Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 81958 June 30, 1988
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner,
vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and
Employment, and TOMAS D. ACHACOSO, as
Administrator of the Philippine Overseas Employment
Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters,
Inc. (PASEI, for short), a firm "engaged principally in the
recruitment of Filipino workers, male and female, for overseas
placement," 1 challenges the Constitutional validity of
Department Order No. 1, Series of 1988, of the Department of
Labor and Employment, in the character of "GUIDELINES
GOVERNING THE TEMPORARY SUSPENSION OF
DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD
WORKERS," in this petition for certiorari and prohibition.
Specifically, the measure is assailed for "discrimination against
males or females;" 2 that it "does not apply to all Filipino
workers but only to domestic helpers and females with similar
skills;" 3 and that it is violative of the right to travel. It is held
likewise to be an invalid exercise of the lawmaking power,
police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of

Article XIII, of the Constitution, providing for worker
participation "in policy and decision-making processes
affecting their rights and benefits as may be provided by
law." 4 Department Order No. 1, it is contended, was passed in
the absence of prior consultations. It is claimed, finally, to be in
violation of the Charter's non-impairment clause, in addition to
the "great and irreparable injury" that PASEI members face
should the Order be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the
respondents Secretary of Labor and Administrator of the
Philippine Overseas Employment Administration, filed a
Comment informing the Court that on March 8, 1988, the
respondent Labor Secretary lifted the deployment ban in the
states of Iraq, Jordan, Qatar, Canada, Hongkong, United
States, Italy, Norway, Austria, and Switzerland. * In submitting
the validity of the challenged "guidelines," the Solicitor
General invokes the police power of the Philippine State.
It is admitted that Department Order No. 1 is in the nature of a
police power measure. The only question is whether or not it is
valid under the Constitution.
The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property
in order to promote the general welfare." 5 As defined, it
consists of (1) an imposition of restraint upon liberty or
property, (2) in order to foster the common good. It is not
capable of an exact definition but has been, purposely, veiled
in general terms to underscore its all-comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the
times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to
conditions and circumstances thus assuring the greatest
benefits." 6

It finds no specific Constitutional grant for the plain reason that

it does not owe its origin to the Charter. Along with the taxing
power and eminent domain, it is inborn in the very fact of
statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital
functions of governance. Marshall, to whom the expression
has been credited, 7 refers to it succinctly as the plenary
power of the State "to govern its citizens." 8
"The police power of the State ... is a power coextensive with
self- protection, and it is not inaptly termed the "law of
overwhelming necessity." It may be said to be that inherent
and plenary power in the State which enables it to prohibit all
things hurtful to the comfort, safety, and welfare of society." 9
It constitutes an implied limitation on the Bill of Rights.
According to Fernando, it is "rooted in the conception that men
in organizing the state and imposing upon its government
limitations to safeguard constitutional rights did not intend
thereby to enable an individual citizen or a group of citizens to
obstruct unreasonably the enactment of such salutary
measures calculated to ensure communal peace, safety, good
order, and welfare." 10 Significantly, the Bill of Rights itself does
not purport to be an absolute guaranty of individual rights and
liberties "Even liberty itself, the greatest of all rights, is not
unrestricted license to act according to one's will." 11 It is
subject to the far more overriding demands and requirements
of the greater number.
Notwithstanding its extensive sweep, police power is not
without its own limitations. For all its awesome consequences,
it may not be exercised arbitrarily or unreasonably. Otherwise,
and in that event, it defeats the purpose for which it is
exercised, that is, to advance the public good. Thus, when the
power is used to further private interests at the expense of the
citizenry, there is a clear misuse of the power. 12
In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity. 13 In

the absence of clear and convincing evidence to the contrary,
the presumption logically stands.
The petitioner has shown no satisfactory reason why the
contested measure should be nullified. There is no question
that Department Order No. 1 applies only to "female contract
workers," 14 but it does not thereby make an undue
discrimination between the sexes. It is well-settled that
"equality before the law" under the Constitution 15 does not
import a perfect Identity of rights among all men and women. It
admits of classifications, provided that (1) such classifications
rest on substantial distinctions; (2) they are germane to the
purposes of the law; (3) they are not confined to existing
conditions; and (4) they apply equally to all members of the
same class. 16
The Court is satisfied that the classification made-the
preference for female workers rests on substantial
distinctions.
As a matter of judicial notice, the Court is well aware of the
unhappy plight that has befallen our female labor force
abroad, especially domestic servants, amid exploitative
working conditions marked by, in not a few cases, physical
and personal abuse. The sordid tales of maltreatment suffered
by migrant Filipina workers, even rape and various forms of
torture, confirmed by testimonies of returning workers, are
compelling motives for urgent Government action. As precisely
the caretaker of Constitutional rights, the Court is called upon
to protect victims of exploitation. In fulfilling that duty, the Court
sustains the Government's efforts.
The same, however, cannot be said of our male workers. In
the first place, there is no evidence that, except perhaps for
isolated instances, our men abroad have been afflicted with an
Identical predicament. The petitioner has proffered no
argument that the Government should act similarly with
respect to male workers. The Court, of course, is not

impressing some male chauvinistic notion that men are

superior to women. What the Court is saying is that it was
largely a matter of evidence (that women domestic workers
are being ill-treated abroad in massive instances) and not
upon some fanciful or arbitrary yardstick that the Government
acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court
accepts. The Court cannot, however, say the same thing as far
as men are concerned. There is simply no evidence to justify
such an inference. Suffice it to state, then, that insofar as
classifications are concerned, this Court is content that
distinctions are borne by the evidence. Discrimination in this
case is justified.
As we have furthermore indicated, executive determinations
are generally final on the Court. Under a republican regime, it
is the executive branch that enforces policy. For their part, the
courts decide, in the proper cases, whether that policy, or the
manner by which it is implemented, agrees with the
Constitution or the laws, but it is not for them to question its
wisdom. As a co-equal body, the judiciary has great respect for
determinations of the Chief Executive or his subalterns,
especially when the legislature itself has specifically given
them enough room on how the law should be effectively
enforced. In the case at bar, there is no gainsaying the fact,
and the Court will deal with this at greater length shortly, that
Department Order No. 1 implements the rule-making powers
granted by the Labor Code. But what should be noted is the
fact that in spite of such a fiction of finality, the Court is on its
own persuaded that prevailing conditions indeed call for a
deployment ban.
There is likewise no doubt that such a classification is
germane to the purpose behind the measure. Unquestionably,
it is the avowed objective of Department Order No. 1 to
"enhance the protection for Filipino female overseas
workers" 17 this Court has no quarrel that in the midst of the
terrible mistreatment Filipina workers have suffered abroad, a
ban on deployment will be for their own good and welfare.

The Order does not narrowly apply to existing conditions.

Rather, it is intended to apply indefinitely so long as those
conditions exist. This is clear from the Order itself ("Pending
review of the administrative and legal measures, in the
Philippines and in the host countries . . ." 18), meaning to say
that should the authorities arrive at a means impressed with a
greater degree of permanency, the ban shall be lifted. As a
stop-gap measure, it is possessed of a necessary malleability,
depending on the circumstances of each case. Accordingly, it
provides:
9. LIFTING OF SUSPENSION. The Secretary
of Labor and Employment (DOLE) may, upon
recommendation of the Philippine Overseas
Employment Administration (POEA), lift the
suspension in countries where there are:
1. Bilateral agreements or understanding with
the Philippines, and/or,
2. Existing mechanisms providing for sufficient
safeguards to ensure the welfare and protection
of Filipino workers. 19
The Court finds, finally, the impugned guidelines to be
applicable to all female domestic overseas workers. That it
does not apply to "all Filipina workers" 20 is not an argument
for unconstitutionality. Had the ban been given universal
applicability, then it would have been unreasonable and
arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the singling
out of a select person or group of persons within an existing
class, to the prejudice of such a person or group or resulting in
an unfair advantage to another person or group of persons. To
apply the ban, say exclusively to workers deployed by A, but
not to those recruited by B, would obviously clash with the
equal protection clause of the Charter. It would be a classic
case of what Chase refers to as a law that "takes property
from A and gives it to B." 21 It would be an unlawful invasion of

property rights and freedom of contract and needless to state,

an invalid act. 22 (Fernando says: "Where the classification is
based on such distinctions that make a real difference as
infancy, sex, and stage of civilization of minority groups, the
better rule, it would seem, is to recognize its validity only if the
young, the women, and the cultural minorities are singled out
for favorable treatment. There would be an element of
unreasonableness if on the contrary their status that calls for
the law ministering to their needs is made the basis of
discriminatory legislation against them. If such be the case, it
would be difficult to refute the assertion of denial of equal
protection." 23 In the case at bar, the assailed Order clearly
accords protection to certain women workers, and not the
contrary.)
It is incorrect to say that Department Order No. 1 prescribes a
total ban on overseas deployment. From scattered provisions
of the Order, it is evident that such a total ban has hot been
contemplated. We quote:

5.4 Hirings by employers in

countries
with
whom
the
Philippines have [sic] bilateral labor
agreements or understanding.
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS AND
WORKERS OF SIMILAR SKILLS--Vacationing
domestic helpers and/or workers of similar skills
shall be allowed to process with the POEA and
leave for worksite only if they are returning to the
same employer to finish an existing or partially
served employment contract. Those workers
returning to worksite to serve a new employer
shall be covered by the suspension and the
provision of these guidelines.
xxx xxx xxx

5.
AUTHORIZED
DEPLOYMENT-The
deployment of domestic helpers and workers of
similar skills defined herein to the following [sic]
are authorized under these guidelines and are
exempted from the suspension.

9. LIFTING OF SUSPENSION-The Secretary of

Labor and Employment (DOLE) may, upon
recommendation of the Philippine Overseas
Employment Administration (POEA), lift the
suspension in countries where there are:

5.1 Hirings by immediate members

of the family of Heads of State and
Government;

1.
Bilateral
agreements
or
understanding with the Philippines,
and/or,

5.2 Hirings by Minister, Deputy

Minister and the other senior
government officials; and

2. Existing mechanisms providing

for sufficient safeguards to ensure
the welfare and protection of
Filipino workers. 24

5.3 Hirings by senior officials of the

diplomatic
corps
and
duly
accredited
international
organizations.

xxx xxx xxx

The consequence the deployment ban has on the right to
travel does not impair the right. The right to travel is subject,

among other things, to the requirements of "public safety," "as

may be provided by law." 25 Department Order No. 1 is a valid
implementation of the Labor Code, in particular, its basic
policy to "afford protection to labor," 26pursuant to the
respondent Department of Labor's rule-making authority
vested in it by the Labor Code. 27 The petitioner assumes that
it is unreasonable simply because of its impact on the right to
travel, but as we have stated, the right itself is not absolute.
The disputed Order is a valid qualification thereto.
Neither is there merit in the contention that Department Order
No. 1 constitutes an invalid exercise of legislative power. It is
true that police power is the domain of the legislature, but it
does not mean that such an authority may not be lawfully
delegated. As we have mentioned, the Labor Code itself vests
the Department of Labor and Employment with rulemaking
powers in the enforcement whereof. 28
The petitioners's reliance on the Constitutional guaranty of
worker participation "in policy and decision-making processes
affecting their rights and benefits" 29 is not well-taken. The right
granted by this provision, again, must submit to the demands
and necessities of the State's power of regulation.
The Constitution declares that:
Sec. 3. The State shall afford full protection to
labor, local and overseas, organized and
unorganized, and promote full employment and
equality of employment opportunities for all. 30
"Protection to labor" does not signify the promotion of
employment alone. What concerns the Constitution more
paramountly is that such an employment be above all, decent,
just, and humane. It is bad enough that the country has to
send its sons and daughters to strange lands because it
cannot satisfy their employment needs at home. Under these
circumstances, the Government is duty-bound to insure that
our toiling expatriates have adequate protection, personally

and economically, while away from home. In this case, the

Government has evidence, an evidence the petitioner cannot
seriously dispute, of the lack or inadequacy of such protection,
and as part of its duty, it has precisely ordered an indefinite
ban on deployment.
The Court finds furthermore that the Government has not
indiscriminately made use of its authority. It is not contested
that it has in fact removed the prohibition with respect to
certain countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the
petitioner, must yield to the loftier purposes targetted by the
Government. 31 Freedom of contract and enterprise, like all
other freedoms, is not free from restrictions, more so in this
jurisdiction, where laissez faire has never been fully accepted
as a controlling economic way of life.
This Court understands the grave implications the questioned
Order has on the business of recruitment. The concern of the
Government, however, is not necessarily to maintain profits of
business firms. In the ordinary sequence of events, it is profits
that suffer as a result of Government regulation. The interest
of the State is to provide a decent living to its citizens. The
Government has convinced the Court in this case that this is
its intent. We do not find the impugned Order to be tainted
with a grave abuse of discretion to warrant the extraordinary
relief prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
SO ORDERED.
Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin, Cortes and Grio-Aquino,
JJ., concur.
Gutierrez, Jr. and Medialdea, JJ., are on leave.

These material facts recited in the basic petition are virtually

undisputed and we reproduce the same hereunder:
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 77875 February 4, 1993

PHILIPPINE AIRLINES, INC., petitioner,
vs.
ALBERTO SANTOS, JR., HOUDIEL MAGADIA, GILBERT ANTONIO,
REGINO DURAN, PHILIPPINE AIRLINES EMPLOYEES
ASSOCIATION, and THE NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Fortunato Gupit, Jr., Solon R. Garcia, Rene B. Gorospe, Bienvinodo T.
Jamoralin, jr. and Paulino D. Ungos, Jr. for petitioner.
Adolpho M. Guerzon for private respondents.

REGALADO, J.:
The instant petition for certiorari seeks to set aside the decision of The
National Labor Relations Commission (NLRC) in NLRC Case No. 41206-85, promulgated on December 11, 1986, 1 containing the following
disposition:
WHEREFORE, in view of the foregoing consideration,
the Decision appealed from is set aside and another
one entered, declaring the suspension of complainants
to be illegal and consequently, respondent PAL is
directed
to
pay
complainants
their
salaries
corresponding to the respective period(s) of their
suspension, and to delete the disciplinary action from
complainants' service records. 2

1. Individual respondents are all Port Stewards of

Catering
Sub-Department,
Passenger
Services
Department
of
petitioner.
Their
duties
and
responsibilities, among others, are:
Prepares meal orders and checklists,
setting up standard equipment in
accordance with the requirements of the
type of service for each flight; skiing,
binning,
and
inventorying
of
Commissary supplies and equipment.
2. On various occasions, several deductions were made
from their salary. The deductions represented losses of
inventoried items charged to them for mishandling of
company properties . . . which respondents resented.
Such that on August 21, 1984, individual respondents,
represented by the union, made a formal notice
regarding the deductions to petitioner thru Mr. Reynaldo
Abad, Manager for Catering. . . .
3. As there was no action taken on said representation,
private respondents filed a formal grievance on
November 4, 1984 pursuant to the grievance machinery
Step 1 of the Collective Bargaining Agreement between
petitioner and the union. . . . The topics which the union
wanted to be discussed in the said grievance were the
illegal/questionable salary deductions and inventory of
bonded goods and merchandise being done by catering
service personnel which they believed should not be
their duty.
4. The said grievance was submitted on November 21,
1984 to the office of Mr. Reynaldo Abad, Manager for
Catering, who at the time was on vacation leave. . . .
5. Subsequently, the grievants (individual respondents)
thru the shop steward wrote a letter on December 5,
1984 addressed to the office of Mr. Abad, who was still
on leave at the time, that inasmuch as no reply was

made to their grievance which "was duly received by

your secretary" and considering that petitioner had only
five days to resolve the grievance as provided for in the
CBA, said grievance as believed by them (private
respondents) was deemed resolved in their favor. . . .
6. Upon Mr. Abad's return on December 7, 1984, he
immediately informed the grievants and scheduled a
meeting on December 12, 1984. . . .
7. Thereafter, the individual respondents refused to
conduct inventory works. Alberto Santos, Jr. did not
conduct ramp inventory on December 7, 10 and 12.
Gilbert Antonio did not conduct ramp inventory on
December 10. In like manner, Regino Duran and
Houdiel Magadia did not conduct the same on
December 10 and 12.
8. At the grievance meeting which was attended by
some union representatives, Mr. Abad resolved the
grievance by denying the petition of individual
respondents and adopted the position that inventory of
bonded goods is part of their duty as catering service
personnel, and as for the salary deductions for losses,
he rationalized:
1. It was only proper that employees are
charged for the amount due to
mishandling of company property which
resulted to losses. However, loss may
be cost price 1/10 selling price.
9. As there was no ramp inventory conducted on the
mentioned dates, Mr. Abad, on January 3, 1985 wrote
by an inter-office memorandum addressed to the
grievants, individual respondents herein, for them to
explain on (sic) why no disciplinary action should be
taken against them for not conducting ramp
inventory. . . .
10. The directive was complied with . . . . The reason for
not conducting ramp inventory was put forth as:

4. Since the grievance step 1 was not

decided and no action was done by your
office within 5 days from November 21,
1984, per provision of the PAL-PALEA
CBA, Art. IV, Sec. 2, the grievance is
deemed resolved in PALEA's favor.
11. Going over the explanation, Mr. Abad found the
same unsatisfactory. Thus, a penalty of suspension
ranging from 7 days to 30 days were (sic) imposed
depending on the number of infractions committed. *
12. After the penalty of suspension was meted down,
PALEA filed another grievance asking for lifting of, or at
least, holding in abeyance the execution of said penalty.
The said grievance was forthwith denied but the penalty
of suspension with respect to respondent Ramos was
modified, such that his suspension which was originally
from January 15, 1985 to April 5, 1985 was shortened
by one month and was lifted on March 5, 1985. The
union, however, made a demand for the reimbursement
of the salaries of individual respondents during the
period of their suspension.
13. Petitioner stood pat (o)n the validity of the
suspensions. Hence, a complaint for illegal suspension
was
filed
before
the
Arbitration Branch of the Commission, . . . Labor Arbiter
Ceferina J. Diosana, on March 17, 1986, ruled in favor
of petitioner by dismissing the complaint. . . . 3
Private respondents appealed the decision of the labor arbiter to
respondent commission which rendered the aforequoted decision
setting aside the labor arbiter's order of dismissal. Petitioner's motion
for reconsideration having been denied, it interposed the present
petition.
The Court is accordingly called upon to resolve the issue of whether or
not public respondent NLRC acted with grave abuse of discretion
amounting to lack of jurisdiction in rendering the aforementioned
decision.

Evidently basic and firmly settled is the rule that judicial review by this
Court in labor cases does not go so far as to evaluate the sufficiency of
the evidence upon which the labor officer or office based his or its
determination, but is limited to issues of jurisdiction and grave abuse of
discretion. 4 It has not been shown that respondent NLRC has unlawfully
neglected the performance of an act which the law specifically enjoins it to
perform as a duty or has otherwise unlawfully excluded petitioner from the
exercise of a right to which it is entitled.
The instant case hinges on the interpretation of Section 2, Article IV of
the PAL-PALEA Collective Bargaining Agreement, (hereinafter, CBA), to
wit:

preempt the resolution of his grievance; rather, he has the duty to

observe the status quo. 6
Citing Section 1, Article IV of the CBA, petitioner further argues that
respondent employees have the obligation, just as management has, to
settle all labor disputes through friendly negotiations. Thus, Section 2 of
the CBA should not be narrowly interpreted. 7 Before the prescriptive
period of five days begins to run, two concurrent requirements must be
met, i.e., presentment of the grievance and its discussion between the
shop steward and the division head who in this case is Mr. Abad. Section 2
is not self-executing; the mere filing of the grievance does not trigger the
tolling of the prescriptive period. 8

Sec. 2 Processing of Grievances

Petitioner has sorely missed the point.

xxx xxx xxx

It is a fact that the sympathy of the Court is on the side of the laboring
classes, not only because the Constitution imposes such sympathy, but
because of the one-sided relation between labor and capital. 9 The
constitutional mandate for the promotion of labor is as explicit as it is
demanding. The purpose is to place the workingman on an equal plane
with management with all its power and influence in negotiating for
the advancement of his interests and the defense of his rights. 10 Under the
policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with
less privileges in life should have more privileges in law. 11

STEP 1 Any employee who believes that he has a

justifiable grievance shall take the matter up with his
shop steward. If the shop steward feels there is
justification for taking the matter up with the Company,
he shall record the grievance on the grievance form
heretofore agreed upon by the parties. Two (2) copies
of the grievance form properly filled, accepted, and
signed shall then be presented to and discussed by the
shop steward with the division head. The division head
shall answer the grievance within five (5) days from the
date of presentation by inserting his decision on the
grievance form, signing and dating same, and returning
one copy to the shop steward. If the division head fails
to act within the five (5)-day regl(e)mentary period, the
grievance must be resolved in favor of the aggrieved
party. If the division head's decision is not appealed to
Step II, the grievance shall be considered settled on the
basis of the decision made, and shall not be eligible for
further appeal. 5 (Emphasis ours.)
Petitioner submits that since the grievance machinery was established
for both labor and management as a vehicle to thresh out whatever
problems may arise in the course of their relationship, every employee
is duty bound to present the matter before management and give the
latter an opportunity to impose whatever corrective measure is
possible. Under normal circumstances, an employee should not

It is clear that the grievance was filed with Mr. Abad's secretary during
his absence. 12 Under Section 2 of the CBA aforequoted, the division head
shall act on the grievance within five (5) days from the date of presentation
thereof, otherwise "the grievance must be resolved in favor of the
aggrieved party." It is not disputed that the grievants knew that division
head Reynaldo Abad was then "on leave" when they filed their grievance
which was received by Abad's secretary. 13 This knowledge, however,
should not prevent the application of the CBA.
On this score, respondent NLRC aptly ruled:
. . . Based on the facts heretofore narrated, division
head Reynaldo Abad had to act on the grievance of
complainants within five days from 21 November 1984.
Therefore, when Reynaldo Abad, failed to act within the
reglementary period, complainants, believing in good
faith that the effect of the CBA had already set in,
cannot be blamed if they did not conduct ramp

inventory for the days thereafter. In this regard,

respondent PAL argued that Reynaldo Abad was on
leave at the time the grievance was presented. This,
however, is of no moment, for it is hard to believe that
everything under Abad's authority would have to stand
still during his absence from office. To be sure, it is to be
expected that someone has to be left to attend to
Abad's duties. Of course, this may be a product of
inadvertence on the part of PAL management, but
certainly, complainants should not be made to suffer the
consequences. 14
Contrary to petitioner's submission, 15 the grievance of employees is not a
matter which requires the personal act of Mr. Abad and thus could not be
delegated. Petitioner could at least have assigned an officer-in-charge to
look into the grievance and possibly make his recommendation to Mr.
Abad. It is of no moment that Mr. Abad immediately looked into the
grievance upon returning to work, for it must be remembered that the
grievants are workingmen who suffered salary deductions and who rely so
much on their meager income for their daily subsistence and survival.
Besides, it is noteworthy that when these employees first presented their
complaint on August 21, 1984, petitioner failed to act on it. It was only after
a formal grievance was filed and after Mr. Abad returned to work on
December 7, 1984 that petitioner decided to turn an ear to their plaints.
As respondent NLRC has pointed out, Abad's failure to act on the
matter may have been due to petitioner's inadvertence, 16 but it is clearly
too much of an injustice if the employees be made to bear the dire effects
thereof. Much as the latter were willing to discuss their grievance with their
employer, the latter closed the door to this possibility by not assigning
someone else to look into the matter during Abad's absence. Thus, private
respondents should not be faulted for believing that the effects of the CBA
in their favor had already stepped into the controversy.
If the Court were to follow petitioner's line of reasoning, it would be
easy for management to delay the resolution of labor problems, the
complaints of the workers in particular, and hide under the cloak of its
officers being "on leave" to avoid being caught by the 5-day deadline
under the CBA. If this should be allowed, the workingmen will suffer
great injustice for they will necessarily be at the mercy of their
employer. That could not have been the intendment of the pertinent
provision of the CBA, much less the benevolent policy underlying our
labor laws.

ACCORDINGLY, on the foregoing premises, the instant petition is

hereby DENIED and the assailed decision of respondent National
Labor Relations Commission is AFFIRMED. This judgment is
immediately executory.
SO ORDERED.
Narvasa, C.J., Feliciano, Nocon and Campos, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-13778

April 29, 1960

PHILIPPINE EDUCATION CO., INC., petitioner,

vs.
UNION OF PHILIPPINE EDUCATION EMPLOYEES (NLU) and THE
COURT OF INDUSTRIAL RELATIONS,respondents.
Marcial Esposo for petitioner.
Eulogio R. Lerum for respondent Union. Jose B. Bolisay for respondent
CIR.
MONTEMAYOR, J.:
The Philippine Education Company, Inc. is appealing the order of the
Court of Industrial Relations, dated February 7, 1958, directing it to
reinstate its former employee, Ernesto Carpio, to his former or
equivalent position, without backpay, and from the resolution of the
same court in banc, dated March 22, 1958, denying the company's
motion for reconsideration.
Ernesto Carpio and other employees of the company, members of the
Union of Philippine Education Employees (NLU) joined a strike staged
on January 16, 1953. After the labor dispute was settled, the Industrial
Court ordered the reinstatement of the strikers, including Carpio. The
company, however, opposed the reinstatement of Carpio for the reason
that a criminal complaint had been filed against him in the Municipal
Court of Manila for theft of magazines allegedly belonging to the
company. He was convicted and sentenced to two months and one day
ofarresto mayor. On appeal to the Court of First Instance, Carpio was
acquitted on the ground of reasonable doubt.
The question of Carpio's reinstatement was heard by the Industrial
Court where the parties submitted as evidence the transcript of the
stenographic notes taken during the hearing in the criminal case before
the Court of First Instance of Manila, the exhibits presented in said

case, as well as the decisions of the Municipal Court convicting him,

and that of the Court of First Instance acquitting him, or rather
dismissing the case against him on reasonable doubt. After said
hearing, the Industrial Court agreed with the finding of the Court of First
Instance that the offense had not been proven beyond reasonable
doubt and held that Carpio's acquittal entitled him to reinstatement,
though without backpay.
We have examined the aforementioned evidence, and we are inclined
to agree with the Municipal Court that Carpio's guilt had been duly
established. At least, the preponderance of evidence was against his
innocence. The question for determination is whether the whether the
acquittal of an employee, specially on the ground of reasonable doubt,
in a criminal case for theft involving articles and merchandise belonging
to his employer, entitles said employee to reinstatement.
In the case of National Labor Organization of Employees and Laborers
vs. Court of Industrial Relations, 95 Phil., 727; Off. Gaz. (9) 4219, we
said:
. . . the acquittal of a employee in a criminal case is no bar to
the Court of Industrial Relations, after proper hearing, finding
the same employee guilty of facts inimical to the interests of his
employer and justifying loss of confidence in him by said
employer, thereby warranting his dismissal or the refusal of the
Company to reinstate him. The reason for this is not difficult to
see. The evidence required by law to establish guilt and to
warrant conviction in a criminal case substantially differs from
the evidence necessary to establish responsibility or liability in a
civil or non-criminal case. The difference is in the amount and
weight of evidence and also in degree. In a criminal case, the
evidence or proof must be beyond reasonable doubt while in a
civil or non criminal case it is merely preponderance of
evidence. In further support of this principle we may refer to Art.
29 of the New Civil Code (Rep. Act 386) which provides that
when the accused in a criminal case is acquitted on the ground
of reasonable doubt a civil action for damages for the same act
or omission may be instituted where only a preponderance of
evidence is necessary to establish liability. From all this it is
clear that the Court of Industrial Relations was justified in
denying the petition of Rivas and Tolentino for reinstatement in
the cement company, because of their illegal possession of
hand grenades intended by them for purposes of sabotage in
connection with the strike on March 16, 1952.

Then in the case of National Labor Union vs. Standard Vacuum Oil
Company, 73 Phil., 279, the City Fiscal refused to prosecute two
employees charged with theft for lack of evidence and yet this Tribunal
upheld their dismissal from the employer company on the ground that
their employer had ample reason to distrust them.
The relation of employer and employee, specially where the employee
has access to the employer's property in the form of articles and
merchandise for sale, necessarily involves trust and confidence. If said
merchandise are lost and said loss is reasonably attributed to said
employee, and he is charged with theft, even if he is acquitted of the
form of articles and merchandise for sale, necessarily involves trust
and confidence. If said merchandise are lost and said loss is
reasonably attributed to said employee, and he is charged with theft,
even if he is acquitted of the charge on reasonable doubt, when the
employer has lost its confidence in him, it would be highly unfair to
require said employer to continue employing him or to reinstate him, for
in that case the former might find it necessary for its protection to
employ another person to watch and keep an eye on him. In the
present case, Carpio was refused reinstatement not because of any
union affiliation or activity or because the company has been guilty of
any unfair labor practice. As already stated, Carpio was convicted in
the Municipal Court and although he was acquitted on reasonable
doubt in the Court of First Instance, the company had ample reason to
distrust him. Under the circumstances, we cannot in conscience require
the company to reemploy or reinstate him.
In view of the foregoing, the appealed orders of the Industrial Court of
February 7, 1958 and March 22, 1958 are hereby reversed. No costs.
Paras, C.J., Bengzon, Bautista Angelo, Labrador, Barrera, and
Gutierrez David, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78090 July 26, 1991
PACIFIC MILLS, INC., petitioner,
vs.
ZENAIDA ALONZO, respondent.
Napoleon L. Apostol for petitioner.

NARVASA, J.:p
From July 30, 1973, Zenaida Alonzo was employed as a ring frame
operator in the Pacific Mills, Inc. until September 30, 1982 when she
was discharged by Management.
The record shows that in the early afternoon of September 22, 1982,
Zenaida challenged Company Inspector Ernesto Tamondong to a fight,
saying: "Putang Ina mo, lumabas ka, tarantado, kalalaki mong tao,
duwag ka . . Ipagugulpi kita sa labas at kaya kitang ipakaladkad dito sa
loob ng compound palabas ng gate sa mga kamag-anak ko." And
suiting action to the word, she thereupon boxed Tamondong in the
stomach. The motive for the assault was Zenaida's resentment at
having been reprimanded, together with other employees, two days
earlier by Tamondong for wasting time by engaging in Idle
chatter. 1 Tamondong forthwith reported the incident to the firm's
Administrative Manager 2 as well as the Chairman of Barangay Balombato,
Quezon City. 3
On September 30, 1982, Zenaida Alonzo was given a Memorandum by
the company's Executive Vice President & General Manager
terminating her employment as of October 1, 1982 on various grounds:
poor work, habitual absences and tardiness, wasting time,
insubordination and gross disrespect. The service of that memorandum
of dismissal on her was not preceded by any complaint, hearing or

other formality. These were apparently considered unnecessary by

Management 4 in view of the provision in the Company Rules and
Regulations (embodied in the Collective Bargaining Agreement between
the company and the union representing the employees) that:
Fighting or attempting to inflict harm to another
employee, will render (sic) the aggressor to outright
dismissal.
It was only at the hearing of the complaint for illegal dismissal (and
non-payment of proportionate 13th month pay) instituted by Zenaida on
October 4, 1982 in the NCR Arbitration Branch, that evidence was
presented by the company not only of the assault by Zenaida on her
superior but also of many other violations by her of company rules and
regulations, in an attempt to substantiate the validity of her dismissal
from work.
The Labor Arbiter found that Alonzo had indeed verbally abused and
struck her superior, Tamondong, and rejected her contention that the
assault was not punishable since it was "not work-connected and was
provoked/instigated by Ernesto Tamondong." 5 The Arbiter also declared
as "fully established the previous infractions of complainant," these being
"a matter of record and not denied by complainant (Zenaida)."
The Arbiter was of the view, however, that Alonzo was entitled to relief,
because (a) the penalty imposed was "harsh and severe and not
commensurate with the offense, . . . suspension of three (3) months . .
(being) the proper, just and reasonable penalty . . .;" and because (b)
the company had failed "to investigate complainant before she was
dismissed." The Arbiter thus ordered Pacific Mills, Inc., Zenaida's
employer:
. . . to reinstate complainant without loss of seniority
rights and to pay her backwages from January 1, 1983
until fully reinstated, the period from October 1, 1982 to
December 31, 1982 complainant being under
suspension without pay . . . (as well as) to pay
complainant's 13th month pay in the amount of THREE
HUNDRED FIFTY-ONE PESOS ONLY (P351.00).
Acting on the employer's appeal, the National Labor Relations
Commission rendered judgment on March 23, 1987, sustaining the
Labor Arbiter's findings. It however limited the award of back wages to

Zenaida only to three (3) years, in accordance with this Court's

judgment in Feati University Faculty Club (PAFLU) vs. Feati
University,58 SCRA 396. 6
Pacific Mills Inc. has instituted in this Court the special civil action
of certiorari at bar praying for nullification of the judgment of the NLRC
for having been rendered with grave abuse of discretion.
In the comment thereon, 7 required of him by the Court, the Solicitor
General opined that:
. . . both the Labor Arbiter and the NLRC apparently
failed to take into consideration the fact that Zenaida
Alonzo was dismissed not because of this isolated act
(of assault against her superior) but rather because of
numerous and repeated violations of company rules
and regulations. It was only this last incident which
compelled Pacific Mills, Inc. to finally terminate her
services. It is the totality of the infractions committed by
the employee which should have been considered in
determining whether or not there is just cause for her
dismissal.
Zenaida Alonzo was caught several times leaving her
place of work to chat with her co-employees. This is
reprehensible conduct since, as ring frame operator,
she must be at her post during work hours to prevent
the occurrence of incidents which could damage the
machine. The company inspector precisely warned her
against doing this. She had also been repeatedly
reprimanded for insubordination, habitual tardiness,
wasting time and not wearing the required company
uniform, In spite of these infractions the company bore
with her services and did not see fit to dismiss her. Her
assault on the company inspector was apparently the
last straw which compelled Pacific Mills, Inc. to
terminate her services.
Accordingly, the Solicitor General recommended "payment of
separation pay equivalent to three (3) years backwages but without
reinstatement" and of "proportionate 13th month pay."

