Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

73887 December 21, 1989 GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs. HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents. G.A. Fortun and Associates for petitioner. Corsino B. Soco for private respondent. PARAS J.: Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico's money claims. The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages and attorney's fees. Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the ground that the employer-employee relations did not exist between the parties but ordered Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity. On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or factual basis to support its payment. Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to wit: I. Whether the relationship between insurance agents and their principal, the insurance company, is that of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or one of employer-employee, to be governed by the Labor Code. II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code. III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between insurance agent and the insurance company, arising from their agency relations. IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employer-employee relationship existed between petitioner and private respondent. Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whose premiums are payable either daily, weekly or monthly and which are collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent that as such debit agent, private respondent Judico had definite work assignments including but not limited to collection of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out that complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in September 1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not paid socalled weekly sales reserve of at least P 200.00. Finally on June 28, 1982, complainant was dismissed by way of termination of his agency contract. Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that Judico's compensation was not based on any fixed number of hours he was required to devote to the service of petitioner company but rather it was the production or result of his efforts or his work that was being compensated and that the socalled allowance for the first thirteen weeks that Judico worked as debit agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and premium collections). Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to canvassing and making regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which an anemic performance would mean dismissal. He earned out of his faithful and productive service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic performance and not because of the termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an insurance agent in the ordinary meaning of the term. That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, 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. The agents who belong to the second category are not required to report for work at anytime, they do not have to devote their time exclusively to or work solely for the company since the time and the effort they spend in their work depend entirely upon their own will and initiative; they are not required to account for their time nor submit a report of their activities; they shoulder their own selling expenses as well as transportation; and they are paid their commission based on a certain percentage of their sales. One salient point in the determination of employer-employee relationship which cannot be easily ignored is the fact that the compensation that these agents on commission received is not paid by the insurance company but by the investor (or the person insured). After determining the commission earned by an agent on his sales the agent directly deducts it from the amount he received from the investor or the person insured and turns over to the insurance company the amount invested after such deduction is made. The test therefore is whether the "employer" controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was assigned a definite place in the

office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both cases he was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite period. On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear of dismissal from the company and short of committing acts detrimental to the business interest of the company or against the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic performance or even dead result does not become a ground for dismissal. Whereas, in private respondent's case, the undisputed facts show that he was controlled by petitioner insurance company not only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law and could not just be terminated without valid and justifiable cause. Premises considered, the appealed decision is hereby AFFIRMED in toto. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC 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. 1183MC 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. L21500. In its petition for certiorari the University alleges (1) that the resolution of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the certification made by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective bargaining purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace Act, and consequently it has no right to strike and picket on the ground of petitioner's alleged refusal to bargain collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5) that the return-to-work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction. On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on the ground that the petition being filed by way of an appeal from the orders of the Court of Industrial Relations denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed from are interlocutory in nature. This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases are decided on the merits after the hearing. Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three cases on the merits of the issues raised. The University has raised several issues in the present cases, the pivotal one being its claim that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is an educational institution and not an industrial establishment and hence not an "employer" in contemplation of said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are independent contractors and, therefore, not employees within the purview of the said Act. In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent thereto, and We find that they do not sustain the contention of the University. It is true that this Court has ruled that certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion College, and other juridical entities, like the Boy Scouts of the Philippines and Manila Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no

jurisdiction to take cognizance of charges of unfair labor practice filed against them, but it is nonetheless true that the principal reason of this Court in ruling in those cases that those institutions are excluded from the operation of Republic Act 875 is that those entities are not organized, maintained and operated for profit and do not declare dividends to stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a portion of the decision: It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and managed by a "religious non-stock corporation duly organized and existing under the laws of the Philippines." It was organized not for profit or gain or division of the dividends among its stockholders, but solely for religious and educational purposes. It likewise appears that the Philippine Association of College and University Professors, respondent herein, is a non-stock association composed of professors and teachers in different colleges and universities and that since its organization two years ago, the university has adopted a hostile attitude to its formation and has tried to discriminate, harass and intimidate its members for which reason the association and the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of unfair labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the following grounds: "(a) That complainants therein being college and/or university professors were not "industrial" laborers or employees, and the Philippine Association of College and University Professors being composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor organization within the meaning of the laws creating the Court of Industrial Relations and defining its powers and functions; "(b) That the University of San Agustin, respondent therein, is not an institution established for the purpose of gain or division of profits, and consequently, it is not an "industrial" enterprise and the members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 5636-5640); "(c) That, as a necessary consequence, alleged controversy between therein complainants and respondent is not an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction, not only on the parties but also over the subject matter of the complaint." The issue now before us is: Since the University of San Agustin is not an institution established for profit or gain, nor an industrial enterprise, but one established exclusively for educational purposes, can it be said that its relation with its professors is one of employer and employee that comes under the jurisdiction of the Court of Industrial Relations? In other words, do the provisions of the Magna Carta on unfair labor practice apply to the relation between petitioner and members of respondent association? The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered the query in the negative in the following wise: "The main issue involved in the present case is whether or not a charitable institution or one organized not for profit but for more elevated purposes, charitable, humanitarian, etc., like the Boy Scouts of the Philippines, is included in the definition of "employer" contained in Republic Act 875, and whether the employees of said institution fall under the definition of "employee" also contained in the same Republic Act. If they are included, then any act which may be considered unfair labor practice, within the meaning of said Republic Act, would come under the jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act, particularly, its definitions of employer and employee, then the Industrial Court would have no jurisdiction at all. xxx xxx xxx

