,

(Signed by National Secretary of FOITAF)

Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no jurisdiction because
Repomanta and Moralde were not its employees but were independent contractors. It stressed that there
was termination of the contract, not a dismissal of an employee. In Repomanta's case, it pointed out that
he was registered with the Social Security System as an employer who, as a peddler, paid premiums for
his employees; that he secured the mayor's permit to do business and the corresponding peddler's
license and paid the privilege tax and that he obtained workmen's compensation insurance for his own
employees or helpers. It alleged that Moralde was in the same situation as Repomanta.

Mafinco further alleged that the Bureau of Labor Relations denied the application of peedlers for
registration as a labor union because they were not employees but employers in their own right of delivery
helpers (Decision dated January 4, 1966 by the Registrar of Labor Organizations in Registration
Proceeding No. 4, In the Matter of Cosmos Supervisors Association-PTGWO); that the Court of Industrial
Relations in Case No. 4399-ULP, Cosmos Supervisors' Association — PTGWO vs. Manila Cosmos
Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the peddlers were not
employees of Cosmos, and that the Court of Appeals held in Rapajon vs. Fong Kui and Figueras vs.
Asierto, CA-G.R. No. 19477-R and 21397-R, March 18, 1958 that the delivery helpers of the peddlers
were not employees of Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs.
Fung Kui, Resolution dated July 16, 1958).

The complaint was referred to a factfinder who in a lengthy report dated January 22, 1973 found, after
"exhaustively and impartially" considering the contentions of the parties, that the peddlers were employers
or "independent businessmen', as held by the Court of Industrial Relations and the Court of Appeals, and
that that holding has the force of res judicata. The factfinder recommended the dismissal of the complaint.

The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O. Castro, adopted that
recommendation in its order dated February 2, 1973. That order, which analyzes the peddling contract
and reviews the court rulings on the matter, is quoted below:

The question of whether peddling contracts of the kind entered into between the parties
give rise to an employer-employee relationship is not new. Nor are the contracts
themselves of recent vintage.

For at least twenty years respondent MAFINCO and its predecessor and/or principal, the
Manila-Cosmos Aerated Water Factory, have entered into contracts with peddlers, under
the terms of which the latter buy from the former at a special price, and sell in Manila, the
former's soft drink products. The distributor provides the peddler with a delivery truck with
the distributor answering for the cost of fuel and maintenance. If a peddler buys a certain
number of cases or more a day, he is entitled to a fixed amount of peddler's discount.
 The peddler himself drives the truck but if he engages a driver or helpers, the latter are
his employees and he assumes all the responsibilities of an employer in relation to them.
He also obtains at his own expense all licenses and permits required by law of salesmen.

The peddler clears his accounts with the distributor at the end of each day, and unpaid
accounts are charged against the cash deposit or bond which he gives the distributor
upon the execution of the peddling contract. He answers for damages caused by him or
his employees to third persons.

Ruling upon this type of contracts, and the practices and relationships that attended its
implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did not create
a relationship of employer and employee; that the peddlers under such contract were not
employees of the manufacturer or distributor, and accordingly dismissed the complaints
in the said case. (The peddler-complainants in that case were claiming overtime pay and
damages, among others.) Elevated to the Supreme Court on review (G.R. Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in effect
affirmed, for the petition for review was dismissed by the Supreme Court 'for being factual
and for lack of merit!

The Court of Industrial Relations is of the same persuasion. After inquiring extensively
into substantially the same terms and conditions of peddling contracts and the practices
and relationships that went into their implementation, the Court said in Case No.
4399ULP that the peddlers of the Manila-Cosmos Aerated Water Factory were not
employees of the latter.

These precedents apply squarely to the case at hand. The complainants here have not
shown that their peddling contracts with the respondent differ in any substantial degree
from those that were at issue in the Court of Industrial Relations, the Court of Appeals
and the Supreme Court in the cases cited above. Indeed, a comparison between the
contracts involved in those cases and those in the instant litigation do not show any
difference that would warrant a different conclusion than that reached by those courts. If
at all, the additional stipulations in the present contracts strengthen the position that the
complainant peddlers are independent contractors or businessman, not employees of the
respondent.

Nor has there been shown any substantial change in the old practices of peddlers vis-a-
vis the distributor or manufacturer. The points raised by the complainants in their
pleadings regarding these practices were extensively discussed by the CIR in the ULP
case above referred to.

We are not prepared to depart from this rule of long standing. It is the law of the case.

We therefore hold that the complainants in this case were not employees of MAFINCO
and Presidential Decree No. 21 does not I apply to them.

Complainants' appeal and the Labor Secretary's decision that they were employees of Mafinco. —
Complainants Repomanta and Moralde appealed to the Secretary of Labor. They argued that the NLRC
erred (1) in holding that they were independent contractors and not employees; (2) in relying on the
peddler's contract to determine the existence of employer-employee relationship; (3) in anchoring its
decisions on precedents which have only persuasive force and which did not rule squarely on the issue of
employer-employee relationship, and (4) in dismissing their complaint.
As stated at the outset, the Secretary in his decision reversed al the NLRC order. He ruled that
Repomanta and Moralde were employees of Mafinco and that, consequently, the NLRC had jurisdiction
over their complaint. The Secretary directed the NLRC to hear the case on the merits.

The Secretary found that the complainants "were driver-salesmen of the company, driving the trucks and
distributing the products of the company" and that they were not independent contractors because they
had no capital of their own. That finding was based on the following considerations:

(1) That the contracts are Identical; (2) that the complainants were originally plant drivers'
of the company; (3) that the complainants had no capital of their own; (4) that their
delivery trucks were provided by the company; (5) that the use of the trucks were
'exclusively' for peddling the products of the company; (6) that they were required to
observe regulations; (7) that they were required to drive the trucks; (8) that the company
furnished the gasoline and oil to run the said trucks in business trips; (9) that the
company shouldered the cost of maintenance and repair of the said trucks arising from
an ordinary wear and tear; (10) that the company required them to secure the necessary
licenses and permits; (11) that the company prohibited them from selling the company's
products higher than the fixed price of the company; and (12) that they and their helpers
were paid on commission basis.

The Secretary relied on this Court's ruling that a person who possesses no capital or money of his own to
pay his obligations to his workers but relies-entirely upon the contract price to be paid by the company,
falls short of the requisites or conditions necessary for an independent contractor (Mansal vs. Gocheco
Lumber Co., 96 Phil. 941).

He observed that "behind the peddling cloak there was in fact employee-employer relationship". He said:

While, generally, written employment contracts are held sufficient in determining the
nature of employment, such contracts, however, cannot be always held conclusive where
the actual circumstances of employment indicate otherwise. For example, some
employers, in order to avoid or evade coverage of the Workmen's Compensation Act,
enter into pseudo contracts with their employees who are named as 'employers' or
'independent contractors'. Such 'written contracts as distinguished from oral Agreements,
purporting to make persons independent contractors, no matter how 'adroitly framed', can
be carefully scanned and the real relationship ascertained' (Glielmi vs. Netherlands Dairy
Co., 254 N.Y. 60 (1930), Morabe & Inton, Workmen's Compensation Act. p. 69).

If the Peddling Contract were carefully scanned, the conclusion may be drawn that the
contract is but a device and subterfuge to evade coverage under the labor laws. There is
more than meets the eye in item 2 of the Peddling Contract which required the peddlers
to do that which the law intends the employer to have done.

In fact, such contracts, as the one in question, exempting or tending to exempt the
employers from their legal obligations to their workers are null and void under Sec. 7 of
the Workmen's Compensation Act, as amended, which states:

Any contract, regulation or device of any sort intended to exempt the employer from all or
part of the liability created by this Act shall be null and void.

To rule otherwise would be to open the floodgate to employers in this territory to evade
liabilities to their workers by simply letting contracts for the doing of their business. 'Such
construction could not only narrow the provisions of the Act, but would defeat its intent
and purposes in their entirety. (Andoyo vs. Manila Railroad Co., supra).
The motion for the reconsideration of the decision was denied by the Secretary in his order of July
16,1973.

The Committee's report that the peddlers are independent contractors. — On July 25, 1973 Mafinco
moved for the clarification of the decision by inquiring whether the question of employee-employer
relationship would be included in the hearing on the merits.

Action on the said motion was deferred until the receipt of the report of the committee created to study the
status of peddlers of Cosmos products. On September 3, 1973- the Secretary directed the committee
composed of Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of
the actual relationship existing between the Cosmos Bottling Co. and its peddlers.

The committee in its report dated September 17, 1973 arrived at the conclusion that the relationship
actually existing between Cosmos and Mafinco, on one hand, and the peddlers of Cosmos products, on
the other, is not one of employer and employee and "that the peddlers are independent contractors".

The committee after a perusal of the record of NLRC Case No. LR-086 interviewed twenty peddlers, an
officer of Cosmos and an officer of Mafinco. In the conduct of the interviews it 44 observed judicious
adherence to impartiality and openmindedness but with a modicum of friendliness and much of
informality". The report reads in part as follows:

(1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital importance to the mind of your
committee is the fact that this Agreement entered into between Cosmos and the Peddlers has, as its
prefatory statement but before the enumeration of its terms and conditions, the following:

That the Peddler has agreed to buy and sell the products of the MANUFACTURER under
the following conditions:

Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers.
contains peculiarly Identical wordings. viz:

WHEREAS, the PEDDLER is desirious of buying and selling in Manila the 'COSMOS'
Soft Drink Products handled by

MAFINCO:

It is immediately clear from the beginning that the relationship that the parties would want
to establish between them is one of buyer and seller of the Cosmos Products. Moreover,
this type of Agreement or Contract has its roots since some twenty (20) years earlier, with
modifications only with respect to the factory price, the amount of over prices or what the
peddlers refer to as commission, and the amount pertaining to the dealer's discount.
which appear to vary depending upon the market demands.