For their part, the Chief Legal Officer of the NLRC, 8 and the private
respondent, 9 insist that since the dismissal of Zenaida Alonzo was not
preceded by any notice of the charges and a hearing thereon, the
judgment of the NLRC must be sustained.
Decisive of this controversy is the judgment of the Court en
banc in Wenphil Corporation v. NLRC, promulgated on February 8,
1989, 10 in which the following policy pronouncements were made:
The Court holds that the policy of ordering the
reinstatement to the service of an employee without
loss of seniority and the payment of his wages during
the period of his separation until his actual
reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not
afforded due process, although his dismissal was found
to be for just and authorized cause in an appropriate
proceeding in the Ministry of Labor and Employment,
should be re-examined. It will be highly prejudicial to the
interests of the employer to impose on him the services
of an employee who has been shown to be guilty of the
charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the
undeserving, if not undesirable, remains in the service.
Thus in the present case, where the private respondent,
who appears to be of violent temper, caused trouble
during office hours and even defied his superiors as
they tried to pacify him, should not be rewarded with
reemployment and back wages. It may encourage him
to do even worse and will render a mockery of the rules
of discipline that employees are required to observe.
Under the circumstances, the dismissal of the private
respondent for just cause should be maintained. He has
no right to return to his former employer.
However, the petitioner (employer) must nevertheless
be held to account for failure to extend to private
respondent his right to an investigation before causing
his dismissal. The rule is explicit as above discussed.
The dismissal of an employee must be for just or
authorized cause and after due process (Section 1,
Rule XIV, Implementing Regulations of the Labor
Code). Petitioner committed an infraction of the second

requirement. Thus, it must be imposed a sanction for its

failure to give a formal notice and conduct an
investigation as required by law before dismissing . . .
(respondent) from employment. Considering the
circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The
measure of tills award depends on the facts of each
case and the gravity of the omission committed by the
employer.
The Court perceives no sufficient cause, it has indeed been cited to
none by the respondents, to decline to apply the Wenphil doctrine to
the case at bar.
While it is true that Pacific Mills, Inc. had not complied with the
requirements of due process prior to removing Zenaida Alonzo from
employment, it is also true that subsequently, in the proceedings before
the Labor Arbiter in which Zenaida Alonzo had of course taken active
part, it had succeeded in satisfactorily proving the commission by
Zenaida of many violations of company rules and regulations justifying
termination of her employment. Under the circumstances, it is clear
that, as the Solicitor General has pointed out, the continuance in the
service of the latter is patently inimical to her employer's interests and
that, citing San Miguel Corporation v. NLRC, 11 the law, in protecting the
rights of the laborer authorizes neither oppression nor self-destruction of
the employer. And it was oppressive and unjust in the premises to require
reinstatement of the employee.
WHEREFORE, the petition is granted and the challenged decision of
the respondent Commission dated March 23, 1987 and that of the
Labor Arbiter thereby affirmed, are NULLIFIED AND SET ASIDE.
However, the petitioner is ordered to pay private respondent a
proportionate part of the 13th month pay due her, amounting to
P351.00 as well as to indemnify her in the sum of P1,000.00. No costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 87698 September 24, 1991
PHILIPPINE AIRLINES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and OSCAR
IRINEO, respondents.
The Legal Department, PAL for petitioner.
Francisco M. Delos Reyes for private respondent.

NARVASA, J.:p
This case treats of an employee of Philippine Airlines, Inc. (PAL), who
was dismissed from his work on August 23, 1967 on the basis of the
findings and recommendations of a Fact Finding Panel, submitted on
August 11, 1967 after an investigation commenced in July, 1967 in
coordination with a well known accounting firm. 1 The Fact Finding Panel
recommended the criminal prosecution of the employee, Oscar Irineo,
together with four others, namely: Rogelio Damian, Antonio Rabasco,
Jacinto Macatol and Jesus Saba, on account of complicity in irregular
refunds of international plane tickets. 2
On the basis of the panel's report, and the testimony of witnesses taken
in the course of the investigation, criminal proceedings were also
initiated against four of the PAL employees above named, namely:
Oscar Irineo, Rogelio Damian, Antonio Rabasco, and Jacinto Macatol.
They were prosecuted for estafa thru falsification of commercial
documents in the Court of First Instance of Rizal, under an information
filed by the Provincial Fiscal on September 25, 1968. 3 The case resulted
in the conviction after due trial of all the accused on March 1, 1976; this,
despite the fiscal's having earlier moved for the dismissal of the charges as
against Irineo and Macatol. 4

All four (4) defendants filed motions for reconsideration and/or new
trial. All the motions were denied except Macatol's. After due hearing on
said motions, the Trial Court rendered an amended decision
dated September 23, 1977 absolving Macatol of any liability for the
offense charged, "for lack of sufficient evidence." The other three
appealed. 5
On July 6, 1978 about twelve (12) years after his dismissal from
employment Macatol filed a complaint for illegal dismissal against
PAL in the Department of Labor. His complaint was however dismissed
by the Labor Arbiter on the ground that his right of action had
prescribed. That dismissal was affirmed by the National Labor
Relations Commission in a decision promulgated on May 30, 1980. The
Commission ruled that "the running of the prescriptive period ...
commenced on the date ... (Macatol's) cause of action accrued;" that
such cause of action did not accrue "upon the termination of the
criminal case," but upon "his dismissal, the legality or illegality of which
could be determined soon after it was effected ... (and a) suit to contest
its legality could proceed independently of any criminal proceedings;"
that "if no criminal case was instituted, following the logic of the
complainant's argument, the cause of action would not and could not
have accrued at all; ... (and) the institution of the criminal action did not
bar the complainant from filing a complaint for illegal dismissal." 6
On the other hand, the appeal taken by Oscar Irineo, Rogelio Damian,
Antonio Rabasco, resulted in a decision promulgated on September
23, 1983 by the Intermediate Appellate Court, 7 affirming the judgment of
conviction only as regards Rogelio Damian, but acquitting Irineo and
Rabasco "on grounds of reasonable doubt." 8
On May 10, 1984, seventeen (17) years after the termination of his
employment on August 23, 1967, Irineo filed a complaint against PAL
for reinstatement and back wages on the claim that that termination
was illegal. It is the action thus instituted that has given rise to the
proceedings now before this Court.
Irineo's action eventuated in a decision of the Labor Arbiter dated
November 12, 1985, 9 decreeing his reinstatement to his position in 1967
without loss of seniority rights and the payment to him of back wages "from
August 13, 1967 up to his actual reinstatement," as well as moral damages
in the amount of P300,000.00.
The Arbiter overruled the defense of prescription asserted by PAL,
among others. The Arbiter held that since there was a PAL circular

dated June 15, 1966 to the effect that "(a)n employee charged with any
crime inimical to the company's interest shall be placed under
preventive suspension until the final adjudication of his case," and there
was, too, a standing order by the Court of Industrial Relations at that
time forbidding the dismissal of any employee by PAL without court
authority, the termination by PAL of Irineo's employment on August 23,
1967 merely "amounted to a suspension per (said) PAL IRD Circular
No. 66-11." According to the Arbiter, said IRD Circular No. 66-11 was
not raised in issue in the earlier case instituted by Macatol, supra, 10 and
this serves to distinguish Macatol's case from Irineo's, precluding reaching
a conclusion in the latter similar to that in the former (i.e., that the claim
was barred by prescription). The Arbiter held, in fine, that in view of said
Circular No. 66-11, PAL's termination of Irineo's employment should be
deemed only as an act by which "Irineo was placed under preventive
suspension until his (criminal) case was finally adjudicated, for after all, the
arbitration branch of the Commission should put meaning to the law
between the parties and unless such law between the parties are (sic)
implemented the same would become useless." The Arbiter concluded with
the following disposition:
WHEREFORE, judgment is hereby rendered directing
PAL to terminate the suspension of Irineo which it
imposed on August 23, 1967 and to reinstate him to his
position without loss of seniority rights and with
backwages from August 13, 1967 up to his actual
reinstatement.
Lastly, moral damages in the amount of P300,000.00 is
(sic) awarded to complainant.
PAL appealed to the NLRC but failed to obtain reversal of the Arbiter's
judgment. In a Resolution promulgated on February 28, 1989, the Third
Division of the NLRC upheld all the Arbiter's conclusions. 11 The NLRC
agreed with the Arbiter that "applying the mandate of IRD Circular No. 6611 which respondent PAL itself solely promulgated," Irineo was never
dismissed from employment but "was merely under preventive
suspension;" and that PAL's termination of Irineo's work was violative of
the "Injunction Order dated September 3, 1963 in CIR Case No. 43-IPA"
(forbidding, during the pendency of said case, the dismissal of any
employee by PAL without court authority), even though that order "lost its
efficacy when the parties concerned entered into a valid Certified
Bargaining Agreement" (on December 7, 1965, according to petitioner
PAL 12 ). It also affirmed the award of moral damages.

PAL is now before this Court, praying for the issuance of a writ
of certiorari to nullify and set aside the NLRC Resolution of February
28, 1989 as constituting "a plain case of patent abuse of discretion
amounting to excess of jurisdiction or lack of the same an exemplary
example of power arbitrarily exercised without due regard to the rule of
law." The Court issued a temporary restraining order on April 26, 1989
prohibiting enforcement or implementation of the challenged
resolution. 13
Required to comment in public respondent's behalf, the Office of the
Solicitor General begged to be excused, declaring that "(a)fter an
exhaustive and judicious scrutiny of the records of the case, as well as
the applicable law and jurisprudence on the issues involved, ... (it could
not), without violating the law, espouse the position taken by the
respondent ... (NLRC) ..." Comments were filed by private
respondent 14 and the Senior Research Attorney of the NLRC in the latter's
behalf, 15 which the Court resolved to treat as their answers to PAL's
petition.
In light of the material facts above set out, it is not indeed possible, as
the Solicitor General holds, to defend the decision of the respondent
Commission or that of the Labor Arbiter.
That there should be care and solicitude in the protection and
vindication of the rights of workingmen cannot be gainsaid; but that
care and solicitude can not justify disregard of relevant facts or
eschewal of rationality in the construction of the text of applicable rules
in order to arrive at a disposition in favor of an employee who is
perceived as otherwise deserving of sympathy and commiseration.
The letter to Oscar Irineo of then PAL President Benigno P. Toda, Jr.
dated August 23, 1967, based evidently on the investigation and report
of the fact finding panel, leaves no doubt that Irineo's employment was
being ended; the language is plain and categorical. It reads pertinently
as follows: 16
To: Oscar Ireneo
Comptroller's Department
For being involved in the irregular refund of tickets in
the international service to the damage and prejudice of

the company, you are dismissed from the service

effective immediately.
The acts committed being criminal, resulting in the
swindling of the company, the Legal Department is
directed to file immediately the corresponding criminal
cases against you.
To say, as both the Arbiter and the respondent Commission do, that
that declaration, "you are dismissed from the service effective
immediately," should be construed merely as a suspension, not a
dismissal, from employment, is illogical if not downright ludicrous. They
attempt to justify this conclusion by adverting to a PAL circular dated
June 15, 1966 to the effect that "(a)n employee charged with any crime
inimical to the company's interest shall be placed under preventive
suspension until the final adjudication of his case," and construe this as
a complete foreclosure or prohibition of any alternative or concurrent
action on PAL's part, such as the imposition of administrative sanctions
or penalties; in other words, any disciplinary action against an erring
employee was absolutely dependent on the outcome of the criminal
action against the latter, no disciplinary measure of any nature being
permissible against the employee "until the final adjudication" of his
criminal case. It is a construction that has nothing to support it, is
contrary to common sense, and one certainly not justified by the
recorded facts.
The attempt to sustain the strained theory of dismissal-quasuspension by referring to a standing order by the Court of Industrial
Relations at that time forbidding the dismissal of any employee by PAL
without court authority, is equally indefensible. That prohibition was
imposed only in relation to a labor dispute then pending before the
Court of Industrial Relations. That dispute however ended when the
parties entered into a collective bargaining agreement two (2) years or
so before Irineo was fired on August 23, 1967. In other words, when
Irineo's employment was terminated, the CIR injunction adverted was
already functions officio and could no longer have any relevance to that
event.
There is moreover, nothing in the record to excuse respondent Irineo's
omission to impugn his termination of employment by PAL in line
with the respondent commission's theory, i.e., that under existing PAL
rules and the CIR injunction, he could only be placed under preventive
suspension and therefore his dismissal was illegal. His assertion
thereof after seventeen (17) years from his discharge from employment

can only mean that he slept on his rights or that his counsel did not
share the respondent Commission's belief in the soundness of the
theory. His claim must thus be rejected as time-barred, as being
unpardonably tardy.
Premises considered, it appears clear to the Court that the respondent
Commission's conclusions are flawed by errors so serious as to
constitute grave abuse of discretion and should on this account be
struck down.
WHEREFORE, the Court GRANTS the petition and issues the writ of
certiorari prayed for, NULLIFYING AND SETTING ASIDE the
respondent Commission's Resolutions promulgated on February 28,
1989 and on March 20, 1989, MAKING PERMANENT the temporary
restraining order issued by this Court on April 26, 1989, and
DISMISSING private respondent's complaint. No costs.
SO ORDERED.
Cruz, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 78409 September 14, 1989
NORBERTO SORIANO, petitioner,
vs.
OFFSHORE SHIPPING AND MANNING CORPORATION, KNUT
KNUTSEN O.A.S., and NATIONAL LABOR RELATIONS
COMMISSION (Second Division), respondents.
R. C. Carrera Law Firm for petitioner.
Elmer V. Pormento for private respondents.
FERNAN, C.J.:
This is a petition for certiorari seeking to annul and set aside the
decision of public respondent National Labor Relations Commission
affirming the decision of the Philippine Overseas Employment
Administration in POEA Case No. (M)85-12-0953 entitled "Norberto
Soriano v. Offshore Shipping and Manning Corporation and Knut
Knutsen O.A.S.", which denied petitioner's claim for salary differential
and overtime pay and limited the reimbursement of his cash bond to
P15,000.00 instead of P20,000.00.
In search for better opportunities and higher income, petitioner
Norberto Soriano, a licensed Second Marine Engineer, sought
employment and was hired by private respondent Knut Knutsen O.A.S.
through its authorized shipping agent in the Philippines, Offshore
Shipping and Manning Corporation. As evidenced by the Crew
Agreement, petitioner was hired to work as Third Marine Engineer on
board Knut Provider" with a salary of US$800.00 a month on a
conduction basis for a period of fifteen (15) days. He admitted that the
term of the contract was extended to six (6) months by mutual

agreement on the promise of the employer to the petitioner that he will

be promoted to Second Engineer. Thus, while it appears that petitioner
joined the aforesaid vessel on July 23, 1985 he signed off on
November 27, 1985 due to the alleged failure of private respondentemployer to fulfill its promise to promote petitioner to the position of
Second Engineer and for the unilateral decision to reduce petitioner's
basic salary from US$800.00 to US$560.00. Petitioner was made to
shoulder his return airfare to Manila.
In the Philippines, petitioner filed with the Philippine Overseas
Employment Administration (POEA for short), a complaint against
private respondent for payment of salary differential, overtime pay,
unpaid salary for November, 1985 and refund of his return airfare and
cash bond allegedly in the amount of P20,000.00 contending therein
that private respondent unilaterally altered the employment contract by
reducing his salary of US$800.00 per month to US$560.00, causing
him to request for his repatriation to the Philippines. Although
repatriated, he claims that he failed to receive payment for the
following:
1. Salary for November which is equivalent to
US$800.00;
2. Leave pay equivalent to his salary for 16.5 days in
the sum of US$440.00;
3. Salary differentials which is equivalent to US$240.00
a month for four (4) months and one (1) week in the
total sum of US$1,020,00;
4. Fixed overtime pay equivalent to US$240.00 a month
for four (4) months and one (1) week in the sum of
US$1,020.00;
5. Overtime pay for 14 Sundays equivalent to
US$484.99;
6. Repatriation cost of US$945.46;
7. Petitioner's cash bond of P20,000.00.

In resolving aforesaid case, the Officer-in-Charge of the Philippine

Overseas Employment Administration or POEA found that petitioner-

complainant's total monthly emolument is US$800.00 inclusive of fixed

overtime as shown and proved in the Wage Scale submitted to the
Accreditation Department of its Office which would therefore not entitle
petitioner to any salary differential; that the version of complainant that
there was in effect contract substitution has no grain of truth because
although the Employment Contract seems to have corrections on it,
said corrections or alterations are in conformity with the Wage Scale
duly approved by the POEA; that the withholding of a certain amount
due petitioner was justified to answer for his repatriation expenses
which repatriation was found to have been requested by petitioner
himself as shown in the entry in his Seaman's Book; and that petitioner
deposited a total amount of P15,000.00 only instead of P20,000.00
cash bond. 2
Accordingly, respondent POEA ruled as follows:
VIEWED IN THE LIGHT OF THE FOREGOING,
respondents are hereby ordered to pay complainant,
jointly and severally within ten (10) days from receipt
hereof the amount of P15,000.00 representing the
reimbursement of the cash bond deposited by
complainant less US$285.83 (to be converted to its
peso equivalent at the time of actual payment).
Further, attorney's fees equivalent to 10 % of the
aforesaid award is assessed against respondents.
All other claims are hereby dismissed for lack of merit.
SO ORDERED. 3
Dissatisfied, both parties appealed the aforementioned decision of the
POEA to the National Labor Relations Commission. Complainantpetitioner's appeal was dismissed for lack of merit while respondents'
appeal was dismissed for having been filed out of time.
Petitioner's motion for reconsideration was likewise denied. Hence this
recourse.
Petitioner submits that public respondent committed grave abuse of
discretion and/or acted without or in excess of jurisdiction by
disregarding the alteration of the employment contract made by private
respondent. Petitioner claims that the alteration by private respondent
of his salary and overtime rate which is evidenced by the Crew

Agreement and the exit pass constitutes a violation of Article 34 of the

Labor Code of the Philippines. 6
On the other hand, public respondent through the Solicitor General,
contends that, as explained by the POEA: "Although the employment
contract seems to have corrections, it is in conformity with the Wage
Scale submitted to said office. 7
Apparently, petitioner emphasizes the materiality of the alleged
unilateral alteration of the employment contract as this is proscribed by
the Labor Code while public respondent finds the same to be merely
innocuous. We take a closer look at the effects of these alterations
upon petitioner's right to demand for his differential, overtime pay and
refund of his return airfare to Manila.
A careful examination of the records shows that there is in fact no
alteration made in the Crew Agreement 8 or in the Exit Pass. 9 As the
original data appear, the figures US$800.00 fall under the column salary,
while the word "inclusive" is indicated under the column overtime rate. With
the supposed alterations, the figures US$560.00 were handwritten above
the figures US$800.00 while the figures US$240.00 were also written
above the word "inclusive".
As clearly explained by respondent NLRC, the correction was made
only to specify the salary and the overtime pay to which petitioner is
entitled under the contract. It was a mere breakdown of the total
amount into US$560.00 as basic wage and US$240.00 as overtime
pay. Otherwise stated, with or without the amendments the total
emolument that petitioner would receive under the agreement as
approved by the POEA is US$800.00 monthly with wage differentials or
overtime pay included. 10
Moreover, the presence of petitioner's signature after said items
renders improbable the possibility that petitioner could have
misunderstood the amount of compensation he will be receiving under
the contract. Nor has petitioner advanced any explanation for
statements contrary or inconsistent with what appears in the records.
Thus, he claimed: [a] that private respondent extended the duration of
the employment contract indefinitely, 11 but admitted in his Reply that his
employment contract was extended for another six (6) months by
agreement between private respondent and himself: 12 [b] that when
petitioner demanded for his overtime pay, respondents repatriated
him 13 which again was discarded in his reply stating that he himself
requested for his voluntary repatriation because of the bad faith and

insincerity of private respondent; 14 [c] that he was required to post a cash

bond in the amount of P20,000.00 but it was found that he deposited only
the total amount of P15,000.00; [d] that his salary for November 1985 was
not paid when in truth and in fact it was petitioner who owes private
respondent US$285.83 for cash advances 15 and on November 27, 1985
the final pay slip was executed and signed; 16 and [e] that he finished his
contract when on the contrary, despite proddings that he continue working
until the renewed contract has expired, he adamantly insisted on his
termination.

Verily, it is quite apparent that the whole conflict centers on the failure
of respondent company to give the petitioner the desired promotion
which appears to be improbable at the moment because the M/V Knut
Provider continues to be laid off at Limassol for lack of charterers. 17
It is axiomatic that laws should be given a reasonable interpretation,
not one which defeats the very purpose for which they were passed.
This Court has in many cases involving the construction of statutes
always cautioned against narrowly interpreting a statute as to defeat
the purpose of the legislator and stressed that it is of the essence of
judicial duty to construe statutes so as to avoid such a deplorable result
(of injustice or absurdity) and that therefore "a literal interpretation is to
be rejected if it would be unjust or lead to absurd results." 18
There is no dispute that an alteration of the employment contract
without the approval of the Department of Labor is a serious violation of
law.
Specifically, the law provides:
Article 34 paragraph (i) of the Labor Code reads:
Prohibited Practices. It shall be unlawful for any
individual, entity, licensee, or holder of authority:
xxxx
(i) To substitute or alter employment contracts approved
and verified by the Department of Labor from the time
of actual signing thereof by the parties up to and
including the period of expiration of the same without
the approval of the Department of Labor.

In the case at bar, both the Labor Arbiter and the National Labor
Relations Commission correctly analyzed the questioned annotations
as not constituting an alteration of the original employment contract but
only a clarification thereof which by no stretch of the imagination can be
considered a violation of the above-quoted law. Under similar
circumstances, this Court ruled that as a general proposition,
exceptions from the coverage of a statute are strictly construed. But
such construction nevertheless must be at all times reasonable,
sensible and fair. Hence, to rule out from the exemption amendments
set forth, although they did not materially change the terms and
conditions of the original letter of credit, was held to be unreasonable
and unjust, and not in accord with the declared purpose of the Margin
Law. 19
The purpose of Article 34, paragraph 1 of the Labor Code is clearly the
protection of both parties. In the instant case, the alleged amendment
served to clarify what was agreed upon by the parties and approved by
the Department of Labor. To rule otherwise would go beyond the
bounds of reason and justice.
As recently laid down by this Court, the rule 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. 20 But to
disregard the employer's own rights and interests solely on the basis of
that concern and solicitude for labor is unjust and unacceptable.
Finally, it is well-settled that factual findings of quasi-judicial agencies
like the National Labor Relations Commission which have acquired
expertise because their jurisdiction is confined to specific matters are
generally accorded not only respect but at times even finality if such
findings are supported by substantial evidence. 21
In fact since Madrigal v. Rafferty 22 great weight has been accorded to the
interpretation or construction of a statute by the government agency called
upon to implement the same. 23
WHEREFORE, the instant petition is DENIED. The assailed decision of
the National Labor Relations Commission is AFFIRMED in toto.
SO ORDERED. Gutierrez, Jr., Bidin, and Cortes, JJ., concur.

Feliciano, J., is on leave.

The pertinent portion of the decision of the respondent Court of

Industrial Relations is as follows:

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 46727

September 27, 1939

PAMBUSCO EMPLOYEES' UNION, INC., petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS, composed to
Honorables Francisco Zulueta, Leopoldo Rovira, and Jose
Generoso, and PAMPANGA BUS COMPANY, INC., respondents.
Jose Alejandrino for petitioner.
Manuel Escudero for respondent court.
L.D. Lockwood for respondent Pampanga Bus Co., Inc.
LAUREL, J.:
This is a petition for a writ of certiorari to review the decision of the
Court of Industrial Relations promulgated on January 14, 1939, denying
the demands of the Pambusco Employees' Union, Inc.
The following are the pertinent facts which have given occasion to this
industrial dispute: On March 26, 1938, the Pambusco Employees'
Union, Inc., addressed a thirteen- point petition to the management of
the Pampanga Bus Co. Upon the failure of the company officials to act
upon the petition, a strike was declared by the workers on April 14,
1938. However, through the timely mediation of the Department of
Labor, a provisional agreement was reached, by virtue of which the
strike was called off, eight demands were granted, and the remaining
five were submitted to the Court of Industrial Relations for settlement.
One of these demands, in the language of the petitioner, is that the
respondent Pampanga Bus Co. "pay to all Company drivers affiliated
with the Pambusco Employees' Union, Inc., all the back overtime pay
due them under the law." After trial on the disputed demands, the Court
of Industrial Relations decided inter alia that the claim for back overtime
pay could not be allowed.

The evidence is clear that even before the final approval of Act
No. 4242 amending Act No. 4123, the Eight Hour Labor Law, by
extending the provisions of the latter to other class of laborers
including drivers of public service vehicles, a petition was
addressed by 44 drivers of the company to the GovernorGeneral asking him to veto the bill amending the law extending
it to drivers for the reason stated in their petition (Exhibit 5 and
5-a). About the 6th day of September, 1935, a petition was
again addressed by 97 drivers of the company to the
Commissioner of Labor requesting adjustment of working hours
to permit them to retain their present status with the company
as nearly as possible under the law (Exhibits 4, 4-a, 4-b, 4-c, 4d and 4-e). This petition was prepared after a meeting of the
employees was held and was drawn with the help of the
manager of the respondent about the last days of August, 1935.
In September, 1937, about 347 employees of the different
departments of the company again addresses a petition to the
Director of Labor expressing their satisfaction with the hours
they work and the pay they receive for their labor including the
special bonuses and overtime pay they receive for extra work,
and asking, in view thereof, that the law be not applied to them
(Exhibits 6, 6-a to 6-g).
After the enactment of Act No. 4242 several transportation
companies operating motor buses filed with Commissioner of
Labor petitions for a readjustment of the hours of labor
specified in section 1 of the Act on the basis of maintaining
the status quo as to the hours the drivers were required to be
actually on duty in order to enable them to make the prescribed
hours daily that the exigencies of the service required. The
petitions were based on the impracticability of applying the
provisions of the law to drivers of public service vehicles without
disrupting the public service and causing pecuniary loss to both
employers and employees alike, and the resulting difficulties on
the part of the drivers. The testimony of Atty. Carlos Alvear on
this point in uncontradicted. He testified that in 1935, he was
president of the Philippine Motor Association composed of bus
operators operating in the Philippines, of which the respondent
is a member. Major Olson, who was at the time the executive
secretary of the association, and himself took up the matter with
the Secretary of the Interior and the Secretary of Labor after the

passage of the Act extending the operation of the Eight Labor

Law to drivers. In their conference with the Commissioner of
Labor, they were told to take advantage of the provisions of the
law in which they may apply for the readjustment of the working
hours, and in conformity with that suggestion, the executive
secretary of the association filed a formal petition, Exhibit 10,
on September 5, 1935. When this was filed the Department of
Labor further suggested that the drivers of each company file
and address a petition of similar nature designating their
representatives who will represent them in a conference that
the Commissioner of Labor may call for the purpose. With the
filing of the petition, the conferees were assured by the UnderSecretary of Labor that the enforcement of the Eight Hour
Labor Law in so far as the drivers were concerned, will be held
in abeyance until such time as the meeting or investigations are
held. It is not clear as to whether investigations and hearings
were finally made but the evidence indicates that the petition
was never decided and the companies continued its schedule
of hours.
Sections 3 and 4 of Act No. 4123 read as follows:
"SEC. 3. The Commissioner of Labor, with the advice of two
representatives of the employers concerned, designated by the
latter, and of two representatives of the laborers concerned,
designated by these, shall, at the request of an interested party,
decide in each case whether or not it is proper to increase or
decrease the number of hours of labor fixed in section one of
this Act, either because the organization or nature of the work
require it, or because of lack or insufficiency of competent
laborers for certain work in a locality, or because the relieving of
the laborers must be done under certain conditions, or by
reason of any other exceptional circumstances or conditions of
the work or industry concerned; but the number of hours of
labor shall in no case exceed twelve daily or seventy-two
weekly.
"SEC. 4. Employees or laborers desiring an increase or
decrease of the number of hours of labor shall address an
application to this effect to the Commissioner of Labor, stating
their reasons. Upon receipt of an application of this kind, the
Commissioner of Labor shall call a meeting of the employers
and laborers of the establishment or industry concerned, for the
designation of advisers as provided in the preceding section

hereof. The Commissioner of Labor or his authorized

representative, together with the advisers, shall make an
investigation of the facts, giving special attention, in the first
place, to the human aspect, and in the second place, to the
economic aspect of the matter, and he may for this purpose
administer oaths, take affidavits examine witnesses and
documents and issue subpoenas and subpoenas duces tecum.
The decision of the Commissioner of Labor may be
reconsidered by him at any time."
It seems clear that the petitions of both employers and
employees for the non-enforcement of the Eight Hour Labor
Law were made in accordance with these provisions of the law.
Exhibit 9 of the respondent which is a communication
addressed by the Under-Secretary of Labor on September 6,
1935, to the A.L. Ammen Transportation Company, Inc., defines
the attitude taken by the Department of Labor in connection
with those petitions. It advises the company to submit an
application under sections 3 and 4 of Act No. 4123 abovequoted for an increase of working hours of such laborers as
may fall under the amendment and that pending final solution of
said application, the Department of Labor will not make any
attempt to enforce said amendment. As has already been
stated it is not clear whether final action or decision has been
made on the applications with respect to the drivers of the
respondent; that it is undeniable fact that up to the outbreak of
the dispute, the law was not observed nor enforced in the
company; and that upon mutual agreement arrived at by the
parties on April 14, 1938, the company worked out a schedule
beginning May 1, 1938, placing all its employees under an
eight-hour schedule.
In view of the foregoing fact, the court is the opinion that the
drivers are not entitled to the overtime pay demanded for the
whole period the law was not observed or enforced in the
company. They are entitled to payment of wages for hours
worked in excess of the legal hours only beginning May 1,
1938.
On January 30, 1939, the petitioner filed a motion for reconsideration
which was denied by the Court of Industrial Relations, sitting in
banc, with the following observations:

We have reviewed carefully the evidence on record with regard

to the claim for back overtime pay we find that it amply supports
the findings and conclusions set forth in support of the motion
for reconsideration are virtually a repetition of the reasons
advanced in the memorandum of the petitioner filed before the
case was decided and were already discussed and considered
in the decision. The evidence permits no other conclusion than
that the employees were not coerced not intimidated by the
respondent on the repeated occasions they signed and
presented to the Department of Labor their petitions for nonenforcement of the Eight Hour Labor Law. The employees were
indubitably aware of certain hardships the enforcement of the
law at that time would bring to them and these prompted their
attitude of preferring the continuation of the schedule of hours
observed prior to the enactment of the legislation extending the
benefits of the Eight Hour Labor Law to drivers of motor
vehicles in public utility enterprises. Whatever pecuniary
advantage they would have gained by the strict observance of
the law by the company should they be made to work more
than eight hours a day was apparently waived or given up by
them in exchange of their personal convenience and of the
additional monthly pay the respondent gave to those
employees who were assigned to routes where the daily
working hours exceeded the maximum fixed by law. The
evidence that the company paid additional salaries not only to
drivers but also to its conductors who were assigned to such
routes stands uncontradicted and no attempt even was made
by the petitioner to deny it. Without need of passing on the
question as to whether the provisions of the law are mandatory
or not, in the light of the above facts and applying the rules of
equity invoked by the union, we are constrained to hold that the
petitioners are not rightly entitled to the payment sought.
In Kapisanan ng mga Manggagawa sa Pantranco vs. Pangasinan
Transportation Co. (39 Off. Gaz., 1217), we have held that, to be
entitled to the benefits of section 5 of Act No. 4123, fulfillment of the
mandate of the law is necessary, this being a matter of public interest.
Where both parties, as in this case, we have violated the law, this court
must decline to extend the strong arm of equity, as neither party is
entitled to its aid. This is especially true in view of the findings of fact
made by the Court of Industrial Relations which we should not disturb.
We are not, to be sure insensible to the argument that industrial
disputes should be decided with an eye on the welfare of the working

class, who, in the inter-play of economic forces, is said to find itself in

the "end of the stick." In the case at bar, however, we find no reason for
disturbing the action taken by the respondent Court of Industrial
Relations, which is a special court enjoined to "act according to justice
and equity and substantial merits of the case, without regard to
technicalities or legal forms and shall not be bound by any technical
rules of legal evidence but may inform its mind in such manner as it
may deem just and equitable" (sec. 20, Commonwealth Act No. 103).
The petition is dismissed, without pronouncement regarding costs. So
ordered.
Avancea, C.J., Villa-Real, Imperial, Diaz, Concepcion, and Moran,
JJ., concur.