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

the findings of fact in said case was that the Far Eastern University made profits from the school year 1952-1953 to 19581959. 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 abovequoted 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 Compaia Martima, et al. vs. Philippine Marine Radio Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:

We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers' Association that upon certification by the President under Section 10 of Republic Act 875, the case comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to the national interest when the President certifies the case to the Court of Industrial Relations. The evident intention of the law is to empower the Court of Industrial Relations to act in such cases, not only in the manner prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted authority to find a solution to an industrial dispute and such solution consists in the ordering of employees to return back to work, it cannot be contended that the Court of Industrial Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its power of conciliation and arbitration if it does not have the power and jurisdiction to carry into effect the solution it has adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can order the return of the workers with or without backpay as a term or condition of employment. The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960. When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR has found under the authority of the presidential certification and conformable thereto cannot be questioned (Radio Operators Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54 O.G. 3218). Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a lockout when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared: There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is limited to the prevention of strikes and lockouts. Even after a strike has been declared where the President believes that public interest demands arbitration and conciliation, the President may certify the ease for that purpose. The practice has been for the Court of Industrial Relations to order the strikers to work, pending the determination of the union demands that impelled the strike. There is nothing in the law to indicate that this practice is abolished." (Emphasis supplied) Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the return-towork order would be an impairment of its contract with the replacements. As stated by the CIR in its order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would return to work under the status quo arrangement and the University would readmit them, and the return-to-work order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot disregard. The faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost their right to go back to their positions, because the declaration of a strike is not a renunciation of their employment and their employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of replacements was not authorized by the CIR. At most, that was a temporary expedient resorted to by the University, which was subject to the power of the CIR to allow to continue or not. The employment of replacements by the University prior to the issuance of the order of March 30, 1963 did not vest in the replacements a permanent right to the positions they held. Neither could such temporary employment bind the University to retain permanently the replacements. Striking employees maintained their status as employees of the employer (Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of strikers do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.) It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common good and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code).

Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the return-towork order without having resolved previously the issue of the legality or illegality of the strike, citing as authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances being very different. The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not certified by the President. In that case the company no longer needed the services of the strikers, nor did it need substitutes for the strikers, because the company was losing, and it was imperative that it lay off such laborers as were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this Court in ruling, in that case, that the legality or illegality of the strike should have been decided first before the issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking professors and instructors because of impending bankruptcy. On the contrary, it was imperative for the University to hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike should be decided first before the issuance of the return-to-work order does not apply to the case at bar. Besides, as We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation of an agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963. The University also maintains that there was no more basis for the claim of the members of the Faculty Club to return to their work, as their individual contracts for teaching had expired on March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for the return-to-work order of the CIR because the contractual relationships having ceased there were no positions to which the members of the Faculty Club could return to. This contention is not well taken. This argument loses sight of the fact that when the professors and instructors struck on February 18, 1963, they continued to be employees of the University for the purposes of the labor controversy notwithstanding the subsequent termination of their teaching contracts, for Section 2(d) of the Industrial Peace Act includes among employees "any individual whose work has ceased a consequence of, or in connection with, any current labor dispute or of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment." The question raised by the University was resolved in a similar case in the United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read: On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their employment. The company believing it had not committed any unfair labor practice, refused the employees' offer and claimed the right to employ others to take the place of the strikers, as it might see fit. This constituted discrimination in the hiring and tenure of the striking employees. When the employees went out on a strike because of the unfair labor practice of the company, their status as employees for the purpose of any controversy growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217. For the purpose of such controversy they remained employees of the company. The company contended that they could not be their employees in any event since the "contract of their employment expired by its own terms on April 23, 1939." In this we think the company is mistaken for the reason we have just pointed out, that the status of the employees on strike became fixed under Sec. 2 (3) of the Act because of the unfair labor practice of the company which caused the strike. The University, furthermore, claims that the information for indirect contempt filed against the officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest were improper, irregular and illegal because (1) the officers of the University had complied in good faith with the return-to-work order and in those cases that they did not, it was due to circumstance beyond their control; (2) the return-to-work order and the order implementing the same were illegal; and (3) even assuming that the order was legal, the same was not Yet final because there was a motion to reconsider it.

Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision of that order is valid and legal. Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and legal. Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the same procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect contempt, among which is "disobedience or resistance to lawful writ, process, order, judgment, or command of a court," and the person guilty thereof can be punished after a written charge has been filed and the accused has been given an opportunity to be heard. The last paragraph of said section provides: But nothing in this section shall be so construed as to prevent the court from issuing process to bring the accused party into court, or from holding him in custody pending such proceedings. The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge Bautista relied when he issued the questioned order of arrest. The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly violated was within the court's jurisdiction to issue. Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from any award, order or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for special reason the court shall order that execution be stayed. Any award, order or decision that is appealed is necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes and lockouts, may compel compliance or obedience of its award, order or decision even if the award, order or decision is not yet final because it is appealed, and it follows that any disobedience or non-compliance of the award, order or decision would constitute contempt against the Court of Industrial Relations which the court may punish as provided in the Rules of Court. This power of the Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience of an award, order or decision, even if not yet final, is a special one and is exercised only in cases involving strikes and lockouts. And there is reason for this special power of the industrial court because in the exercise of its jurisdiction over cases involving strikes and lockouts the court has to issue orders or make decisions that are necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout, or to effect the prompt creation of a situation that would be most beneficial to the management and the employees, and also to the public even if the solution may be temporary, pending the final determination of the case. Otherwise, if the effectiveness of any order, award, or decision of the industrial court in cases involving strikes and lockouts would be suspended pending appeal then it can happen that the coercive powers of the industrial court in the settlement of the labor disputes in those cases would be rendered useless and nugatory. The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order, award, or decision of the Court of Industrial Relations shall after such order, award or decision has become final, conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are final (meaning one that is not appealed) may be the subject of contempt proceedings. We believe that there is no inconsistency between the abovequoted provision of Section 6 and the provision of Section 14 of Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of Section 14 an order, award or decision of the Court of Industrial Relations in cases involving strikes and lockouts are immediately executory, so that a violation of that order would constitute an indirect contempt of court. We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103 which provides as follows:

SEC. 19. Implied condition in every contract of employment.In every contract of employment whether verbal or written, it is an implied condition that when any dispute between the employer and the employee or laborer has been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the provisions of this Act . . . and pending award, or decision by the Court of such dispute . . . the employee or laborer shall not strike or walk out of his employment when so enjoined by the Court after hearing and when public interest so requires, and if he has already done so, that he shall forthwith return to it, upon order of the Court, which shall be issued only after hearing when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work, the Court may authorize the employer to accept other employees or laborers. A condition shall further be implied that while such dispute . . . is pending, the employer shall refrain from accepting other employees or laborers, unless with the express authority of the Court, and shall permit the continuation in the service of his employees or laborers under the last terms and conditions existing before the dispute arose. . . . A violation by the employer or by the employee or laborer of such an order or the implied contractual condition set forth in this section shall constitute contempt of the Court of Industrial Relations and shall be punished by the Court itself in the same manner with the same penalties as in the case of contempt of a Court of First Instance. . . . We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged, they were simply ordered arrested to be brought before the Judge to be dealt with according to law. Whether they are guilty of the charge or not is yet to be determined in a proper hearing. Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No. L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that order. In other words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue that order, and neither did it abuse its discretion when it issued that order. In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that petition for certification election was because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The University opposed the petition for withdrawal, but at the same time it moved for the dismissal of the petition for certification election. It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee relationship between the University and the Faculty Club, the alleged status of the Faculty Club as a labor union, its majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and, therefore, the motion to withdraw the petition for certification election should not have been granted upon the ground that the issues in the first case were absorbed in the second case. We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by the discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L-21278. After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification election had in a way produced the situation desired by the University. After considering the arguments adduced by the University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR did not commit any error when it granted the withdrawal of the petition for certification election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the questions relating to the labor disputes between the University and the Faculty Club may be threshed out, and decided, in that case. In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion for the reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has jurisdiction to issue that order of

March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963. IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati University. It is so ordered. Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur. Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to strike.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21212 September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO EPIS, NICOLAS ROJO, ET AL., petitioners, vs. HON. MACAPANTON ABBAS, Judge of the Court of First Instance of Davao and TEOFILO GERONIMO and EMERITA MENDEZ, respondents. Carlos Dominguez, Jr. for petitioners. C. S. Nitorreda for respondents. DIZON, J.: Petition for certiorari with a prayer for the issuance of a writ of preliminary injunction filed by the Citizens' League of Freeworkers, a legitimate labor organization, hereinafter referred to as the Union and its members against the spouses Teofilo Geronimo and Emerita Mendez, and the Hon. Macapanton Abbas, as judge of the Court of First Instance of Davao. Its purpose is to set aside the writ of preliminary injunction issued by the latter in Civil Case No. 3966 and restrain him from proceeding with the case, on the ground that the controversy involves a labor dispute and is, therefore, within the exclusive jurisdiction of the Court of Industrial Relations. It appears that on March 11, 1963, respondents-spouses owners and operators of auto-calesas in Davao City, filed a complaint with the Court of First Instance of Davao (Civil Case No. 3966) to restrain the Union and its members, who were drivers of the spouses in said business, from interfering with its operation, from committing certain acts complained of in connection therewith, and to recover damages. The complaint alleged that the defendants named therein used to lease the auto-calesas of the spouses on a daily rental basis; that, unable to get the spouses to recognize said defendants as employees instead of lessees and to bargain with it on that basis, the Union declared a strike on February 20, 1963 and since then had paralyzed plaintiffs' business operations through threats, intimidation and violence. The complaint also prayed for the issuance of a writ of preliminary injunction ex-parte restraining defendants therein from committing said acts of violence and intimidation during the pendency of the case. On March 11, 1963 the respondent judge granted the writ prayed for, while deferring action on petitioners' motion to dissolve said writ to March 20 of the same year. Meanwhile, on March 12, 1963, petitioners filed a complaint for unfair labor practice against the respondents-spouses with the Court of Industrial Relations on the ground, among others, of the latter's refusal to bargain with them. 1awphl.nt On March 18, 1963, petitioners filed a motion to declare the writ of preliminary injunction void on the ground that the same had expired by virtue of Section 9 (d) of Republic Act 875. In his order of March 21, 1963, however, the respondent judge denied said motion on the ground that there was no employer-employee relationship between respondents-spouses and the individual petitioners herein and that, consequently, the Rules of Court and not Republic Act No. 875 applied to the matter of injunction. Thereupon the petition under consideration was filed. In the case of Isabelo Doce vs. Workmen's Compensation Commission, et al. (G.R. No. L-9417, December 22, 1958), upon a similar if not an altogether identical set of facts, We held: This case falls squarely within our ruling in National Labor Union v. Dinglasan, 52 O.G., 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 petitioner