We are, however, tempted to argue, as did the Peddlers, that this Agreement or Contract
might have been contrived as a device to evade responsibilities imposed upon Cosmos
or Mafinco under our labor laws as well as under other national or municipal laws.
Nevertheless, a close reading thereof will show a flaw in this line of insistence, when we
consider that this type of Agreement or Contract has been substantially the same since
the beginning of this relationship. More than this, it has withstood the test of time by
pronouncements of the CIR in ULP Case No. 4399, Cosmos Supervisors Association vs.
Manila Cosmos Aerated Water Factory, Inc.' July 17, 1967; by judicial review of the Court
of Appeals in CA-G.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et al.
vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on March 18, 1958; and
 impliedly by resolution of the Supreme Court in G.R. Nos. L-14072 to L-14074 when the
Court of Appeals cases were appealed to that Tribunal.

But the more basic and indeed forceful ratiocination in favor of the validity of the
Agreement or Contract which covenants that the relationship between the Peddlers and
Cosmos or Mafinco is one of buyer and seller of the Cosmos Products on the part of the
Peddlers, and, therefore, one of an independent contractorship, finds substantive support
in our Civil Code which provides: (here arts. 1370 and 1374 of the Civil Code regarding
interpretation of contracts are quoted).

For its adjective interpretation, our Rules of Court specifically provides: (Here parol
evidence rule in see. 7, Rule 130, Rules of Court is quoted)

It must b restated at this point for purposes of emphasis that the validity of the aforesaid
Agreement or Contract has not been seriously assailed by the parties. In fact, their
rallying cause was the Agreement or Contract itself. To strengthen these provisions of the
Civil Code and the Rules of Court, stabilized jurisprudence have held that it is elementary
rule of contract that the laws in force at the time the contract was made must govern its
interpretation and application; that the terms of the contract, where unambiguous, are
conclusive, in the absence of averment and proof of mistake, the question being, not
what intention existed in the minds of the parties, but what intention is expressed by the
language used; that interpretation of an agreement does not include its modifications or
the creation of a new or different one; that Courts cannot make for the parties better
agreements than they themselves have been satisfied to make, or rewrite contracts
because they operate harshly or inequitably as to one of the parties; and that there is no
right to interpret an agreement as meaning something different from what the parties
intended as expressed by the language they saw fit to employ.

xxx xxx xxx

(1) The selection and engagement of the employees.-Nothing in the Agreement to Peddler Soft Drinks in
the case of Cosmos and in the Peddling Contract in the case of Mafinco, will reveal and we cannot
logically infer therefrom, that the Peddlers were engaged as employees of Cosmos or Mafinco. The
selection of the Peddlers who will buy and sell Cosmos products is left entirely between the parties; it is
not the sole prerogative of either one of the parties. There must be meeting of the minds in order to
consummate the Agreement or Contract and no evidence of coercion or imposition of the will of one over
the other is evident or apparent from the Peddlers' or Managements' interviews had by the members of
your Committee. This test, therefore, cannot be invoked by the Peddlers in their attempt at presenting
arguments to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the
Agreement or Contract itself provides that the Peddlers can hire helpers and drivers under their direction
and responsibility, and to whom they shall be liable for payment of 'salaries, wages, overtime pay,
separation pay, bonus and other remuneration and privileges.' As a matter of fact, drivers were employed
by Mrs. Victoria Ariz and M. Fong Kui, who are peddlers in their own right. This evidently shows the
discretion granted the peddlers to hire employees of their own.

(2) The payment of wages. — On the basis of the clear terms of the Agreement or Contract, no mention is
made of the wages of the Peddlers; neither can an inference be made that any salary or wage is given to
Peddlers. In the interviews, however, with the Peddlers, they vehemently take the position that the
'dealer's discount' which was given to them at the rate of Pll.50 in excess of 200 cases of Cosmos
products they sell a day, constitutes their 'wages'. The term 'wages' as defined in Section 2 of the
Minimum Wage Law (Rep. Act No. 602, as amended) is as follows:

(g) '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, commission
basis, or other method of calculating the same, which is payable by an employer to an under a written or
unwritten contract of employement for work done or to be done or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee. ...

Section 10 (k) of the same law provides as follows:

(k) Notification of wage conditions. — It shall be the duty of every employer to notify his employees at the
time of hiring of the wage conditions under which they are employed, which shall include the following
particulars:

(1) The rate of wages payable;

(2) The method of calculation of wages;

(3) The periodicity of wage payment; the day, the hour and pIace of payment; and

(4) Any change with respect to any of the foregoing items.

To the Committee's mind, all these requirements have not been shown to exist in the
relationship between the Peddlers and the Cosmos or Mafinco. If it were true that the
Pedders' 'dealer's discount' is in the nature of wages, then they must be notifed fully of
the wage conditions. Moreover, such 'wages' must be paid to them periodically at least
once every two weeks or twice a month. (See Par. (h) of See. 10 of Act No. 602, as
amended). The absence of such notification to the Peddlers and the lack of periodicity of
such payment in the manner and procedure contemplated in the Minimum Wage Law
destroy, quiet evidently, their allegation that the 'dealer's discount' was their 'wage'. Take
note that the 'dealer's discount' was given only about a week after the end of the month,
and from the evidence submitted by Cosmos, it appears clearly that the 'dealer's
discount' varies from month to month. Thus, the earnings of Mr. Salvador Abonales, who
is a Peddler, from January to August, 1973, amounted to P12,520.70, while that of Mr.
Alberto S. Garcia, for the same period, amounted to P13,633.42, and 4 their earnings
every month vary decisively. This factor defeats factually the insistence of the Peddlers
that they are employees of Cosmos or Mafinco.

Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers are
taken from the overprice or what is ordinarily termed as 'commission' of ten centavos
(P0.10) per case that they get-a factor which indicates that they are themselves
employers of their helpers. In addition, the Peddlers are reported as Employers of these
helpers with the Social Security System, and that they also purchase workmen's
compensation policies in their names as Employers of their own helpers for purposes of
workmen's compensation insurance of their liabilities, which are all in accordance with the
terms and conditions of the Agreement or Contract and indicative of an attribute of one
who is an independent merchant.

(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and Rey Moralde vs. Mafinco Trading
Corp.,' NLRC Case No. LR-086, which served as one of our bases for this study, the complainants therein
appear to have complained before the National Labor Relations Commission for being allegedly illegally
dismissed or that their services were terminated without cause. A search of the alleged dismissal however
shows that the Identical letters both dated December 7, 1972 addressed to the said complainants were
not actually what complainants pictured them to be, but the termination of the peddling in accordance with
paragraph 9 of said Contract.

xxx xxx xxx

 Thus, complainants' services were not terminated, only their Peddling Contracts with
Mafinco were. The power of dismissal is not lodged with either Mafinco or Cosmos, for
based on the Agreement or Contract none whatsoever exists. Certainly, to attribute a
power of dismissal to Cosmos or Mafinco where none exists is careless imprudence and
a height of inaccuracy. This power of dismissal by Cosmos or Mafinco is not
countenanced in the Agreement or Contract.

There is, however, an allegation by the Peddlers that the hiring and firing of the helpers
ultimately rest on Cosmos or Mafinco. This allegation nevertheless, is controverted by
Cosmos and Mafinco. Nonetheless, we checked the basic document — the Agreement or
Contract — and we find that the hiring and, impliedly firing, we is a prerogative of the
Peddlers and not of Cosmos or Mafinco.

(4) The power to control the employee's conduct. — From the interviews had by your Committee with
both the Peddlers and the representatives of Cosmos and Mafinco, we gather that the following findings
on the power of control are substantially correct:

(a) That the delivery trucks assigned to the Peddlers are available to them early in the
morning and are free to get them, which they usually do between 5:30 A.M. to 6:30 A.M.
There was no compulsion on the part of the Peddlers to report for work at that time, as in
fact, they did not sign any time record. The practice of getting the delivery trucks early in
the morning is more beneficial to the Peddlers than to Cosmos or Mafinco since they can
finish the peddling of Cosmos products much earlier and spend the rest of the day at their
own pleasure. The signing of the 'logbooks' is both pertinent and necessary since the
trucks used in the delivery of Cosmos products are owned by Cosmos or Mafinco and are
simply utilized by Peddlers as a measure of convenience and for advertising purposes.
But peddlers are not precluded from getting trucks of their own should they so desire.

(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in definite
areas routes or zones, not so much of supervision over Peddlers, since their areas,
routes or zones were already agreed upon or pre-arranged among them through the
Cosmos Peddlers Association, Inc. of which all Peddlers are members, as principally for
market analysis since soft drinks selling is a highly competitive business, and also to
inquire or check on sales, and the result of which, report is made direct to the Office of
Cosmos or Mafinco.

(c) That the use of the uniform does not seem to be an imposition by management of
Cosmos or Mafinco upon the Peddlers, but a voluntary arrangement among the Peddlers
themselves. For, from the documents submitted to this Committee, it appears that the
Cosmos Peddlers Association, in a meeting held on August 5, 1967, adopted a resolution
to 'always wear their uniform while in the performance of their sales work,' and in their
meeting on January 25, 1969, it adopted another resolution penalizing Peddlers who
failed to wear their uniform in the amount of P2.00 per violation. Certainly, the resolutions
of the Cosmos Peddlers Association, an independent association of Peddlers and duly
registered with the Securities and Exchange Commission, and possessing an entirely
distinct existence, cannot be taken as impositions from Cosmos or Mafinco.