On January 2, 1980, Arbitrator Vivar rendered a decision directing

Filipro to:
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS
COMMISSION and NESTL PHILIPPINES, INC. (formerly FILIPRO,
INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the
holiday pay award and the change of the divisor in the computation of
benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines,
Inc.) filed with the National Labor Relations Commission (NLRC) a
petition for declaratory relief seeking a ruling on its rights and
obligations respecting claims of its monthly paid employees for
holiday pay in the light of the Court's decision in Chartered Bank
Employees Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to
submit the case for voluntary arbitration and appointed respondent
Benigno Vivar, Jr. as voluntary arbitrator.

pay its monthly paid employees holiday pay pursuant to

Article 94 of the Code, subject only to the exclusions
and limitations specified in Article 82 and such other
legal restrictions as are provided for in the Code.
(Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the
award to three years, (2) the exclusion of salesmen, sales
representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the
award of the holiday pay, and (3) deduction from the holiday pay award
of overpayment for overtime, night differential, vacation and sick leave
benefits due to the use of 251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from
the date of effectivity of the Labor Code, that their sales personnel are
not field personnel and are therefore entitled to holiday pay, and that
the use of 251 as divisor is an established employee benefit
which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order
declaring that the effectivity of the holiday pay award shall retroact to
November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company's sales personnel are field
personnel and, as such, are not entitled to holiday pay. He likewise
ruled that with the grant of 10 days' holiday pay, the divisor should be
changed from 251 to 261 and ordered the reimbursement of
overpayment for overtime, night differential, vacation and sick leave
pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial
reconsideration. Respondent Arbitrator treated the two motions as
appeals and forwarded the case to the NLRC which issued a resolution
dated May 25, 1987 remanding the case to the respondent arbitrator on
the ground that it has no jurisdiction to review decisions in voluntary
arbitration cases pursuant to Article 263 of the Labor Code as amended
by Section 10, Batas Pambansa Blg. 130 and as implemented by
Section 5 of the rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator

refused to take cognizance of the case reasoning that he had no more
jurisdiction to continue as arbitrator because he had resigned from
service effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay;
and
2) Whether or not, concomitant with the award of holiday pay, the
divisor should be changed from 251 to 261 days and whether or not the
previous use of 251 as divisor resulted in overpayment for overtime,
night differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field
personnel under Article 82 of the Labor Code. The respondent
company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said
article defines field personnel as "non-agritultural employees who
regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose
actual hours of work in the field cannot be determined with reasonable
certainty."
It is undisputed that these sales personnel start their field work at 8:00
a.m. after having reported to the office and come back to the office at
4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or
4:30 p.m. comprises the sales personnel's working hours which can be
determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of
work in the field be reasonably ascertained. The company has no way
of determining whether or not these sales personnel, even if they report

to the office before 8:00 a.m. prior to field work and come back at 4:30
p.m, really spend the hours in between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly
situated employees to report for work at the office at
8:00 a.m. and return at 4:00 or 4:30 p.m. is not within
the realm of work in the field as defined in the Code but
an exercise of purely management prerogative of
providing administrative control over such personnel.
This does not in any manner provide a reasonable level
of determination on the actual field work of the
employees which can be reasonably ascertained. The
theoretical analysis that salesmen and other similarlysituated workers regularly report for work at 8:00 a.m.
and return to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is
supervised, is surface projection. Actual field work
begins after 8:00 a.m., when the sales personnel follow
their field itinerary, and ends immediately before 4:00 or
4:30 p.m. when they report back to their office. The
period between 8:00 a.m. and 4:00 or 4:30 p.m.
comprises their hours of work in the field, the extent or
scope and result of which are subject to their individual
capacity and industry and which "cannot be determined
with reasonable certainty." This is the reason why
effective supervision over field work of salesmen and
medical representatives, truck drivers and
merchandisers is practically a physical impossibility.
Consequently, they are excluded from the ten holidays
with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot
be determined with reasonable certainty" must be read in conjunction
with Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage This rule shall apply to all
employees except:
xxx xxx xxx

(e) Field personnel and other employees whose time

and performance is unsupervised by the employer . . .
(Emphasis supplied)
While contending that such rule added another element not found in
the law (Rollo, p. 13), the petitioner nevertheless attempted to show
that its affected members are not covered by the abovementioned rule.
The petitioner asserts that the company's sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and
the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo,
pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the
aforementioned rule did not add another element to the Labor Code
definition of field personnel. The clause "whose time and performance
is unsupervised by the employer" did not amplify but merely interpreted
and expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause is
still within the scope and purview of Article 82 which defines field
personnel. Hence, in deciding whether or not an employee's actual
working hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least
signify that these sales personnel's time and performance are
supervised. The purpose of this schedule is merely to ensure that the
sales personnel are out of the office not later than 8:00 a.m. and are
back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the
number of actual hours spent in field work by an employee through the
imposition of sanctions on absenteeism contained in the company
circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given
incentive bonus every quarter based on their performance is proof that
their actual hours of work in the field can be determined with
reasonable certainty.

The criteria for granting incentive bonus are: (1) attaining or exceeding
sales volume based on sales target; (2) good collection performance;
(3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6) proper truck
maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given
incentive bonuses precisely because of the difficulty in measuring their
actual hours of field work. These employees are evaluated by the result
of their work and not by the actual hours of field work which are hardly
susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA
613 [1963]), the Court had occasion to discuss the nature of the job of
a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A.
Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are
fairly apparent. Such a salesman, to a greater extent,
works individually. There are no restrictions respecting
the time he shall work and he can earn as much or as
little, within the range of his ability, as his ambition
dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away
from his employer's place of business, is not subject to
the personal supervision of his employer, and his
employer has no way of knowing the number of hours
he works per day.
While in that case the issue was whether or not salesmen were entitled
to overtime pay, the same rationale for their exclusion as field
personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that,
concomitant with the award of holiday pay, the divisor should be
changed from 251 to 261 days to include the additional 10 holidays and
the employees should reimburse the amounts overpaid by Filipro due
to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:

The Court thinks otherwise.

. . . The new doctrinal policy established which ordered
payment of ten holidays certainly adds to or accelerates

the basis of conversion and computation by ten days.

With the inclusion of ten holidays as paid days, the
divisor is no longer 251 but 261 or 262 if election day is
counted. This is indeed an extremely difficult legal
question of interpretation which accounts for what is
claimed as falling within the concept of "solutio indebti."
When the claim of the Union for payment of ten
holidays was granted, there was a consequent need to
abandon that 251 divisor. To maintain it would create an
impossible situation where the employees would benefit
with additional ten days with pay but would
simultaneously enjoy higher benefits by discarding the
same ten days for purposes of computing overtime and
night time services and considering sick and vacation
leave credits. Therefore, reimbursement of such
overpayment with the use of 251 as divisor arises
concomitant with the award of ten holidays with pay.
(Rollo, p. 34)
The divisor assumes an important role in determining whether or not
holiday pay is already included in the monthly paid employee's salary
and in the computation of his daily rate. This is the thrust of our
pronouncement in Chartered Bank Employees Association
v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in
the rules and in the policy instruction, the company
practice indicates that the monthly salaries of the
employees are so computed as to include the holiday
pay provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is
the fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a "divisor" of
251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10)
legal holidays from the total number of calendar days in
a year. If the employees are already paid for all nonworking days, the divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September
1, 1980, is as follows:

monthly rate x 12 months

251 days
Following the criterion laid down in the Chartered Bank case, the use of
251 days' divisor by respondent Filipro indicates that holiday pay is not
yet included in the employee's salary, otherwise the divisor should have
been 261.
It must be stressed that the daily rate, assuming there are no
intervening salary increases, is a constant figure for the purpose of
computing overtime and night differential pay and commutation of sick
and vacation leave credits. Necessarily, the daily rate should also be
the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261
days would result in a lower daily rate which is violative of the
prohibition on non-diminution of benefits found in Article 100 of the
Labor Code. To maintain the same daily rate if the divisor is adjusted to
261 days, then the dividend, which represents the employee's annual
salary, should correspondingly be increased to incorporate the holiday
pay. To illustrate, if prior to the grant of holiday pay, the employee's
annual salary is P25,100, then dividing such figure by 251 days, his
daily rate is P100.00 After the payment of 10 days' holiday pay, his
annual salary already includes holiday pay and totals P26,100
(P25,100 + 1,000). Dividing this by 261 days, the daily rate is still
P100.00. There is thus no merit in respondent Nestle's claim of
overpayment of overtime and night differential pay and sick and
vacation leave benefits, the computation of which are all based on the
daily rate, since the daily rate is still the same before and after the grant
of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by
mistake, due to its use of 251 days as divisor must fail in light of the
Labor Code mandate that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor." (Article 4). Moreover,
prior to September 1, 1980, when the company was on a 6-day working
schedule, the divisor used by the company was 303, indicating that the
10 holidays were likewise not paid. When Filipro shifted to a 5-day
working schebule on September 1, 1980, it had the chance to rectify its

error, if ever there was one but did not do so. It is now too late to allege
payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay
should be computed from November 1, 1974. This ruling was not
questioned by the petitioner union as obviously said decision was
favorable to it. Technically, therefore, respondent Nestle should have
filed a separate petition raising the issue of effectivity of the holiday pay
award. This Court has ruled that an appellee who is not an appellant
may assign errors in his brief where his purpose is to maintain the
judgment on other grounds, but he cannot seek modification or reversal
of the judgment or affirmative relief unless he has also appealed.
(Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing
La Campana Food Products, Inc. v. Philippine Commercial and
Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully
settle the issues so that the execution of the Court's decision in this
case may not be needlessly delayed by another petition, the Court
resolved to take up the matter of effectivity of the holiday pay award
raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday
pay award is 1985 when the Chartered Bank decision, promulgated on
August 28, 1985, became final and executory, and not from the date of
effectivity of the Labor Code. Although the Court does not entirely
agree with Nestle, we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU)
v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA
case, the Court declared that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then
Secretary of Labor on February 16, 1976 and April 23, 1976,
respectively, and which excluded monthly paid employees from holiday
pay benefits, are null and void. The Court therein reasoned that, in the
guise of clarifying the Labor Code's provisions on holiday pay, the
aforementioned implementing rule and policy instruction amended
them by enlarging the scope of their exclusion. The Chartered
Bank case reiterated the above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing
rule and policy instruction enjoyed the presumption of validity and
hence, Nestle's non-payment of the holiday benefit up to the
promulgation of the IBAA case on October 23, 1984 was in compliance
with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429

[1971], the Court discussed the effect to be given to a legislative or
executive act subsequently declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the
declaration of nullity such challenged legislative or
executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to
obedience and respect. Parties may have acted under it
and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard
be had to what has been done while such legislative or
executive act was in operation and presumed to be
valid in all respects. It is now accepted as a doctrine
that prior to its being nullified, its existence as a fact
must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the
government organ which has the final say on whether
or not a legislative or executive measure is valid, a
period of time may have elapsed before it can exercise
the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no
recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court
decision: "The actual existence of a statute, prior to
such a determination of [unconstitutionality], is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to
particular relations, individual and corporate, and
particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374
[1940]). This language has been quoted with approval
in a resolution in Araneta v. Hill (93 Phil. 1002 [1952])
and the decision inManila Motor Co., Inc. v. Flores (99
Phil. 738 [1956]). An even more recent instance is the

opinion of Justice Zaldivar speaking for the Court

in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967].
(At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null
and void, undue harshness and resulting unfairness must be avoided. It
is now almost the end of 1991. To require various companies to reach
back to 1975 now and nullify acts done in good faith is unduly harsh.
1984 is a fairer reckoning period under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not farfetched that Nestle, relying on the implicit validity of the implementing
rule and policy instruction before this Court nullified them, and thinking
that it was not obliged to give holiday pay benefits to its monthly paid
employees, may have been moved to grant other concessions to its
employees, especially in the collective bargaining agreement. This
possibility is bolstered by the fact that respondent Nestle's employees
are among the highest paid in the industry. With this consideration, it
would be unfair to impose additional burdens on Nestle when the nonpayment of the holiday benefits up to 1984 was not in any way
attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective,
not from the date of promulgation of the Chartered Bank case nor from
the date of effectivity of the Labor Code, but from October 23, 1984, the
date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby
MODIFIED. The divisor to be used in computing holiday pay shall be
251 days. The holiday pay as above directed shall be computed from
October 23, 1984. In all other respects, the order of the respondent
arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla, Bidin,
Medialdea, Grio-Aquino, Regalado, Davide, Jr. and Romero, JJ.,
concur.
Cruz and Nocon, JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 117442-43 January 11, 1995

FEM'S ELEGANCE LODGING HOUSE, FENITHA SAAVEDRA and
IRIES ANTHONY SAAVEDRA, petitioners,
vs.
The Honorable LEON P. MURILLO, Labor Arbiter, Regional
Arbitration Branch, Region X, National Labor Relations
Commission, Cagayan de Oro City, ALFONSO GALLETO,
GEORGE VEDAD, ROLAND PANTONIAL, REYNALDO DELAORAO,
FELICISIMO BAQUILID, CECILIO SAJOL, ANNABEL CASTRO,
BENJAMIN CABRERA, RHONDEL PADERANGA, ZENAIDA GUTIB,
AIDA IMBAT and MARIA GRACE ATUEL,respondents.
RESOLUTION

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of
court with temporary restraining order to reverse and set aside the
Order dated September 21, 1994 of the Labor Arbiter in the NLRC RAB
X Cases Nos. 10-04-00232 (-00233)-94.
Petitioner FEM's elegance Lodging House is a business enterprise
engaged in providing lodging accommodations. It is owned by
petitioner Fenitha Saavedra and managed by petitioner Iries Anthony
Saavedra. Private respondents are former employees of petitioners
whose services were terminated between March and April, 1994.
Sometime after their dismissal from the employment of petitioners,
private respondents separately filed two cases against petitioners

before the National Labor Relations Commission (NLRC), Regional

Arbitration Branch No. X, Cagayan de Oro City, docketed as NLRC
RAB X Cases Nos. 10-04-00232-(0023)-94. Private respondents
sought for unpaid benefits such as minimum wage, overtime pay, rest
day pay, holiday pay, full thirteenth-month pay and separation pay
(Rollo, pp. 40-42).
On May 31, 1994, a pre-arbitration conference of the cases took place
before the Labor Arbiter. It was agreed therein: (1) that both labor
cases should be consolidated; and (2) that the parties would file their
respective position papers within thirty days from said date or until June
30, 1994, after which the cases would be deemed submitted for
resolution (Rollo, p. 14).
On June 29, petitioners filed their position paper. On July 7, they
inquired from the NLRC whether private respondents had filed their
position paper. The receiving clerk of the NLRC confirmed that as of
said date private respondents had not yet filed their position paper.
The following events then transpired: on July 8, petitioners filed a
Motion to dismiss for failure of private respondents to file their position
paper within the agreed period (Rollo, p. 38); on July 15, private
respondents belatedly filed their position paper; on July 18, petitioners
filed a Motion to Expunge [private respondents'] Position Paper from
the records of the case (Rollo, p. 45); and on August 23, the Labor
Arbiter issued a notice of clarificatory hearing, which was set for
September 7 (Rollo, p. 47). Prior to the hearing, petitioners filed a
Motion to Resolve [petitioners'] Motion to dismiss and Motion to
Expunge [private respondent'] Position Paper from the Records of the
Case (Rollo, p. 48).
On September 21, the Labor Arbiter issued the order denying the
motions filed by petitioners. He held that a fifteen-day delay in filing the
position paper was not unreasonable considering that the substantive
rights of litigants should not be sacrificed by technicality. He cited
Article 4 of the Labor Code of the Philippines, which provides that all
doubts in the interpretation thereof shall be resolved in favor of labor.
He said that even under Section 15, Rule 5 of the Revised Rules of
Court, a delay in the filing of a position paper is not a ground for a
motion to dismiss under the principle of exclusio unius est excludio
alterius (Rollo, pp. 51-52).

Hence, the present petition where petitioners charged the Labor Arbiter
with grave abuse of discretion for issuing the order in contravention of
Section 3, Rule V of The New Rules of Procedure of the NLRC, Said
section provides:
Submission of Position Papers/Memorandum. . . .
Unless otherwise requested in writing by both parties,
the Labor Arbiter shall direct both parties to
submit simultaneously their position
papers/memorandum with the supporting documents
and affidavits within fifteen (15) calendar days from the
date of the last conference, with proof of having
furnished each other with copies thereof (Emphasis
supplied).
Petitioners claimed that they were denied due process and that the
Labor Arbiter should have cited private respondents in contempt for
their failure to comply with their agreement in the pre-arbitration
conference.
We dismiss the petition for failure of petitioners to exhaust their
remedies, particularly in seeking redress from the NLRC prior to the
filing of the instant petition. Article 223 of the Labor code of the
Philippines provides that decisions, awards or orders of the Labor
Arbiter are appealable to the NLRC. Thus, petitioners should have first
appealed the questioned order of the Labor Arbiter to the NLRC, and
not to this court. their omission is fatal to their cause.
However, even if the petition was given due course, we see no merit in
petitioners' arguments. The delay of private respondents in the
submission of their position paper is a procedural flaw, and the
admission thereof is within the discretion of the Labor Arbiter.
Well-settled is the rule that technical rules of procedure are not binding
in labor cases, for procedural lapses may be disregarded in the interest
of substantial justice, particularly where labor matters are concerned
(Ranara v. National Labor Relations commission, 212 SCRA 631
[1992]).
The failure to submit a position paper on time is not on of the grounds
for the dismissal of a complaint in labor cases (The New Rules of
procedure of the NLRC, Rule V, Section 15). It cannot therefore be
invoked by petitioners to declare private respondents as non-suited.

This stance is in accord with Article 4 of the Labor Code of the

Philippines, which resolves that all doubts in the interpretation of the
law and its implementing rules and regulations shall be construed in
favor of labor. Needless to state, our jurisprudence is rich with
decisions adhering to the State's basic policy of extending protection to
Labor where conflicting interests between labor and management exist
(Aquino v. National Labor Relations Commission, 206 SCRA 118
[1992]).
Petitioners cannot claim that they were denied due process inasmuch
as they were able to file their position paper. The proper party to invoke
due process would have been private respondents, had their position
paper been expunged from the records for mere technicality. Since
petitioners assert that their defense is meritorious, it is to their best
interest that the cases be resolved on the merits. In this manner, the
righteousness of their cause can be vindicated.
IN VIEW OF THE FOREGOING, the Court Resolved to DISMISS the
petition for lack of merit.
SO ORDERED.
Davide, Jr., Bellosillo and Kapunan, JJ., concur.
Separate Opinions
PADILLA, J., concurring:
The petition in this case should be dismissed because petitioners did
not exhaust their remedies in the National Labor Relations Commission
(NLRC) before coming to this Court.
It is clear from Article 223 of the Labor Code that decisions, awards
or orders of the labor arbiter are appealable to the National Labor
Relations Commission. The proper remedy which petitioners should
have taken was to appeal to the NLRC the labor arbiter's order denying
their motion to dismiss and motion to expunge private respondents'
position paper. The present petition is therefore clearly premature, a
procedural flaw and should on this score be dismissed.
If this Court were to entertain appeals from orders of labor arbiters,
even in the form of a petition for certiorari for alleged grave abuse of
discretion under Rule 65 of the Rules of Court, we will be opening the

flood gates to petitions for certiorari against orders (including

interlocutory ones) of labor arbiters when the clear intent of the law is to
subject the decisions, awards and orders of labor arbiters to review by
the NLRC before they are brought to this Court.

Separate Opinions
PADILLA, J., concurring:
The petition in this case should be dismissed because petitioners did
not exhaust their remedies in the National Labor Relations Commission
(NLRC) before coming to this Court.
It is clear from Article 223 of the Labor Code that decisions, awards
or orders of the labor arbiter are appealable to the National Labor
Relations Commission. The proper remedy which petitioners should
have taken was to appeal to the NLRC the labor arbiter's order denying
their motion to dismiss and motion to expunge private respondents'
position paper. The present petition is therefore clearly premature, a
procedural flaw and should on this score be dismissed.
If this Court were to entertain appeals from orders of labor arbiters,
even in the form of a petition for certiorari for alleged grave abuse of
discretion under Rule 65 of the Rules of Court, we will be opening the
flood gates to petitions for certiorari against orders (including
interlocutory ones) of labor arbiters when the clear intent of the law is to
subject the decisions, awards and orders of labor arbiters to review by
the NLRC before they are brought to this Court.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48605 December 14, 1981
DOMNA N. VILLAVERT, petitioner,
vs.
EMPLOYEES' COMPENSATION COMMISSION & GOVERNMENT
SERVICE INSURANCE SYSTEM (Philippine
Constabulary), respondents.

FERNANDEZ, J.:
This is a petition to review the decision of the Employees'
Compensation Commission in ECC Case No. 0692, entitled "Domna N.
Villavert, appellant versus Government Service Insurance System
(Philippine Constabulary), respondents," affirming the decision of the
Government Service Insurance System denying the claim for death
benefits. 1
The petitioner, Domna N. Villavert, is the mother of the late, Marcelino
N. Villavert who died of acute hemorrhagic pancreatitis on December
12, 1975 employed as a Code Verifier in the Philippine Constabulary.
She filed a claim for income benefits for the death of her son under P.D.
No. 626 as amended with the Government Service Insurance System
on March 18, 1976. The said claim was denied by the Government
Service Insurance System on the ground that acute hemorrhagic
pancreatitis is not an occupational disease and that the petitioner had
failed to show that there was a causal connection between the fatal
ailment of Marcelino N. Villavert and the nature of his employment.
The petitioner appealed to the Employees' Compensation Commission
which affirmed on May 31, 1978 the decision of the respondent,
Government Service Insurance System, denying the claim.

The record shows that in addition to his duties as Code Verifier,

Marcelino N. Villavert also performed the duties of a computer operator
and clerk typist. In the morning of December 11, 1975, Marcelino
reported as usual to the Constabulary Computer Center at Camp
Crame, Quezon City. He performed his duties not only as code verifier
but also handled administrative functions, computer operation and
typing jobs due to shortage of civilian personnel. Although he was
complaining of chest pain and headache late in the afternoon of
December 11, 1975, after a whole day of strenuous activities, Marcelino
was still required to render overtime service until late in the evening of
the same day, typing voluminous classified communications, computing
allowances and preparing checks for the salary of Philippine
Constabulary and Integrated National Police personnel throughout the
country for distribution on or before December 15, 1975. He went home
late at night and due to fatigue, he went to bed as soon as he arrived
without taking his meal. Shortly thereafter, Marcelino was noticed by his
mother, the herein petitioner, gasping for breath, perspiring profusely,
and mumbling incoherent words. The petitioner tried to wake him up
and after all efforts to bring him to his senses proved futile, she rushed
Marcelino to the UE Ramon Magsaysay Memorial Hospital where he
was pronounced dead at 5:30 o'clock in the morning of December 12,
1975 without regaining consciousness. The case of death was acute
hemorrhagic pancreatitis.
To support the claim that Marcelino N. Villavert died of acute
hemorrhagic pancreatitis as a result of his duties as a code verifier,
computer operator and typist of the Philippine Constabulary, the
petitioner submitted the following certification of Lt. Colonel Felino C.
Pacheco Jr., commanding officer, of the Philippine Constabulary, which
reads:
THIS IS TO CERTIFY that MARCELINO N.
VILLAVERT, a regular employee of the Constabulary
Computer Center, had been performing the following
duty assignments in this office in addition to his
appointment as Coder Verifier before his death;
a. Computer Operator As computer operator he was
subject to excessive heat and cold;
b. Clerk TypistAs typist he was responsible for typing
important communications not only for the office of the
Constabulary Computer Center but also for other posts,
including engagement speeches of the Chief of

Constabulary and other ranking officers of the

Command;
c. Due to the shortage of qualified civilian personnel to
handle the task, he was given excessive work
responsibilities in the office which could have
aggravated his ailment.
d. That more often he took his meals irregularly late in
view of the nature of his work especially during the
preparation of checks for the salary of the Philippine
Constabulary and the National Integrated Police
personnel throughout the country;
e. He used to perform rotation duties, thereby leaving
him in sufficient time to consult the Constabulary
Medical Dispensary for routine physical check up about
his health.
f. That subject employee never drinks alcoholic liquor,
neither smokes nor engages on immoral habits during
his lifetime.
g. That he died in line of duty after retiring from his night
shift.
This certification is being issued in behalf of legal heirs
in order to justify their claim for payment of benefits
from the Employees' Compensation to reciprocate the
services rendered by the late Marcelino N. Villavert, a
loyal and dedicated public servant. 2
The foregoing certification of Lt. Col. Felino C. Pacheco, Jr. was
corroborated by the affidavit of Rustico P. Valenzuela, Chief Clerk of the
Constabulary Computer Center, which reads:
I, RUSTICO P. VALENZUELA, Master Sergeant,
Philippine Constabulary, Filipino of legal age, married
and presently Chief Clerk of the Constabulary
Computer Center, Camp Crame, Quezon City after
having been duly sworn to in accordance to law hereby
depose and say:

a. That as Chief Clerk I am responsible to my

Commanding Officer about the accounting, detail,
duties, etc. of all military and civilian personnel in the
office and therefore the duties of the late Marcelino N.
Villavert are personally known to me prior to his death;
b. That the late Marcelino N. Villavert although was
appointed as Coder Verifier, still he was instructed to
perform extra additional workload due to shortage of
qualified civilian personnel to handle administrative
function, he being a graduate of the Computer Operator
and an expert typist which is seldom found among the
qualities of civilian personnel assigned in the
Constabulary Computer Center;
c. That the late Marcelino N. Villavert was complaining
of chest pain and headache prior to his death but
because of an urgent call to the service, although it
necessitated his rest; he was obliged to go on
strenuous duty on the night of December 11, 1975,
typing voluminous classified communications, compute
allowances and prepare checks for the salary of
Philippine Constabulary and Integrated National Police
personnel throughout the country for distribution on or
before December 15, 1975, scheduled payday, thereby
aggravating his ailment due to excessive work,
disposed to heat and cold, operating computer machine
and over fatigue that caused his sudden death;
d. That the late Marcelino N. Villavert before his death
have insufficient time to consult the Medical Dispensary
for routine physical check-up due to the rotation of his
duties and therefore no record of his physical
examination could be found in this Headquarters;
e. That the death of late Marcelino N. Villavert was
service connected in view of the fact that he died while
in the performance of his official duties.
Affiant further sayeth none.
IN WITNESS WHEREOF, I have hereunto set my hand
this 22nd day of August 1977 at Quezon City.

(SGD) RUSTICO P. VALENZUEL

Affiant
SUBSCRIBED AND SWORN to before me this 22nd
day of August 1977 at Quezon City, Metro Manila.
Affiant exhibited his Residence Certificate No. A1183510 issued at Taguig, Metro Manila on January 10,
1977.
(SGD) ENRIQUE C VILLANUEVA JR
1Lt. PC Administrative Officer 3
The Government Service Insurance System and the Employees'
Compensation Commission denied the claim for compensation on the
ground that the petitioner did not present evidence that the illness of
Marcelino N. Villavert, acute hemorrhagic pancreatitis, was caused or
aggravated by the nature of his duties as employee of the Philippine
Constabulary.
The Employees' Compensation Commission, citing a book on
medicine, said:
In medical science, acute hemorrhagic pancreatitis is
"acute inflammation with hemorrhagic necrosis of the
pancreas." It occurs most commonly in association with
alcoholism. The onset of the symptoms often occurs
during or shortly after bouts of alcoholic intoxication. It
also occurs in association with biliary tract disease.
Occasionally, it occurs as a complication of peptic ulcer,
mumps, viral hepatitis or following the use of drugs
such as glucocorticoids, or chlorothiazide. It is
sometimes associated with metabolic disorders such as
hyperpidemia and hyperparathyroidism. It may also be
associated with a genetic type of pancreatitis with onset
in childhood. Trauma is a relatively frequent cause of
pancreatitis; it may result from a severe blow to the
abdomen, a penetrating injury from a bullet or knife
wound, inadvertent trauma from surgical procedures in
the upper abdomen or rarely, electric shock.
Approximately 20% of the patients have no apparent
underlying or predisposing cause. (Principles of Internal
Medicine by Harrison, 7th Edition, pp. 157) 4

However, the Medico Legal Officer of the National Bureau of

Investigation stated that the exact cause of acute hemorrhagic
pancreatitis is still unknown despite extensive researches in this field,
although most research data are agreed that physical and mental
stresses are strong causal factors in the development of the disease. 5
From the foregoing facts of record, it is clear that Marcelino N. Villavert
died of acute hemorrhagic pancreatitis which was directly caused or at
least aggravated by the duties he performed as coder verifier, computer
operator and clerk typist of the Philippine Constabulary. There is no
evidence at all that Marcelino N. Villavert had a "bout of alcoholic
intoxication" shortly before he died. Neither is there a showing that he
used drugs.
It should be noted that Article 4 of the Labor Code of the Philippines, as
amended, provides that "All doubts in the implementation and
interpretation of this Code, including its implementing rules and
regulations shall be resolved in favor of labor."
WHEREFORE, the decision of the Employees' Compensation
Commission sought to be reviewed is set aside and judgment is hereby
rendered ordering the Government Service Insurance System to pay
the petitioner death benefits in the amount of SIX THOUSAND PESOS
(P6,000.00).
SO ORDERED.
Teehankee (Chairman), Makasiar, Guerrero and Plana, JJ., concur.

Separate Opinions

MELENCIO-HERRERA, J., dissenting.

Section 1 (b), Rule III of the Amended Rules on Employees'
Compensation explicitly provides:

SECTION 1.

MELENCIO-HERRERA, J., dissenting.

xxxxxxxxx

Section 1 (b), Rule III of the Amended Rules on Employees'

Compensation explicitly provides:

(b) For the sickness and the resulting disability or death

to be compensable, the sickness must be the result of
an occupational disease annotated under Annex "A" of
these rules with the conditions set therein
satisfied; otherwise, proof must be shown that the risk
of contracting the disease is increased by the working
conditions (emphasis supplied).
The cause of death of petitioner's son was acute hemorrhagic
pancreatitis. This disease is not one of those listed, even under the
additional listing, as an occupational disease in Annex "A" of the
Amended Rules on Employees Compensation. Neither did petitioner
present evidence to prove that the risk of contracting hemorrhagic
pancreatitis was increased by the working conditions surrounding her
son's employment as code verifier, computer operator and typist of the
Philippine Constabulary. For which reasons, the Government Service
Insurance System and the Employees' Compensation Commission
denied the claim for compensation.
That physical and mental stresses are strong causal factors in the
development of the disease, as stated by the Medico Legal Officer of
the National Bureau of Investigation is not scientifically confirmed
"research data." Medical science still associates the disease with
alcoholism, binary tract disease, the use of drugs, or trauma, among
others. In fact, the exact cause is still unknown. Medical reports
indicate that approximately 20% of the patients suffering from that
disease have no apparent underlying or predisposing cause.
The illness of petitioner's son not having been caused nor aggravated
by the nature of his duties as an employee of the Philippine
Constabulary, petitioner's claim is not compensable under explicit
provisions of existing laws.