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 earnings 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 drivers 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." Even assuming, arguendo, that the respondent court had jurisdiction to issue the abovementioned writ of preliminary injunction in Civil Case No. 3966 at the time it was issued, We are of the opinion, and so hold, that it erred in denying petitioners' motion to set aside said writ upon expiration of the period of thirty days from its issuance, upon the wrong ground that there was no labor dispute between the parties and that, therefore, the provisions of Republic Act No. 875 did not apply to the case. As stated heretofore, there was a labor dispute between the parties from the beginning. Moreover, upon the filing of the unfair labor practice case on March 12, 1963, the Court of Industrial Relations acquired complete jurisdiction over the labor dispute and the least that could be done in Civil Case No. 3966 is either to dismiss it or suspend proceedings therein until the final resolution of the former. Wherefore, judgment is hereby rendered setting aside the writ of preliminary injunction issued by the respondent judge in Civil Case No. 3966 of the Court of First Instance of Davao, with costs. Concepcion, C.J., Reyes, J.B.L., Barrera, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur. Regala, J., took no part.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 165881 April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner, vs. COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents DECISION CALLEJO, SR., J.: Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante. Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he operated by employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would remit to Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of the vehicle and continue to drive the same under Villamarias franchise. It was also agreed that Bustamante would make a downpayment of P10,000.00. On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL26647. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have to return the vehicle to Villamaria Motors. Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only and not for other purposes. He was also required to display an identification card in front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would be charged against his account. Bustamante further obliged himself to pay for the cost of replacing any parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful towards the passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or more days and was required to attend any meetings which may be called from time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees of the vehicle and the premium for the vehicles comprehensive insurance. Bustamante promised to strictly comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance of the jeepney. Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to continue driving the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective jeepneys would be returned to him without any complaints. He warned the drivers that the Kasunduan would henceforth be strictly enforced and urged them to comply with their obligation to avoid litigation. On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the vehicle. On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under the boundary system, where he was required to remit P450.00 a day. After one year of continuously working for them, the spouses Villamaria presented the Kasunduan for his signature, with the assurance that he (Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily installments and that he would thereafter continue driving the vehicle along the same route under the same franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was assured that it would be done. However, he was later arrested and his drivers license was confiscated because apparently, the replacement engine that was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the vehicle since then unless he paid them P70,000.00. Bustamante prayed that judgment be rendered in his favor, thus: WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the respondents, jointly and severally, the following: 1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of the complainant relative to the PUJ with Plate No. PVU-660; 2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from July 24, 2000 up to the time of his actual reinstatement; 3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the complainant in the repair and maintenance of the subject jeep; 4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7, 1997 up to June 2000 or a total of P91,200.00; 5. To pay moral and exemplary damages of not less than P200,000.00; 6. Attorneys fee*s+ of not less than 10% of the monetary award. Other just and equitable reliefs under the premises are also being prayed for.9 In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00 downpayment and the vehicles annual registration fees. They further alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped making his remittances despite his daily trips and even brought the jeepney to the province without permission. Worse, the jeepney figured in an accident and its license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in Sucat, Paraaque City for two weeks. When the security guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working. Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed on August 7, 1997