(d) That the matter of turning in of sales of collection which, if found short, is charged
against the Peddler's cash bond, is to the mind of the Committee, giving effect to the valid
terms and conditions of the Agreement or Contract, and also an ordinary business
practice which necessarily requires liquidation of the day's accounts. We do not see any
evidence of control on the part of Cosmos or Mafinco over the activities, including the
sales, of the Cosmos products by the Peddlers themselves who are, apparently, left to
their own choices of routes, areas or zones as pre-arranged, with no definite, much less
supervised, time schedule.
 (e) That in the matter of reprimand or discipline which the peddlers attempt to project
when they failed to report for work, your Committee found no substantial evidence on this
point. The evidence shows that the peddlers are free to choose their time. Obviously, any
absence that they may incur means so much reduction from their earnings. Thus, if their
attention is incidentally called on this matter it is for the observance of their agreements
which is present in any contractual relations.

As to the aspect of employer-employee relation, therefore, between Cosmos or Mafinco

and the Peddlers, your Committee does not have sufficient basis to reasonably sustain
the stand of the Peddlers that there is such relationship.

(c) Attributes of an independent contractor. — As a countercheck, as it were, to the issue

of employer-employee relationship your committee has taken the task of testing such
relationship against the attributes of an independent contractor which, from the interviews
and documents submitted by the parties, appear to exists on the part of the Peddlers.
The earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722, promulgated on
March 28, 1932, furnishes us the definition of an 'independent contractor.' Our Supreme
Court of pre-war composition, ruled:

An independent contractor is one who exercises independent employment and contracts

to do a piece of work according to his own methods and without being subject to control
of his employer except as to the resuIt of thework. A person who has no capital or money
of his own to pay his laborers or to comply with his obligations to them, who files no bond
to answer for the fulfillment of his contract with his employer, falls short of the requisites
or conditions necessary to classify him as independent contractor.

These requisites and conditions were reiterated in the postwar cases of Philippine
Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November 29,
1954, and Koppel (Phil.), Inc. vs. Darlucio et, al., G.R. No. L-14903, promulgated on
August. 29, 1960. Analyzing the definition of 'independent contractor', the following may
be gathered from the relationship between the Peddlers, on the one hand, and Cosmos
or Mafinco, on the other:

(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter furnishing the
delivery truck, but the former sell Cosmos products according to their own methods, subject to the pre-
arranged routes, areas and zones, and go back to the Company compound to return the delivery truck
and to make accounting of the day's sales collection at any time in the morning or in the afternoon.
Essentially, control, if at all, extends only as to observance of traffic regulations which is inherent in
ownership of the delivery truck by Cosmos or Mafinco and the end result which is the liquidation of the
sales collection. Control over the details of the Peddlers' sales activities seems to be farfetched in this
case.

(2) Capital or money of the Peddlers to pay their own helpers is evidently within their prerogative,
although it appears that the wages of helpers are uniform at P6.00 per trip. But can we safely say that the
cash bond of Pl,500.00 by the Peddlers constitute their capital? For big-time businessmen, this small
amount may not be considered capital, but when it is taken as a 'deposit on consignment' since the same
answers for any deficiencies that the Peddlers may incur during the day's sales collection, then it can be
taken to mean 'capital' within its signification that it allocates to every day business dealing. The amount
of capital, to us, is immaterial; it is the purpose for which the same is deposited that is most significant.

(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and Peddling Contract to put
up not only the cash bond of P1,500.00, but also a performance bond of P1,000.00 as embodied in said
Agreement to Peddler Soft Drinks as follows:
(4) To assure performance by the PEDDLER of his obligation to his employees under the Social Security
Act, the applicable labor laws, and for damages suffered by third persons PEDDLER shall furnish a
performance bond of P1,000.00 in favor of the MANUFACTURER from a surety Company acceptable to
the MANUFACTURER. And, in case Performance Bond within 30 days from the date of signing of this
Contract, such failure shall be sufficient ground for the MANUFACTURER to suspend the business
relationship with the Peddler until the Peddler complies with this provision.

Again, to the mind of your Committee, the amount of the Performance Bond is not so
relevant and material as to the purpose for which the same is executed- which is to
assure performance of the Peddlers' obligations as employer of his helpers. This is an
attribute of an independent contractor to which the Peddlers are bound under the
Agreement or Contract.

(4) Peddlers are doing business for themselves since they took out licenses in the City of
Manila, and have paid their corresponding professional or occupation tax to the Bureau of
Internal Avenue. This fact strengthens the Committee findings that the peddlers are
carrying on a business as independent merchants.

The Secretary in his resolution of October 18, 1973 ignored the committee's conclusion. He clarified that
the NLRC should determine whether the two complainants were illegally dismissed and that the
jurisdictional issue should not be taken up anymore.

The instant petition; the issue and the ruling thereon. — Mafinco filed the instant actions on November 14,
1973. It prayed for a declaration that the Secretary of Labor and the NLRC had no jurisdiction to entertain
the complaints of Repomanta and Moralde; that the Secretary's decision should be set aside, and that the
NLRC and the Secretary be enjoined from further proceeding in NLRC Case No. LR-086.

Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21 the Secretary's
decision "is appealable" to the President of the Philippines (Nation Multi Service Labor Union vs. Agcaoili,
L-39741, May 30, 1975, 64 SCRA 274). However, under section 22 of the old NLRC regulations, an
appeal to the President should be made only "in national interest cases".

On the other hand, judicial review of the decision of an administrative agency or official exercising quasi-
judicial functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel
Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs vs.
Valencia, 100 Phil. 165; Villegas vs. Auditor General, L-21352, November 29, 1966, 18 SCRA 877, 891).

After the parties had submitted their illuminating memoranda, Mafinco filed a motion in this Court for the
dismissal of the complaint in the defunct NLRC on three grounds, to wit: (1) that the NLRC had no
jurisdiction over the case because Repomanta and Moralde had not sought reinstatement or backwages;
(2) that the employer's failure to secure written clearance from the Secretary of Labor before dismissing
an employee might constitute a crime punishable under article 327 of the Labor Code and not mere
contempt, as contemplated in section 10 of Presidential Decree No. 21, and (3) that the contempt
provisions of that decree were abrogated by the Labor Code.

Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale Veneer & Plywood, Inc.,
L-38088, August 30, 1974, 58 SCRA 771, where it was held that the regular court, not the NLRC, has
jurisdiction over an employee's action for damages against his employer's act of demoting him.

Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed out that, inasmuch
as their complaint is pending in the new NLRC, this Court cannot dismiss it. They also observed that
article 327 was eliminated from the Labor Code which, as amended by Presidential Decrees Nos. 570-A,
626 and 643, contains only 292 articles. Article 327 was superseded by article 278 of the amended Code.
The truth is that Mafinco's motion merely adduced additional grounds to support its stand that the
Secretary of Labor had no jurisdiction over the complaint of Repomanta and Moralde.

This case was not rendered moot by the Labor Code. Although the Code abolished the old NLRC (Art.
289), it created a new NLRC (Art. 213) and provided that cases pending before the old NLRC should be
transferred to, and processed by, the corresponding labor relations division or the new NLRC and should
be decided in accordance with Presidential Decree No. 21 and the rules and regulations adopted
thereunder (Art. 290. See Sec. 5, P.D. No. 626).

The issue is whether the dismissal of Repomanta and Moralde was within the jurisdiction of the old
NLRC. If, as held by the old NLRC, it had no jurisdiction over their complaint because they were not
employees of Mafinco but independent contractors, then the Secretary of Labor had no jurisdiction to
remand the case to the NLRC for a hearing on the merits of the complaint.

Hence, the crucial issue is whether Repomanta and Moralde were employees of Mafinco under the
peddling contract already quoted. Is the contract an employment contract or a contract to sell or distribute
Cosmos products?

The question of whether an employer-employee relationship exists in a certain situation has bedevilled
the courts. Businessmen, with the aid of lawyers, have tried to avoid the bringing about of an employer-
employee relationship in some of their enterprises because that juridical relation spawns obligations
connected with workmen's compensation, social security, medicare, minimum wage, termination pay and
unionism.

Presidential Decree No. 21 provides:

SEC. 2. The Commission shall have original and exclusive jurisdiction over the following:

1) All matters involving employee-employer relations including all disputes and grievances which may
otherwise lead to strikes and lockouts under Republic Act No. 875;

xxx xxx xxx

SEC. 10. The President of the Philippines, on recommendation of the Commission and
the Secretary of Labor, may order the arrest and detention of any person held in
contempt by the Commission for non-compliance and defiance of any subpoena, order or
decision duly issued by the Commission in accordance with this Decree and its
implementing rules and regulations and for any violation of the provisions of this Decree.

SEC. 11. No employer may shut down his establishment or dismiss or terminate the
services of regular employees with at least one year of service without the written
clearance of the Secretary of , Labor.

The Solicitor General, as counsel for the old NLRC and the Secretary of Labor, argues that the question
of whether Repomanta and Morale are independent contractors or employees is factual in character and
cannot be resolved by merely construing the peddling contracts; that other relevant facts aliunde or
dehors the said contracts should be taken into account, and that the contracts were a part of an "intricate
network of devices (of Mafinco and Cosmos) developed. and perfected through the years to conceal the
true nature of their relationship to their sales agents".