SECTION 1.
xxxxxxxxx
(b) For the sickness and the resulting disability or death
to be compensable, the sickness must be the result of
an occupational disease annotated under Annex "A" of
these rules with the conditions set therein
satisfied; otherwise, proof must be shown that the risk
of contracting the disease is increased by the working
conditions (emphasis supplied).
The cause of death of petitioner's son was acute hemorrhagic
pancreatitis. This disease is not one of those listed, even under the
additional listing, as an occupational disease in Annex "A" of the
Amended Rules on Employees Compensation. Neither did petitioner
present evidence to prove that the risk of contracting hemorrhagic
pancreatitis was increased by the working conditions surrounding her
son's employment as code verifier, computer operator and typist of the
Philippine Constabulary. For which reasons, the Government Service
Insurance System and the Employees' Compensation Commission
denied the claim for compensation.
That physical and mental stresses are strong causal factors in the
development of the disease, as stated by the Medico Legal Officer of
the National Bureau of Investigation is not scientifically confirmed
"research data." Medical science still associates the disease with
alcoholism, binary tract disease, the use of drugs, or trauma, among
others. In fact, the exact cause is still unknown. Medical reports
indicate that approximately 20% of the patients suffering from that
disease have no apparent underlying or predisposing cause.
The illness of petitioner's son not having been caused nor aggravated
by the nature of his duties as an employee of the Philippine
Constabulary, petitioner's claim is not compensable under explicit
provisions of existing laws.

Separate Opinions

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

[G.R. No. 58176. March 23, 1984.]

RUTH JIMENEZ, Petitioner,
vs.
EMPLOYEES COMPENSATION COMMISSION and
GOVERNMENT SERVICE INSURANCE
SYSTEM, Respondents.
Isidro Pasana for Petitioner.
The Solicitor General for Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE;
EMPLOYEES
COMPENSATION
COMMISSION;
COMPENSABILITY OF ILLNESS; CANCER OF THE
LUNGS, A BORDERLINE CASE REQUIRING STUDY OF
CIRCUMSTANCES OF CASE. Admittedly, cancer of the
lungs (bronchogenic carcinoma) is one of those borderline
cases where a study of the circumstances of the case is
mandated to fully appreciate whether the nature of the work
of the deceased increased the possibility of contracting
such an ailment. WE have ruled in the case of Dator v.
Employees Compensation Commission (111 SCRA 634, L57416, January 30, 1982) that" (U)ntil now, the cause of
cancer is not known." Indeed, the respondent has provided
an opening through which petitioner can pursue and did
pursue the possibility that the deceaseds ailment could
have been caused by the working conditions while

employed with the Philippine Constabulary. Respondents

maintain that the deceased was a smoker and the logical
conclusion is that the cause of the fatal lung cancer could
only be smoking which cannot in any way be justified as
work-connected. However, medical authorities support the
conclusion that up to now, the etiology or cause of cancer of
the lungs is still largely unknown.
2. ID.; ID.; ID.; ID.; CONCLUSION OF COMMISSION NOT IN
ACCORDANCE WITH MEDICAL AUTHORITIES AND
FACTS ON RECORD. The sweeping conclusion of the
respondent Employees Compensation Commission to the
effect that the cause of the bronchogenic carcinoma of the
deceased was due to his being a smoker and not in any
manner connected with his work as a soldier, is not in
accordance with medical authorities nor with the facts on
record. No certitude can arise from a position of uncertainty.
WE are dealing with possibilities and medical authorities
have given credence to the stand of the petitioner that her
husband developed bronchogenic carcinoma while working
as a soldier with the Philippine Constabulary. The records
show that when the deceased enlisted with the Philippine
Constabulary in 1969, he was found to be physically and
mentally healthy. A soldiers life is a hard one. As a soldier
assigned to field duty, exposure to the elements, dust and
dirt, fatigue and lack of sleep and rest is a common
occurrence. Exposure to chemicals while handling
ammunition and firearms cannot be discounted. WE take
note also of the fact that he became the security of one Dr.
Emilio Cordero of Anulung, Cagayan, and he always
accompanied the doctor wherever the latter went (p. 26,
rec.). Such assignment invariably involved irregular working
hours, exposure to different working conditions, and body
fatigue, not to mention psychological stress and other
similar factors which influenced the evolution of his ailment.
3. ID.; ID.; ID.; ID.; THEORY OF INCREASED RISK. The
theory of increased risk is applicable in the case at bar. In
the case of Cristobal v. ECC (103 SCRA, 336-337) where

the Court held that "to establish compensability under the

said theory, the claimant must show proof of workconnection. Impliedly, the degree of proof required is merely
substantial evidence, which means such relevant evidence
to support a decision (Ang Tibay v. The Court of Industrial
Relations and National Labor Union, Inc., 69 Phil. 635) or
clear and convincing evidence. In this connection, it must
be pointed out that the strict rules of evidence are not
applicable in claims for compensation. Respondents
however insist on evidence which would establish direct
causal relation between the disease rectal cancer and the
employment of the deceased. Such a strict requirement
which even medical experts cannot support considering the
uncertainty of the nature of the disease would negate the
principle of the liberality in the matter of evidence.
Apparently, what the law merely requires is a reasonable
work-connection and not a direct causal relation. This kind
of interpretation gives meaning and substance to the liberal
and compassionate spirit of the law as embodied in Article 4
of the new Labor Code which states that all doubts in the
implementation of the provisions of this Code, including its
implementing rules and regulations shall be resolved in
favor of labor."cralaw virtua1aw library
4. ID.; ID.; ID.; STRICT RULES ON EVIDENCE NOT
APPLICABLE; STATE POLICY OF LIBERALITY TOWARDS
LABOR MUST BE MAINTAINED. In San Valentin v. ECC
(118 SCRA 160), the Court held that "In compensation
cases, strict rules on evidence are not applicable. A
reasonable work-connection is all that is required or that the
risk of contracting the disease is increased by the working
condition." This is in line with the avowed policy of the State
as mandated by the Constitution (Art. II, Sec. 9) and
restated in the New Labor Code (Art. 4) to give maximum
aid and protection to labor.

DECISION
MAKASIAR, J.:
This is a petition to review the decision of respondent
Employees Compensation Commission (ECC) dated August
20, 1981 (Annex "A", Decision, pp. 10-12, rec.) in ECC Case
No. 1587, which affirmed the decision of respondent
Government Service Insurance System (GSIS), denying
petitioners claim for death benefits under Presidential Decree
No. 626, as amended.
The undisputed facts are as follows:chanrob1es virtual 1aw
library
Petitioner is the widow of the late Alfredo Jimenez, who joined
the government service in June, 1969 as a constable in the
Philippine Constabulary (p. 2, rec.)
After rendering service for one year, he was promoted to the
rank of constable second class. On December 16, 1974, he
was again promoted to the rank of sergeant (p. 26, rec.)
Sometime in April, 1976, he and his wife boarded a bus from
Tuguegarao, Cagayan, to Anulung, Cagayan. While on their
way, Sgt. Jimenez, who was seated on the left side of the bus,
fell down from the bus because of the sudden stop of the
vehicle. As a result, he was confined at the Cagayan
Provincial Hospital for about one (1) week, and thereafter,
released (comment of respondent ECC, pp. 25-36, rec.). He
was again confined for further treatment from November 7,
1978 to May 16, 1979 at the AFP Medical Center in Quezon
City.
While on duty with the 111th PC Company, Tuguegarao,
Cagayan, he was assigned as security to one Dr. Emilio

Cordero of Anulung, Cagayan (ECC rec., Proceedings of the

PC Regional Board, June 6, 1980). In compliance with his
duty, he always accompanied the doctor wherever the latter
went (p. 26, rec.)chanroblesvirtualawlibrary
On November 7, 1978, the deceased was again confined at
the Cagayan Provincial Hospital and then transferred to the
AFP V. Luna Medical Center at Quezon City for further
treatment. He complained of off-and-on back pains,
associated with occasional cough and also the swelling of the
right forearm. The doctors found a mass growth on his right
forearm, which grew to the size of 3 by 2 inches, hard and
associated with pain, which the doctors diagnosed as "aortic
aneurysm, medrastinal tumor" (p. 27, rec.)
His condition improved somewhat after treatment and he was
released on May 16, 1979. He was advised to have complete
rest and to continue medication. He was then given light duty
inside the barracks of their company.
Unfortunately, his ailment continued and became more
serious.
On May 12, 1980, he died in his house at Anulung, Cagayan,
at about 9:00 oclock in the evening. He was barely 35 years
old at the time of his death.
The cause of death, as found by the doctors, is "bronchogenic
carcinoma" which is a malignant tumor of the lungs.
On June 6, 1980, an administrative hearing was conducted
before the PC Regional Board. It was their official findings that
the subject enlisted man "died in line of duty" ; that the
deceased was a PC member of the 111th PC Company at
Tuguegarao, Cagayan; that he died due to "bronchogenic
CA" ; and that he "died not as a result of his misconduct and
did not violate any provisions of the Articles of War" (ECC rec.,
Proceedings of the PC Regional Board, June 6, 1980).

The Board recommended "that all benefits due to or become

due subject EP be paid and settled to his legal heirs" (ECC
rec., Proceedings of the PC Regional Board, June 6, 1980).
Thus, as per records of the GSIS, petitioner was paid benefits
due to her deceased husband under Republic Act No. 610
(Comment of respondent ECC, p. 27, rec.)cralawnad
Nevertheless, petitioner filed a claim for death benefits under
PD No. 626, as amended with the respondent GSIS. Said
claim was denied by the GSIS on the ground that her
husbands death is not compensable "for the reason that the
injury/sickness that caused his death is not due to the
circumstances of the employment or in the performance of the
duties and responsibilities of said employment" (Letter of
denial by the GSIS dated July 14, 1980, ECC rec.)
The said decision was affirmed by respondent Employees
Compensation Commission in its decision dated August 21,
1981, stating among others:chanrob1es virtual 1aw library
x

"After an exhausted (sic) study of the evidences (sic) on

record and the applicable law on the case, we conclude that
the law has been properly applied by the respondent System. .
..
"Bronchogenic carcinoma, medical authorities disclose, is the
most common form of malignancy in males reaching a peak
between the fifth and seventh decades and accounting for one
in four male cancer deaths. The sex incidence is at least 5 to
1, male to female. Extensive statistical analysis by medical
authorities have confirmed the relationship between lung
cancer and cigarette smoking. Other factors that may have
potential roles are exposure to ionizing radiation, exposure to
chromates, metallic iron and iron oxides, arsenic, nickel,
beryllium and asbestos (Harrisons Principles of Internal

Medicine by Wintrobe, Et Al., 7th Edition, p. 1322).

"Although Presidential Decree No. 626, as amended, was
envisioned to give relief to workingmen, who sustain an injury
or contract an ailment in the course of employment and that to
best attain its lofty objective, a liberal interpretation of the law
should pervade in its implementation, this precept, however,
may not be invoked as not even a slight causal link between
the development of the ailment and the decedents (sic) duties
and working conditions as a PC sergeant could be deduced
from the records of this case. The respondent Systems ruling
that appellants claim does not fall within the beneficiant
provisions of Presidential Decree No. 626, as amended, and
therefore the same should be denied, is in full harmony with
the law and the facts obtaining herein.

On the other hand, respondent Commission maintains that

while the deceased soldier may have been exposed to
elements of dust and dirt and condition of lack of rest and
continued fatigue by virtue of his duties to protect the life and
property of the citizens, such conditions have no causal
relation to his contraction of bronchogenic carcinoma. It is also
the opinion of the respondent that since there is evidence of
the deceased to be a smoker, "the late Sgt. Jimenez may have
indulged heavily in smoking and drinking, not merely
occasionally. And it has been demonstrated medically that
the more cigarettes a person smokes, the greater the risk of
developing lung cancer" (Memorandum, p. 62, rec.). In short,
the respondent alleges that the deceased was responsible to
a large degree for his having contracted bronchogenic
carcinoma that led to his demise.cralawnad

. . ." (Decision, pp. 10-12, rec.)

WE find the petitioners claim meritorious.
On September 28, 1981, Petitioner, assisted by counsel, filed
the instant petition, the only pertinent issue being whether or
not her husbands death from bronchogenic carcinoma is
compensable under the law.
The petitioner contends that her husbands death is
compensable and that respondent Commission erred in not
taking into consideration the uncontroverted circumstance that
when the deceased entered into the Philippine Constabulary,
he was found to be physically and mentally healthy. She
farther contends that as a soldier, her husbands work has
always been in the field where exposure to the elements, dust
and dirt, fatigue and lack of sleep and rest was the rule rather
than the exception. The nature of work of a soldier being to
protect life and property of citizens, he was subject to call at
any time of day or night. Furthermore, he was even assigned
as security to one Emilio Cordero and always accompanied
the latter wherever he went. Exposed to these circumstances
for several years, the deceaseds physical constitution began
to deteriorate, which eventually resulted to his death from
bronchogenic carcinoma (Petition, pp. 2-9, rec.)

Primary carcinoma of the lung is the most common fatal

cancer and its frequency is increasing (The Merck Manual,
13th Edition, p. 647). Admittedly, cancer of the lungs
(bronchogenic carcinoma) is one of those borderline cases
where a study of the circumstances of the case is mandated to
fully appreciate whether the nature of the work of the
deceased increased the possibility of contracting such an
ailment. In the case of Laron v. Workmens Compensation
Commission (73 SCRA 90), WE held, citing Schmidts
Attorneys Dictionary of Medicine, 165 Sup. 143; Beerman v.
Public Service Coordinated Transport, 191 A 297, 299; Words
and Phrases, 6 Permanent Edition 61, "The English word
cancer means crab, in the medical sense, it refers to a
malignant, usually fatal, tumor or growth." Findings of fact by
the respondent points out that bronchogenic carcinoma is a
malignant tumor of the lungs. WE have ruled in the case of
Dator v. Employees Compensation Commission (111 SCRA
634, L-57416, January 30, 1982) that" (U)ntil now, the cause
of cancer is not known." Indeed, the respondent has provided
an opening through which petitioner can pursue and did

pursue the possibility that the deceaseds ailment could have

been caused by the working conditions while employed with
the Philippine Constabulary.
Respondents maintain that the deceased was a smoker and
the logical conclusion is that the cause of the fatal lung cancer
could only be smoking which cannot in any way be justified as
work-connected. However, medical authorities support the
conclusion that up to now, the etiology or cause of cancer of
the lungs is still largely unknown as provided for in the
following:jgc:chanrobles.com.ph
"Although the etiology of cancer in humans cannot yet be
explained at the molecular level, it is clear that genetic
composition of the host is important in cancer induction.
Related immunologic factors may predispose the host to a
putative carcinogen. There is some evidence that viruses may
play a role in the neoplastic process. In addition, both
environmental and therapeutic agents have been identified of
carcinogens" (Harrison, Principles of Internal Medicine, 9th
Edition, 1980, p. 1584).
"Considerable attention has been directed to the potential role
of air pollution exposure to ionizing radiation and numerous
occupational hazards, including exposure to chromates,
metallic iron and iron oxides, arsenic, nickel, beryllium and
asbestos" (Harrison, Ibid, p. 1259).
"The lungs are the site of origin of primary benign and
malignant tumors and receive metastases from many other
organs and tissues. Specific causes have not been
established but a strong dose-related statistical association
exists between cigarette smoking and squamous cell and
undifferentiated small (oat) cell bronchogenic carcinomas.
There is suggestive evidence that prolonged exposure to air
pollution promotes lung neoplasms" (The Merck Manual, 13th
Edition, p. 647).
"What emerges from such concepts is the belief that cancers

in man do not appear suddenly out of the blue. . . . Moreover,

there need not be a single etiology or pathogenesis. Many
influences may be at work during the evolution of the lesion
and many pathways may be involved. Indeed, the term cancer
may embrace a multiplicity of diseases of diverse origins"
(Robbins, Pathologic Basis of Disease, 2nd Edition, 1979, p.
185, Emphasis supplied).
WE cannot deny the fact that the causes of the illness of the
deceased are still unknown and may embrace such diverse
origins which even the medical sciences cannot tell with
reasonable certainty. Indeed, scientists attending the World
Genetic Congress in New Delhi, India, have warned that about
25,000 chemicals used around the world could potentially
cause cancer, and Lawrence Fishbein of the U.S. National
Center for Toxilogical Research pointed out that humans were
daily exposed to literally hundreds of chemical agents via air,
food, medication, both in their industrial home and
environments (Evening Post, December 16, 1983, p. 3, cols.
2-3).
The theory of increased risk is applicable in the instant case.
WE had the occasion to interpret the theory of increased risk
in the case of Cristobal v. Employees Compensation
Commission (103 SCRA, 336-337, L-49280, February 26,
1981):chanrobles.com.ph : virtual law library
"To establish compensability under the said theory, the
claimant must show proof of work-connection. Impliedly, the
degree of proof required is merely substantial evidence, which
means such relevant evidence to support a decision (Ang
Tibay v. The Court of Industrial Relations and National Labor
Union, Inc., 69 Phil. 635) or clear and convincing evidence. In
this connection, it must be pointed out that the strict rules of
evidence are not applicable in claims for compensation.
Respondents however insist on evidence which would
establish direct causal relation between the disease rectal
cancer and the employment of the deceased. Such a strict
requirement which even medical experts cannot support

considering the uncertainty of the nature of the disease would

negate the principle of the liberality in the matter of evidence,
Apparently, what the law merely requires is a reasonable
work-connection and not a direct causal relation. This kind of
interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as embodied in Article 4 of the
new Labor Code which states that all doubts in the
implementation of the provisions of this Code, including its
implementing rules and regulations shall be resolved in favor
of labor.

exposure to the elements, dust and dirt, fatigue and lack of

sleep and rest is a common occurrence. Exposure to
chemicals while handling ammunition and firearms cannot be
discounted. WE take note also of the fact that he became the
security of one Dr. Emilio Cordero of Anulung, Cagayan, and
he always accompanied the doctor wherever the latter went
(p. 26, rec.). Such assignment invariably involved irregular
working hours, exposure to different working conditions, and
body fatigue, not to mention psychological stress and other
similar factors which influenced the evolution of his ailment.

". . . As the agents charged by the law to implement the social

justice guarantee secured by both 1935 and 1973
Constitutions, respondents should adopt a more liberal
attitude in deciding claims for compensation especially when
there is some basis in the facts inferring a work-connection.
This should not be confused with the presumption of
compensability and theory of aggravation under the
Workmens Compensation Act. While these doctrines may
have been abandoned under the New Labor Code (the
constitutionality of such abrogation may still be challenged), it
is significant that the liberality of the law, in general, still
subsists. . . ." (Emphasis supplied)

WE held in the case of San Valentin v. Employees

Compensation Commission (118 SCRA 160)
that:jgc:chanrobles.com.ph

The sweeping conclusion of the respondent Employees

Compensation Commission to the effect that the cause of the
bronchogenic carcinoma of the deceased was due to his being
a smoker and not in any manner connected with his work as a
soldier, is not in accordance with medical authorities nor with
the facts on record. No certitude can arise from a position of
uncertainty.

(L-57416, January 30, 1982), WE held the death of Wenifreda

Dator, a librarian for 15 years, caused by bronchogenic
carcinoma compensable. Being a librarian, "she was exposed
to duty books and other deleterious substances in the library
under unsanitary conditions" (Ibid., 632). WE do not see any
reason to depart from the ruling in the said case, considering
that a soldiers duties and environment are more hazardous.

WE are dealing with possibilities and medical authorities have

given credence to the stand of the petitioner that her husband
developed bronchogenic carcinoma while working as a soldier
with the Philippine Constabulary. The records show that when
the deceased enlisted with the Philippine Constabulary in
1969, he was found to be physically and mentally healthy. A
soldiers life is a hard one. As a soldier assigned to field duty,

This is in line with the avowed policy of the State as mandated

by the Constitution (Article II, Section 9) and restated in the
new Labor Code (Article 4), to give maximum aid and
protection to labor.

"x

"In compensation cases. strict rules of evidence are not

applicable. A reasonable work-connection is all that is required
or that the risk of contracting the disease is increased by the
working conditions."cralaw virtua1aw library
In the case of Dator v. Employees Compensation Commission

WHEREFORE, THE DECISION APPEALED FROM IS

HEREBY SET ASIDE AND THE GOVERNMENT SERVICE

INSURANCE SYSTEM IS HEREBY ORDERED.

1. TO PAY THE PETITIONER THE SUM OF TWELVE
THOUSAND (P12,000.00) PESOS AS DEATH BENEFITS;
2. TO REIMBURSE THE PETITIONERs MEDICAL AND
HOSPITAL EXPENSES DULY SUPPORTED BY PROPER
RECEIPTS; AND
3. TO PAY THE PETITIONER THE SUM OF ONE
THOUSAND TWO HUNDRED (P1,200.00) PESOS FOR
BURIAL EXPENSES.
SO ORDERED.
Concepcion, Jr., Guerrero, Abad Santos, De Castro and
Escolin, JJ., concur.
Separate Opinions

AQUINO, J., dissenting:

I dissent. Bronchogenic carcinoma was not work-connected.
The ECC did not err in denying death benefits.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50999 March 23, 1990
JOSE SONGCO, ROMEO CIPRES, and AMANCIO
MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION),
LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M),
INC., respondents.

application seeking clearance to terminate the services of petitioners

Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter
referred to as petitioners) allegedly on the ground of retrenchment due
to financial losses. This application was seasonably opposed by
petitioners alleging that the company is not suffering from any losses.
They alleged further that they are being dismissed because of their
membership in the union. At the last hearing of the case, however,
petitioners manifested that they are no longer contesting their
dismissal. The parties then agreed that the sole issue to be resolved is
the basis of the separation pay due to petitioners. Petitioners, who
were in the sales force of Zuellig received monthly salaries of at least
P40,000. In addition, they received commissions for every sale they
made.
The collective Bargaining Agreement entered into between Zuellig and
F.E. Zuellig Employees Association, of which petitioners are members,
contains the following provision (p. 71, Rollo):

Raul E. Espinosa for petitioners.

ARTICLE XIV Retirement Gratuity

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Section l(a)-Any employee, who is separated from

employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee
shall receive from the company a retirement gratuity in
an amount equivalent to one (1) month's salary per year
of service. One month of salaryas used in this
paragraph shall be deemed equivalent to the salary at
date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least
six months being considered one year, including
probationary employment. (Emphasis supplied)

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the
National Labor Relations Commission in NLRC Case No. RB-IV-2084078-T entitled, "Jose Songco and Romeo Cipres, ComplainantsAppellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC
Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, ComplainantAppellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which
dismissed the appeal of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private respondent to pay
petitioners separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as
Zuellig) filed with the Department of Labor (Regional Office No. 4) an

On the other hand, Article 284 of the Labor Code then prevailing
provides:
Art. 284. Reduction of personnel. The termination of
employment of any employee due to the installation of
labor saving-devices, redundancy, retrenchment to
prevent losses, and other similar causes, shall entitle
the employee affected thereby to separation pay. In
case of termination due to the installation of laborsaving devices or redundancy, the separation pay shall
be equivalent to one (1) month pay or to at least one (1)

month pay for every year of service, whichever is

higher. In case of retrenchment to prevent losses and
other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due
to retrechment initiated by the employer to prevent
losses or other similar causes, or where the employee
suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the
health of his co-employees, the employee shall be
entitled to termination pay equivalent at least to his one
month salary, or to one-half month pay for every year of
service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation
of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless
the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of
computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive
portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent
should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances,
etc.) for every year of service that they have worked
with the company.

SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission
was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide
by the decision appealed from" since he had "received, to his full and
complete satisfaction, his separation pay," resolved to dismiss the
petition as to him.
The issue is whether or not earned sales commissions and allowances
should be included in the monthly salary of petitioners for the purpose
of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount
of separation pay due them, whether under the Labor Code or the
CBA, their basic salary, earned sales commissions and allowances
should be added together. They cited Article 97(f) of the Labor Code
which includes commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the
remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is
payable by an employer to an employee under a written
or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered,
and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging,
or other facilities customarily furnished by the employer
to the employee. 'Fair reasonable value' shall not
include any profit to the employer or to any person
affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as
well as its implementing rules to include commission in the computation

of separation pay, it could have explicitly said so in clear and

unequivocal terms. Furthermore, in the definition of the term "wage",
"commission" is used only as one of the features or designations
attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in
the monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case
of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154
SCRA 166, where We ruled that "in the computation of backwages and
separation pay, account must be taken not only of the basic salary of
petitioner but also of her transportation and emergency living
allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R.
No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters
Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not
earned sales commission should be included in the monthly salary of
petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the
definition of the term "wage". It has been repeatedly declared by the
courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for
application (Cebu Portland Cement Co. v. Municipality of Naga, G.R.
Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of
Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and
unambiguous statute speaks for itself, and any attempt to make it
clearer is vain labor and tends only to obscurity. How ever, it may be
argued that if We correlate Article 97(f) with Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b)
and 10 of the Implementing Rules, there appears to be an ambiguity. In
this regard, the Labor Arbiter rationalized his decision in this manner
(pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the
Code can be correctly be (sic) stated as a general
definition. It is 'wage ' in its generic sense. A careful
perusal of the same does not show any indication that
commission is part of salary. We can say that
commission by itself may be considered a wage. This is
not something novel for it cannot be gainsaid that
certain types of employees like agents, field personnel
and salesmen do not earn any regular daily, weekly or

monthly salaries, but rely mainly on commission

earned.
Upon the other hand, the provisions of Section 10, Rule
1, Book VI of the implementing rules in conjunction with
Articles 273 and 274 (sic) of the Code specifically states
that the basis of the termination pay due to one who is
sought to be legally separated from the service is 'his
latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly
pay or monthly salary'.
The above terms found in those Articles and the
particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of
separation pay they mean to be specifically referring to
salary only.
.... Each particular benefit provided in the Code and
other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus,
for a specific provision, a specific meaning is attached
to simplify matters that may arise there from. The
general guidelines in (sic) the formation of specific rules
for particular purpose. Thus, that what should be
controlling in matters concerning termination pay should
be the specific provisions of both Book VI of the Code
and the Rules. At any rate, settled is the rule that in
matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter
should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is
used in its generic sense and obviously refers to the
basic wage rate to be ascertained on a time, task, piece
or commission basis or other method of calculating the
same. It does not, however, mean that commission,

allowances or analogous income necessarily forms part

of the employee's salary because to do so would lead
to anomalies (sic), if not absurd, construction of the
word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month
pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their
separation pay. This situation, to our mind, is not the
real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines
the term 'wage' and Article XIV of the Collective Bargaining Agreement,
Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary", is
more apparent than real. Broadly, the word "salary" means a
recompense or consideration made to a person for his pains or industry
in another man's business. Whether it be derived from "salarium," or
more fancifully from "sal," the pay of the Roman soldier, it carries with it
the fundamental idea of compensation for services rendered. Indeed,
there is eminent authority for holding that the words "wages" and
"salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.
839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with
"wage", the etymology of which is the Middle English word "wagen".
Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the
synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.).
Inasmuch as the words "wages", "pay" and "salary" have the same
meaning, and commission is included in the definition of "wage", the
logical conclusion, therefore, is, in the computation of the separation
pay of petitioners, their salary base should include also their earned
sales commissions.
The aforequoted provisions are not the only consideration for deciding
the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti,
that the commissions were in the form of incentives or encouragement,
so that the petitioners would be inspired to put a little more industry on
the jobs particularly assigned to them, still these commissions are
direct remuneration services rendered which contributed to the
increase of income of Zuellig . Commission is the recompense,
compensation or reward of an agent, salesman, executor, trustees,

receiver, factor, broker or bailee, when the same is calculated as a

percentage on the amount of his transactions or on the profit to the
principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217
Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and
the reason for such type of remuneration for services rendered
demonstrate clearly that commission are part of petitioners' wage or
salary. We take judicial notice of the fact that some salesmen do not
receive any basic salary but depend on commissions and allowances
or commissions alone, are part of petitioners' wage or salary. We take
judicial notice of the fact that some salesman do not received any basic
salary but depend on commissions and allowances or commissions
alone, although an employer-employee relationship exists. Bearing in
mind the preceeding dicussions, if we adopt the opposite view that
commissions, do not form part of wage or salary, then, in effect, We will
be saying that this kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation is not
in accord with the liberal spirit of our labor laws and considering the
purpose of separation pay which is, to alleviate the difficulties which
confront a dismissed employee thrown the the streets to face the harsh
necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of
the salary base that should be used in computing the separation pay,
We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not
properly includible in such base figure since such
commissions must be earned by actual market
transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case
were earned by actual market transactions attributable to petitioners,
these should be included in their separation pay. In the computation
thereof, what should be taken into account is the average commissions
earned during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor
Code's provisions and its implementing regulations, the workingman's
welfare should be the primordial and paramount consideration. This
kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor
Code which states that "all doubts in the implementation and

interpretation of the provisions of the Labor Code including its

implementing rules and regulations shall be resolved in favor of labor"
(Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and
Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by
including allowances and commissions in the separation pay of
petitioners Jose Songco and Amancio Manuel. The case is remanded
to the Labor Arbiter for the proper computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 81077 June 6, 1990
LUIS DE OCAMPO, JR., JOSE RODRIGO, EUGENIO ESQUEJO,
VICTORINO TABERNERO, RIZALO DALIVA, FRANCISCO ACOSTA
and 87 others listed in Annex 'A' hereof, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MAKATI
DEVELOPMENT CORPORATION, respondents.

It appears that on September 30, 1980, the services of 65 employees

of private respondent Makati Development Corporation were
terminated on the ground of the expiration of their contracts; that the
said employees filed a complaint for illegal dismissal against the MDC
on October 1, 1980; * that on October 8, 1980, as a result of the aforementioned
termination, the Philippine Transport and General Workers Association, of which the complainants
were members, filed a notice of strike on the grounds of union-busting, subcontracting of projects
which could have been assigned to the dismissed employees, and unfair labor practice; that on
October 14, 1980, the PTGWA declared a strike and established picket lines in the perimeter of the
MDC premises; that on November 4, 1980, the MDC filed with the Bureau of Labor Relations a
motion to declare the strike illegal and restrain the workers from continuing the strike; that on that
same day and several days thereafter the MDC filed applications for clearance to terminate the
employment of 90 of the striking workers, whom it had meanwhile preventively suspended; that of
the said workers, 74 were project employees under contract with the MDC with fixed terms of
employment; and that on August 31, 1982, Labor Arbiter Apolinar L. Sevilla rendered a
decision 1 denying the applications for clearance filed by the MDC and

directing it to reinstate the individual complainants with two months back

wages each.

Maximo P. Amurao, Jr. for private respondent.

This is the decision modified by the NLRC 2 which is now faulted by the
petitioners for grave abuse of discretion. The contention is that the public
respondent acted arbitrarily and erroneously in ruling that: a) the motion for
reconsideration was filed out of time; b) the strike was illegal; and c) the
separation of the project employees was justified.

CRUZ, J.:

Having considered the issues and the arguments of the parties in their
respective pleadings, including the petitioners' ex parte motion for early
resolution of this case, the Court makes the findings that follow.

Alfra Beta A. Serquina for petitioners.

The petition seeks a reversal of the decision of the respondent NLRC

dated June 8, 1984, the dispositive portion of which reads as follows:
WHEREFORE, the Decision appealed from is hereby
MODIFIED as hereinabove indicated. Consequently,
the application for clearance to dismiss the union
officers is granted; the employment status of the
individual complainants who were project employees is
also considered severed, not on account of illegality of
the strike but due to the expiration of their employment
contracts; and the respondent is ordered to reinstate,
without back wages, the individual complainants who
were regular employees except those who were officers
of the union among them or paid separation pay at their
option, equivalent to one month's pay or one-half
month's pay for every year of service, whichever is
greater.