transformed the employer-employee relationship into that of vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent lack of merit. In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas16 are germane to the issue as they define the nature of the owner/operator-driver relationship under the boundary system. He further reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that he conformed thereto only upon their representation that he would own the vehicle after four years. Moreover, it appeared that the Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a blank piece of paper purporting to be an "attendance sheet." On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses Villamaria and ordered the complaint dismissed on the following ratiocination: Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that complainant violated the terms of their contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the] complaints (sic) mere allegations to the contrary cannot prevail. Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.18 Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employer-employee relationship between him and Villamaria. While he did not receive fixed wages, he kept only the excess of the boundaryhulog which he was required to remit daily to Villamaria under the agreement. Bustamante maintained that he remained an employee because he was engaged to perform activities which were necessary or desirable to Villamarias trade or business. The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus: WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the subject matter of the controversy.21 The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30, 2003.22 Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred I IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;" II IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23 Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that of employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is common knowledge that operators of passenger jeepneys (including taxis) pay their drivers not on a regular monthly basis but on commission or boundary basis, or even the boundary-hulog system. Bustamante asserted that he was dismissed from employment without any lawful or just cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not the boundary-hulog system, hence inapplicable in the instant case. He argued that upon the execution of the Kasunduan, the juridical tie between him and Bustamante was transformed into a vendor-vendee relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not in the business of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante paid were actually periodic installments for the the vehicle and were not the same fees as understood in the boundary system. He added that the boundary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full, and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-buyers conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed purchase price, while Bustamante would be assured that the vehicle would still be in good running condition even after four years. Moreover, the right of vendor to impose certain conditions on the buyer should be respected until full ownership of the property is vested on the latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v. Drilon24 has analogous application to the instant issue. In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision reads: UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner: 1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed from the time of his employment up to the time of termination based on the prevailing minimum wage at the time of termination; and, 2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal. Without Costs. SO ORDERED.26 The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes complaint. Under the Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that Villamarias exercise of control over Bustamantes conduct in operating the jeepney is inconsistent with the formers claim that he was not engaged in the transportation business. There was no evidence that petitioner was allowed to let some other person drive the jeepney. The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that Villamaria could not exercise it. It explained that the existence of an employment relationship did not depend on how the worker was paid but on the presence or absence of control over the means and method of the employees work. In this case, Villamarias directives (to drive carefully, wear an identification card, don decent attire, park the vehicle in his garage, and to inform him about provincial trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of Villamarias supervision and control as employer, the fact that the "boundary" represented installment payments of the purchase price on the jeepney did not remove the parties employer-employee relationship. While the appellate court recognized that a weeks default in paying the boundary-hulog constituted an additional cause for terminating Bustamantes employment, it held that the latter was illegally dismissed. According to the CA, assuming that Bustamante failed to make the required payments as claimed by Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria neither submitted any police report to support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the claim that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for reconsideration thereof. The CA denied the motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy thereof on November 8, 2004. Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical relationship between him and respondent under the Kasunduan was a combination of employer-employee and vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that he and respondent Bustamante had entered into a conditional deed of sale over the jeepney; as such, their employer-employee relationship had been transformed into that of vendorvendee. Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase price thereof had been paid in full. In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord with law and the evidence on record. Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines. Respondent insists that his juridical relationship with petitioner is that of employer-employee because he was engaged to perform activities which were necessary or desirable in the usual business of petitioner, his employer. In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it behooves the Court to resolve the merits of his petition. We agree with respondents contention that the remedy of petitioner from the CA decision was to file a petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for the reconsideration within which to file the petition under Rule 45.28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running of the 15-day reglementary period; consequently, the CA decision became final and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed.29 It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals:30 We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process over the original case. A review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however, assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This is based on the premise that in issuing the assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court. The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an original action and does not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding. A petition for certiorari must be based on

jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any error committed by it will amount to nothing more than an error of judgment which may be corrected or reviewed only by appeal.31 However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling circumstances warrant that the petition be resolved on its merits.32 In this case, the petition was filed within the reglementary period and petitioner has raised an issue of substance: whether the existence of a boundary-hulog agreement negates the employeremployee relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such case. We resolve these issues in the affirmative. The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the government has jurisdiction over the same, are determined by the material allegations of the complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs.33 A prayer or demand for relief is not part of the petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect of what is alleged.34 In determining which body has jurisdiction over a case, the better policy is to consider not only the status or relationship of the parties but also the nature of the action that is the subject of their controversy.35 Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the following: x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or nonagricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work, and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relationship, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee

relationship which can only be resolved by reference to the Labor Code, other labor statutes or their collective bargaining agreement.37 Not every dispute between an employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular courts.38 When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an incident to such claim.39 We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee relationship of the parties extant before the execution of said deed. As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the jeepney owner/operator-driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the relationships between auto-calesa owner/operator and driver,43 bus owner/operator and conductor,44 and taxi owner/operator and driver.45 The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the compensation of the driver, that is, the latters daily earnings are remitted to the owner/operator less the excess of the boundary which represents the drivers compensation. Under this system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of its use. The management of the business is still in the hands of the owner/operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business operations. The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator is not sufficient to change the relationship between them. Indubitably, the driver performs activities which are usually necessary or desirable in the usual business or trade of the owner/operator.46 Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented the boundary of petitioner as well as respondents partial payment (hulog) of the purchase price of the jeepney. Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily remittances also had a dual purpose: that of petitioners boundary and respondents partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment, and adds other obligations not incompatible with the old provisions or where the new contract merely supplements the previous one. 47 The two obligations of the respondent to remit to petitioner the boundary-hulog can stand together. In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail.48 The intention of the contracting parties should be ascertained by looking at the words used to project their intention, that is, all the words, not just a particular word or two or more words standing alone. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.49 The parts and clauses must be interpreted in relation to one another to give effect to the whole. The legal effect of a contract is to be determined from the whole read together.50 Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of the jeepney, thus: Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod: 1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan. 3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG. 4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG. 5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng windshield upang sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi. 6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan. 7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan. 8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan. 9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA MOTORS. 10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng mga pasahero. 11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring kasangkutan. 12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS. 13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG. 14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG. 15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong ng samahan. 16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo. 18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito. 19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin. 20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang aksidente. 21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS. 22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.51 The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or title over the property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment of the purchase price and/or upon faithful compliance with the other terms and conditions that may lawfully be stipulated.52 Such payment or satisfaction of other preconditions, as the case may be, is a positive suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an event that would prevent the obligation of the vendor to convey title from acquiring binding force.53 Stated differently, the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.54 The vendor may extrajudicially terminate the operation of the contract, refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for.55 Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily installment payment for a week, the agreement would be of no force and effect and respondent would have to return the jeepney to petitioner; the employeremployee relationship would likewise be terminated unless petitioner would allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee relationship. The juridical relationship of employer-employee between petitioner and respondent was not negated by the foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondents conduct as driver of the vehicle. As correctly ruled by the CA: The exercise of control by private respondent over petitioners conduct in operating the jeepney he was driving is inconsistent with private respondents claim that he is, or was, not engaged in the transportation business; that, even if petitioner was allowed to let some other person drive the unit, it was not shown that he did so; that the existence of an employment relation is not dependent on how the worker is paid but on the presence or absence of control over the means and method of the work; that the amount earned in excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or could not exercise such power. Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about the fact that the unit would