Repomanta and Moralde contend that their peddling contracts were terminated because of their activities
in organizing a union among the peddlers. Annexed to their memorandum is a joint affidavit of sixty-three
sales agents of Cosmos products who described therein the nature of their work, the organization of their
union and the dismissal of Repomanta and Moralde. Annexed to their answer is Resolution No. 921 of the
Social Security Commission dated November 16, 1972 in SSS Case No. 602 wherein it was held that
peddlers and their helpers were employees of Cosmos.

Like the Solicitor General, Repomanta and Moralde harp on the argument that the peddling contracts
were a scheme to camouflage an employer-employee relationship and thus evade the coverage of labor
laws.

The parties in their pleadings and memoranda injected conflicting factual allegations to support their
diametrically opposite contentions. From the factual angle, the case has become highly controversial.

In a certiorari and prohibition case, like the instant case, only legal issues affecting the jurisdiction of the
tribunal, board or officer involved may be resolved on the basis of undisputed facts. Sections 1, 2 and 3,
Rule 65 of the Rules of Court require that in the verified petition for certiorari, mandamus and prohibition
the petitioner should allege "facts with certainty".

In this case the facts have become uncertain. Controversial evidentiary facts have been alleged. What is
certain and indubitable is that a notarized peddling contract was executed.

This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on
the basis of the parties' contradictory factual submissions. The record has become voluminous because
of their efforts to persuade this Court to accept their discordant factual statements.

Pro hac vice the issue of whether Repomanta and Moralde were employees of Mafinco or were
independent contractors should be resolved mainly in the light of their peddling contracts. A different
approach would lead this Court astray into the field of factual controversy where its legal pronouncements
would not rest on solid grounds.

A restatement of the provisions of the peddling contract is necessary in order to find out whether under
that instrument Repomanta and Moralde were independent contractors or mere employees of Mafinco.

Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the
distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver and helpers, he would be
responsible for their compensation and social security contributions and he should comply with applicable
labor laws "in relation to his employees" (Par. 2).

The peddler would be responsible for any damage to persons or property or to the truck caused by his
own acts or omissions or those of his driver and helpers (Par. 3). Mafinco would bear the cost of gasoline
and maintenance of the truck (Par. 4). The peddler would secure at his own expense the necessary
licenses and permits and bear the expenses to be incurred in the sale of Cosmos products (Par. 5).

The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should
he purchase at least 250 cases a day, he would be entitled to a peddler's discount of eleven pesos (Par.
6). The peddler would post a cash bond in the sum of P1,500 to answer for his obligations to Mafinco
(Par. 7) and another cash bond of P1,000 to answer for his obligations to his employees (Par. 11). He
should liquidate his accounts at the end of each day (Par. 8). The contract would be effective up to May
31, 1973. Either party might terminate it upon five days' prior notice to the other (Par. 9).

We hold that under their peddling contracts Repomanta and Moralde were not employees of Mafinco but
were independent contractors as found by the NLRC and its fact-finder and by the committee appointed
by the Secretary of Labor to look into the status of Cosmos and Mafinco peddlers. They were distributors
of Cosmos soft drinks with their own capital and employees. Ordinarily, an employee or a mere peddler
does not execute a formal contract of employment. He is simply hired and he works under the direction
and control of the employer.

Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the
manner in which they would sell Cosmos soft drinks. That Circumstance signifies that they were acting as
independent businessmen. They were to sign or not to sign that contract. If they did not want to sell
Cosmos products under the conditions defined in that contract; they were free to reject it.

But having signed it, they were bound by its stipulations and the consequences thereof under existing
labor laws. One such stipulation is the right of the parties to terminate the contract upon five days' prior
notice (Par. 9). Whether the termination in this case was an unwarranted dismissal of an employee, as
contended by Repomanta and Moralde, is a point that cannot be resolved without submission of
evidence. Using the contract itself as the sole criterion, the termination should perforce be characterized
as simply the exercise of a right freely stipulated upon by the parties.

"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" (Viana vs. Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).

On the other hand, an independent contractor is "one who exercises independent employment and
contracts to do a piece of work according to his own methods and without being subject to control of his
employer except as to the result of the work" (Mansal vs. P.P. Gocheco Lumber Co., supra).

Among the factors to be considered are whether the contractor is carrying on an

independent business; whether the work is part of the employer's general 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 the work to another; the power to terminate the
relationship; the existence of a contract for the performance of a specified piece of work;
the control and supervision of the work; the employer's powers and duties with respect to
the hiring, firing, and payment of the contractor's servants; the control of the premises;
the duty to supply the premises, tools, appliances, material and labor; and the mode,
manner, and terms of payment. (56 C.J.S. 46).

Those tests to determine the existence of an employer-employee relationship or whether the person
doing a particular work for another is an independent contractor cannot be satisfactorily applied in the
instant case. It should be obvious by now that the instant case is a penumbral, sui generis case lying on
the shadowy borderline that separates an employee from an independent contractor.

In determining whether the relationship is that of employer and employee or whether one is an
independent contractor, "each case must be determined on its own facts and all the features of the
relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of the peddling
contract, no employer-employee relationship was created. Hence, the old NLRC had no jurisdiction over
the termination of the peddling contract.

However, this ruling is without prejudice to the right of Repomanta and Moralde and the other peddlers to
sue in the proper Court of First Instance and to ask for a reformation of the instrument evidencing the
contract or for its annulment or to secure a declaration that, disregarding the peddling contract, the actual
juridical relationship between them and Mafinco or Cosmos is that of employer and employee. In that
action a fulldress trial may be held and the parties may introduce the evidence necessary to sustain their
respective contentions.

Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted oppressively
towards their peddlers, as contemplated in article 1701 of the Civil Code, then they should file the proper
action for damages in the regular courts. Where there is a right, there is a remedy (Ubi jus, ubi
remedium).

WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case No. LR-086
dated April 16, July 16 and October 18, 1973, respectively, are set aside and the order of the NLRC dated
February 2, 1973, dismissing the case for lack of jurisdiction, is affirmed. No costs.

SO ORDERED.

Barredo, Antonio, Concepcion, Jr. and Martin, JJ., concur.

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for members of
golf clubs and their guests in said clubs' courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally, in three separate
proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies. That which
gave rise to the present petition for review was originally filed with the Social Security Commission (SSC)
via petition of seventeen (17) persons who styled themselves "Caddies of Manila Golf and Country Club-
PTCCEA" for coverage and availment of benefits under the Social Security Act as amended, "PTCCEA"
being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees
Association," with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No.
5443, alleged in essence that although the petitioners were employees of the Manila Golf and Country
Club, a domestic corporation, the latter had not registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were pending;
these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of
Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country
Club, the case being titled "Philippine Technical, Clerical, Commercial Association vs.
Manila Golf and Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it
appears to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando
S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's
motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of
Labor by the same labor organization, titled "Philippine Technical, Clerical, Commercial
 Employees Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf
and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was
dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later
affirmed on appeal by the National Labor Relations Commission on the ground that there
was no employer-employee relationship between the petitioning caddies and the
respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition,
alleging in substance that the petitioners, caddies by occupation, were allowed into the Club premises to
render services as such to the individual members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the petitioners were not subject to the direction
and control of the Club as regards the manner in which they performed their work; and hence, they were
not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social
security coverage, avowedly coming to realize that indeed there was no employment relationship between
them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted
proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission
dismissed the petition for lack of merit, 3 ruling:

. . . that the caddy's fees were paid by the golf players themselves and not by respondent
club. For instance, petitioner Raymundo Jomok averred that for their services as caddies
a caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to
management the other portion of the stub known as Caddy Ticket (Exh. "1") so that by
this arrangement management will know how much a caddy will be paid (TSN, p. 80, July
23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in
accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner
Jomok could not state any policy of respondent that directs the manner of caddying
(TSN, pp. 76-77, July 23, 1980). While respondent club promulgates rules and
regulations on the assignment, deportment and conduct of caddies (Exh. "C") the same
are designed to impose personal discipline among the caddies but not to direct or
conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his
preference regardless of the respondent club's group rotation system and has the
discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that their
income depends on the number of players engaging their services and liberality of the
latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that
the caddies are never their employees in the absence of two elements, namely, (1)
payment of wages and (2) control or supervision over them. In this connection, our
Supreme Court ruled that in the determination of the existence of an employer-employee
relationship, the "control test" shall be considered decisive (Philippine Manufacturing Co.
vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96 Phil.
941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil.
358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment
Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and
Daniel Quijano, as bat unloader and helper, respectively, including their ground men,
house and administrative personnel, a situation indicative of the latter's concern with the
rights and welfare of its employees under the SS law, as amended. The unrebutted
testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely
intended to identify the holders as accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which could be withdrawn anytime for loss of
 confidence. This gives us a reasonable ground to state that the defense posture of
respondent that petitioners were never its employees is well taken. 4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing
Llamar and Jomok. After the appeal was docketed 5 and some months before decision thereon was
reached and promulgated, Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin
Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations
Division of National Capital Regional Office in the certification election case (R-4-LRD-M-
10-504-78) supra, on the precise issue of the existence of employer-employee
relationship between the respondent club and the appellants, it being contended that said
issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the
Bureau of Labor Relations, which "has not only become final but (has been) executed or
(become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least
importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said
Court reserved the appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold
and Country Club, ordering that he be reported as such for social security coverage and paid any
corresponding benefits, 8 it conspicuously ignored the issue of res adjudicata raised in said second
assignment. Instead, it drew basis for the reversal from this Court's ruling in Investment Planning
Corporation of the Philippines vs. Social Security System, supra 9 and declared that upon the evidence,
the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-
called "control test," establishment in the case — i.e., "whether the employer controls or has reserved the
right to control the employee not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished," — the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about
every aspect of the conduct that the caddy must observe, or avoid, when serving as
such, any violation of any which could subject him to disciplinary action, which may
include suspending or cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned
a number which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the
players, not by the Club, that they observed no definite working hours and earned no fixed income. It
quoted with approval from an American decision 10 to the effect that: "whether the club paid the caddies
and afterward collected in the first instance, the caddies were still employees of the club." This, no matter
that the case which produced this ruling had a slightly different factual cast, apparently having involved a
claim for workmen's compensation made by a caddy who, about to leave the premises of the club where
he worked, was hit and injured by an automobile then negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed
out, is now among the mainways of the private respondent's defenses to the petition for review.
Considered in the perspective of the incidents just recounted, it illustrates as well as anything can, why
the practice of forum-shopping justly merits censure and punitive sanction. Because the same question of
employer-employee relationship has been dragged into three different fora, willy-nilly and in quick
succession, it has birthed controversy as to which of the resulting adjudications must now be recognized
as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-504-78), where the decision
of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was
affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never
thereafter appealed according to the private respondent; on the other, the compulsory arbitration case
(NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which
was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on
the ground that there existed no such relationship between the Club and the private respondent. And, as
if matters were not already complicated enough, the same respondent, with the support and assistance of
the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory social
security coverage with the Social Security Commission (SSC Case No. 5443), with the result already
mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification
case had never become final, being in fact the subject of three pending and unresolved motions for
reconsideration, as well as of a later motion for early resolution. 11 Unfortunately, none of these motions is
incorporated or reproduced in the record before the Court. And, for his part, the private respondent
contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR,
but that a certification election had in fact been held, which resulted in the PTCCEA being recognized as
the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect to wages,
hours of work, terms of employment, etc. 12 Whatever the truth about these opposing contentions, which
the record before the Court does not adequately disclose, the more controlling consideration would seem
to be that, however, final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to
the existence, or non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following
essential requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order
must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter and
the parties; and (4) there must be between the two cases identity of parties, identity of subject matter and
identity of cause of action. 13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment"
that would operate in bar of a subsequent action between the same parties for the same cause, be
adversarial, or contentious, "one having opposing parties; (is) contested, as distinguished from an ex
parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to the other party
and afforded the latter an opportunity to contest it" 14 and a certification case is not such a proceeding, as
this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly
understood, but mere investigation of a non-adversary, fact-finding character, in which
the investigating agency plays the part of a disinterested investigator seeking merely to
ascertain the desires of the employees as to the matter of their representation. The court
enjoys a wide discretion in determining the procedure necessary to insure the fair and
free choice of bargaining representatives by the employees. 15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of
employer-employee relationship between present petitioner and the private respondent, it would logically
be that rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner
having asserted, without dispute from the private respondent, that said issue was there squarely raised
and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of Labor) that such
relationship did not exist, and which ruling was thereafter affirmed by the National Labor Relations
Commission in an appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of
the conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who
actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions
more lately imposed by the Court for forum-shopping may not be applied to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on
contrary, it acted correctly in doing so.

Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and employee
between petitioner and private respondent is, however, another matter. The Court does not agree that
said facts necessarily or logically point to such a relationship, and to the exclusion of any form of
arrangements, other than of employment, that would make the respondent's services available to the
members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress,
language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe
the actions or judgment of the caddies concerned as to leave them little or no freedom of choice
whatsoever in the manner of carrying out their services. In the very nature of things, caddies must submit
to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the
premises and grounds of whatever club they do their work in. For all that is made to appear, they work for
the club to which they attach themselves on sufference but, on the other hand, also without having to
observe any working hours, free to leave anytime they please, to stay away for as long they like. It is not
pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond
barring them from the premises which, it may be supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to work on their part. All these considerations clash
frontally with the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the
caddies as still another indication of the latter's status as employees. It seems to the Court, however, that
the intendment of such fact is to the contrary, showing that the Club has not the measure of control over
the incidents of the caddies' work and compensation that an employer would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer
control than an assurance that the work is fairly distributed, a caddy who is absent when his turn number
is called simply losing his turn to serve and being assigned instead the last number for the day. 17

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required
to exercise his occupation in the premises of petitioner. He may work with any other golf
club or he may seek employment a caddy or otherwise with any entity or individual
without restriction by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies
as they are not required to render a definite number of hours of work on a single day.
Even the group rotation of caddies is not absolute because a player is at liberty to choose
a caddy of his preference regardless of the caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still
find sufficient time to work elsewhere. Under such circumstances, he may then leave the
premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy
who is on call for a particular day may deliberately absent himself if he has more
profitable caddying, or another, engagement in some other place. These are things
 beyond petitioner's control and for which it imposes no direct sanctions on the caddies. . .
. 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed
and set aside, it being hereby declared that the private respondent, Fermin Llamar, is not an employee of
petitioner Manila Golf and Country Club and that petitioner is under no obligation to report him for
compulsory coverage to the Social Security System. No pronouncement as to costs.

SO ORDERED.

Regalado and Mendoza, JJ., concur

G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS
CORPORATION and/or OTTO ONG and CATALINA CO., respondents.

PADILLA, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside the
Resolution 1 of respondent National Labor Relations Commission (NLRC) rendered on 20
September 1994 remanding the records of the case to the arbitration branch of origin for further
proceedings.

The antecedent facts as narrated by public respondent in the assailed resolution are as follows:

The complaint was instituted by Eddie Domasig against respondent Cata Garments
Corporation, a company engaged in garments business and its owner/manager
Otto Ong and Catalina Co for illegal dismissal, unpaid commission and other
monetary claim[s]. Complainant alleged that he started working with the
respondent on July 6, 1986 as Salesman when the company was still named Cato
Garments Corporation; that three (3) years ago, because of a complaint against
respondent by its workers, its changed its name to Cata Garments Corporation;
and that on August 29, 1992, he was dismissed when respondent learned that he
was being pirated by a rival corporation which offer he refused. Prior to his
dismissal, complainant alleged that he was receiving a salary of P1,500.00 a month
plus commission. On September 3, 1992 he filed the instant complaint.

Respondent denied complainant's claim that he is a regular employee contending

that he is a mere commission agent who receives a commission of P5.00 per piece
of article sold at regular price and P2.50 per piece sold in [sic] bargain price; that
in addition to commission, complainant received a fixed allowance of P1,500.00 a
month; that he had no regular time schedule; and that the company come [sic] into
existence only on September 17, 1991. In support of its claim that complainant is a
commission agent, respondent submitted as Annexes "B" and "B-1" the List of
Sales Collections, Computation of Commission due, expenses incurred, cash
advances received for the month of January and March 1992 (Rollo, p. 22-27).
 Respondent further contends that complainant failed to turn over to the
respondent his collection from two (2) buyers as per affidavit executed by these
buyers (Rollo p. 28-29) and for which, according to respondent it initiated criminal
proceedings against the complainant.

The Labor Arbiter held that complainant was illegally dismissed and entitled to
reinstatement and backwages as well as underpayment of salary; 13th month pay;
service incentive leave and legal holiday. The Arbiter also awarded complainant
his claim for unpaid commission in the amount of P143,955.00. 2

Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid,
the NLRC resolved to remand the case to the labor arbiter for further proceeding. It declared as
follows:

We find the decision of the Labor Arbiter not supported by evidence on record. The
issue of whether or not complainant was a commission agent was not fully
resolved in the assailed decision. It appears that the Labor Arbiter failed to
appreciate the evidences submitted by respondent as Annexes "B" and "B-1"
(Rollo p. 22-27) in support of its allegation as regard[s] the nature of complainant's
employment. Neither is there a showing that the parties were required to adduce
further to support their respective claim. The resolution of the nature of
complainant's employment is vital to the case at bar considering that it would be
determinative to his entitlement of monetary benefits. The same is similarly true as
regard the claim [sic] for unpaid commission. The amount being claim [sic] for
unpaid commission as big as it is requires substantial proof to establish the
entitlement of the complainant proof to establish the entitlement of the
complainant to the same. We take not of the respondent's claim that "while they
admit that complainant has an unpaid commission due him, the same is only for
his additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain price
for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of
Sales and unpaid commission" (Annex "C" and "C-1" Appeal, Rollo p. 100-102).
Said amount according to respondent is being withheld by them pending the
accounting of money collected by complainant from his two (2) buyers which was
not remitted to them. Considering the conflicting version of the parties regarding
the issues on hand, it was incumbent on the Labor Arbiter to conduct further
proceedings thereon. The ends of justice would better be served if both partied are
given the opportunity to ventilate further their positions. 3

In their comment on the petition at bar, private respondents agree with the finding of the NLRC
that the nature of petitioner's employment with private respondents is vital to the case as it will
determine the monetary benefits to which he is entitled. They further aver that the evidence
presented upon which the labor arbiter based her decision is insufficient, so that the NLRC did
not commit grave abuse of discretion in remanding the case to the arbitration branch of origin for
further proceedings.

The comment of the Solicitor General is substantially the same as that of private respondents, i.e.,
there is no sufficient evidence to prove employer-employee relationship between the parties.
Furthermore, he avers that the order of the NLRC to the labor arbiter for further proceedings does
not automatically translate to a protracted trial on the merits for such can be faithfully complied
with through the submission of additional documents or pleadings only.