On the first issue, we note that the rule on motions for reconsideration
of the decision of the NLRC is now found in Rule X of the Revised
Rules of the NLRC, providing thus:
Section 9. Motions for reconsideration Motions for
reconsideration of any order, resolution or decision of
the Commission shall not be entertained except when
based on palpable or patent errors, provided that the
motion is under oath and filed within ten (I 0) calendar
days from receipt of the order, resolution or decision,
with proof of service that a copy of the same has been
furnished, within the aforesaid reglementary period, the
adverse party and provided further, that only one such
motion shall be entertained.
Subject to the provisions of Section 3, Rule IX of these
Rules, motions for reconsideration of an order,

resolution or decision of a Division shall be resolved by

the Division of origin.
However, this section was promulgated only on November 5, 1986, and
became effective only on November 29, 1986, after the required
publication. 3 It was therefore not yet in force when the required resolution
in the present case was rendered in 1984.
Apparently agreeing that the reglementary period then was fifteen
days, the Solicitor General argues that the petitioner's motion for
reconsideration was nevertheless filed late on June 26, 1984, the
decision of the NLRC having been rendered on June 7, 1984, or 19
days earlier. 4 This is not exactly accurate. The fact is Annex "C" of the
petition shows that a copy of the decision was received by the petitioner
only on June 13, 1984, and it was from that date that the reglementary
period commenced to run. This means that the motion for reconsideration
was filed on time, only 13 days having elapsed before the deadline.
But this notwithstanding, we must hold that under the law then in force,
to wit, PD No. 823 as amended by PD No. 849, the strike was indeed
illegal. In the first place, it was based not on the ground of unresolved
economic issues, which was the only ground allowed at that time, when
the policy was indeed to limit and discourage strikes. Secondly, the
strike was declared only after 6 days from the notice of strike and
before the lapse of the 30-day period prescribed in the said law for a
cooling-off of the differences between the workers and management
and a possible avoidance of the intended strike. That law clearly
provided:
Sec. 1. It is the policy of the state to encourage free
trade unionism and free collective bargaining within the
framework of compulsory and voluntary arbitration.
Therefore all forms of strikes, picketing and lockout are
hereby strictly prohibited in vital industries such as in
public utilities, including transportation and
communication, companies engaged in the
manufacturer processing as well as in the distribution of
fuel gas, gasoline and fuel or lubricating oil, in
companies engaged in the production or processing of
essential commodities or products for export, and in
companies engaged in banking of any kind, as well as
in hospitals and in schools and colleges.

However, any legitimate labor union may strike and any

employer may lockout in establishments not covered by
General Order No. 5 only on grounds of unresolved
economic issues in collective bargaining, in which case
the union or the employer shall file a notice with the
Bureau of Labor Relations at least 30 days before the
intended strike or lockout. (Emphasis supplied)
It is our ruling that the leaders of the illegal strike were correctly
punished with dismissal, but their followers (other than the contract
workers) were properly ordered reinstated, considering their lesser
degree of responsibility. The penalty imposed upon the leaders was
only proper because it was they who instigated the strike even if they
knew, or should have known, that it was illegal. It was also fair to rule
that the reinstated strikers were not entitled to backpay as they
certainly should not be compensated for services not rendered during
the illegal strike. In our view, this is a reasonable compromise between
the demands of the workers and the rights of the employer.
Coming now to the last question, we stress the rule in Cartagenas v.
Romago Electric Co., 5 that contract workers are not considered regular
employees, their services being needed only when there are projects to be
undertaken. 'The rationale of this rule is that if a project has already been
completed, it would be unjust to require the employer to maintain them in
the payroll while they are doing absolutely nothing except waiting until
another project is begun, if at all. In effect, these stand-by workers would
be enjoying the status of privileged retainers, collecting payment for work
not done, to be disbursed by the employer from profits not earned. This is
not fair by any standard and can only lead to a coddling of labor at the
expense of management.
We believe, however, that this rule is not applicable in the case at bar,
and for - good reason. The record shows that although the contracts of
the project workers had indeed expired, the project itself was still ongoing and so continued to require the workers' services for its
completion. 6 There is no showing that such services were unsatisfactory
to justify their termination. This is not even alleged by the private
respondent. One can therefore only wonder why, in view of these
circumstances, the contract workers were not retained to finish the project
they had begun and were still working on. This had been done in past
projects. This arrangement had consistently been followed before, which
accounts for the long years of service many of the workers had with the
MDC.

It is obvious that the real reason for the termination of their serviceswhich, to repeat, were still needed-was the complaint the project
workers had filed and their participation in the strike against the private
respondent. These were the acts that rendered them persona non
grata to the management. Their services were discontinued by the
MDC not because of the expiration of their contracts, which had not
prevented their retention or rehiring before as long as the project they
were working on had not yet been completed. The real purpose of the
MDC was to retaliate against the workers, to punish them for their
defiance by replacing them with more tractable employees.

This is a symbiotic relationship we must maintain if such a quest is to

succeed.

Also noteworthy in this connection is Policy Instruction No. 20 of the

Department of Labor, providing that "project employees are not entitled
to separation pay if they are terminated as a result of the completion of
the project or any phase thereof in which they are employed,
regardless of the projects in which they had been employed by a
particular construction company." 7 Affirmatively put, and interpreting it in
the most liberal way to favor the working class, the rule would entitle
project employees to separation pay if the projects they are working on
have not yet been completed when their services are terminated. And this
should be true even if their contracts have expired, on the theory that such
contracts would have been renewed anyway because their services were
still needed.

Narvasa (Chairman), Gancayco and Medialdea, JJ., concur.

Applying this rule, we hold that the project workers in the case at bar,
who were separated even before the completion of the project at the
New Alabang Village and not really for the reason that their contracts
had expired, are entitled to separation pay. We make this disposition
instead of ordering their reinstatement as it may be assumed that the
said project has been completed by this time. Considering the workers
to have been separated without valid cause, we shall compute their
separation pay at the rate of one month for every year of service of
each dismissed employee, up to the time of the completion of the
project. 8 We feel this is the most equitable way to treat their claim in light
of their cavalier dismissal by the private respondent despite their long
period of satisfactory service with it.
It is the policy of the Constitution to afford protection to labor in
recognition of its role in the improvement of our welfare and the
strengthening of our democracy. An exploited working class is a
discontented working class. It is a treadmill to progress and a threat to
freedom. Knowing this, we must exert all effort to dignify the lot of the
employee, elevating him to the same plane as his employer, that they
may better work together as equal partners in the quest for a better life.

WHEREFORE, the appealed decision of the NLRC is AFFIRMED but

with the modification that the contract workers are hereby declared to
have been illegally separated before the expiration of the project they
were working on and so are entitled to separation pay equivalent to one
month salary for every year of service. No costs.
SO ORDERED.

Grio-Aquino, J., is on leave.

Footnotes
* On April 14, 1983, a compromise agreement
subsequently approved by the NLRC en banc provided
for the reinstatement of the workers and payment to
them of one year backwage and separation pay by the
MDC.
1 Rollo, pp. 53-61.
2 Rollo, pp. 45-52.
3 Daily Express, dated November 13 and 14, 1986.
4 Rollo, p. 115.
5 G.R. No. 82973, September 15, 1989.
6 Rollo, p. 60.
7 Dated February 15, 1977.
8 Art. 283, Labor Code.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 76633 October 18, 1988
EASTERN SHIPPING LINES, INC., petitioner,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA),
MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER
ABDUL BASAR and KATHLEEN D. SACO, respondents.
Jimenea, Dala & Zaragoza Law Office for petitioner.
The Solicitor General for public respondent.
Dizon Law Office for respondent Kathleen D. Saco.

CRUZ, J.:
The private respondent in this case was awarded the sum of
P192,000.00 by the Philippine Overseas Employment Administration
(POEA) for the death of her husband. The decision is challenged by the
petitioner on the principal ground that the POEA had no jurisdiction
over the case as the husband was not an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he
was killed in an accident in Tokyo, Japan, March 15, 1985. His widow
sued for damages under Executive Order No. 797 and Memorandum
Circular No. 2 of the POEA. The petitioner, as owner of the vessel,
argued that the complaint was cognizable not by the POEA but by the
Social Security System and should have been filed against the State
Insurance Fund. The POEA nevertheless assumed jurisdiction and
after considering the position papers of the parties ruled in favor of the
complainant. The award consisted of P180,000.00 as death benefits
and P12,000.00 for burial expenses.

The petitioner immediately came to this Court, prompting the Solicitor

General to move for dismissal on the ground of non-exhaustion of
administrative remedies.
Ordinarily, the decisions of the POEA should first be appealed to the
National Labor Relations Commission, on the theory inter alia that the
agency should be given an opportunity to correct the errors, if any, of its
subordinates. This case comes under one of the exceptions, however,
as the questions the petitioner is raising are essentially questions of
law. 1 Moreover, the private respondent himself has not objected to the
petitioner's direct resort to this Court, observing that the usual procedure
would delay the disposition of the case to her prejudice.
The Philippine Overseas Employment Administration was created
under Executive Order No. 797, promulgated on May 1, 1982, to
promote and monitor the overseas employment of Filipinos and to
protect their rights. It replaced the National Seamen Board created
earlier under Article 20 of the Labor Code in 1974. Under Section 4(a)
of the said executive order, the POEA is vested with "original and
exclusive jurisdiction over all cases, including money claims, involving
employee-employer relations arising out of or by virtue of any law or
contract involving Filipino contract workers, including seamen." These
cases, according to the 1985 Rules and Regulations on Overseas
Employment issued by the POEA, include "claims for death, disability
and other benefits" arising out of such employment. 2
The petitioner does not contend that Saco was not its employee or that
the claim of his widow is not compensable. What it does urge is that he
was not an overseas worker but a 'domestic employee and
consequently his widow's claim should have been filed with Social
Security System, subject to appeal to the Employees Compensation
Commission.
We see no reason to disturb the factual finding of the POEA that
Vitaliano Saco was an overseas employee of the petitioner at the time
he met with the fatal accident in Japan in 1985.
Under the 1985 Rules and Regulations on Overseas Employment,
overseas employment is defined as "employment of a worker outside
the Philippines, including employment on board vessels plying
international waters, covered by a valid contract. 3 A contract worker is
described as "any person working or who has worked overseas under a
valid employment contract and shall include seamen" 4 or "any person
working overseas or who has been employed by another which may be a

local employer, foreign employer, principal or partner under a valid

employment contract and shall include seamen." 5 These definitions clearly
apply to Vitaliano Saco for it is not disputed that he died while under a
contract of employment with the petitioner and alongside the petitioner's
vessel, the M/V Eastern Polaris, while berthed in a foreign country. 6

It is worth observing that the petitioner performed at least two acts

which constitute implied or tacit recognition of the nature of Saco's
employment at the time of his death in 1985. The first is its submission
of its shipping articles to the POEA for processing, formalization and
approval in the exercise of its regulatory power over overseas
employment under Executive Order NO. 797. 7 The second is its
payment 8 of the contributions mandated by law and regulations to the
Welfare Fund for Overseas Workers, which was created by P.D. No. 1694
"for the purpose of providing social and welfare services to Filipino
overseas workers."
Significantly, the office administering this fund, in the receipt it prepared
for the private respondent's signature, described the subject of the
burial benefits as "overseas contract worker Vitaliano Saco." 9 While this
receipt is certainly not controlling, it does indicate, in the light of the
petitioner's own previous acts, that the petitioner and the Fund to which it
had made contributions considered Saco to be an overseas employee.
The petitioner argues that the deceased employee should be likened to
the employees of the Philippine Air Lines who, although working abroad
in its international flights, are not considered overseas workers. If this
be so, the petitioner should not have found it necessary to submit its
shipping articles to the POEA for processing, formalization and
approval or to contribute to the Welfare Fund which is available only to
overseas workers. Moreover, the analogy is hardly appropriate as the
employees of the PAL cannot under the definitions given be considered
seamen nor are their appointments coursed through the POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial
expenses was made by the POEA pursuant to its Memorandum
Circular No. 2, which became effective on February 1, 1984. This
circular prescribed a standard contract to be adopted by both foreign
and domestic shipping companies in the hiring of Filipino seamen for
overseas employment. A similar contract had earlier been required by
the National Seamen Board and had been sustained in a number of
cases by this Court. 10 The petitioner claims that it had never entered into
such a contract with the deceased Saco, but that is hardly a serious
argument. In the first place, it should have done so as required by the

circular, which specifically declared that "all parties to the employment of

any Filipino seamen on board any ocean-going vessel are advised to adopt
and use this employment contract effective 01 February 1984 and to desist
from using any other format of employment contract effective that date." In
the second place, even if it had not done so, the provisions of the said
circular are nevertheless deemed written into the contract with Saco as a
postulate of the police power of the State. 11

But the petitioner questions the validity of Memorandum Circular No. 2

itself as violative of the principle of non-delegation of legislative power.
It contends that no authority had been given the POEA to promulgate
the said regulation; and even with such authorization, the regulation
represents an exercise of legislative discretion which, under the
principle, is not subject to delegation.
The authority to issue the said regulation is clearly provided in Section
4(a) of Executive Order No. 797, reading as follows:
... The governing Board of the Administration (POEA),
as hereunder provided shall promulgate the necessary
rules and regulations to govern the exercise of the
adjudicatory functions of the Administration (POEA).
Similar authorization had been granted the National Seamen Board,
which, as earlier observed, had itself prescribed a standard shipping
contract substantially the same as the format adopted by the POEA.
The second challenge is more serious as it is true that legislative
discretion as to the substantive contents of the law cannot be
delegated. What can be delegated is the discretion to
determine how the law may be enforced, notwhat the law shall be. The
ascertainment of the latter subject is a prerogative of the legislature.
This prerogative cannot be abdicated or surrendered by the legislature
to the delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which
annulled Executive Order No. 626, this Court held:
We also mark, on top of all this, the questionable
manner of the disposition of the confiscated property as
prescribed in the questioned executive order. It is there
authorized that the seized property shall be distributed
to charitable institutions and other similar institutions as
the Chairman of the National Meat Inspection
Commission may see fit, in the case of carabaos.'
(Italics supplied.) The phrase "may see fit" is an

extremely generous and dangerous condition, if

condition it is. It is laden with perilous opportunities for
partiality and abuse, and even corruption. One
searches in vain for the usual standard and the
reasonable guidelines, or better still, the limitations that
the officers must observe when they make their
distribution. There is none. Their options are apparently
boundless. Who shall be the fortunate beneficiaries of
their generosity and by what criteria shall they be
chosen? Only the officers named can supply the
answer, they and they alone may choose the grantee as
they see fit, and in their own exclusive discretion.
Definitely, there is here a 'roving commission a wide
and sweeping authority that is not canalized within
banks that keep it from overflowing,' in short a clearly
profligate and therefore invalid delegation of legislative
powers.
There are two accepted tests to determine whether or not there is a
valid delegation of legislative power, viz, the completeness test and the
sufficient standard test. Under the first test, the law must be complete in
all its terms and conditions when it leaves the legislature such that
when it reaches the delegate the only thing he will have to do is enforce
it. 13 Under the sufficient standard test, there must be adequate guidelines
or stations in the law to map out the boundaries of the delegate's authority
and prevent the delegation from running riot. 14
Both tests are intended to prevent a total transference of legislative
authority to the delegate, who is not allowed to step into the shoes of
the legislature and exercise a power essentially legislative.
The principle of non-delegation of powers is applicable to all the three
major powers of the Government but is especially important in the case
of the legislative power because of the many instances when its
delegation is permitted. The occasions are rare when executive or
judicial powers have to be delegated by the authorities to which they
legally certain. In the case of the legislative power, however, such
occasions have become more and more frequent, if not necessary. This
had led to the observation that the delegation of legislative power has
become the rule and its non-delegation the exception.
The reason is the increasing complexity of the task of government and
the growing inability of the legislature to cope directly with the myriad
problems demanding its attention. The growth of society has ramified

its activities and created peculiar and sophisticated problems that the
legislature cannot be expected reasonably to comprehend.
Specialization even in legislation has become necessary. To many of
the problems attendant upon present-day undertakings, the legislature
may not have the competence to provide the required direct and
efficacious, not to say, specific solutions. These solutions may,
however, be expected from its delegates, who are supposed to be
experts in the particular fields assigned to them.
The reasons given above for the delegation of legislative powers in
general are particularly applicable to administrative bodies. With the
proliferation of specialized activities and their attendant peculiar
problems, the national legislature has found it more and more
necessary to entrust to administrative agencies the authority to issue
rules to carry out the general provisions of the statute. This is called the
"power of subordinate legislation."
With this power, administrative bodies may implement the broad
policies laid down in a statute by "filling in' the details which the
Congress may not have the opportunity or competence to provide. This
is effected by their promulgation of what are known as supplementary
regulations, such as the implementing rules issued by the Department
of Labor on the new Labor Code. These regulations have the force and
effect of law.
Memorandum Circular No. 2 is one such administrative regulation. The
model contract prescribed thereby has been applied in a significant
number of the cases without challenge by the employer. The power of
the POEA (and before it the National Seamen Board) in requiring the
model contract is not unlimited as there is a sufficient standard guiding
the delegate in the exercise of the said authority. That standard is
discoverable in the executive order itself which, in creating the
Philippine Overseas Employment Administration, mandated it to protect
the rights of overseas Filipino workers to "fair and equitable
employment practices."
Parenthetically, it is recalled that this Court has accepted as sufficient
standards "Public interest" in People v. Rosenthal 15 "justice and equity"
in Antamok Gold Fields v. CIR 16 "public convenience and welfare"
in Calalang v. Williams 17 and "simplicity, economy and efficiency"
in Cervantes v. Auditor General, 18 to mention only a few cases. In the
United States, the "sense and experience of men" was accepted in Mutual
Film Corp. v. Industrial Commission, 19 and "national security"
in Hirabayashi v. United States. 20

It is not denied that the private respondent has been receiving a

monthly death benefit pension of P514.42 since March 1985 and that
she was also paid a P1,000.00 funeral benefit by the Social Security
System. In addition, as already observed, she also received a
P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers.
These payments will not preclude allowance of the private respondent's
claim against the petitioner because it is specifically reserved in the
standard contract of employment for Filipino seamen under
Memorandum Circular No. 2, Series of 1984, that
Section C. Compensation and Benefits.
1. In case of death of the seamen during the term of his
Contract, the employer shall pay his beneficiaries the
amount of:
a. P220,000.00 for master and chief
engineers
b. P180,000.00 for other officers,
including radio operators and master
electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits
mentioned above shall be separate and distinct from,
and will be in addition to whatever benefits which the
seaman is entitled to under Philippine laws. ...
3. ...
c. If the remains of the seaman is buried
in the Philippines, the owners shall pay
the beneficiaries of the seaman an
amount not exceeding P18,000.00 for
burial expenses.
The underscored portion is merely a reiteration of Memorandum
Circular No. 22, issued by the National Seamen Board on July 12,1976,
providing an follows:

Income Benefits under this Rule Shall be Considered

Additional Benefits.
All compensation benefits under Title II, Book Four of
the Labor Code of the Philippines (Employees
Compensation and State Insurance Fund) shall be
granted, in addition to whatever benefits, gratuities or
allowances that the seaman or his beneficiaries may be
entitled to under the employment contract approved by
the NSB. If applicable, all benefits under the Social
Security Law and the Philippine Medicare Law shall be
enjoyed by the seaman or his beneficiaries in
accordance with such laws.
The above provisions are manifestations of the concern of the State for
the working class, consistently with the social justice policy and the
specific provisions in the Constitution for the protection of the working
class and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case.
Its argument that it has been denied due process because the same
POEA that issued Memorandum Circular No. 2 has also sustained and
applied it is an uninformed criticism of administrative law itself.
Administrative agencies are vested with two basic powers, the quasilegislative and the quasi-judicial. The first enables them to promulgate
implementing rules and regulations, and the second enables them to
interpret and apply such regulations. Examples abound: the Bureau of
Internal Revenue adjudicates on its own revenue regulations, the
Central Bank on its own circulars, the Securities and Exchange
Commission on its own rules, as so too do the Philippine Patent Office
and the Videogram Regulatory Board and the Civil Aeronautics
Administration and the Department of Natural Resources and so on ad
infinitumon their respective administrative regulations. Such an
arrangement has been accepted as a fact of life of modern
governments and cannot be considered violative of due process as
long as the cardinal rights laid down by Justice Laurel in the landmark
case of Ang Tibay v. Court of Industrial Relations 21 are observed.
Whatever doubts may still remain regarding the rights of the parties in
this case are resolved in favor of the private respondent, in line with the
express mandate of the Labor Code and the principle that those with
less in life should have more in law.

When the conflicting interests of labor and capital are weighed on the
scales of social justice, the heavier influence of the latter must be
counter-balanced by the sympathy and compassion the law must
accord the underprivileged worker. This is only fair if he is to be given
the opportunity and the right to assert and defend his cause not as a
subordinate but as a peer of management, with which he can negotiate
on even plane. Labor is not a mere employee of capital but its active
and equal partner.
WHEREFORE, the petition is DISMISSED, with costs against the
petitioner. The temporary restraining order dated December 10, 1986 is
hereby LIFTED. It is so ordered.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10338

April 30, 1957

MAGALONA & COMPANY, petitioner,

vs.
THE WORKMEN'S COMPENSATION COMMISSIONER and PEDRO
P. GERONCA, respondents.
Hilado and Hilado for petitioner.
Paciano C. Villavieja and Ernesto H Cruz for respondents.
ENDENCIA, J.:
The Petitioner seeks the reversal of the order of the Workmen's
Compensation Commissioner to pay to Pedro P. Geronca the amount
of 12,995.20 together with the sum of P30 as fee required by section
55 of the Workmen's Compensation Law, for the injuries suffered by
Jorge Geronca while he Was working as a mechanic helper in the
automobile repair shop run and operated by the herein petitioner.
It appears that on May 16, 1954, while Jorge Geronca was working in
the aforesaid shop hammering the spindle pin of a truck, a piece, of
steel flew off, pierced his left eye and became imbedded in his posterior
eyeball. He was immediately given emergency treatment by Dr.
Eduardo Garcia, the petitioner's physician, and was able thereafter to
continue working. However, on June 10,1954, he stopped working
because of diminishing vision of his injured eye and was immediately
sent to Manila at the petitioner's expense for specialized treatment. In
that city, he was confined at the Singian Clinic from June 16, to July 14,
1954, under the care of Dr. Carlos Sevilla who removed the foreign
body from his injured eye. Thereafter, while he was recovering from the
operation of his eye, he developed psychosis and had to be confined in
the National Psychopathic Hospital.

On April 21, 1955, the manager of the petitioner company received a

letter-computation, dated March 21, 1955, from respondent
Commissioner Cesareo P. de Leon, wherein he was held liable for
compensation under sections 14 and 15 of the aforementioned Act for
the claimant's permanent total disability (insanity resulting from his
injury) and ordered to pay to said claimant the total sum of P2,995.20.
In that letter he was adverted that if after fifteen (15) days from receipt
thereof the Commissioner did not hear from petitioner, it shall be
presumed that the latter is in full accord with the letter-computation and
the same will be entered as the final decision on the case.
On April 28, 1955, petitioner replied to respondent Commissioner thru a
letter, the most pertinent portions of which read as follows:
We make reference to your letter of March 21, 1955, copy of
which was received by our client, Magalona Motor Co., on April
21, 1955, relative to the claim for compensation of the above
named laborer. We must disagree with the views expressed
therein, with all due respect, most especially with your finding
our said client liable for compensation for total permanent
disability (insanity resulting from his injury) of the said worker
and assessing compensation on the basis thereof.
While our said client is not minded to escape liability where
compensation is legally demandable, still it feels that in view of
the exaggerated claim for which it is now sought to be
answerable, it has no other recourse but to contest the claim. It
is not denied that the insanity of the claimant supervened while
recovering from the operation of his eye. But it is certainly and
unjustifiable jumping at conclusions for the Honorable
Commission to hold that merely on that account the insanity
from which the claimant now suffers is compensable illness
under the Workmen's Compensation Act, for which our client is
bound to respond.
In view of the foregoing circumstances, our client is contesting
the claim. It is, therefore, requested that the hearing required by
law be conducted to the end that our client may be afforded
opportunity to present evidence in its favor and against the
claim.
On July 21, 1955, the respondent Commissioner rejoined and stated in
his communication among other things, the following:

Preference is made to your letter dated April 28, 1955,

contesting the claim for compensation of the above-named
injured laborer of your client, the Magalona Motor Co., on the
ground that although, admittedly, his eye injury occurred in the
course of his employment, his supervening insanity could
arisen out of and in the course of same employment.
We cannot at this stage of the proceedings take cognizance of
your opposition to the claim, it being a matter of record that no
controversion had ever been submitted to the Workmen's
Compensation Commission within the period provided for by
the following pertinent provision of Section 45 of the Workmen's
Compensation Act, as amended:
". . . In case the employer decides to controvert the right to
compensation, he shall, either on or before the fourteenth day
of disability or within ten, days after he has knowledge of the
alleged accident, file a notice with the Commissioner, on a form
prescribed by him, that compensation is not being paid, giving
the name of the claimant, name of the employer, date of the
accident and the reason why compensation is not being paid.
Failure on the part of the employer or the insurance carrier
comply with this requirement shall constitute a renunciation of
his right to controvert the claim. . . ."
The 15-day period mentioned in the last paragraph of our lettercomputation was not intended to reinstate your client's right to
controvert but to afford him an opportunity to question our
computation as well as the disability rating given to the injured.
The compensability of the claim is deemed admitted by your
client because of his failure to controvert. This being the case,
no further hearing is necessary.
In view of the foregoing, this Commission is of the opinion, and
so holds, that your request for a hearing is not necessary. We
would request, therefore, that your client be prevailed upon to
remit at once to this Office the compensation due the injured in
the amount of TWO THOUSAND NINE HUNDRED NINETYFIVE PESOS and 20/100 (P2,995.20), together with the sum of
THIRTY PESOS (30.00) as fee required by section 55 of the
Act.

On September 15, 1955, the petitioner reiterated its petition for the
reconsideration of the computation mentioned above and urged that
the same be made merely on the basis of the eye injury sustained by
Mr. Geronca, alleging that the latter's insanity upon which the disputed
computation was based cannot be taken into consideration without
giving the herein petitioner sufficient opportunity to be heard. This
petition for reconsideration was turned down by the Commissioner on
January 27, 1956, hence the present appeal by way of certiorari.
Petitioner contends that the Commissioner committed an error in
adjudicating Geronca's claim on the basis of insanity without holding a
hearing thereon as demanded by it in its letter of April 28, 1955.
Petitioner claims: "that the casuality of the injury in relation to the
insanity upon which the compensation was computed can be arrived at
only after a hearing. Short of any showing by evidence that there is
such causality, many other factors may be surmised to have
intervened, not necessarily connected with the eye injury, which could
have induced the psychosis. As a matter of fact, the authorities hold the
view that insanity which comes about after an injury cannot necessarily
be presumed to be causally linked. The legal causation must still be
established and proved. In support of our stand, we quote from
Schneider on Workmen's Compensation Laws, 2nd ed., Vol. 1, section
629 to 632, as follows:
"In October a workman suffered an injury to his thumb, which,
due to infection, was slow in healing. He could not work. After
Christmas he became very depressed, and began to suffer
from neurasthenia and in a few days threw himself under a train
and was killed. The court, in denying compensation, said: "I
think if we were to assent to the very able and interesting
arguments which we have heard, we should be driven to say
that, wherever we find an accident which involves, as so many
accidents do, depression of spirits, particularly in the case of a
man who had been leading an active life as a laboring man or
artisan, depression at being kept from his work and idling about
at home, then it neurasthenia and suicide result, they can all be
traced directly to the accident. If we were to say that, we should
be opening a very wide door; and I think we ought not to do so.
I think as the Scottish court said, there must be some direct
evidence of the insanity being a result of the accident
something more than the insanity being subsequent in turn to
the accident. The legal causation must be established and
proved."

xxx

xxx

xxx

"Insanity is not to be inferred merely from the fact that a

workman who had received an injury to his eye, and was
suffering great pain, committed suicide, although there was no
other reason advanced for the act except injury."
It is further argued by the petitioner that, having in view all the facts of
the case, the Commissioner, in denying its request for a formal hearing
on the issue of insanity, violated the constitutional provision of due
process of law in that it was deprived of the opportunity to contest the
legality and correctness of the disputed computation based not only on
the jury in the eye but also on the insanity resulting from such injury.
In turn, the respondents contend that the petitioner has waived its right
to show lack of casual relation between Geronca's insanity and eye
injury when the petitioner failed to controvert the right to compensation
on or before the 14th day of disability or within the 10-day period fixed
by paragraph 2, section 45 of the Workmen's Compensation Act, as
amended. Carefully considered, this contention can hardly be
maintained, for the letter-computation dated March 21, 1955 was only
received by the petitioner on April 21, 1955 and on April 28 it
immediately sent its letter of protest, wherein it requested formal
hearing about the computation based not only on the injury in the eye
but also on the insanity resulting from such injury. And it cannot be
pretended that the petitioner lost its right to contest such computation
because the same was based not only on the injury in the eye, of Jorge
Geronca but principally on his insanity, and upon learning of such
computation the petitioner filed its protest and demanded hearing
thereon. Again, we find that no claim for compensation based on
insanity was filed by the respondent Geronca; and the record does not
show when the insanity of Jorge Geronca did begin, and although
petitioner had knowledge of the accident, or the injury on the eye, at
that time there was no sign of Geronca's insanity so that petitioner
could not file the corresponding notice required by section 45 of the
Workmen's Compensation Act to controvert such claim based on
insanity. In other words, we find paragraph 2 of section 45 of the
Workmen's Compensation Act inapplicable to the present case for
there is no sufficient fact laid before this Court from which it may be
inferred that the herein petitioner, as employer of Jorge Geronca, has
renounced its right to controvert the latter's claim to compensation
based on his insanity.

We do not lose sight of the fact that under our laws and the policies of
our government, the labor laws should be construed liberally in favor of
the laborer; but, on the other hand, the fundamental principle of due
process of law should be sternly applied alike on both the poor and the
rich in order to attain proper justice. Hence, in the present case, we
believe that a hearing should be had on the disputed facts about
causality of the injury on the eye of Jorge Geronca and his alleged
insanity arising therefrom.
ACCORDINGLY, the resolutions of the respondent Commissioner,
dated March 21 and July 21, 1955 and January 27, 1956, are hereby
set aside and a formal hearing is hereby ordered on the issue of legal
causation between the eye injury and insanity of Jorge Geronca in
order to determine the true compensation that should be awarded to
him.
Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Reyes, J.B.L. and Felix, JJ.,concur.

The defendant made the false declaration previously mentioned

after he had sworn before Lucas Magno, notary public,
authorized by law to administer oaths, that he would state the
truth; and said false declaration made under the oath taken by
the defendant, as above stated, concerned a fact of such
importance that without it he would not have been admitted to
said examinations prescribed for the municipal police service.
In violation of the law. (Sec. 3, Act No. 1697.)