be going out to the province for two days of more, or to drive the unit carefully, etc. necessarily related to control over the means by which the petitioner was to go about his work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union since the latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary" here represented installment payment of the purchase price on the jeepney did not withdraw the relationship from that of employer-employee, in view of the overt presence of supervision and control by the employer.56 Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the Kasunduan relative to respondents behavior and deportment as driver was for his and respondents benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and that the vehicle would still be in good condition despite the lapse of four years. What is primordial is that petitioner retained control over the conduct of the respondent as driver of the jeepney. Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control over the respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.57 As respondents employer, it was the burden of petitioner to prove that respondents termination from employment was for a lawful or just cause, or, at the very least, that respondent failed to make his daily remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the appellate court: It is basic of course that termination of employment must be effected in accordance with law. The just and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code. Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the boundary hulog for one week or longer may be considered an additional cause for termination of employment. The reason is because the Kasunduan would be of no force and effect in the event that the purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently stipulates: 13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa. Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is for a just cause. The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and back wages. In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to issue a "Paalala," which petitioner however ignored; that petitioner even brought the unit to his (petitioners) province without informing him (private respondent) about it; and that petitioner eventually abandoned the vehicle at a gasoline station after figuring in an accident. But private respondent failed to substantiate these allegations with solid, sufficient proof. Notably, private respondents allegation viz, that he retrieved the vehicle from the gas station, where petitioner abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the Kasunduan) to the effect that default in the remittance of the boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as follows: "Sa lahat ng mga kumukuha ng sasakyan "Sa pamamagitan ng BOUNDARY HULOG

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa. "Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan kayat aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito. "Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso. "Sumasainyo "Attendance: 8/27/99 "(The Signatures appearing herein include (sic) that of petitioners) (Sgd.) OSCAR VILLAMARIA, JR." If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to abandon it?1avvphil.net On another point, private respondent did not submit any police report to support his claim that petitioner really figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to substantiate his claim that petitioner abandoned the unit there.58 Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity is negated by his (petitioners) own evidence that he took the jeepney from the respondent only on July 24, 2000. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 142293 February 27, 2003

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and SBT1 TRUCKING CORPORATION, petitioners, vs. HON. COURT OF APPEALS and JAIME SAHOT, respondents. DECISION QUISUMBING, J.: This petition for review seeks the reversal of the decision2 of the Court of Appeals dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the decision3 of the National Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also pray for the reinstatement of the decision4 of the Labor Arbiter in NLRC NCR Case No. 00-09-06717-94. Culled from the records are the following facts of this case: Sometime in 1958, private respondent Jaime Sahot5 started working as a truck helper for petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business of petitioners. In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted by his employer. Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II (Annexes "G-5" and "G-3", pp. 48, 104, respectively),6 HPM, UTI, Osteoarthritis (Annex "G-4", p. 105),7 and heart enlargement (Annex G, p. 107).8 On said grounds, Belen Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. At the end of his week-long absence, Sahot applied for extension of his leave for the whole month of June, 1994. It was at this time when petitioners allegedly threatened to terminate his employment should he refuse to go back to work. At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work, But he could not retire on pension because petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work, effective June 30, 1994. He ended up sick, jobless and penniless. On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the recovery of separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs Trucking and SBT Trucking, herein petitioners. For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent was not illegally dismissed as a driver because he was in fact petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then did

respondent Sahot become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his separation. Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work for almost seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30, 1994. It appeared that from the expiration of his leave, private respondent never reported back to work nor did he file an extension of his leave. Instead, he filed the complaint for illegal dismissal against the trucking company and its owners. Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should be deemed to have voluntarily resigned from his work. They contended that Sahot had all the time to extend his leave or at least inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled "Manuelito Jimenez et al. vs. T. Paulino Trucking Service," as a defense in view of the alleged similarity in the factual milieu and issues of said case to that of Sahots, hence they are in pari material and Sahots complaint ought also to be dismissed. The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in Sahots case. Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay "financial assistance" of P15,000 to Sahot for having served the company as a regular employee since January 1994 only. On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but his employment was terminated on account of his illness, pursuant to Article 2849 of the Labor Code. Accordingly, the NLRC ordered petitioners to pay private respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service. Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the appellate court affirmed with modification the judgment of the NLRC. It held that private respondent was indeed an employee of petitioners since 1958. It also increased the amount of separation pay awarded to private respondent to P74,880, computed at the rate of P2,080 per year for 36 years of service from 1958 to 1994. It decreed: WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation pay.10 Hence, the instant petition anchored on the following contentions: I RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF THE CIVIL CODE.11 II RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).12 III PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION.13

Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners and respondent Sahot; (2) Whether or not there was valid dismissal; and (3) Whether or not respondent Sahot is entitled to separation pay. Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.14 Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not an employee but was in fact, petitioners industrial partner.15 It is contended that it was the Labor Arbiter who heard the case and had the opportunity to observe the demeanor and deportment of the parties. The same conclusion, aver petitioners, is supported by substantial evidence.16 Moreover, it is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the following pronouncement: We agree with complainant that there was error committed by the Labor Arbiter when he concluded that complainant was an industrial partner prior to 1994. A computation of the age of complainant shows that he was only twenty-three (23) years when he started working with respondent as truck helper. How can we entertain in our mind that a twenty-three (23) year old man, working as a truck helper, be considered an industrial partner. Hence we rule that complainant was only an employee, not a partner of respondents from the time complainant started working for respondent.17 Because the Court of Appeals also found that an employer-employee relationship existed, petitioners aver that the appellate courts decision gives an "imprimatur" to the "illegal" finding and conclusion of the NLRC. Private respondent, for his part, denies that he was ever an industrial partner of petitioners. There was no written agreement, no proof that he received a share in petitioners profits, nor was there anything to show he had any participation with respect to the running of the business.18 The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.19 As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and by their own allegations, they determined private respondents wages and rest day.20 Records of the case show that private respondent actually engaged in work as an employee. During the entire course of his employment he did not have the freedom to determine where he would go, what he would do, and how he would do it. He merely followed instructions of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the CA, private respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under the latters control. Article 176721 of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves.22 Not one of these circumstances is present in this case. No written agreement exists to prove the partnership between the parties. Private respondent did not contribute money, property or industry for the purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of course, during the period when the trucking business was under operation. Neither is there any proof that he had actively participated in the management, administration and adoption of policies of the business. Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994. On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-employee relationship is ultimately a question of fact23 and the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality when supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.24

Time and again this Court has said that "if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter."25 Here, we entertain no doubt. Private respondent since the beginning was an employee of, not an industrial partner in, the trucking business. Coming now to the second issue, was private respondent validly dismissed by petitioners? Petitioners contend that it was private respondent who refused to go back to work. The decision of the Labor Arbiter pointed out that during the conciliation proceedings, petitioners requested respondent Sahot to report back for work. However, in the same proceedings, Sahot stated that he was no longer fit to continue working, and instead he demanded separation pay. Petitioners then retorted that if Sahot did not like to work as a driver anymore, then he could be given a job that was less strenuous, such as working as a checker. However, Sahot declined that suggestion. Based on the foregoing recitals, petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition that he did not report for work anymore. In his decision, the Labor Arbiter concluded that: While it may be true that respondents insisted that complainant continue working with respondents despite his alleged illness, there is no direct evidence that will prove that complainants illness prevents or incapacitates him from performing the function of a driver. The fact remains that complainant suddenly stopped working due to boredom or otherwise when he refused to work as a checker which certainly is a much less strenuous job than a driver.26 But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of Appeals, held that: While it was very obvious that complainant did not have any intention to report back to work due to his illness which incapacitated him to perform his job, such intention cannot be construed to be an abandonment. Instead, the same should have been considered as one of those falling under the just causes of terminating an employment. The insistence of respondent in making complainant work did not change the scenario. It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost requirement (sic). Complainant started working with respondent as truck helper at age twenty-three (23), then as truck driver since 1965. Complainant was already fifty-nine (59) when the complaint was filed and suffering from various illness triggered by his work and age. x x x27 In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made.28 Article 277(b) of the Labor Code puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the dismissal.29 For an employees dismissal to be valid, (a) the dismissal must be for a valid cause and (b) the employee must be afforded due process.30 Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz: Art. 284. Disease as a ground for termination- An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: xxx However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires: Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or

ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Italics supplied). As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC,31 the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the protection of labor. In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T. (International) Corp., we ruled: Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employees dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work.32 In addition, we must likewise determine if the procedural aspect of due process had been complied with by the employer. From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by the management of the trucking company. The employer is required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense.33 These, the petitioners failed to do, even only for record purposes. What management did was to threaten the employee with dismissal, then actually implement the threat when the occasion presented itself because of private respondents painful left thigh. All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, Sahots dismissal is tainted with invalidity. On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to separation pay. The law is clear on the matter. An employee who is terminated because of disease is entitled to "separation pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is greater xxx."34 Following the formula set in Art. 284 of the Labor Code, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after noting that his last monthly salary was P4,160.00 so that one-half thereof is P2,080.00. Finding no reversible error nor grave abuse of discretion on the part of appellate court, we are constrained to sustain its decision. To avoid further delay in the payment due the separated worker, whose claim was filed way back in 1994, this decision is immediately executory. Otherwise, six percent (6%) interest per annum should be charged thereon, for any delay, pursuant to provisions of the Civil Code. WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of one-half monthly pay for every year of service, amounting to P74,880.00, with interest of six per centum (6%) per annum from finality of this decision until fully paid. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. Nos. 83380-81 November 15, 1989 MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents. Ledesma, Saludo & Associates for petitioners. Pablo S. Bernardo for private respondents.