The only issue to be resolved in this petition is whether or not the NLRC gravely abused its
discretion in vacating and setting aside the decision of the labor arbiter and remanding the case
to the arbitration branch of origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the petitioner,
consisting of the identification card issued to him by private respondent corporation and the cash
vouchers reflecting his monthly salaries covering the months stated therein, settled the issue of
employer-employee relationship between private respondents and petitioner.

It has long been established that in administrative and quasi-judicial proceedings, substantial
evidence is sufficient as a basis for judgment on the existence of employer-employee relationship.
No particular form of evidence is required is required to prove the existence of such employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted. 4

Substantial evidence has been defined to be such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, and its absence is not shown by stressing that there
is contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute
its own judgment or criterion for that of the trial court in determining wherein lies the weight of
evidence or what evidence is entitled to belief. 5

In a business establishment, an identification card is usually provided not only as a security

measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioner's salaries for the months stated therein,
we agree with the labor arbiter that these matters constitute substantial evidence adequate to
support a conclusion that petitioner was indeed an employee of private respondent.

Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides
thus:

Sec. 4. Determination of Necessity of Hearing. — Immediately after the submission

of the parties of their position papers/memoranda, 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.

It is clear from the law that it is the arbiters who are authorized to determine
whether or not there is a necessity for conducting formal hearings in cases
brought before them for adjudication. Such determination is entitled to great
respect in the absence of arbitrariness. 6

In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding
of the NLRC, her decision at least on the existence of an employer-employee relationship between
private respondents and petitioner, is supported by substantial evidence on record.

The list of sales collection including computation of commissions due, expenses incurred and
cash advances received (Exhibits "B" and "B-1") which, according to public respondent, the labor
arbiter failed to appreciate in support of private respondents" allegation as regards the nature of
petitioner's employment as a commission agent, cannot overcome the evidence of the ID card and
salary vouchers presented petitioner which private respondents have not denied. The list
presented by private respondents would even support petitioner's allegations that, aside from a
monthly salary of P1,500.00, he also received commissions for his work as a salesman of private
respondents.

Having been in the employ of private respondents continuously for more than one year, under the
law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not required
as a basis for judgment on the legality of an employer's dismissal of an employee, nor even
preponderance of evidence for that matter, substantial evidence being sufficient. 7 Petitioner's
contention that private respondents terminated his employment due to their suspicion that he was
being enticed by another firm to work for it was not refuted by private respondents. The labor
arbiter's conclusion that petitioner's dismissal is therefore illegal, is not necessarily arbitrary or
erroneous. It is entitled to great weight and respect.

It was error and grave abuse of discretion for the NLRC to remand the case for further
proceedings to determine whether or not petitioner was private respondents' employee. This
would only prolong the final disposition of the complaint. It is stressed that, in labor cases,
simplification of procedures, without regard to technicalities and without sacrificing the
fundamental requisites of due process, is mandated to ensure the speedy administration of
justice. 8

After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers,
including issuance of subpoena, requiring the attendance and testimony of witnesses or the
production of such documentary evidence as may be material to a just determination of the matter
under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter have authority under
the Labor Code to decide a case based on the position papers and documents submitted without
resorting to the technical rules of evidence. 9

However, in view of the need for further and correct computation of the petitioner's commissions
in the light of the exhibits presented and the dismissal of the criminal cases filed against
petitioner, the labor arbiter is required to undertake a new computation of the commissions to
which petitioner may be entitled, within thirty (30) days from the submission by the partied of all
necessary documents.

WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November
1994 are SET ASIDE. The decision of the labor arbiter dated 19 may 1993 us REINSTATED and
AFFIRMED subject to the modification above-stated as regards a re-computation by the labor
arbiter of the commissions to which petitioner maybe actually entitled.

SO ORDERED.

Bellosillo, Vitug, Kapunan and Hermosisisma, Jr., JJ., concur.

G.R. No. 154463 September 5, 2006

CEBU METAL CORPORATION, petitioner,

vs.
GREGORIO ROBERT SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO,
respondents.

DECISION

CHICO-NAZARIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated 18 February 2002, and the Resolution2 dated 27 June 2002, rendered by the Court of
Appeals in CA-G.R. SP No. 66480, which annulled and set aside the decision3 dated 9 October 2000, and
resolution4 dated 2 July 2001, of the National Labor Relations Commission (NLRC) in NLRC Case No.V-
000840-99. In its decision, the NLRC reversed and set aside the decision5 dated 27 May 1999 of Labor
Arbiter Jesus N. Rodriguez, Jr. in favor of complainant employees, herein respondents Gregorio Saliling,
Elias Bolido, Manuel Alquiza and Benjie Amparado, RAB Case No. 06-01-10019-97.

The Facts

Parties herein are somewhat at variance with respect to the basic facts of the case at bar.

The facts of the case as recounted6 by petitioner Cebu Metal Corporation are as follows:

Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buying and selling of scrap
iron x x x. In the Bacolod Branch, it has three regular (3) employees holding such positions as
Officer-in-Charge, a scaler and a yardman, x x x whose salaries are paid directly by its main
office in Cebu while others are undertaking pakiao work in the unloading of scrap iron for
stockpiling.

Among those workers who presented for work in the unloading of scrap iron in the area are the
unemployed persons or trisicad drivers standing by in the vicinity some of whom are the herein
complainants x x x Gregorio Robert Saliling, Elias Bolido, Manuel Alquiza, Benjie Amparado and
non-complainants Arnel Allera, Eliseo Torralba or any other persons who wanted to augment their
income aside from their regular jobs. Robert Gregorio Saliling started working in 1996, Elias
Bolido on (sic) October 1995 while Manuel Alquiza and Benjie Amparado, on (sic) February 1996.

As compensation for their services, these workers including the herein complainants are paid at
the rate of P15.00 per ton for which each person can unload at least two (2) to three (3) tons per
hour or can earn at least P240.00 to P360.00 in eight (8) hours if work is only available which
payment necessarily includes cost of living allowance (COLA) and 13th-month pay.

xxxx

Petitioner company further elaborated7 on the nature of its business and the circumstances surrounding
the employment of respondent complainants, to wit:

The Bacolod buying station is mainly a stockyard where scrap metal delivered by its suppliers are
stockpiled.

The supply of scrap metal is not steady as it depends upon many factors, such as availability of
supplies, price, competition and demand among others. There are therefore (sic) instances when
in a single week , one or two trucks of scrap metal are delivered while there are weeks when not
a single truck of scrap metal are delivered although there may also be weeks when quite a
number of trucks are delivered to the stockyard x x x. The arrivals of these trucks and the
deliveries of scrap metal are not regular and the schedules of deliveries x x x to the stockyard x x
x are not known before hand by the respondent (petitioner company).

x x x [t]he trucks used in the delivery of scrap metal are owned and/or rented by the different
suppliers of scrap metal. These trucks have their own driver and truck boys employed by these
different suppliers. Sometimes, these trucks do not have any truck boys, and in these instances,
the respondent hires the services of people for the purpose of unloading the scrap metal from
these trucks.
 It is for this reason that the unloaders hired by the respondent to unload the scrap metal from
these trucks are basically seasonal workers. They are hired only whenever there are trucks of
suppliers of scrap metal that deliver scrap metal to the yard of the respondent and these trucks
happen not to have any accompanying truck boys. Whoever are available and whoever are
willing to help unload x x x on a particular occasion are hired to unload x x x.

Usually, there is a leader for a particular group who is tasked to unload the scrap metal from a
particular truck. It is this leader who distributes the individual take of each member of the
particular group unloading the scrap metal from a particular truck.

In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie
Amparado, in their position paper8 submitted to the Labor Arbiter, narrate:

1. That complainants Gregorio Saliling was employed by defendant Corporation x x x in 1988,

complainant Elias Bolido was hired in 1992 and complainant Benjie Amparado was hired by
respondent in 1994; x x x.

2. The aforesaid complainants, from the time they were employed by respondent, they received
their salary on (sic) the following rate:

GREGORIO ROBERT SALILING ------- P5.00/hour in 1988

5.00/hour in 1989
6.00/hour in 1990
7.00/hour in 1991
7.00/hour in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
ELIAS BOLIDO ------- P100.00/day in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
BENJIE AMPARADO ------- P7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996

3. That the aforesaid complainants never received any other benefits from the respondent, except
the amount indicated above; (sic) They received the sum of P10.93 per hour in case of overtime
work, but they never received additional benefits in case, (sic) they worked on Saturdays,
Sundays, and Holidays;

Complainants likewise never received 13th month pay, holiday pay, incentive leave pay, bonuses
and other labor benefits;

4. Complainants were required to work from 8:00 A.M. to 12:00 noon and from 1:00 P.M. to 5:00
P.M. or for eight hours a day; seven days a week and thirty days a month;

5. When these complainants demanded from respondent for the increase of their salary,
respondent through Marlon got irritated and instructed complainants to stop working, thus,
complainants, effective December 1996 were precluded from entering respondent loading and
unloading compound x x x.
On 10 January 1997, respondent complainants filed a Complaint9 before the Regional Arbitration Branch
No VI, Bacolod City for underpayment of wages and non-payment of the following benefits: 1) 13th month
pay; 2) holiday pay; and 3) service incentive leave pay.

On 6 March 1998, respondent complainants manifested10 that they were including in their complaint
against petitioner company, the claim for illegal dismissal. Such belated filing was alleged to have been
due to the fact that they were only dismissed after the filing of their complaint.