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9878 December 24, 1914

After hearing the evidence adduced during the trial of the cause, the
Honorable Francisco Santamaria, judge, found the defendant guilty of
the crime charged, and sentenced him to be imprisoned for a period of
two months and to pay a fine of P100, in case of insolvency to suffer
subsidiary imprisonment in accordance with the provisions of the law,
and to pay the costs. The defendant was further sentenced to be
disqualified from holding any public office or from giving testimony in
any court in the Philippine Islands until such time as the sentence
against him is reversed. From that sentence the defendant appealed to
this court and made the following assignments of error:

THE UNITED STATES, plaintiff-appellee,

vs.
FRANK TUPASI MOLINA, defendant-appellant.
Julio Borbon Villamor for appellant.
Office of the Solicitor-General Corpus for appellee.
JOHNSON, J.:
On the 6th day of February, 1914, the prosecuting attorney of the
Province of Ilocos Sur filed a complaint against the defendant charging
him with the crime of perjury, alleged to have been committed as
follows:
The said Frank Tupasi Molina, the above-named defendant, did
on September 10, 1912, in the municipality of Tayum of the
Province of Ilocos Sur, P. I., for the purpose of gaining
admission, as in fact he did, owing to the deceit he practiced,
as will be hereinafter related, to the examinations for the
municipal police service in the Province of Ilocos Sur, which
were held in the municipality of Vigan, said province, on or
about January 18, 1913, willfully, unlawfully, and criminally take
a false oath by affirming and asserting in an oath that he knew
to be false, in an examination application which he himself filled
out and signed, that prior to the said date, to wit, September 10,
1912, he had never been indicted, tried, or sentenced for the
violation of any law, ordinance, or regulation in any court, when
he knew at the time he took that oath and signed his
examination application, as he knows at the present time, that
he had been twice indicted for disturbing the public peace, and
for injurias graves, and sentenced to pay a fine and undergo
imprisonment therefor, by the justice of the peace court of
Tayum and the Court of First Instance of Ilocos Sur.
1awphil.net

1. The trial court erred in holding section 3 of Act No. 1697 to

be applicable in this case.
2. The trial court manifestly erred in sentencing the appellant for
violation of section 3 of Act No. 1697, when the prosecution did
not present any evidence demonstrating that he had willfully
and corruptly sworn or taken an oath.
3. The trial court erred in not sustaining the defense set up by
the appellant Tupasi with reference to the construction he
placed upon the fifth question of Exhibit A of the prosecution.
4. The trial court erred also in holding that the words "which he
does not believe to be true," used in Act No. 1697, are
equivalent to the term "knowingly," used in section 31 of Act No.
1761.
5. The trial court erred in not acquitting the defendant.
It appears from the record that on the 10th day of September, 1912, the
defendant signed a petition to be permitted to take the examination for
the position of municipal policeman. Said petition was signed by the
defendant and sworn to by him before a notary public. Said petition

contained a number of questions which the applicant was required to

answer. Among other questions we find that No. 5 was as follows:
Have you ever been indicted, tried, or sentenced in any court
for violation of any law, ordinance, or regulations, or have you
ever been tried or sentenced for violation of regulations of the
Army, Navy, of the Constabulary, in any court martial of the
Army or of the Constabulary, or in any other court?
To said question the defendant answered: "No, sir; I cannot remember
any."
During the trial of the cause the prosecuting attorney presented
Exhibits B, C, and D.
Exhibit B shows that one Francisco Tupasi and others, on the 8th day
of February, 1911, had been arrested by an order of the justice of the
peace of the municipality of Tayum, Province of Ilocos Sur, and charged
with disturbing the public peace, were found guilty, and sentenced, on
the 20th day of February, 1911, to be imprisoned for a period of fifteen
days, and each to pay a fine of 25 pesetas, and to pay the costs.
Exhibit C shows that Francisco Tupasi, on the 18th day of May, 1911,
had been arrested and taken before the justice of the peace of the
municipality of Tayum, Province of Ilocos Sur, charged with the crime of
"injurias graves," and was sentenced on the 22d day of May, 1911, to
be imprisoned for a period of fifteen days and to pay a fine of
75 pesetas and the costs.
Exhibit D is the certificate of the clerk of the Court of First Instance of
the Province of Ilocos Sur and shows that the Honorable Dionisio
Chanco, on the 26th day of April, 1911, in an appealed case for
disturbing the public peace, sentenced the said Francisco Tupasi and
others to pay a fine of 60 pesetas, in case of insolvency to suffer
subsidiary imprisonment, and to pay the costs.
Exhibit A was the sworn petition presented by the defendant for
permission to take the examination. Said petition was signed by Frank
Tupasi y Molina. It was shown during the trial of the cause, by the
admission of the defendant himself, that he was the same person
accused and sentenced in Exhibits B, C, and D. It was argued that the
defendant signed said application in the name of "Frank Tupasi y
Molina" when he had theretofore been known as "Francisco Tupasi,"

for the purpose of avoiding identity. The defendant said that "Francisco"
was the same as "Frank" and that he had adopted the name of "Frank"
instead of "Francisco." The answers to the questions in said application
were made in English.
With reference to the first assignment of error, that the lower court
committed an error in applying section 3 of Act No. 1697 to the facts in
the present case, it may be said that said article provides that:
Any person who, having taken an oath before a competent
tribunal, officer, or person, in any case in which a law of the
Philippine Islands authorizes an oath to be administered, that
he will testify, declare, depose, or certify truly, or that any
written testimony, declaration, deposition or certificate by him
subscribed is true, willfully and contrary to such oath states or
subscribes any material matter which he does not believe to be
true, is guilty or perjury, and shall be punished, etc.
Act No. 2169 of the Philippine Legislature, which is an Act to provide for
the reorganization, government, and inspection of municipal police of
the municipalities or provinces and subprovinces organized under Act
No. 83, provides for the reorganization of the municipal police of the
municipalities or provinces and subprovinces organized under Act No.
83.
Said Act further provides that, subject to the approval of the Secretary
of Commerce and Police, the Director of Constabulary shall prepare
general regulations for the good government, discipline, and inspection
of the municipal police, "compliance wherewith shall be obligatory for
all members of the organization."
Said Act further provides for an examining board for the municipal
police. It further provides that, subject to the approval of the Secretary
of Commerce and Police, the Director of Constabulary shall prepare an
examination manual, prescribing, at the same time, suitable rules for
the conduct of the examination.
Said Act (No. 2169) also provides for the time and place for holding
said examinations.
Section 9 of said Act provides that: "To be eligible for examination, a
candidate shall have the following requirements: . . . (6) Have no
criminal record."

In accordance with the requirements of said law, the Director of

Constabulary prepared an examination manual, prescribing at the
same time rules for conducting examinations, which examination
manual was approved by the Secretary of Commerce and Police, and
thereby was given the force of law. Said manual prescribed a form in
blank, known as "Municipal Form No. 11," which form each applicant
was required to fill, in order to be permitted to take said examination.
Said application required the applicant to swear to the facts stated
therein. We have, therefore, a law which authorizes the administration
of an oath in the present case.
Of course, the regulations adopted under legislative authority by a
particular department must be in harmony with the provisions of the
law, and for the sole purpose of carrying into effect its general
provisions. By such regulations, of course, the law itself can not be
extended. So long, however, as the regulations relate solely to carrying
into effect the provisions of the law, they are valid. A violation of a
regulation prescribed by an executive officer of the Government in
conformity with and based upon a statute authorizing such regulation,
constitutes an offense and renders the offender liable to punishment in
accordance with the provisions of law. (United States vs.Bailey, 9 Pet.,
238, 252, 254, 256; Caha vs. United States, 152 U. S., 211, 218; United
States vs. Eaton, 144 U. S., 677.)
In the very nature of things in many cases it becomes impracticable for
the legislative department of the Government to provide general
regulations for the various and varying details for the management of a
particular department of the Government. It therefore becomes
convenient for the legislative department of the Government, by law, in
a most general way, to provide for the conduct, control, and
management of the work of the particular department of the
Government; to authorize certain persons, in charge of the
management, control, and direction of the particular department, to
adopt certain rules and regulations providing for the detail of the
management and control of such department. Such regulations have
uniformly been held to have the force of law, whenever they are found
to be in consonance and in harmony with the general purposes and
objects of the law. Many illustrations might be given. For instance, the
Civil Service Board is given authority to examine applicants for various
positions within the Government service. The law generally provides
the conditions in a most general way, authorizing the chief of such
Bureau to provide rules and regulations for the management of the
conduct of examinations, etc. The law provides that the Collector of
Customs shall examine persons who become applicant to act as

captains of ships for the coastwise trade, providing at the same time
that the Collector of Customs shall establish rules and regulations for
such examinations. Such regulations, once established and found to be
in conformity with the general purposes of the law, are just as binding
upon all of the parties, as if the regulations had been written in the
original law itself. (United States vs. Grimaud, 220 U. S., 506;
Williamson vs. United States, 207 U. S., 425; United States vs. United
Verde Copper Co., 196 U. S., 207.)
1awphil.net

By reference to Exhibit A, the application made and sworn to by the

defendant, we find that the oath was taken before a notary public, a
person qualified to administer an oath, in accordance with the
provisions of law.
The defendant, in support of his first assignment of error, argues that
the purpose of Act No. 1697 was not intended to cover cases like the
present. He argues that said Act was an Act only authorizing the
appointment of commissioners, to make official investigations, fixing
their powers, for the payment of witness fees, and for the punishment
of perjury in official investigations. The same question was presented to
this court in the case of United States vs. Concepcion (13 Phil. Rep.,
424). In that case the court decided against the contention of the
defendant in the present case. It is true that the title of said Act (No.
1697) does not seem to indicate that said law contained a provision
punishing the crime of perjury generally. Reading the title alone, it
would seem to be a law punishing the crime of perjury in particular
cases. The law (Act No. 1697) is a general law. It is not a private or
local law. In the United States the constitutions in the different States
generally provide that the title of a law shall indicate the general
purpose of the law. There seems to be no provision in the Philippine
Islands that the title of a general law shall contain a statement of the
subject matter of the law. Section 5 of the Act of Congress of July 1,
1902, provides:
That no private or local bill which may be enacted into law shall
embrace more than one subject, and that subject shall be
expressed in the title of the bill.
We held in the case of United States vs. Concepcion, supra, that said
Act of Congress did not apply to general laws, and that said section 3
was a provision punishing the crime of perjury generally. (U. S. vs. De
Chaves, 14 Phil. Rep., 565; U. S. vs. Estraa, 16 Phil. Rep., 520; U.
S. vs. Fonseca, 20 Phil. Rep., 191.)

In the case of United States vs. Dumlao (R. G., No. 8721, not reported)
this court held the defendant guilty of the crime of perjury, under facts
exactly analogous to those in this case, under the provisions of section
3 of Act No. 1697. We find no reason, either in law or in the argument
of the appellant in the present case, to modify or reverse our
conclusions in that case (No. 8721).
With reference to the second assignment of error, the appellant alleged
that the lower court committed an error in finding that he had committed
the crime of perjury voluntarily and corruptly. There is nothing in the
record which shows that he did not present to the proper authorities
Exhibit A voluntarily. It is difficult to understand, in view of the fact that
the defendant had theretofore been convicted of two different offenses
and in one of them by two courts, how he could, within a few months
thereafter, make a sworn statement that he "did not have a criminal
record," unless he answered said question No. 5 in the manner
indicated in said application for the express purpose of deceiving the
authority to which said application was presented.
With reference to the third assignment of error, it may be said that the
language of question No. 5 seems to be perfectly clear. The defendant
admitted that he could read and understand Spanish. It is to be noted
that at the very beginning of said application there are three
paragraphs devoted to instructions to the applicant, which he should
have read and no doubt did. Said instructions were sufficient to indicate
to the defendant that if there were any questions which he did not fully
understand, he should have acquired a full understanding of the same
before answering them. If there was any fault in understanding said
question No. 5, it was wholly due to his own negligence.
With reference to the fourth assignment of error, the appellant contends
that the lower court committed an error in holding that the phrase
"which he does not believe to be true," found in section 3 of Act No.
1697, is equivalent to the word "knowingly," used in other laws. The
lower court cited the case of U. S. vs. Tin Masa (17 Phil. Rep., 463) in
support of his conclusion. Said section 3, in effect, provides that any
person who takes an oath before a competent tribunal, officer or
person, in any case in which a law of the Philippine Islands authorizes
an oath, that he will testify, etc., or that any written testimony,
declaration, etc., by him subscribed is true, and thereafter willfully and
contrary to such oath states or subscribes any material matter, "which
he does not believe to be true," is guilty of perjury. Under said section,
three things are necessary, in order to constitute the crime of perjury:

1. The person must have taken an oath, in a case where the law
authorizes an oath, before a competent person, or a person authorized
to administer an oath;
2. That the person who has taken the oath will testify, declare, dispose,
or certify truly, or that any written testimony, declaration, deposition or
certificate by him subscribed is true;
3. That he willfully and contrary to such oath states or subscribes any
material matter, "which he does not believe to be true."
It is difficult to understand how a person can state, under oath, that a
fact is true or subscribe a document, asserting that the same is true,
which he does not believe to be true. If, under his oath, he declares
that said facts are true, we must conclude that he believed that they
were true. If, as a matter of fact, they were not true, and he had full
knowledge of the fact that they were not true, then his declaration that
they were true would certainly be a sworn statement that a certain fact
was true which he did not believe to be true and, therefore, he must
have made a false statement knowingly. Without attempting to show or
assert that the phrase "which he does not believe to be true" is
equivalent to the word "knowingly," as the lower court held, we are of
the opinion that whoever makes a statement or subscribes a document,
under the circumstances mentioned in said section 3, which is false
and which he, at the time he makes the same does not believe to be
true, is guilty of the crime of perjury. In other words, under the
circumstances mentioned in said section, if one swears positively that a
fact is true, which he does not believe to be true, and it turns out that it
is false, he is guilty of the crime of perjury. No one should swear
positively that a fact is true or subscribe a document asserting that the
facts stated therein are true, unless he at least believes that they are
true at the time he takes such oath or subscribes such document. It can
scarcely be believed that the defendant in the present case believed
that the answer to said question No. 5 was true. He must have signed
or answered said question not only believing that it was not true, but,
as a matter of fact, signed the same knowing that the answer was
false.
With reference to the fifth assignment of error, we are of the opinion
that the evidence adduced during the trial of the cause clearly shows
that the defendant is guilty of the crime charged and therefore the
sentence of the lower court should be and is hereby affirmed with
costs.

Arellano, C.J., Torres, Carson and Araullo, JJ., concur.

Separate Opinions
MORELAND, J., dissenting:
I dissent. The case of United States vs. George (228 U. S., 14), is
decisive of this, holding that an indictment for perjury can not be based
on an affidavit not authorized or required by any law of the United
States. There is no law of the Philippine Islands which authorizes or
requires the affidavit which is the basis of the charge of perjury in this
case. (U. S. vs. Panlilio, 28 Phil. Rep., 608.)
#Separate Opinions
MORELAND, J., dissenting:
I dissent. The case of United States vs. George (228 U. S., 14), is
decisive of this, holding that an indictment for perjury can not be based
on an affidavit not authorized or required by any law of the United
States. There is no law of the Philippine Islands which authorizes or
requires the affidavit which is the basis of the charge of perjury in this
case. (U. S. vs. Panlilio, 28 Phil. Rep., 608.)

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 101279 August 6, 1992

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner,
vs.
HON. RUBEN D. TORRES, as Secretary of the Department of Labor
& Employment, and JOSE N. SARMIENTO, as Administrator of the
PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION,respondents.

On June 1, 1991, as a result of published stories regarding the abuses

suffered by Filipino housemaids employed in Hong Kong, DOLE
Secretary Ruben D. Torres issued Department Order No. 16, Series of
1991, temporarily suspending the recruitment by private employment
agencies of "Filipino domestic helpers going to Hong Kong" (p.
30, Rollo). The DOLE itself, through the POEA took over the business
of deploying such Hong Kong-bound workers.
In view of the need to establish mechanisms that
will enhance the protection for Filipino domestic helpers
going to Hong Kong, the recruitment of the same by
private employment agencies is hereby temporarily
suspended effective 1 July 1991. As such, the DOLE
through the facilities of the Philippine Overseas
Employment Administration shall take over the
processing and deployment of household workers
bound for Hong Kong, subject to guidelines to be issued
for said purpose.

De Guzman, Meneses & Associates for petitioner.

In support of this policy, all DOLE Regional Directors

and the Bureau of Local Employment's regional offices
are likewise directed to coordinate with the POEA in
maintaining a manpower pool of prospective domestic
helpers to Hong Kong on a regional basis.

GRIO-AQUINO, J.:

For compliance. (Emphasis ours; p. 30, Rollo.)

This petition for prohibition with temporary restraining order was filed by
the Philippine Association of Service Exporters (PASEI, for short), to
prohibit and enjoin the Secretary of the Department of Labor and
Employment (DOLE) and the Administrator of the Philippine Overseas
Employment Administration (or POEA) from enforcing and
implementing DOLE Department Order No. 16, Series of 1991 and
POEA Memorandum Circulars Nos. 30 and 37, Series of 1991,
temporarily suspending the recruitment by private employment
agencies of Filipino domestic helpers for Hong Kong and vesting in the
DOLE, through the facilities of the POEA, the task of processing and
deploying such workers.
PASEI is the largest national organization of private employment and
recruitment agencies duly licensed and authorized by the POEA, to
engaged in the business of obtaining overseas employment for Filipino
landbased workers, including domestic helpers.

Pursuant to the above DOLE circular, the POEA issued Memorandum

Circular No. 30, Series of 1991, dated July 10, 1991, providing
GUIDELINES on the Government processing and deployment of
Filipino domestic helpers to Hong Kong and the accreditation of Hong
Kong recruitment agencies intending to hire Filipino domestic helpers.
Subject: Guidelines on the Temporary Government
Processing and Deployment of Domestic Helpers to
Hong Kong.
Pursuant to Department Order No. 16, series of 1991
and in order to operationalize the temporary
government processing and deployment of domestic
helpers (DHs) to Hong Kong resulting from the
temporary suspension of recruitment by private
employment agencies for said skill and host market, the

following guidelines and mechanisms shall govern the

implementation of said policy.

Thereafter, all contracts shall be processed with the

HWPU.

I. Creation of a joint POEA-OWWA Household Workers

Placement Unit (HWPU)

Recruitment agencies in Hong Kong shall submit to the

Philippine Consulate General in Hong kong a list of their
accepted applicants in their pool within the last week of
July. The last day of acceptance shall be July 31 which
shall then be the basis of HWPU in accepting contracts
for processing. After the exhaustion of their respective
pools the only source of applicants will be the POEA
manpower pool.

An ad hoc, one stop Household Workers Placement

Unit [or HWPU] under the supervision of the POEA shall
take charge of the various operations involved in the
Hong Kong-DH industry segment:
The HWPU shall have the following functions in
coordination with appropriate units and other entities
concerned:
1. Negotiations with and Accreditation of Hong Kong
Recruitment Agencies
2. Manpower Pooling
3. Worker Training and Briefing

For strict compliance of all concerned. (pp. 3135, Rollo.)

On August 1, 1991, the POEA Administrator also issued Memorandum
Circular No. 37, Series of 1991, on the processing of employment
contracts of domestic workers for Hong Kong.
TO: All Philippine and Hong Kong Agencies engaged in
the recruitment of Domestic helpers for Hong Kong

II. Documentary Requirements and Other Conditions for

Accreditation of Hong Kong Recruitment Agencies or
Principals

Further to Memorandum Circular No. 30, series of 1991

pertaining to the government processing and
deployment of domestic helpers (DHs) to Hong
Kong, processing of employment contracts which have
been attested by the Hong Kong Commissioner of
Labor up to 30 June 1991 shall be processed by the
POEA Employment Contracts Processing Branch up to
15 August 1991 only.

Recruitment agencies in Hong Kong intending to hire

Filipino DHs for their employers may negotiate with the
HWPU in Manila directly or through the Philippine Labor
Attache's Office in Hong Kong.

Effective 16 August 1991, all Hong Kong recruitment

agent/s hiring DHs from the Philippines shall recruit
under the new scheme which requires prior
accreditation which the POEA.

4. Processing and Deployment

5. Welfare Programs

xxx xxx xxx

X. Interim Arrangement
All contracts stamped in Hong Kong as of June 30 shall
continue to be processed by POEA until 31 July 1991
under the name of the Philippine agencies concerned.

Recruitment agencies in Hong Kong may apply for

accreditation at the Office of the Labor Attache,
Philippine Consulate General where a POEA team is
posted until 31 August 1991. Thereafter, those who
failed to have themselves accredited in Hong Kong may
proceed to the POEA-OWWA Household Workers

Placement Unit in Manila for accreditation before their

recruitment and processing of DHs shall be allowed.
Recruitment agencies in Hong Kong who have some
accepted applicants in their pool after the cut-off period
shall submit this list of workers upon accreditation. Only
those DHs in said list will be allowed processing outside
of the HWPU manpower pool.
For strict compliance of all concerned. (Emphasis
supplied, p. 36, Rollo.)
On September 2, 1991, the petitioner, PASEI, filed this petition for
prohibition to annul the aforementioned DOLE and POEA circulars and
to prohibit their implementation for the following reasons:
1. that the respondents acted with grave abuse of
discretion and/or in excess of their rule-making authority
in issuing said circulars;
2. that the assailed DOLE and POEA circulars are
contrary to the Constitution, are unreasonable, unfair
and oppressive; and
3. that the requirements of publication and filing with the
Office of the National Administrative Register were not
complied with.
There is no merit in the first and second grounds of the petition.
Article 36 of the Labor Code grants the Labor Secretary the power to
restrict and regulate recruitment and placement activities.
Art. 36. Regulatory Power. The Secretary of Labor
shall have the power to restrict and regulatethe
recruitment and placement activities of all agencies
within the coverage of this title [Regulation of
Recruitment and Placement Activities] and is hereby
authorized to issue orders and promulgate rules and
regulations to carry out the objectives and implement
the provisions of this title. (Emphasis ours.)

On the other hand, the scope of the regulatory authority of the POEA,
which was created by Executive Order No. 797 on May 1, 1982 to take
over the functions of the Overseas Employment Development Board,
the National Seamen Board, and the overseas employment functions of
the Bureau of Employment Services, is broad and far-ranging for:
1. Among the functions inherited by the POEA from the
defunct Bureau of Employment Services was the power
and duty:
"2. To establish and maintain a
registration and/or licensing system to
regulate private sector participation in
the recruitment and placement of
workers, locally and overseas, . . ." (Art.
15, Labor Code, Emphasis supplied). (p.
13, Rollo.)
2. It assumed from the defunct Overseas Employment
Development Board the power and duty:
3. To recruit and place workers for
overseas employment of Filipino
contract workers on a government to
government arrangement and in such
other sectors as policy may dictate . . .
(Art. 17, Labor Code.) (p. 13, Rollo.)
3. From the National Seamen Board, the POEA took
over:
2. To regulate and supervise the
activities of agents or representatives of
shipping companies in the hiring of
seamen for overseas employment; and
secure the best possible terms of
employment for contract seamen
workers and secure compliance
therewith. (Art. 20, Labor Code.)
The vesture of quasi-legislative and quasi-judicial powers in
administrative bodies is not unconstitutional, unreasonable and
oppressive. It has been necessitated by "the growing complexity of the

modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79).
More and more administrative bodies are necessary to help in the
regulation of society's ramified activities. "Specialized in the particular
field assigned to them, they can deal with the problems thereof with
more expertise and dispatch than can be expected from the legislature
or the courts of justice" (Ibid.).
It is noteworthy that the assailed circulars do not prohibit the petitioner
from engaging in the recruitment and deployment of Filipino landbased
workers for overseas employment. A careful reading of the challenged
administrative issuances discloses that the same fall within the
"administrative and policing powers expressly or by necessary
implication conferred" upon the respondents (People vs. Maceren, 79
SCRA 450). The power to "restrict and regulate conferred by Article 36
of the Labor Code involves a grant of police power (City of Naga vs.
Court of Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or
stop" (p. 62, Rollo) and whereas the power to "regulate" means "the
power to protect, foster, promote, preserve, and control with due regard
for the interests, first and foremost, of the public, then of the utility and
of its patrons" (Philippine Communications Satellite Corporation vs.
Alcuaz, 180 SCRA 218).
The Solicitor General, in his Comment, aptly observed:
. . . Said Administrative Order [i.e., DOLE Administrative
Order No. 16] merely restricted the scope or area of
petitioner's business operations by excluding therefrom
recruitment and deployment of domestic helpers for
Hong Kong till after the establishment of the
"mechanisms" that will enhance the protection of
Filipino domestic helpers going to Hong Kong. In
fine, other than the recruitment and deployment of
Filipino domestic helpers for Hongkong, petitioner may
still deploy other class of Filipino workers either for
Hongkong and other countries and all other classes of
Filipino workers for other countries.
Said administrative issuances, intended to curtail, if not
to end, rampant violations of the rule against excessive
collections of placement and documentation fees, travel
fees and other charges committed by private
employment agencies recruiting and deploying
domestic helpers to Hongkong. [They are reasonable,
valid and justified under the general welfare clause of

the Constitution, since the recruitment and deployment

business, as it is conducted today, is affected with
public interest.
xxx xxx xxx
The alleged takeover [of the business of recruiting and
placing Filipino domestic helpers in Hongkong] is
merely a remedial measure, and expires after its
purpose shall have been attained. This is evident from
the tenor of Administrative Order No. 16 that
recruitment of Filipino domestic helpers going to
Hongkong by private employment agencies are hereby
"temporarily suspendedeffective July 1, 1991."
The alleged takeover is limited in scope, being confined
to recruitment of domestic helpers going to Hongkong
only.
xxx xxx xxx
. . . the justification for the takeover of the processing
and deploying of domestic helpers for Hongkong
resulting from the restriction of the scope of petitioner's
business is confined solely to the unscrupulous practice
of private employment agencies victimizing applicants
for employment as domestic helpers for Hongkong and
not the whole recruitment business in the Philippines.
(pp. 62-65,Rollo.)
The questioned circulars are therefore a valid exercise of the police
power as delegated to the executive branch of Government.
Nevertheless, they are legally invalid, defective and unenforceable for
lack of power publication and filing in the Office of the National
Administrative Register as required in Article 2 of the Civil Code, Article
5 of the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of
the Administrative Code of 1987 which provide:
Art. 2. Laws shall take effect after fifteen (15) days
following the completion of their publication in the
Official Gazatte, unless it is otherwise provided. . . .
(Civil Code.)

Art. 5. Rules and Regulations. The Department of

Labor and other government agencies charged with the
administration and enforcement of this Code or any of
its parts shall promulgate the necessary implementing
rules and regulations. Such rules and regulations shall
become effective fifteen (15) days after announcement
of their adoption in newspapers of general circulation.
(Emphasis supplied, Labor Code, as amended.)
Sec. 3. Filing. (1) Every agency shall file with the
University of the Philippines Law Center, three (3)
certified copies of every rule adopted by it. Rules in
force on the date of effectivity of this Code which are
not filed within three (3) months shall not thereafter be
the basis of any sanction against any party or persons.
(Emphasis supplied, Chapter 2, Book VII of the
Administrative Code of 1987.)
Sec. 4. Effectivity. In addition to other rule-making
requirements provided by law not inconsistent with this
Book, each rule shall become effective fifteen (15) days
from the date of filing as above provided unless a
different date is fixed by law, or specified in the rule in
cases of imminent danger to public health, safety and
welfare, the existence of which must be expressed in a
statement accompanying the rule. The agency shall
take appropriate measures to make emergency rules
known to persons who may be affected by them.
(Emphasis supplied, Chapter 2, Book VII of the
Administrative Code of 1987).
Once, more we advert to our ruling in Taada vs. Tuvera, 146 SCRA
446 that:
. . . Administrative rules and regulations must also be
published if their purpose is to enforce or implement
existing law pursuant also to a valid delegation. (p.
447.)
Interpretative regulations and those merely internal in
nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be
published. Neither is publication required of the so-

called letters of instructions issued by administrative

superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of
their duties. (p. 448.)
We agree that publication must be in full or it is no
publication at all since its purpose is to inform the public
of the content of the laws. (p. 448.)
For lack of proper publication, the administrative circulars in question
may not be enforced and implemented.
WHEREFORE, the writ of prohibition is GRANTED. The
implementation of DOLE Department Order No. 16, Series of 1991,
and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by
the public respondents is hereby SUSPENDED pending compliance
with the statutory requirements of publication and filing under the
aforementioned laws of the land.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Medialdea,
Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-43795 April 5, 1985
JOSE NEGRE, petitioner,
vs.
WORKMEN'S COMPENSATION COMMISSION and MAXIMA VDA.
DE SOLIVIO, for herself and in behalf of her minor children,
namely, VlVIAN, MIGUEL, JR., and LEONARDO, all surnamed
SOLIVIO, respondents.
Amado G. Solis for petitioner.
Pedro P. Requieron for respondents.
Ernesto H. Cruz and Emilia E. Andres for respondent WCC.

GUTIERREZ, JR., J.:

The petitioner charges the defunct Workmen's Compensation
Commission with abuse of discretion amounting to lack of jurisdiction in
declaring the decision in WC Case No. 923 final and executory without
resolving his motion for reconsideration, thus depriving him of his right
to appeal under the commission's own rules.
Petitioner Jose Negre is the owner of a fishing boat named "Sonny".
Miguel Solivio and his son Manuel Solivio were among the crew
members of the fishing boat. While they were fishing off the coast of
Masbate, typhoon "Klaring" passed their way, wrecking and completely
destroying the boat, resulting in the drowning of all the crew members.
The bodies were never recovered.
Private respondent Maxima Vda. de Solivio is the widow of Miguel
Solivio and mother of Manuel Solivio. Stating that both Miguel and

Manuel were the employees of Jose Negre, Maxima filed two separate
claims for death compensation against Jose Negre before the
Workmen's Compensation Unit in Bacolod City. The claims based on
the death of Miguel Solivio were docketed as WC Case No. 923.
In her claim, Maxima alleged that Miguel was employed as master
fisherman locally known as "maestro" of the fishing boat (basnigan)
while Manuel was just a member of the crew; that Miguel received a
monthly salary of P250.00 plus his percentage in the catch which,
could not be less than P400.00 monthly, and that Manuel received a
monthly Wary of P150.00 plus a percentage in the catch which netted
him the minimum amount of P200.00. She added that after the accident
she asked for the payment of compensation for the death of Miguel and
Manuel but Jose Negre made promises without paying her until after
several months when he gave her the amount of P700.00.
In his controversion, Jose Negre while admitting that Miguel Solivio
was a "maestro" of his fishing boat "Sonny" denied any employeremployee relationship between them. He described the operation of his
fishing business in the following manner:
In the operation of his "basnigan", he requested the
master fisherman or "maestro" to recruit fishermen with
license and the "maestro" whom he requested was
Miguel Solivio and the arrangement were that after the
catch, the expenses for the trip like rice, crude oil,
gasoline and other expenses needed for the trip were
deducted and the remainder was divided, one half goes
to him and the other half to the members of the crew.
The shares for the crew members are further divided in
proportion to the nature of their respective jobs. He
furnished the boat and all the expenses while the crew
members merely contributed their labor.
In effect, Jose Negre claimed that Miguel was his business partner with
him providing the capital and Miguel contributing his labor.
As regards Manuel Solivio, Jose Negre denied that he was his
employee because he was then a minor and if he was on board the
boat when the accident happened, the fault could be attributed to his
father. He also denied that Miguel Solivio received a monthly salary
from him.

After both parties submitted their respective memoranda, the

Workmen's Compensation Unit of Bacolod rendered a decision finding
Jose Negre the employer of the decedents. Thus, Jose Negre was
ordered to pay Maxima Vda. de Solivio and her minor children as
follows:
1. To pay the claimant, thru this Office, the total sum of
NINE THOUSAND EIGHT HUNDRED THIRTY NINE &
68/100 PESOS (P9,939.68) minus P700.00 already
paid or a balance of P9,139.68 as compensation;
2. To Atty. Pedro Requieron, counsel of record for the
claimants, the sum of FOUR HUNDRED NINETY ONE
AND 98/100 PESOS (P491.98) as attorney's fees;
3. To this Office, the sum of NINETY NINE PESOS
(P99.00) as administrative fees, pursuant to Section 55
of the Act, as amended.
When the case was elevated to the Workmen's Compensation
Commission, (WCC) the decision below was affirmed except for the
attorney's fees which were raised to P983.96. Jose Negre filed his
motion for reconsideration but the same was not acted upon.
Subsequently, he received an order from the Workmen's Compensation
Commission asking Mm to remit the following: P9,139.68 as
compensation for claimant; P983.68 as attorney's fees and P104.00 as
administrative fees payable to the Workmen's Compensation
Commission on the ground that the decision of the Workmen's
Compensation Commission had already become final and executory.
In this petition, the petitioner contends that the Workmen's
Compensation Commission committed grave abuse of discretion in not
acting upon his motion for reconsideration and in ordering him to pay
the aforestated amounts pursuant to Rule 17, Section 4 of the Rules of
the Workmen's Compensation Act which provides that upon motion for
reconsideration by any party the Commission en banc shall resolve the
case. Petitioner maintains that the Workmen's Compensation
Commission did not follow the above-cited rule. Questioning the
declaration of the decision as final and executory, the petitioner
contends that he was deprived of his right to appeal said decision
pursuant to Rule 18 of the Rules of the Commission in relation to Rule
43 of the Rules of Court.

We note that this case was decided after the process of phasing out the
Workmen's Compensation Commission had commenced.
Under Letter of Instruction No. 190, dated June 3, 1974, the Secretary
of Labor was instructed to effect the orderly abolition of the workmen's
compensation system by taking "such remedial steps as may be
necessary to expedite the determination and/or settlement under such
terms as he may consider fair and just, of the backlog of the
compensation cases pending before the workmen's compensation units
in the regional offices of the Department of Labor as well as in the
Workmen's Compensation Commission to the end that said backlog
may be liquidated by the end of the transaction period.
Pursuant to this mandate the Secretary of Labor on July 17, 1974,
issued Department Order No. 3, Series of 1974 providing, among
others, the following:
Section 5. Decision by the Commission en banc, when
final. Within ten (10) days from receipt of an
appealed case, the Commission en banc shall review
and decide said case. Two affirmative votes shall
decide the case.
Any decision or Order on the merits of the
Commission en banc shall become final and executory
if no appeal is taken to the Supreme Court within ten
(10) days from notice in accordance with the law.
Since the questioned decision bears the concurrence of the chairman
and an associate commissioner, it is apparent that the commission
followed this directive and immediately reviewed the case en
banc. Hence, the commission was merely implementing the rules for a
speedy and orderly transaction to the new compensation system when
it did not act on the petitioner's motion for reconsideration. At any rate,
we have gone; into the merits of the case and considered all issues
raised b3' the petitioner in the records. The declaration of finality has
not resulted in a denial of due process,
The petitioner objects to the death compensation benefits awarded to
the private respondent insisting that Manuel Solivio and Miguel Solivio
were not his employees.