FERNAN, C.J.: This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails the decision of respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the existence of employer-employee relationship and granting respondent workers by reason thereof their various monetary claims. The undisputed facts are as follows: Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesos provided they report for work before 9:30 a.m. everyday. Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods even on Sundays and holidays. On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1 During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied that the same was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the design of petitioner Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and Zapata denied ownership of the same. Consequently a memorandum was issued to each of them to explain on or before February 4, 1985 why no action should be taken against them for accepting a job order which is prejudicial and in direct competition with the business of the company. 2 Both respondents allegedly did not submit their

explanation and did not report for work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4 On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions without loss of seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The charge of unfair labor practice is dismissed for lack of merit. In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage law is hereby ordered dismissed for lack of merit. Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is directed to compute the monetary awards due each complainant based on the available records of the respondents retroactive as of three years prior to the filing of the instant case. SO ORDERED. 5 From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6 After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues: I THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS. II THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE. III THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7 The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly held in countless decisions that the test of employer-employee relationship is four-fold: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. It is the so called "control test" that is the most important element. 8 This simply means the determination of whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and method by which the same is to be accomplished. 9 The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's measurements, and to sew the pants, coat or shirt as specified by the customer. Supervision is actively manifested in all these aspects the manner and quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which reads in part: 4. Effective immediately, new procedures shall be followed: A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must ask permission to the above mentioned before giving orders or instructions to the tailors. B. Before accepting the job orders tailors must check the materials, job orders, due dates and other things to maximize the efficiency of our production. The materials should be checked (sic) if it is matched (sic) with the sample, together with the number of the job order. C. Effective immediately all job orders must be finished one day before the due date. This can be done by proper scheduling of job order and if you will cooperate with your supervisors. If you have many due dates for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on due dates. D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must advise the tailors regarding the due dates so that we can eliminate what we call 'Bitin'. E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle the problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be subject to disciplinary action. For strict compliance. 10 From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only as to the result but also the means and methods by which the same are to be accomplished. That private respondents are regular employees is further proven by the fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11 Since private respondents are regular employees, necessarily the argument that they are independent contractors must fail. As established in the preceding paragraphs, private respondents did not exercise independence in their own methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to their completion. Unlike independent contractors who generally rely on their own resources, the equipment, tools, accessories, and paraphernalia used by private respondents are supplied and owned by petitioners. Private respondents are totally dependent on petitioners in all these aspects. Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, "All employees paid by the result shall receive not less than the applicable new minimum wage rates for eight (8) hours work a day, except where a payment by result rate has been established by the Secretary of Labor. ..." 12 No such rate has been established in this case. But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum wages to private respondents has already been resolved in the decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient evidence to support the claims of the complainants for alleged violation of the minimum wage, their claims for underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13 The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is concerned, that issue has been laid to rest. As to private respondents, the judgment may be said to have attained finality. For it is a well-settled rule in this

jurisdiction that "an appellee who has not himself appealed cannot obtain from the appellate court-, any affirmative relief other than the ones granted in the decision of the court below. " 14 As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance. This is apparent from the provision defining the employees entitled to said allowance, thus: "... All workers in the private sector, regardless of their position, designation or status, and irrespective of the method by which their wages are paid. " 15 Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which provides: Section 3. Employers covered. The Decree shall apply to all employers except to: xxx xxx xxx (e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned. (Emphasis supplied.) On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code). With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show that a violation of the employer's rules has been committed and the evidence of such transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner. When required by their employer to explain in a memorandum issued to each of them, they not only failed to do so but instead went on AWOL (absence without official leave), waited for the period to explain to expire and for petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private respondents, their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for termination of employment by the employer expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts inimical to the interests of the employer, another justifiable ground for dismissal under the same Article of the Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is inimical to the employer's interest. 16 In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to their version and found their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant Manager who was investigating them, unbelievable. Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that: No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and responsibility of his office, has so plainly and completely been bared. That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writings should be resolved in the former's favor, is not an unreasonable or unfair rule. But that disregard of the employer's own rights and interests can be justified by that concern and solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. 17 More importantly, while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will automatically be decided in favor of labor. 18 Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in accordance with the norms of due process. 19 There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously insist on the existence of employer-employee relationship, because of the supervision and control of their employer over them, were the very ones who exhibited their lack of respect and regard for their employer's rules. Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of private respondents. WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service incentive leave pay to private respondents is deleted. SO ORDERED.