On 27 May 1999, the Labor Arbiter rendered a decision11 the dispositive of which reads:

CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation, through its

manager, MARLON RADEN, is hereby ordered to REINSTATE complainants to their former
positions with backwages limited to one (1) year and 13th month pay, ERA and COLA as follows:

NAME OF COMPLAINANTS:

1. Gregorio Robert Saliling

A) Backwages ----- P42,238.30
th
B) 13 Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
2. Elias Bolido
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38

A) Backwages ----- P42,238.30

B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
3. Manuel Alquiza
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
4. Benjie Amparado
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
GRAND TOTAL ----- P257,009.52
 In case reinstatement is no longer feasible, complainants are to be given separation pay
equivalent to fifteen (15) days to be given for every year of service.

Attorney's fees of five percent (5%) of the total judgment award of the amount of Twelve
Thousand Eight Hundred fifty Pesos and Forty-Eight Centavos (P12,850.48) is also awarded.

In ordering the reinstatement of respondent complainants, the Labor Arbiter found them to have been
illegally dismissed from their employment with petitioner company. The decision explained that:

Regarding the second issue which is illegal dismissal, we find the same meritorious. Under Article
280 of the Labor Code, complainants are regular employees since they are "engaged to perform
activities which are necessary and desirable in the usual business or trade of the employer", (sic)
x x x. Complainants job of loading, unloading and stockpiling scrap iron is necessary and part of
the business of respondent. Since complainants were dismissed without cause and due process
of law, they are entitled to reinstatement with backwages limited to one (1) year.

Aggrieved, petitioner company appealed the foregoing decision to the NLRC.

In a Decision12 promulgated on 9 October 2000, the Fourth Division of the NLRC reversed and set aside
the ruling of the Labor Arbiter. Instead, the Commission held that respondent complainants were not
regular employees of petitioner company, thus, they could not have been illegally dismissed. The order of
reversal was based on the Commission's finding that the petty cash vouchers13 submitted by petitioner
company confirmed the fact that unloaders were paid on "pakiao" or task basis at P15.00 per metric ton.
The Commission further rationalized that with the irregular nature of the work involved, the stoppage and
resumption of which depended solely on the availability or supply of scrap metal, it necessarily follows
that after the job of unloading was completed and "unloaders" were paid the contract price, the latter's
working relationship with petitioner company legally ended. They were then free to offer their services to
others.

As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on the question
of whether or not respondent complainants were illegally dismissed since the complaint filed on 10
January 1997 failed to include such matter. To be sure, the complaint merely imputed the following
causes of action: 1) underpayment of wages; and 2) non-payment of a) 13th month pay; b) holiday pay;
and c) service incentive leave pay. Nowhere was the matter of illegal dismissal written on the same. The
issue was formally brought up only on 6 March 1998, via a Manifestation, long after the filing of the
parties' respective position papers.

In view of the above, the Commission declared that respondent complainants invalidly raised the issue of
illegal dismissal in the position paper they filed before the Labor Arbiter.

Dissatisfied by the above, it was the turn of respondent complainants to challenge the same but this time
before the Court of Appeals.

In a Decision dated 18 February 2002, the Court of Appeals annulled and set aside the assailed decision
of the NLRC. Said Decision was grounded exclusively on the argument that the Commission committed
grave abuse of discretion in reversing and setting aside the Decision of the Labor Arbiter since petitioner
company did not make an issue out of the Labor Arbiter's action in ruling on a cause of action, i.e., illegal
dismissal, not specifically stated in the complaint. Stated differently, the NLRC gravely abused its
discretion in ruling on an issue that was allegedly not raised on appeal before it.

The Court of Appeals decision ended in this wise:

 WHEREFORE, foregoing premises considered, the PETITION HAVING MERIT is hereby GIVEN
DUE COURSE. RESULTANTLY, the challenged decision of Public Respondent National Labor
Relations Commission is hereby ANNULLED AND SET ASIDE AND THE JUDGMENT OF THE
LABOR ARBITER IN RAB-CASE No. 06-01-10019-97 REINSTATED. No costs.

SO ORDERED.

The Issues

Its Motion for Reconsideration having been denied14, petitioner company now comes to this Court
imputing the following errors on the Court of Appeals:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS
COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO DISMISS PRIVATE
RESPONDENT'S CLAIMS FOR ILLEGAL DISMISSAL AND OTHER MONEY CLAIMS;

II.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS
COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO REVERSE THE
LABOR ARBITER'S DECISION; and

III.

THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR CERTIORARI IN CA

G.R. SP. NO. 66480 AND IN ANNULING (sic) THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION.

In essence, the issue for resolution in the case at bar is whether or not the Court of Appeals committed
reversible error in ruling that the NLRC had no authority to adjudicate on an issue not properly raised in
petitioner company's Memorandum on Appeal.

Petitioner company posits that contrary to the argument of the appellate court, the main or primary reason
for the reversal of the Labor Arbiter's decision was the finding that respondent complainants could not be
regarded, based on the facts of the case and the evidence presented, as regular employees of petitioner
company.

Conversely, respondent complainants allege that an appellate court has no power to resolve an
unassigned error that does not affect the court's jurisdiction or is an error that is neither plain nor clerical.
Likewise, they contend that "there is nothing to show that petitioner company made an issue of the Labor
Arbiter's action in ruling on a cause of action not specifically stated in the complaint."

The Court's Ruling

We find merit in the petition.

It was plain error for the Court of Appeals to annul and set aside the decision of the NLRC on the lone
reason that the latter "dismissed Petitioner's appeal on the basis of an issue not raised by Private
Respondent in its appeal x x x."15 A painstaking review of the decision of the NLRC will readily reveal that
the Commission's finding that respondent complainants were not regular employees was the raison d'être
for the subsequent turnaround of the state of affairs.
What the NLRC made use of to reverse the Labor Arbiter's decision was precisely the conclusion of the
latter that respondent complainants were regular employees of petitioner company. According to the
Commission, such conclusion was predicated merely on the consideration that respondent complainants
were performing activities necessary and desirable to the business or trade of their employer. Based on
the facts of the case and the evidence presented by the parties to the case at bar, however, the NLRC
arrived at a divergent conclusion, which we fully agree in. We quote with approval its disquisition:

It is interesting to note that the Labor Arbiter had given credence and probative value to the Petty
Cash Vouchers submitted by the respondents. Thus he said:

"The petty cash vouchers (Annexes "1" to"1-A-62", respondents position paper) show
that complainants are not paid on hourly or daily basis as they would like this office to
believe but on "pakiao" or task basis at P15.00 per metric ton. There is no basis then for
complainants to claim that they are underpaid since there is no minimum wage in this
type of work. Complainants' earnings depend upon their own diligence and speed in
unloading and stockpiling scrap iron. More importantly, it depends upon the availability of
scrap iron to be unloaded and stockpiled."

The above findings validate respondent's position as to the nature of complainants' work. Their
services are needed only when scrap metals are delivered which occurs only one or twice a week
or sometimes no delivery at all in a given week. The irregular nature of work, stoppage of work
and then work again depending on the supply of scrap metal has not been denied by
complainants. On the contrary they even admitted the same in their Reply to respondent's
Appeal. x x x. Indeed, it would be unjust to require respondent to maintain complainants in the
payroll even if there is no more work to be done. To do so would make complainants privileged
retainers who collect payment from their employer for work not done. This is extremely unfair and
amount to cuddling of labor at the expense of management.16

It should be remembered that The Philippine Constitution, while inexorably committed towards the
protection of the working class from exploitation and unfair treatment, nevertheless mandates the policy of
social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and
the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other.
Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be
dispensed with in the light of established facts, the applicable law, and existing jurisprudence.17

Under the circumstances abovestated:

x x x there can be no illegal dismissal to speak of. Besides, complainants cannot claim regularity
in the hiring every time a truck comes loaded with scrap metal. This is confirmed in the Petty cash
Vouchers which are in the names of different leaders who apportion the amount earned among
his members.18

And, quite telling is the fact that not every truck delivery of scrap metal requires the services of
respondent complainants when a particular truck is accompanied by its own "unloader." And whenever
required, respondent complainants were not always the ones contracted to undertake the unloading of the
trucks since the work was offered to whomever were available at a given time.

Finally, the judgment of the Commission that the Labor Arbiter acted incorrectly in ruling on a cause of
action, i.e., illegal dismissal, not specifically stated in the complaint, did not constitute grave abuse of
discretion on its part.

It is well settled that an act of a court or tribunal may only be considered to have been done in grave
abuse of discretion when the same was performed in a capricious or whimsical exercise of judgment
which is equivalent to lack of jurisdiction.19 The abuse of discretion must be so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined or to a ct at all in
contemplation of law, as where the power is exercised in an arbitrary power and despotic manner by
reason of passion or personal hostility.20

In the case at bar, from the preceding definition, it is quite apparent that no grave abuse of discretion can
be attributed to the NLRC. Its decision simply expressed an observation, to wit:

Moreover, We note that in the complaint filed last January 10, 1997, the issue of illegal dismissal
was not raised as a cause of action although it was later discussed in their position paper filed on
January 12, 1998. x x x. [Emphasis supplied.]

The use of the word "moreover" clearly expresses NLRC's position in treating the matter of the non-
inclusion of the issue of illegal dismissal in the complaint merely as an add-on, adjunct or a supplement to
its finding that respondent complainants' were not regular employees of petitioner company.