The petitioner admittedly owns four fishing boats which he uses in his
fishing business. For this purpose, he engages a considerable number
of fishermen, with one master fisherman locally known as "maestro" in
charge of recruiting the others to complete the crew members. At the
time of death, Manuel Solivio acted as "maestro" while Miguel Solivio
was among those present in the petitioner's boat named "Sonny" when
it Capsized and was wrecked due to typhoon "Klaring".
We have defined an employee to be ... any person in the service of
another under a contract for hire, express, or implied, oral or written."
(Uy v. Workmen's Compensation Commission, 97 SCRA 255, Natividad
v. Workmen's Compensation Commission, et al., L-42021, November
21, 1979: Villones v. Employees Compensation Commission, et al., L46200, July 30, 1979; Mesina v. Republic, L-43517, May 31, 1979, 90
SCRA 489; Dulay v. Workmen's Compensation Commission, et al., 89
SCRA 659; Marasigan v. Workmen's Compensation Commission, et al.,
89 SCRA 259; Vega v. Workmen's Compensation Commission, 89
SCRA 141; and Capinpin v. Workmen's Compensation Commission,
103 SCRA 270).
There is no doubt that under the facts of the case, Manuel Solivio falls
under this decision. The pretense of the petitioner that Manuel was his
business partner is not supported by the evidence. The fact that
Manuel is paid on a commission basis does not support the petitioner's
partnership theory.
In Abong v. Workmen's Compensation Commission (54 SCRA 379), we
held that fishermen crew-members hired and working under the same
circumstances as Manuel and Miguel are employees and not industrial
partners.
Miguel Solivio was an employee of the petitioner. His presence in the
fishing boat "Sonny" at the time of the fatal accident points to no other
conclusion but that he was among those who were recruited by Manuel
Solivio to be a crew member for his employer, the petitioner. In the
absence of convincing evidence on record, Miguel's being a minor at
the time does not support the petitioner's allegations that he was not
his employee. We ruled in Uy v. Workmen's Compensation
Commission (97 SCRA 255):
... it is true that the existence of employer-employee
relationship is often difficult of determination because it
was purposely made so by employers bent on evading

liability under the Workmen's Compensation and

Nationalization Laws.
Hence, if the object of the law is to be accomplished
with a liberal construction, the creation of the
relationship should not be adjudged strictly in
accordance with technical legal rules, but rather
according to the actualities and realities of industrial or
business practice (Fernandez & Quiazon, Labor
Standards & Social Legislation, 414 [19641; Pucan &
Besinga, Comments & Annotations on the Workmen's
Compensation Act, as amended, 32 [19711, citing the
case or Asia Steel Corporation v. Workmen's
Compensation Commission, L-7636, June 27, 1955).
It is within the spirit of the statutory requirements of the Workmen's
Compensation Act and the mandate expressed in Section 5. Article II of
the 1935 Constitution that "the promotion of social justice to insure the
well-being and economic security of all the people should be the
concern of the state" for us to declare the existence of an employeremployee relationship between the petitioner and the deceased father
and son. (Manapat v. Workmen's Compensation Commission, 119
SCRA 156)
The petitioner also contends that the claim has already prescribed
under Section 24 of the Workmen's Compensation Act as amended.
The records show that the private respondent filed the claim on
February 26, 1974 which was approximately eight (8) years after the
death of Manuel Solivio and Miguel Solivio. The claim is well within the
statutory period to file a claim for compensation which is ten years. (St.
Anne's Hospital v. Workmen's Compensation Commission, 85 SCRA
721, 725; Balanga v. Workmen's Compensation Commission, 83 SCRA
721, 725; Canonero v. Workmen's Compensation Commission, 81
SCRA 713, 720; Romero v. Workmen's Compensation Commission, 77
SCRA 482, 487; and Capinpin v. Workmen's Compensation
Commission, 103 SCRA 270).
Under the foregoing circumstances, the private respondent is entitled to
compensation benefits arising from thedeaths of her husband and
sort. However, we find the money awards incorrect. In all similar cases,
we have consistently awarded the maximum amount of P6,000.00 as
death compensation benefits; P600.00 as attorney's fees and P61.00

as administrative fees pursuant to the provisions of the Workmen's

Compensation Act. To this extent, the Commission's decision is
modified.
WHEREFORE, the Workmen's Compensation Commission's decision
is MODIFIED to the effect that the petitioner is hereby ordered to pay
the private respondent:
1. The sum of TWELVE THOUSAND PESOS (P12,000.00) as death
benefits minus SEVEN HUNDRED PESOS (P700.00) already paid;
2. The sum of ONE THOUSAND TWO HUNDRED PESOS (P1,200.00)
as attorney's fees; and
3. The sum of ONE HUNDRED TWENTY TWO PESOS (P122.00) as
administrative fees to the Ministry of Labor and Employment.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Relova, De la Fuente
and Alampay, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-75038 August 23, 1993

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES
ABAD, BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO
AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO,
JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION)
and BROAD STREET TAILORING and/or RODOLFO
ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.
Teresita Gandionco Oledan for private respondents.

NOCON, J.:
A basic factor underlying the exercise of rights and the filing of claims
for benefits under the Labor Code and other presidential issuances or
labor legislations is the status and nature of one's employment.
Whether an employer-employee relationship exist and whether such
employment is managerial in character or that of a rank and file
employee are primordial considerations before extending labor
benefits. Thus, petitioners in this case seek a definitive ruling on the
status and nature of their employment with Broad Street Tailoring and
pray for the nullification of the resolution dated May 12, 1986 of the
National Labor Relations Commissions in NLRC Case No. RB-IV21558-78-T affirming the decision of Labor Arbiter Ernilo V. Pealosa
dated May 28, 1979, which held eleven of them as independent
contractors and the remaining one as employee but of managerial rank.

The facts of the case shows that petitioner Elias Villuga was employed
as cutter in the tailoring shop owned by private respondent Rodolfo
Zapanta and known as Broad Street Tailoring located at Shaw
Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a fixed
monthly salary of P840.00 and a monthly transportation allowance of
P40.00. In addition to his work as cutter, Villuga was assigned the
chore of distributing work to the shop's tailors or sewers when both the
shop's manager and assistant manager would be absent. He saw to it
that their work conformed with the pattern he had prepared and if not,
he had them redone, repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They
were paid a fixed amount for every item ironed, repaired or sewn,
regardless of the time consumed in accomplishing the task. Petitioners
did not fill up any time record since they did not observe regular or fixed
hours of work. They were allowed to perform their work at home
especially when the volume of work, which depended on the number of
job orders, could no longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for
work allegedly due to illness. For not properly notifying his employer, he
was considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the Regional Office of
the Department of Labor, Villuga claimed that he was refused
admittance when he reported for work after his absence, allegedly due
to his active participation in the union organized by private respondent's
tailors. He further claimed that he was not paid overtime pay, holiday
pay, premium pay for work done on rest days and holidays, service
incentive leave pay and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and
David Oro also claimed that they were dismissed from their
employment because they joined the Philippine Social Security Labor
Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo
Aguilan, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and
Domingo Saguit claimed that they stopped working because private
respondents gave them few pieces of work to do after learning of their
membership with PSSLU. All the petitioners laid claims under the
different labor standard laws which private respondent allegedly
violated.

On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision

ordering the dismissal of the complaint for unfair labor practices, illegal
dismissal and other money claims except petitioner Villuga's claim for
13th month pay for the years 1976, 1977 and 1980. The dispositive
portion of the decision states as follows:
WHEREFORE, premises considered, the respondent
Broad Street Tailoring and/or Rodolfo Zapanta are
hereby ordered to pay complainant Elias Villuga the
sum of ONE THOUSAND TWO HUNDRED FORTYEIGHT PESOS AND SIXTY-SIX CENTAVOS
(P1,248.66) representing his 13th month pay for the
years 1976, 1977 and 1978. His other claims in this
case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11)
complainants are concerned should be, as it is hereby
dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the
questioned decision in a resolution dated May 12, 1986, the dispositive
portion of which states as follows:
WHEREFORE, premises considered, the decision
appealed from is, as it is hereby AFFIRMED, and the
appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the
result while Commissioner Gabriel M. Gatchalian rendered a dissenting
opinion which states as follows:
I am for upholding employer-employee relationship as
argued by the complainants before the Labor Arbiter
and on appeal. The further fact that the proposed
decision recognizes complainant's status as piece-rate
worker all the more crystallizes employer-employee
relationship the benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following
grounds:
1. That the respondent National Labor Relations
Commission abused its discretion when it ruled that

petitioner/complainant, Elias Villuga falls within the

category of a managerial employee;
2. . . . when it ruled that the herein petitioners were not
dismissed by reason of their union activities;
3. . . . when it ruled that petitioners Andres Abad,
Benjamin Brizuela, Norlito Ladia, Marcelo Aguilan,
David Oro, Nelia Brizuela, Flora Escobido, Justilita
Cabaneg and Domingo Saguit were not employees of
private respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is not
entitled to overtime pay and services for Sundays and
Legal Holidays; and
5. . . . when it failed to grant petitioners their respective
claims under the provisions of P.D. Nos. 925, 1123 and
851. 4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor
Code, to be a member of a managerial staff, the following elements
must concur or co-exist, to wit: (1) that his primary duty consists of the
performance of work directly related to management policies; (2) that
he customarily and regularly exercises discretion and independent
judgment in the performance of his functions; (3) that he regularly and
directly assists in the management of the establishment; and (4) that he
does not devote his twenty per cent of his time to work other than those
described above.
Applying the above criteria to petitioner Elias Villuga's case, it is
undisputed that his primary work or duty is to cut or prepare patterns
for items to be sewn, not to lay down or implement any of the
management policies, as there is a manager and an assistant manager
who perform said functions. It is true that in the absence of the
manager the assistant manager, he distributes and assigns work to
employees but such duty, though involving discretion, is occasional and
not regular or customary. He had also the authority to order the repair
or resewing of defective item but such authority is part and parcel of his
function as cutter to see to it that the items cut are sewn correctly lest
the defective nature of the workmanship be attributed to his "poor
cutting." Elias Villuga does not participate in policy-making. Rather, the
functions of his position involve execution of approved and established

policies. InFranklin Baker Company of the Philippines v. Trajano, 5 it

was held that employees who do not participate in policy-making but are
given ready policies to execute and standard practices to observe are not
managerial employees. The test of "supervisory or managerial status"
depends on whether a person possesses authority that is not merely
routinary or clerical in nature but one that requires use of independent
judgment. In other words, the functions of the position are not managerial
in nature if they only execute approved and established policies leaving
little or no discretion at all whether to implement said policies or not. 6

petitioner Villuga absented himself for four (4) days without leave and
without submitting a medical certificate to support his claim of illness, the
imposition of a sanction is justified, but surely, not dismissal, in the light of
the fact that this is petitioner's first offense. In lieu of reinstatement,
petitioner Villuga should be paid separation pay where reinstatement can
no longer be effected in view of the long passage of time or because of the
realities of the situation. 10 But petitioner should not be granted backwages
in addition to reinstatement as the same is not just and equitable under the
circumstances considering that he was not entirely free from blame. 11

Consequently, the exclusion of Villuga from the benefits claimed under

Article 87 (overtime pay and premium pay for holiday and rest day
work), Article 94, (holiday pay), and Article 95 (service incentive leave
pay) of the Labor Code, on the ground that he is a managerial
employee is unwarranted. He is definitely a rank and file employee
hired to perform the work of the cutter and not hired to perform
supervisory or managerial functions. The fact that he is uniformly paid
by the month does not exclude him from the benefits of holiday pay as
held in the case ofInsular Bank of America Employees Union
v. Inciong. 7 He should therefore be paid in addition to the 13th month pay,
his overtime pay, holiday pay, premium pay for holiday and rest day, and
service incentive leave pay.

As to the other eleven petitioners, there is no clear showing that they

were dismissed because the circumstances surrounding their dismissal
were not even alleged. However, we disagree with the finding of
respondent Commission that the eleven petitioners are independent
contractors.

As to the dismissal of the charge for unfair labor practices of private

respondent consisting of termination of employment of petitioners and
acts of discrimination against members of the labor union, the
respondent Commission correctly held the absence of evidence that
Mr. Zapanta was aware of petitioners' alleged union membership on
February 22, 1978 as the notice of union existence in the establishment
with proposal for recognition and collective bargaining negotiation was
received by management only an March 3, 1978. Indeed, self-serving
allegations without concrete proof that the private respondent knew of
their membership in the union and accordingly reacted against their
membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his
work acceptable. For abandonment to constitute a valid cause for
dismissal, there must be a deliberate and unjustified refusal of the
employee to resume his employment. Mere absence is not sufficient, it
must be accompanied by overt acts unerringly pointing to the fact that
the employee simply does not want to work anymore. 8 At any rate,
dismissal of an employee due to his prolonged absence without leave by
reason of illness duly established by the presentation of a medical
certificate is not justified. 9 In the case at bar, however, considering that

For an employer-employee relationship to exist, the following elements

are generally considered: "(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." 12
Noting that the herein petitioners were oftentimes allowed to perform
their work at home and were paid wages on a piece-rate basis, the
respondent Commission apparently found the second and fourth
elements lacking and ruled that "there is no employer-employee
relationship, for it is clear that respondents are interested only in the
result and not in the means and manner and how the result is
obtained."
Respondent Commission is in error. The mere fact that petitioners were
paid on a piece-rate basis is no argument that herein petitioners were
not employees. The term "wage" has been broadly defined in Article 97
of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is
just a method of compensation and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home
does not likewise imply absence of control and supervision. The control
test calls merely for the existence of a right to control the manner of doing
the work, not the actual exercise of the right. 14

In determining whether the relationship is that of employer and

employee or one of an independent contractor, "each case must be
determined on its own facts and all the features of the relationship are
to be considered." 15Considering that petitioners who are either sewers,
repairmen or ironer, have been in the employ of private respondent as
early as 1972 or at the latest in 1976, faithfully rendering services which
are desirable or necessary for the business of private respondent, and
observing management's approved standards set for their respective lines
of work as well as the customers' specifications, petitioners should be
considered employees, not independent contractors.
Independent contractors are those who exercise independent
employment, contracting to do a piece of work according to their own
methods and without being subjected to control of their employer
except as to the result of their work. By the nature of the different
phases of work in a tailoring shop where the customers' specifications
must be followed to the letter, it is inconceivable that the workers
therein would not be subjected to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar
workers hired in the tailoring department, although paid weekly wages on
piece work basis, are employees not independent contractors. Accordingly,
as regular employees, paid on a piece-rate basis, petitioners are not
entitled to overtime pay, holiday pay, premium pay for holiday/rest day and
service incentive leave pay. Their claim for separation pay should also be
defined for lack of evidence that they were in fact dismissed by private
respondent. They should be paid, however, their 13th month pay under
P.D. 851, since they are employees not independent contractors.
WHEREFORE, in view of the foregoing reasons, the assailed decision
of respondent National Labor Relations Commission is hereby
MODIFIED by awarding
(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay
for holiday and rest day, service incentive leave pay and separation
pay, in addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month
pay.
The case is hereby REMANDED to the National Labor Relations
Commission for the computation of the claims herein-above mentioned.
SO ORDERED.

Narvasa C.J., Padilla, Regalado and Puno, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-59229 August 22, 1991

HIJOS DE F. ESCAO INC., and PIER 8 ARRASTRE AND
STEVEDORING SERVICES, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL
ORGANIZATION OF WORKINGMEN (NOWM) PSSLU-TUCP and
ROLANDO VILLALOBOS, respondents.
Beltran, Beltran & Beltran for petitioners.
Bautista, Santiago & Associates for private respondents.

FELICIANO, J.:p
Petitioners seek to set aside the Decision of the National Labor
Relations Commission ("NLRC") dated 11 November 1981, which
affirmed the Decision of the Labor Arbiter dated 28 February 1980.
Private respondent National Organization of Workingmen ("NOWM")
PSSLU-TUCP is a labor organization that counts among its members a
majority of the laborers of petitioner Pier 8 Arrastre & Stevedoring
Services, Inc. ("PIER 8 A&S") consisting, among others, of stevedores,
dockworkers, sweepers and forklift operators (hereinafter collectively
referred to as "the stevedores"). On 31 July 1978, NOWM PSSLUTUCP and about 300 stevedores filed with the then Ministry of Labor
and Employment ("MOLE") a complaint 1 for unfair labor practice ULP
and illegal dismissal against PIER 8 A&S.

On 8 September 1978, NOWM PSSLU-TUCP amended its complaint to

include the monetary claims of the stevedores for overtime
compensation, legal holiday pay, emergency cost of living allowance,
13th month pay, night shift differential pay, and the difference between
the salaries they received and that prescribed under the minimum
wage law. The complaint was also amended to implead petitioner Hijos
de F. Escao, Inc. (Escao) as respondent before the MOLE. 2
The MOLE Director in the National Capital Region certified for
compulsory arbitration only the claims for illegal dismissal and ULP
Considering that NOWM PSSLU-TUCP wanted to include as well the
other issues it had raised in the amended complaint, it filed a motion for
reconsideration. The motion was denied because money claims,
according to the MOLE Director, should be brought against Escao and
PIER 8 A&S in a separate complaint.
On the basis of the position papers submitted by the parties and the
annexes attached thereto, the case was considered submitted for
resolution. On 28 February 1980, the Labor Arbiter rendered a
Decision 3 with the following dispositive portion:
WHEREFORE, consonant with the foregoing premises,
the respondents Hijos de F. Escao and Pier 8 Arrastre
and Stevedoring Services, Inc. are hereby found guilty
of committing acts of unfair labor practice and are
ordered to jointly and severally reinstate all of the
petitioners named in the amended complaint, with
payment of full backwages counted from the time they
were illegally dismissed which was on August 10, 1978
up to March 27, 1979, inclusive, when the petitioners
admitted having received return to work notice from the
respondent but refused to comply in view of the
pendency of the present case, based on their individual
rate at the time of their dismissal or on the minimum
wage then prevailing whichever is more beneficial to
them.
For purposes of this decision, the Socio-Economic
Analyst of this branch is hereby directed to compute the
backwages of the individual petitioners as mandated
herein, and to submit his report within ten 10 days from
receipt hereof which shall form part of this award.

SO ORDERED.
Petitioners appealed to the NLRC which, however, affirmed the
Decision of the Labor Arbiter.
The instant Petition for certiorari imputes grave abuse of discretion to
the NLRC in upholding the finding of the Labor Arbiter that the
stevedores are employees not only of PIER 8 A&S but also of Escao.
Petitioners also assail that portion of the Decision which directed them
to reinstate the dismissed stevedores with the obligation to pay
backwages from 10 August 1978 to 27 March 1979.
In his Decision, the Labor Arbiter took the view that PIER 8 A&S was a
labor only contractor and held that Escao was the principal employer
of the stevedores. For that reason, the Labor Arbiter adjudged the
petitioners solidarily liable for payment of backwages to the stevedores
as well as for reinstatement.
While petitioner PIER 8 A&S does not dispute that the stevedores were
its employees, petitioner Escao denies the existence of an employeremployee relationship between it and the stevedores. Escao therefore
contends that liability, if any, should attach only to PIER 8 A&S.
PIER 8 A&S is a corporation providing Arrastre and stevedoring
services to vessels docked at Pier 8 of the Manila North Harbor. Prior
to the incorporation of PIER 8 A&S two (2) stevedoring companies had
been servicing vessels docking at Pier 8. One of these was the Manila
Integrated Services, Inc. MISI which was servicing Escao vessels,
then berthing at Pier 8. The other was the San Nicolas Stevedoring and
Arrastre Services, Inc. (SNSASI) which was servicing Compania
Maritima vessels. Aside, of course, from MISI and SNSASI there were
individual contractors known as the "cabos" who were operating in Pier
8.
On 11 July 1974, the Philippine Port Authority ("PPA") was created
pursuant to the policy of the State to implement an integrated program
of port development for the entire country. 4 Towards this end, the PPA
issued Administrative Order No. 1377 specifically adopting the policy of
"one pier, one Arrastre and/or stevedoring company." MISI and SNSASI
merged to form the Pier 8 Arrastre and Stevedoring Services, Inc.
Sometime in June 1978, Escao had transferred berth to Pier 16 with
the approval of the PPA. PIER 8 A&S then started to encounter

problems; it found its business severely reduced with only Compania

Maritima vessels to service. Even if it had wanted to continue servicing
the vessels of Escao at Pier 16, that was simply not possible as there
was another company exclusively authorized to handle and render
Arrastre and stevedoring services at Pier 16.
Because of its resulting manpower surplus, PIER 8 A&S altered the
work schedule of its stevedores by rotating them. The rotation scheme
was resisted by the stevedores, especially those formerly assigned to
service Escao vessels. It appears that the employees formerly
belonging to MISI continued to service Escao vessels in like manner
that those employees formerly belonging to SNSASI continued to
service Compania Maritima vessels, although MISI and SNSASI had
already merged to form PIER 8 A&S The affected stevedores boycotted
Pier 8 leading to their severance from employment by PIER 8 A&S on
10 August 1978. Their refusal to work continued even after they were
served with a return-to-work order.
The stevedores claim that since they had long been servicing Escao
vessels, i.e. from the time Escao was exclusively serviced by MISI
until the time MISI was merged with SNSASI to form PIER 8 A&S they
should also be considered as employees of Escao. Escao
disclaimed any employment relationship with the stevedores. In its
Position Paper, Escao alleged that the stevedores are included in the
payroll of PIER 8 A&S and that the SSS and Medicare contributions of
the stevedores are paid by PIER 8 A&S as well.
It is firmly settled that the existence or non-existence of the employeremployee relationship is commonly to be determined by examination of
certain factors or aspects of that relationship. These include: (a) the
manner of selection and engagement of the putative employee; (b) the
mode of payment of wages; (c) the presence or absence of the power
of dismissal; and (d) the presence or absence of a power to control the
putative employee's conduct. 5
The Court notes that in finding against PIER 8 A&S and Escao the
Labor Arbiter relied solely on the position paper of the parties. The
record of the case is bare of evidence tending to support such
allegations; what is found in the record instead are the self-serving
statements from both parties. It is not clear to the Court from
examination of the record which entity paid the salaries of the
stevedores. While the stevedores attached to their amended complaint
a list of their daily wages set forth opposite their individual names under
the heading "Hijos de F. Escao Inc. and/or Pier 8 Arrastre and

Stevedoring Services, Inc. 6 apparently to show that they are paid for their
services by either or both of petitioners, they did not submit direct
evidence, e.g., copies of payrolls and remittances to the SSS and
Medicare, establishing this fact. Further, the stevedores failed to
substantiate their allegation that the supervisors of Escao had control
over them while discharging their (stevedores') duties. On the contrary,
their Position Paper submitted to the Labor Arbiter disclosed that the
supervisors of Escao "merely supervised" them.
The record includes letters written by the National President of NOWM
PSSLU-TUC to which the stevedores belong-relating to collective
bargaining and other operating matters, were all addressed to the
management of PIER 8 A&S indicating that they recognized PIER 8
A&S as their employer. Specifically, in the letter dated 21 May 1977, the
stevedores proposed that PIER 8 A&S recognize their union as the sole
and exclusive representative of the stevedores for the purpose of
collective bargaining. They also sought to submit for collective
bargaining with PIER 8 A&S such other labor standard issues as wage
increases, 13th month pay and vacation and sick leave pay. 7
The stevedores, however, now contend that PIER 8 A&S is not an
independent contract but a labor only contractor. In their Amended
Complaint and Position Paper, the stevedores alleged that:
(1) They perform their duties or work assignments
under the close supervision of supervisors of
respondent Hijos de F. Escao Inc.;
(2) The machineries, equipment, tools and other
facilities complainants used, while in the performance of
their jobs, are owned by respondent Hijos de F. Escao,
Inc.;
(3) The jobs they were performing from the time they
were first employed, until their dismissals, are principal
phases of respondent's operations; and
(4) The so-called Pier 8 Arrastre & Stevedoring
Services, Inc. is a mere middleman; its vital role is
purely one of supplying workers to respondent Hijos de
F. Escao, Inc. in short, a mere recruiting agent. Plainly,
said contractor can be categorized as an agent of
respondent Hijos de F. Escao, Inc. as it performs

activities directly related to the principal business of

said Hijos de F. Escao, Inc.
Although the record does not show that the stevedores had submitted
any evidence to fortify their claim that PIER 8 A&S is a labor only
contractor, the Labor Arbiter simply conceded that claim to be factual.
The Labor Arbiter added that the business of PIER 8 A&S is "desirable
and indispensable in the business of Hijos de F. Escao and without
[the stevedores], its vessels could not be operated."
The Court is unable to agree with the conclusion reached by the Labor
Arbiter, particularly that portion where the Labor Arbiter supposed
stevedoring to be an indispensable part of the business of Escao.
Escao is a corporation engaged in inter-island shipping business,
being the operator of the Escao Shipping Lines. It was not alleged,
nor has it been shown, that Escao or any other shipping company is
also engaged in Arrastre and stevedoring services. Stevedoring is not
ordinarily included in the business of transporting goods, it
(stevedoring) being a special kind of service which involves the loading
unloading of cargo on or from a vessel on port. It consists of the
handling of cargo from the hold of the ship to the dock, in case of pierside unloading, or to a barge, in case of unloading at sea. The loading
on a ship of outgoing cargo is also part of stevedoring work. 8Arrastre,
upon the other hand, involves the handling of cargo deposited on the wharf
or between the establishment of the consignee or shipper and the ships
tackle. 9 Considering that a shipping company is not normally or
customarily engaged in stevedoring and arrastre activities either for itself or
other vessels, it contracts with other companies offering those services.
The employees, however, of the stevedoring and/or arrastre company
should not be deemed the employees of the shipping company, in the
absence of any showing, that the arrastre and/or stevedoring company in
fact acted as an agent only of the shipping company. No such showing was
made in this case.
We turn next to the stevedores' contention that PIER 8 A&S is guilty of
ULP. In this respect, the Labor Arbiter had found that:
Now comes the issue of unfair labor practice. This
Labor Arbiter believes that respondents are guilty as
charged. The unfair labor practice acts of the
respondents started when they came to know that the
petitioners have organized themselves and affiliated
with the NOWM Subsequent acts of the respondents
like requiring the petitioners to disaffiliate with the

NOWM and affiliate with the General Maritime

Stevedores Union and later on to Independent Workers
Union, requiring them to sign applications for
membership therein, they were threatened and
coerced, are all acts of unfair labor practices.
Thereafter, the petitioners' working schedules were
rotated when the respondent Hijos de F. Escao
transferred to Pier 16 through the alleged approval of
the Philippine Port Authority and later on the said
petitioners were left without work, were all in
furtherance of such unfair labor practice acts. ... 10
Both the Constitution and the Labor Code guarantee to the stevedores
a right to self-organization. It was unlawful for PIER 8 A&S to deprive
them of that right by its undue interference. The Constitution (Article III,
Section 7) expressly recognizes the right of employees, whether of the
public or the private sector, to form unions. Article 248 of the Labor
Code provides:
Art. 248. Unfair labor practices of employers. It shall
be unlawful for an employer to commit any of the
following unfair labor practice:
(a) To interfere with, restrain or coerce employees in
the exercise of their right to self- organization;
(b) To require as a condition of employment that a
person or an employee shall not join a labor
organization or shall withdraw from one to which he
belongs;
(c) To contract out services or functions being
performed by union members when such will interfere
with, restrain or coerce employees in the exercise of
their rights to self-organization;
(d) To initiate, dominate, assist or otherwise interfere
with the formation or administration of any labor
organization, including the giving of financial or other
support to it or its organizations or supporters;
(e) To discriminate in regard to wages, hours of work,
and other terms and conditions of employment in order

to encourage or discourage membership in any labor

organization.
xxx xxx xxx
(Emphasis supplied.)
Not only was PIER 8 A&S guilty of ULP; it was also liable for illegal
dismissal. PIER 8 A&S did not obtain prior clearance from the MOLE
before it dismissed the stevedores, as required by the law then in force
which read:
Section 1. Requirement for shutdown or dismissal.
No employer may shut down his establishment or
dismiss any of his employees with at least one year of
service during the last two years, whether the service is
broken or continuous, without prior clearance issued
therefor in accordance with this Rule. Any provision in a
collective bargaining agreement dispensing with the
clearance requirement shall be null and void.
Section 2. Shutdown or dismissal without clearance.
Any shutdown or dismissal without prior clearance shall
be conclusively presumed to be a termination of
employment without a just cause. The Regional Director
shall, in such case, order the immediate reinstatement
of the employee and the payment of his wages from the
time of the shutdown or dismissal until the time of
reinstatement.11
B.P. Blg. 130 amended the Labor Code on 4 September 1981 by
abolishing the requirement of prior clearance from the MOLE but since
the dismissal of the stevedores was effected prior to the promulgation
of B.P. Blg. 130, PIER 8 A&S was then bound to comply with the old
law. The Court, interpreting Sections 1 and 2 above quoted, has
consistently held that a dismissal without said clearance shall be
conclusively presumed a termination without just cause. 12 The record is
bare of any evidence that could compel the Court to overturn the factual
findings of the Labor Arbiter on this point.
WHEREFORE, considering the absence of an employer-employee
relationship between Hijos de F. Escao, Inc. and private respondents,
the Decision of the Labor Arbiter dated 28 February 1980 in NLRC

Case No. RB-IV-2326-79 and the Decision of the NLRC dated 11

November 1981 are hereby MODIFIED so that only Pier 8 Arrastre &
Stevedoring Services, Inc. shall be liable for reinstatement and
payment of backwages. As so modified, both Decisions are hereby
AFFIRMED. No costs.
SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ.,
concur.

and 3% was to be withheld by the Tourist World

Service, Inc.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitionersappellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC.,
ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondentsappellees.

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

On or about November 24, 1961 (Exhibit 16) the Tourist

World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service
considered closing down its office. This was firmed up
by two resolutions of the board of directors of Tourist
World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and
13), the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita
Branch, and the second,authorizing the corporate
secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was
terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of
fact appellants used it since Nov. 1961. Because of this,
and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went
over to the branch office, and, finding the premises
locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could
enter the locked premises, a complaint wall filed by the
herein appellants against the appellees with a prayer for
the issuance of mandatory preliminary injunction. Both
appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought
reconsideration of the order dismissing her
counterclaim which the court a quo, in an order dated
June 8, 1963, granted permitting her to present
evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case
against the herein appellees and after the issues were
joined, the reinstated counterclaim of Segundina

Noguera and the new complaint of appellant Lina

Sevilla were jointly heard following which the court a
quo ordered both cases dismiss for lack of merit, on the
basis of which was elevated the instant appeal on the
following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN
APPRECIATING THE NATURE OF PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT
APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT
(WITH APPELLEE TOURIST WORLD SERVICE, INC.)
WAS ONE MERELY OF EMPLOYER-EMPLOYEE
RELATION AND IN FAILING TO HOLD THAT THE
SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS
ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST
THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING
THAT APPELLEES HAD NO RIGHT TO EVICT
APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR
OWN HANDS.
V. THE LOWER COURT ERRED IN NOT
CONSIDERING AT .ALL APPELLEE NOGUERA'S
RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A.
MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT
APPELLANT APPELLANT MRS. LINA O. SEVILLA
SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues
to be resolved are:

1. Whether the appellee Tourist World Service

unilaterally disco the telephone line at the branch office
on Ermita;
2. Whether or not the padlocking of the office by the
Tourist World Service was actionable or not; and
3. Whether or not the lessee to the office premises
belonging to the appellee Noguera was appellees TWS
or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint
bussiness venture was entered into by and between her
and appellee TWS with offices at the Ermita branch
office and that she was not an employee of the TWS to
the end that her relationship with TWS was one of a
joint business venture appellant made declarations
showing:
1. Appellant Mrs. Lina 0. Sevilla, a
prominent figure and wife of an eminent
eye, ear and nose specialist as well as a
imediately columnist had been in the
travel business prior to the
establishment of the joint business
venture with appellee Tourist World
Service, Inc. and appellee Eliseo
Canilao, her compadre, she being the
godmother of one of his children, with
her own clientele, coming mostly from
her own social circle (pp. 3-6 tsn.
February 16,1965).
2. Appellant Mrs. Sevilla was signatory
to a lease agreement dated 19 October
1960 (Exh. 'A') covering the premises at
A. Mabini St., she expressly warranting
and holding [sic] herself 'solidarily' liable
with appellee Tourist World Service, Inc.
for the prompt payment of the monthly
rentals thereof to other appellee Mrs.
Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive

any salary from appellee Tourist World
Service, Inc., which had its own,
separate office located at the Trade &
Commerce Building; nor was she an
employee thereof, having no
participation in nor connection with said
business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned
commissions for her own passengers,
her own bookings her own business
(and not for any of the business of
appellee Tourist World Service, Inc.)
obtained from the airline companies.
She shared the 7% commissions given
by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof
aid retaining 4% for herself (pp. 18
tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared
in the expenses of maintaining the A.
Mabini St. office, paying for the salary of
an office secretary, Miss Obieta, and
other sundry expenses, aside from
desicion the office furniture and
supplying some of fice furnishings (pp.
15,18 tsn. April 6,1965), appellee Tourist
World Service, Inc. shouldering the
rental and other expenses in
consideration for the 3% split in the co
procured by appellant Mrs. Sevilla (p. 35
tsn Feb. 16,1965).
6. It was the understanding between
them that appellant Mrs. Sevilla would
be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.),
appellee Eliseo Canilao admit that it was
just a title for dignity (p. 36 tsn. June 18,
1965- testimony of appellee Eliseo
Canilao pp. 38-39 tsn April 61965-

testimony of corporate secretary Gabino

Canilao (pp- 2-5, Appellants' Reply
Brief)
Upon the other hand, appellee TWS contend that the
appellant was an employee of the appellee Tourist
World Service, Inc. and as such was designated
manager. 1
xxx xxx xxx

The trial court 2 held for the private respondent on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it
was within its prerogative to terminate the lease and padlock the
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and as such, she was bound
by the acts of her employer. 4 The respondent Court of Appeal 5 rendered
an affirmance.
The petitioners now claim that the respondent Court, in sustaining the
lower court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE
PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE
INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE
APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O.
SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO
IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST
WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED
THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE
CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE
TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO
THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P.
2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE
RULE OF LAW.
II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND

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

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

III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT
PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF
ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL
APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM
THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of
the relation between Lina Sevilla and Tourist World Service, Inc. The
respondent Court of see fit to rule on the question, the crucial issue, in
its opinion being "whether or not the padlocking of the premises by the
Tourist World Service, Inc. without the knowledge and consent of the
appellant Lina Sevilla entitled the latter to the relief of damages prayed
for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and
without the consent of the appellant disconnected the telephone lines
of the Ermita branch office of the appellee Tourist World Service,
Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its Ermita
"branch" office and that inferentially, she had no say on the lease executed
with the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one of joint
venture, but concede that "whatever might have been the true relationship
between Sevilla and Tourist World Service," the Rule of Law enjoined
Tourist World Service and Canilao from taking the law into their own
hands, 8 in reference to the padlocking now questioned.