At any rate, the Court is clothed with authority to review matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.21

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 18
February 2002, and the Resolution dated 27 June 2002, both rendered by the Court of Appeals in CA-
G.R. SP No. 66480, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the NLRC
dated 9 October 2000 is REINSTATED. Costs against respondent complainants.

SO ORDERED.

Panganiban, C.J. Chairman, Ynares-Santiago, Austria-Martinez, Callejo, Sr., J.J., concur.

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI,
TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA,
Respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the
Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2
respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein
petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National
Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No.
30-10-0-489-01, finding that private respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate
documents; neither did she attend any board meeting nor required to do so. She never prepared any legal
document and never represented the company as its Corporate Secretary. However, on some occasions,
she was prevailed upon to sign documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant
in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees
and perform management administration functions; represent the company in all dealings with
government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System
(SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation
of Kasei Restaurant which is owned and operated by Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary
was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was
required to sign a prepared resolution for her replacement but she was assured that she would still be
connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.
9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to
September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her
mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not
receive her salary from the company. She made repeated follow-ups with the company cashier but she
was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was
informed that she is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that
petitioner was hired in 1995 as one of its technical consultants on accounting matters and act
concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and
she came to the office any time she wanted. The company never interfered with her work except that from
time to time, the management would ask her opinion on matters relating to her profession. Petitioner did
not go through the usual procedure of selection of employees, but her services were engaged through a
Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and
that she was not one of those reported to the BIR or SSS as one of the company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As such,
her consultancy may be terminated any time considering that her services were only temporary in nature
and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of
employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among
the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which
included petitioner. SSS records were also submitted showing that petitioner’s latest employer was Seiji
Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and
jointly and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 – 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with
additional backwages that would accrue up to actual payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive
portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of
service in addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorney’s fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay
are AFFIRMED.

SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations
Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby
rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for
constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship
between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether
petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on
one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine
which of the propositions espoused by the contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee relation. Generally, courts have relied on the so-called
right of control test where the person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee
relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship
between the parties, owing to the complexity of such a relationship where several positions have been
held by the worker. There are instances when, aside from the employer’s power to control the employee
with respect to the means and methods by which the work is to be accomplished, economic realities of
the employment relations help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s
power to control the employee with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration
the totality of circumstances surrounding the true nature of the relationship between the parties. This is
especially appropriate in this case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in
Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the end achieved but
also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions
prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the
employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, 22 such as: (1) the extent to which the services performed
are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and
facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for
profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise; (6) the permanency and duration of the relationship between the worker
and the employer; and (7) the degree of dependency of the worker upon the employer for his continued
employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged
employer for his continued employment in that line of business. 24 In the United States, the touchstone of
economic reality in analyzing possible employment relationships for purposes of the Federal Labor
Standards Act is dependency. 25 By analogy, the benchmark of economic reality in analyzing possible
employment relationships for purposes of the Labor Code ought to be the economic dependence of the
worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because
she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant.
She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing functions necessary and desirable
for the proper operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18,
2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the
SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by a copy of the SSS
specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her
name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her
continued employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an

identification card is provided not only as a security measure but mainly to identify the holder thereof as a
bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioner’s
salaries for the months stated therein, these matters constitute substantial evidence adequate to support
a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof
that the latter were the former’s employees. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner
never acted as Corporate Secretary and that her designation as such was only for convenience. The
actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer
in representing the company to secure construction permits, license to operate and other requirements
imposed by government agencies. Petitioner was never entrusted with corporate documents of the
company, nor required to attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to sign prepared
documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit
has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact,
we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look
with favor on any retraction or recanted testimony, for it could have been secured by considerations other
than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at
the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration,
but like any other testimony the same is subject to the test of credibility and should be received with
caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent
Kasei Corporation. She was selected and engaged by the company for compensation, and is
economically dependent upon respondent for her continued employment in that line of business. Her
main job function involved accounting and tax services rendered to respondent corporation on a regular
basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the
power to control petitioner with the means and methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from
January to September 2001. This amounts to an illegal termination of employment, where the petitioner is
entitled to full backwages. Since the position of petitioner as accountant is one of trust and confidence,
and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of
reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive
dismissal is an involuntary resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an
employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it impossible for such employee to
continue working for her employer. Hence, her severance from the company was not of her own making
and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex,
race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship between
employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code
to a greater number of employees. This would enable employees to avail of the benefits accorded to them
by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their
welfare and reaffirming it as a primary social economic force in furtherance of social justice and national
development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated
October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET
ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of
petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until the date of
finality of this decision, and separation pay representing one-half month pay for every year of service,
where a fraction of at least six months shall be considered as one whole year.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The
facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees)
entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first
part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the
second part, and hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St., Manila for the
former-s use as a branch office. In the said contract the party of the third part held herself
solidarily liable with the party of the part for the prompt payment of the monthly rental
agreed on. When the branch office was opened, the same was run by the herein
appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to
be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to
have been informed that Lina Sevilla was connected with a rival firm, the Philippine
Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service
considered closing down its office. This was firmed up by two resolutions of the board of
directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first
abolishing the office of the manager and vice-president of the Tourist World Service, Inc.,
Ermita Branch, and the second,authorizing the corporate secretary to receive the
properties of the Tourist World Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the
appellees no longer used it. As a matter of fact appellants used it since Nov. 1961.
Because of this, and to comply with the mandate of the Tourist World Service, the
 corporate secretary Gabino Canilao went over to the branch office, and, finding the
premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises
on June 4, 1962 to protect the interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the locked premises, a
complaint wall filed by the herein appellants against the appellees with a prayer for the
issuance of mandatory preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein, the trial court ordered
the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her
counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting
her to present evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and
after the issues were joined, the reinstated counterclaim of Segundina Noguera and the
new complaint of appellant Lina Sevilla were jointly heard following which the court a quo
ordered both cases dismiss for lack of merit, on the basis of which was elevated the
instant appeal on the following assignment of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF

PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.)
WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO
HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS.

LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE
EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS
AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO
RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE
BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE

NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE
DISPOSSESSION OF THE A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS.
LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the
branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee Noguera
was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered
into by and between her and appellee TWS with offices at the Ermita branch office and
that she was not an employee of the TWS to the end that her relationship with TWS was
one of a joint business venture appellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an

eminent eye, ear and nose specialist as well as a imediately columnist
had been in the travel business prior to the establishment of the joint
business venture with appellee Tourist World Service, Inc. and appellee
Eliseo Canilao, her compadre, she being the godmother of one of his
children, with her own clientele, coming mostly from her own social circle
(pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19

October 1960 (Exh. 'A') covering the premises at A. Mabini St., she
expressly warranting and holding [sic] herself 'solidarily' liable with
appellee Tourist World Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn.
Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist
World Service, Inc., which had its own, separate office located at the
Trade & Commerce Building; nor was she an employee thereof, having
no participation in nor connection with said business at the Trade &
Commerce Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers,

her own bookings her own business (and not for any of the business of
appellee Tourist World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by the airline
companies giving appellee Tourist World Service, Lic. 3% thereof aid
retaining 4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining

the A. Mabini St. office, paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from desicion the office
furniture and supplying some of fice furnishings (pp. 15,18 tsn. April
6,1965), appellee Tourist World Service, Inc. shouldering the rental and
other expenses in consideration for the 3% split in the co procured by
appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla

would be given the title of branch manager for appearance's sake only
(p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for
dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao
pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the
appellee Tourist World Service, Inc. and as such was designated manager. 1

xxx xxx xxx

The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World
Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5
rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they
state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ...
WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE
PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN
THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA)
AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF
DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH
ADHERES TO THE RULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO
WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH
APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS
CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER
CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST
ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla
and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue,
in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc.
without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for the said appellant supports the contention that the
appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the
telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World
Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch
manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with
the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the
between parties was one of joint venture, but concede that "whatever might have been the true
relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service
and Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World
Service, Inc., maintains, that the relation between the parties was in the character of employer and
employee, the courts would have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to
statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee
relation. In general, we have relied on the so-called right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end." 10 Subsequently, however, we have considered, in addition to the standard
of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent
Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had
bound herself in solidum as and for rental payments, an arrangement that would be like claims of a
master-servant relationship. True the respondent Court would later minimize her participation in the lease
as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a
true employee cannot be made to part with his own money in pursuance of his employer's business, or
otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation,
but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline
for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in
pursuing the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then,
who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her
booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's
employee. As we said, employment is determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting
Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the
operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner
in which the business was run. A joint venture, including a partnership, presupposes generally a of
standing between the joint co-venturers or partners, in which each party has an equal proprietary interest
in the capital or property contributed 15 and where each party exercises equal rights in the conduct of the
business. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in representation or on behalf of
another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal
agent relationship, rather than a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with
the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina
Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the business, using her own name, after
Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she
earned as a result of her business transactions, but one that extends to the very subject matter of the
power of management delegated to her. It is an agency that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of
Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the
telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service,
Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must
shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the
fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any
authority to terminate that contract without notice to its actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a third party in charge of rental payments
(solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would
eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put
the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be
sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no
clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact
that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist World's board of
directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate
secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January
3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without
notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked,
personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the
Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need
when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it
sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she
could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's
telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla
articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had
perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair
play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent,
Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages
may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina
Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on
the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage. 24

ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same
damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been
shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking
incidents. She cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary
damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable
under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July
31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private
respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of
P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.

Costs against said private respondents.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.