In this jurisdiction, there has been no uniform test to determine the

evidence of an employer-employee relation. In general, we have relied
on the so-called right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to
be achieved but also the means to be used in reaching such
end." 10 Subsequently, however, we have considered, in addition to the
standard of right-of control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject
to control by the private respondent Tourist World Service, Inc., either
as to the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the
Tourist Worlds Ermita office, she had bound herself insolidum as and
for rental payments, an arrangement that would be like claims of a
master-servant relationship. True the respondent Court would later
minimize her participation in the lease as one of mere guaranty, 12 that
does not make her an employee of Tourist World, since in any case, a true
employee cannot be made to part with his own money in pursuance of his
employer's business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, '[w]hen the
branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for
any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these
circumstances, it cannot be said that Sevilla was under the control of
Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the
business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For
her efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an employee then, who

earns a fixed salary usually, she earned compensation in fluctuating

amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not
make her, ergo, Tourist World's employee. As we said, employment is
determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are
not, as a consequence, accepting Lina Sevilla's own, that is, that the
parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of such
a relation. In her letter of November 28, 1961, she expressly 'concedes
your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office 14 in effect, accepting Tourist World Service, Inc.'s control
over the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a of standing between the joint coventurers or partners, in which each party has an equal proprietary interest
in the capital or property contributed 15 and where each party exercises
equal rights in the conduct of the business. 16 furthermore, the parties did
not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina
Sevilla, agreed to (wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another. 18 In the case
at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of
the proceeds in the concept of commissions. And as we said, Sevilla
herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are
convinced, considering the circumstances and from the respondent Court's
recital of facts, that the ties had contemplated a principal agent
relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot
be revoked at will. The reason is that it is one coupled with an interest,
the agency having been created for mutual interest, of the agent and
the principal. 19 It appears that Lina Sevilla is a bona fidetravel agent
herself, and as such, she had acquired an interest in the business

entrusted to her. Moreover, she had assumed a personal obligation for the
operation thereof, holding herself solidarily liable for the payment of
rentals. She continued the business, using her own name, after Tourist
World had stopped further operations. Her interest, obviously, is not to the
commissions she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the revocation complained of should
entitle the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining

itself to the telephone disconnection and padlocking incidents. Anent
the disconnection issue, it is the holding of the Court of Appeals that
there is 'no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office. 20Yet, what cannot
be denied is the fact that Tourist World Service, Inc. did not take pains to
have them reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as owner
of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect
to the padlocking incident. For the fact that Tourist World Service, Inc.
was the lessee named in the lease con-tract did not accord it any
authority to terminate that contract without notice to its actual occupant,
and to padlock the premises in such fashion. As this Court has ruled,
the petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining thereto.
Furthermore, Sevilla was not a stranger to that contract having been
explicitly named therein as a third party in charge of rental payments
(solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was
indeed some malevolent design to put the petitioner, Lina Sevilla, in a
bad light following disclosures that she had worked for a rival firm. To
be sure, the respondent court speaks of alleged business losses to
justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in
fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What
the evidence discloses, on the other hand, is that following such an information (that Sevilla was
working for another company), Tourist World's board of directors adopted two resolutions abolishing
the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to
effect the takeover of its branch office properties. On January 3, 1962, the private respondents
ended the lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the
Ermita office was padlocked, personally by the respondent Canilao, on

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

This conduct on the part of Tourist World Service, Inc. betrays a sinister
effort to punish Sevillsa it had perceived to be disloyalty on her part. It
is offensive, in any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of
agency, the private respondent, Tourist World Service, Inc., should be
sentenced to pay damages. Under the Civil Code, moral damages may
be awarded for "breaches of contract where the defendant acted ... in
bad faith. 23

Tourist World Service, Inc. in the disconnection and padlocking

incidents. She cannot therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as
nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable
under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well
as the Resolution issued on July 31, 1975, by the respondent Court of
Appeals is hereby REVERSED and SET ASIDE. The private
respondent, Tourist World Service, Inc., and Eliseo Canilao, are
ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla,
the sum of 25,00.00 as and for moral damages, the sum of P10,000.00,
as and for exemplary damages, and the sum of P5,000.00, as and for
nominal and/or temperate damages.
Costs against said private respondents.

We likewise condemn Tourist World Service, Inc. to pay further

damages for the moral injury done to Lina Sevilla from its brazen
conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in relation
to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage. 24
ART. 2219. Moral damages 25 may be recovered in the
following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28,
29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby
ordered to respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is
concerned, no evidence has been shown that she had connived with

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

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16600

December 27, 1961

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,

vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION
COMMISSION, respondents.
Luis G. Hofilea for petitioner.
J. T. de Leon for respondents.
PAREDES, J.:
As a result of the death of Santiago Fabrigar, on June 28, 1956, his
heirs in the person of Leonora Fabrigar (common-law wife) and their
children, filed a claim for compensation with the Workmen's
Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora
Fabrigar, et al., Claimants, vs. Iloilo Chinese Commercial School,
Respondent." In this claim, it was alleged that the cause of death was
" pulmonary tuberculosis contractedduring and as a result of his
employment as janitor." The Hearing Officer of the WCC denied the
claim and dismissed the case, finding that the claimant failed to prove
the casual effect of employment and death; nothing was shown that the
disease was contracted in line of duty; that whatever evidence claimant
presented about the cause of death was only a mere suggestion that
progressively developed from tuberculosis with heart trouble to a
sudden fatal turn, ending up for the cause of "beriberi adult" at the time
of death, as per certification of Sanitary Inspector Dr. P. E. Labitoria, of
Dao, Capiz (Exhibits C & 4).
The heirs of Santiago Fabrigar appealed the decision with the
Workmen's Compensation Commission which, on November 12, 1959,
rendered judgment reversing the decision of its Hearing Officer, making
the following findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12,
1956, as a janitor-messenger of the respondent Iloilo Chinese
Commercial School, his work consisting of sweeping and scrubbing the
floors, cleaning the classrooms and the school premises, and other
janitorial chores; on March 11, 1956, preparatory to graduation day, he
carried desks and chairs from the classrooms to the auditorium, set the
curtains and worked harder and faster than usual; that although he felt
shortness of breath and did not feel very well that day, he continued
working at the request of the overseer of respondent, that on the
following day he reported for work, but on March 13, he spat blood and
stopped working; that from April 29, 1956 to May 15, 1956, he was
under treatment by Dr. Quirico Villareal "for far advanced pulmonary
tuberculosis and for heart disease"; and that previous to said treatment,
he was attended by Dr. Jaranilla for pulmonary tuberculosis. The
Commission concluded that the short period of intervention between
his last day of work (March 13, 1956) when he spat blood and his death
on June 28, 1956, due to pulmonary tuberculosis, indicated that he had
been suffering from such disease even during the time he was
employed by the respondent and considering the strenuous work he
performed, his employment as janitor aggravated his pre-existing
illness; that although here is a discrepancy between the cause of death
"beriberi adult," as appearing in the death Certificate and the testimony
of Dr. Villareal, the latter deserves more credence, because the
information (cause of death) was given by the sanitary inspector who
did not, in any way, examine the deceased before or after his death.
The Commission, therefore, ordered the respondent Chinese
Commercial School, Inc., in said case
1. To pay to the claimant, for and in behalf of her minor children
by the deceased, namely, Carlito, Gloria, Rosita and Ernesto,
all surnamed Fabrigar, the amount of TWO THOUSAND FOUR
HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as
Death benefits; and
2. To pay to the Commission the amount of P25.00 as fees
pursuant to Section 55 of Act 3428, as amended.
The above decision is now before Us for Review on a Writ of Certiorari,
after the motion for reconsideration had been denied, petitioner alleging
that the Commission erred:
1. In disregarding completely the evidentiary value of the death
certificate of the attending physician which was presented as

evidence by both claimants and respondent (Exhibits C & 4) to

prove the cause of death;
2. In finding that the cause of death of said Santiago Fabrigar
was tuberculosis and was contracted during and as a result of
the nature of his employment;
3. In holding that the herein petitioner was the employer of the
deceased Santiago Fabrigar; and
4. In not holding that the herein petitioner is exempt from the
scope of the Workmen's Compensation Law.

fact that immediately preceding his last day of work with the
respondent, he had an unusually hard day lifting desks and
other furnitures and assisting in the preparations for the
graduation exercises of the school. Considering also his
complaints during that day (March 11), among which was
"shortness of breath", we may also say that his work affected
an already existing heart ailment.
We find no plausible reason for altering or disturbing the above factual
findings of the Commission, in the present appeal by certiorari.

Petitioner contends that the preponderance of evidence on the matters

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

It is claimed that actually the deceased was not an employee of the

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

The short period of time intervening between his last day of

work (March 13, 1956) when he spat blood and his death June
28, 1956 due to pulmonary tuberculosis indicates that he had
been suffering from the disease even during the time that he
was employed by the respondent. Considering the strenuous
work that he performed while in the service of the respondents
and the unusually long hours of work he rendered (6:00 p.m. to
1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond
the normal and legal working hours, we find that his
employment aggravated his pre-existing illness and brought
about his death. Moreover, our conclusion finds support in the

It is finally contended that petitioner is an institution devoted solely for

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

lawphil.net

not found in the record before us. And the resolution to the motion for
reconsideration does not touch this question.
IN VIEW HEREOF, the appeal interposed by the petitioner is
dismissed, and the decision appealed from is affirmed, with costs
against the herein petitioner.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Barrera, Dizon and De Leon, JJ., concur.
Padilla, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 116960 April 2, 1996

BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators of JJ's
TRUCKING, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PEDRO JUANATAS
and FREDELITO JUANATAS,respondents.

REGALADO, J.:p
This petition for certiorari seeks the annulment of the decision of
respondent National Labor Relations Commission (NLRC), dated May
27, 1994, as well as its resolution, dated August 8, 1994, denying
petitioners's motion for reconsideration, 1 which assailed decision
affirmed with modifications the adverse decision of the labor arbiter against
herein petitioners.
On June 29, 1990, herein private respondent Pedro and Fredelito
Juanatas, father and son, filed a claim for unpaid wages/commissions,
separation pay and damages against JJ's Trucking and/or Dr. Bernardo
Jimenez. Said respondents, as complainants therein, alleged that in
December, 1987, they were hired by herein petitioner Bernardo
Jimenez as driver/mechanic and helper, respectively, in his trucking
firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul
soft drinks of Coca-Cola Bottling Company and paid on commission
basis, initially fixed at 17% but later increased to 20% in 1988.
Private respondents further alleged that for the years 1988 and 1989
they received only a partial commission of P84,000.00 from petitioners'
total gross income of almost P1,000,000.00 for the said two years.

Consequently, with their commission for that period being computed at

20% of said income, there was an unpaid balance to them of
P106,211.86; that until March, 1990 when their services were illegally
terminated, they were further entitled to P15,050.309 which, excluding
the partial payment of P7,000.00, added up to a grand total of
P114,261.86 due and payable to them; and that petitioners' refusal to
pay their aforestated commission was a ploy to unjustly terminate
them.
Disputing the complaint, petitioners contend that respondent Fredelito
Juanatas was not an employee of the firm but was merely a helper of
his father Pedro; that all commissions for 1988 and 1989, as well as
those up to March, 1990, were duly paid; and that the truck driven by
respondent Pedro Juanatas was sold to one Winston Flores in 1991
and, therefore, private respondents were not illegally dismissed. 2
After hearings duly conducted, and with the submission of the parties'
position/supporting papers, Labor Arbiter Rogue B. de Guzman
rendered a decision dated March 9, 1993, with this decretal portion:
WHEREFORE, decision is hereby issued ordering
respondents JJ's Trucking and/or Dr. Bernardo Jimenez
to pay jointly and severally complainant Pedro Juanatas
a separation pay of FIFTEEN THOUSAND FIFTY
(P15,050.00) PESOS, plus attorney's fee equivalent to
ten percent (10%) of the award. The complaint of
Fredelito Juanatas is hereby dismissed for lack of
merit. 3
On appeal filed by private respondents, the NLRC modified the
decision of the labor arbiter and disposed as follows:
PREMISES CONSIDERED, the Decision of March 9,
1993 is hereby MODIFIED, to wit:
1. Complainant Fredelito Juanatas is hereby declared
respondents' employee and shares in (the) commission
and separation pay awarded to complainant Pedro
Juanatas, his father.
2. Respondent JJ's Trucking and Dr. Bernardo Jimenez
are jointly and severally liable to pay complainants their
unpaid commissions in the total amount of Eighty Four

Thousand Three Hundred Eighty Seven Pesos and

05/100 (P84,387.05).
3. The award of attorney's fees is reduced accordingly
to eight thousand four hundred thirty eight pesos and
70/100 (P8,438.70).
4. The other findings stand affirmed.

When the existence of a debt is fully established by the evidence

contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such a
defense to the claim of the creditor. 12 Where the debtor introduces some
evidence of payment, the burden of going forward with the evidence as
distinct from the general burden of proof shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment. 13

Petitioners' motion for reconsideration having been denied thereafter in

public respondent's resolution dated August 8, 1994, 5 petitioners have
come to us in this recourse, raising for resolution the issues as to whether
or not respondent NLRC committed grave abuse of discretion in ruling (a)
that private respondents were not paid their commissions in full, and (b)
that respondent Fredelito Juanatas was an employee of JJ's Trucking.
The review of labor cases elevated to us on certiorari is confined to
questions of jurisdiction or grave abuse of discretion. 6 As a rule, this
Court does not review supposed errors in the decision of the NLRC which
raise factual issues, because factual findings of agencies exercising quasijudicial functions are accorded not only respect but even finality, 7aside
from the consideration that the Court is essentially not a trier of facts.
However, in the case at bar, a review of the records thereof with an
assessment of the facts is necessary since the factual findings of the
NLRC and the labor arbiter are at odds with each other. 8
On the first issue, we find no reason to disturb the findings of
respondent NLRC that the entire amount of commissions was not paid,
this by reason of the evident failure of herein petitioners to present
evidence that fullpayment thereof has been made. It is a basic rule in
evidence that each party must prove his affirmative allegation. Since
the burden of evidence lies with the party who asserts an affirmative
allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or respondent has to
prove the affirmative allegations in his affirmative defenses and
counterclaim. Considering that petitioners herein assert that the
disputed commissions have been paid, they have the bounden duty to
prove that fact.
As a general rule, one who pleads payment has the burden of proving
it. 9 Even where the plaintiff must allege non-payment, the general rule is
that the burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment. 10 The debtor has the burden of showing
with legal certainty that the obligation has been discharged by payment. 11

In the instant case, the right of respondent Pedro Juanatas to be paid a

commission equivalent to 17%, later increased to 20%, of the gross
income is not disputed by petitioners. Although private respondents
admit receipt of partial payment, petitioners still have to present proof
of full payment. Where the defendant sued for a debt admits that the
debt was originally owed, and pleads payment in whole or in part, it is
incumbent upon him to prove such payment. That a plaintiff admits that
some payments have been made does not change the burden of proof.
The defendant still has the burden of establishing payments beyond
those admitted by plaintiff. 14
The testimony of petitioners which merely denied the claim of private
respondents, unsupported by documentary evidence, is not sufficient to
establish payment. Although petitioners submitted a notebook showing
the allegedvales of private respondents for the year 1990, 15 the same is
inadmissible and cannot be given probative value considering that it is not
properly accomplished, is undated and unsigned, and is thus uncertain as
to its origin and authenticity. 16
The positive testimony of a creditor may be sufficient of it self to show
non-payment, even when met by indefinite testimony of the debtor.
Similarly, the testimony of the debtor may also be sufficient to show
payment, but, where his testimony is contradicted by the other party or
by a disinterested witness, the issue may be determined against the
debtor since he has the burden of proof. The testimony of the debtor
creating merely an inference of payment will not be regarded as
conclusive on that issue. 17
Hence, for failure to present evidence to prove payment, petitioners
defaulted in their defense and in effect admitted the allegations of
private respondents.
With respect to the second issue, however, we agree with petitioners
that the NLRC erred in holding that the son, Fredelito, was an
employee of petitioners.

We have consistently ruled that in determining the existence of an

employer-employee relationship, the elements that are generally
considered are the following: (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, 18 with the control test
assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The
agreement was between petitioner JJ's Trucking and respondent Pedro
Juanatas. The hiring of a helper was discretionary on the part of Pedro.
Under their contract, should he employ a helper, he would be
responsible for the latter's compensation. With or without a helper,
respondent Pedro Juanatas was entitled to the same percentage of
commission. Respondent Fredelito Juanatas was hired by his father,
Pedro, and the compensation he received was paid by his father out of
the latter's commission. Further, Fredelito was not subject to the control
and supervision of and dismissal by petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of
the labor arbiter that Fredelito was not an employee of petitioners, to
wit:
Public respondent committed grave abuse of discretion
in holding that said private respondent is an employee
of JJ's Trucking on the ground that, citing Article 281 of
the Labor Code, "Fredelito's functions as helper was
(sic) necessary and desirable to respondent's trucking
business".
In the first place, Article 281 of the Labor Code does not
refer to the basic factors that must underlie every
existing employer-employee relationship, the absence
of any of which will negate such existence. It refers
instead to the qualifications of "(A)n employee who is
allowed to work after a probationary period" and who,
as a consequence, "shall be considered a regular
employee." Secondly, the test in determining the
existence of an employee-employer relationship is not
the necessity and/or desirability of one's functions in
relation to an employer's business, but "(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. The latter is the most
important element" (Singer Sewing Machine Company

vs. Drilon, 193 SCRA 270, 275; Deferia vs. NLRC, 194
SCRA 531, 525; Ecal vs. NLRC, 224, 228, Hijos De F.
Escano, Inc vs. NLRC, 224 SCRA 781, 785). The
aforequoted pertinent findings of the Labor Arbiter
indicate (that) the foregoing requirements do not exist
between petitioner and private respondent Fredelito
Juanatas. Thus, the labor arbiter stated that respondent
Fredelito Juanatas was never hired by petitioners.
Instead the former's services were availed of by
respondent Pedro Juanatas his father, who, at the same
time, supervised and controlled his work and paid his
commissions. Respondent NLRC's ruling did not
traverse these findings of the labor arbiter. 19
WHEREFORE, the judgment of respondent National Labor Relations
Commission is hereby AFFIRMED, with the MODIFICATION that
paragraph 1 thereof, declaring Fredelito Juanatas an employee of
petitioners and entitled to share in the award for commission and
separation pay, is hereby DELETED.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.
Torres, Jr., J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 114787 June 2, 1995

MAM REALTY DEVELOPMENT CORPORATION and MANUEL
CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and CELSO B.
BALBASTRO respondents.

VITUG, J.:
A prime focus in the instant petition is the question of when to hold a
director or officer of a corporation solidarily obligated with the latter for
a corporate liability.
The case originated from a complaint filed with the Labor Arbiter by
private respondent Celso B. Balbastro against herein petitioners, MAM
Realty Development Corporation ("MAM") and its Vice President
Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay,
incentive leave pay, 13th month pay (for the years 1988 and 1989),
holiday pay and rest day pay. Balbastro alleged that he was employed
by MAM as a pump operator in 1982 and had since performed such
work at its Rancho Estate, Marikina, Metro Manila. He earned a basic
monthly salary of P1,590.00 for seven days of work a week that started
from 6:00 a.m. to up until 6:00 p.m. daily.
MAM countered that Balbastro had previously been employed by
Francisco Cacho and Co., Inc., the developer of Rancho Estates.
Sometime in May 1982, his services were contracted by MAM for the
operation of the Rancho Estates' water pump. He was engaged,
however, not as an employee, but as a service contractor, at an agreed

fee of P1,590.00 a month. Similar arrangements were likewise entered

into by MAM with one Rodolfo Mercado and with a security guard of
Rancho Estates III Homeowners' Association. Under the agreement,
Balbastro was merely made to open and close on a daily basis the
water supply system of the different phases of the subdivision in
accordance with its water rationing scheme. He worked for only a
maximum period of three hours a day, and he made use of his free time
by offering plumbing services to the residents of the subdivision. He
was not at all subject to the control or supervision of MAM for, in fact,
his work could so also be done either by Mercado or by the security
guard. On 23 May 1990, prior to the filing of the complaint, MAM
executed a Deed of Transfer, 1effective 01 July 1990, in favor of the
Rancho Estates Phase III Homeowners Association, Inc., conveying to the
latter all its rights and interests over the water system in the subdivision.
In a decision, dated 23 December 1991, the Labor Arbiter dismissed
the complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission
("NLRC") rendered judgment (a) setting aside the questioned decision
of the Labor Arbiter and (b) referring the case, pursuant to Article
218(c) of the Labor Code, to Arbiter Cristeta D. Tamayo for further
hearing and submission of a report within 20 days from receipt of the
Order. 2 On 21 March 1994, respondent Commissioner, after considering
the report of Labor Arbiter Tamayo, ordered:
WHEREFORE, the respondents are hereby directed to
pay jointly and severally complainant the sum of
P86,641.05 as above-computed. 3
The instant petition asseverates that respondent NLRC gravely
abused its discretion, amounting to lack or excess of
jurisdiction, (1) in finding that an employer-employee
relationship existed between petitioners and private respondent
and (2) in holding petitioners jointly and severally liable for the
money claims awarded to private respondent.
Once again, the matter of ascertaining the existence of an employeremployee relationship is raised. Repeatedly, we have said that this
factual issue is determined by:
(a) the selection and engagement of the employee;

(b) the payment of wages;

(c) the power of dismissal; and
(d) the employer's power to control the employee with
respect to the result of the work to be done and to the
means and methods by which the work is to be
accomplished.
We see no grave abuse of discretion on the part of NLRC in
finding a full satisfaction, in the case at bench, of the criteria to
establish that employer-employee relationship. The power of
control, the most important feature of that relationship and,
here, a point of controversy, refers merely to the existence of
the power and not to the actual exercise thereof. It is not
essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the
former has a right to wield the power. 4 It is hard to accede to the
contention of petitioners that private respondent should be
considered totally free from such control merely because the work
could equally and easily be done either by Mercado or by the
subdivision's security guard. Not without any significance is that
private respondent's employment with MAM has been registered
by petitioners with the Social Security System. 5
It would seem that the money claims awarded to private respondent
were computed from 06 March 1988 to 06 March 1991, 6 the latter being
the date of the filing of the complaint. The NLRC might have missed the
transfer by MAM of the water system to the Homeowners Association on
01 July 1990, a matter that would appear not to be in dispute. Accordingly,
the period for the computation of the money claims should only be for the
period from 06 March 1988 to 01 July 1990 (when petitioner corporation
could be deemed to have ceased from the activity for which private
respondent was employed), and petitioner corporation should, instead, be
made liable for the employee's separation pay equivalent to one-half (1/2)
month pay for every year of
service. 7 While the transfer was allegedly due to MAM's financial
constraints, unfortunately for petitioner corporation, however, it failed to
sufficiently establish that its business losses or financial reverses were
serious enough that possibly can warrant an exemption under the law. 8
We agree with petitioners, however, that the NLRC erred in holding
Centeno jointly and severally liable with MAM. A corporation, being a
juridical entity, may act only through its directors, officers and

employees. Obligations incurred by them, acting as such corporate

agents, are not theirs but the direct accountabilities of the corporation
they represent. True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the
following cases: 9
1. When directors and trustees or, in appropriate cases,
the officers of a corporation
(a) vote for or assent
to patently unlawful acts of the
corporation;
(b) act in bad faith or with gross
negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the
prejudice of the corporation, its
stockholders or members, and other
persons. 10
2. When a director or officer has consented to the
issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary
his written objection thereto. 11
3. When a director, trustee or officer has contractually
agreed or stipulated to hold himself personally and
solidarily liable with the Corporation. 12
4 When a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate action. 13

In labor cases, for instance, the Court has held corporate

directors and officers solidarily liable with the corporation for the
termination of employment of employees done with malice or in
bad faith. 14
In the case at Bench, there is nothing substantial on record that can
justify, prescinding from the foregoing, petitioner Centeno's solidary
liability with the corporation.

An extra note. Private respondent avers that the questioned decision,

having already become final and executory, could no longer be
reviewed by this Court. The petition before us has been filed under
Rule 65 of the Rules of Court, there being no appeal, or any other
plain, speedy and adequate remedy in the ordinary course of law from
decisions of the National Labor Relations Commission; it is a relief that
is open so long as it is availed of within a reasonable time.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is
REMANDED to the NLRC for a re-computation of private respondent's
monetary awards, which, conformably with this opinion, shall be paid
solely by petitioner MAM Realty Development Corporation. No special
pronouncement on costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 119930 March 12, 1998

INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division,
Cebu City), LABOR ARBITER NICASIO P. ANINON and
PANTALEON DE LOS REYES, respondents.

decision of the Labor Arbiter and held instead that the complaint was
properly filed as an employer-employee relationship existed between
petitioner and private respondent.
Petitioner reprises the stand it assumed below that it never had any
employer-employee relationship with private respondent, this being an
express agreement between them in the agency contracts, particularly
reinforced by the stipulation therein that De los Reyes was allowed
discretion to devise ways and means to fulfill his obligations as agent
and would be paid commission fees based on his actual output. It
further insists that the nature of this work status as described in the
contracts had already been squarely resolved by the Court in the
earlier case ofInsular Life Assurance Co., Ltd. v. NLRC and
Basiao where the complainant therein, Melecio Basiao, was similarly
situated as respondent De los Reyes in that he was appointed first as
an agent and then promoted as agency manager, and the contracts
under which he was appointed contained terms and conditions identical
to those of Delos Reyes. Petitioner concludes that since Basiao was
declared by the Court to be an independent contractor and not an
employee of petitioner, there should be no reason why the status of De
los Reyes hereinvis-a-vis petitioner should not be similarly determined.
3

BELLOSILLO, J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of
jurisdiction NLRC RAB-VII Case No. 03-0309-94 filed by private
respondent Pantaleon de los Reyes against petitioner Insular Life
Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and
nonpayment of salaries and back wages after finding no employeremployee relationship between De los Reyes and petitioner INSULAR
LIFE. On appeal by private respondent, the order of dismissal was
reversed by the National Labor Relations Commission (NLRC) which
ruled that respondent De los Reyes was an employee of
petitioner. Petitioner's motion for reconsideration having been denied,
the NLRC remanded the case to the Labor Arbiter for hearing on the
merits.
1

Seeking relief through this special civil action for certiorari with prayer
for a restraining order and/or preliminary injunction, petitioner now
comes to us praying for annulment of the decision of respondent NLRC
dated 3 March 1995 and its Order dated 6 April 1995 denying the
motion for reconsideration of the decision. It faults NLRC for acting
without jurisdiction and/or with grave abuse of discretion when, contrary
to established facts and pertinent law and jurisprudence, it reversed the

We reject the submissions of petitioner and hold that respondent NLRC

acted appropriately within the bounds of the law. The records of the
case are replete with telltale indicators of an existing employeremployee relationship between the two parties despite written
contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into
an agency contract with respondent Pantaleon de los
Reyes authorizing the latter to solicit within the Philippines applications
for life insurance and annuities for which he would be paid
compensation in the form of commissions. The contract was prepared
by petitioner in its entirety and De los Reyes merely signed his
conformity thereto. It contained the stipulation that no employeremployee relationship shall be created between the parties and that the
agent shall be free to exercise his own judgment as to time, place and
means of soliciting insurance. De los Reyes however was prohibited by
petitioner from working for any other life insurance company, and
violation of this stipulation was sufficient ground for termination of the
contract. Aside from soliciting insurance for the petitioner, private
respondent was required to submit to the former all completed
applications for insurance within ninety (90) consecutive days, deliver
policies, receive and collect initial premiums and balances of first year
4

premiums, renewal premiums, deposits on applications and payments

on policy loans. Private respondent was also bound to turn over to the
company immediately any and all sums of money collected by him. In a
written communication by petitioner to respondent De los Reyes, the
latter was urged to register with the Social Security System as a selfemployed individual as provided under PD No. 1636.
5

On 1 March 1993 petitioner and private respondent entered into

another contract where the latter was appointed as Acting Unit
Manager under its office the Cebu DSO V (157). As such, the duties
and responsibilities of De los Reyes included the recruitment, training,
organization and development within his designated territory of a
sufficient number of qualified, competent and trustworthy underwriters,
and to supervise and coordinate the sales efforts of the underwriters in
the active solicitation of new business and in the furtherance of the
agency's assigned goals. It was similarly provided in the management
contract that the relation of the acting unit manager and/or the agents
of his unit to the company shall be that of independent contractor. If the
appointment was terminated for any reason other than for cause, the
acting unit manager would be reverted to agent status and assigned to
any unit. As in the previous agency contract, De los Reyes together
with his unit force was granted freedom to exercise judgment as to
time, place and means of soliciting insurance. Aside from being granted
override commissions, the acting unit manager was given production
bonus, development allowance and a unit development financing
scheme euphemistically termed "financial assistance" consisting of
payment to him of a free portion of P300.00 per month and a validate
portion of P1,200.00. While the latter amount was deemed as an
advance against expected commissions, the former was not and would
be freely given to the unit manager by the company only upon
fulfillment by him of certain manpower and premium quota
requirements. The agents and underwriters recruited and trained by the
acting unit manager would be attached to the unit but petitioner
reserved the right to determine if such assignment would be made or,
for any reason, to reassign them elsewhere.
6

Aside from soliciting insurance, De los Reyes was also expressly

obliged to participate in the company's conservation program, i.e.,
preservation and maintenance of existing insurance policies, and to
accept moneys duly receipted on agent's receipts provided the same
were turned over to the company. As long as he was unit manager in
an acting capacity, De los Reyes was prohibited from working for other
life insurance companies or with the government. He could not also

accept a managerial or supervisory position in any firm doing business

in the Philippines without the written consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit
Manager until he was notified by petitioner on 18 November 1993 that
his services were terminated effective 18 December 1993. On 7 March
1994 he filed a complaint before the Labor Arbiter on the ground that
he was illegally dismissed and that he was not paid his salaries and
separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for
lack of jurisdiction, citing the absence of employer-employee
relationship. It reasoned out that based on the criteria for determining
the existence of such relationship or the so-called "four-fold test," i.e.,
(a) selection and engagement of employee, (b) payment of wages, (c)
power of dismissal, and, (d) power of control, De los Reyes was not an
employee but an independent contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor
Arbiter and the case was dismissed on the ground that the element of
control was not sufficiently established since the rules and guidelines
set by petitioner in its agency agreement with respondent Delos Reyes
were formulated only to achieve the desired result without dictating the
means or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different
perspective. It determined that respondent De los Reyes was under the
effective control of petitioner in the critical and most important aspects
of his work as Unit Manager. This conclusion was derived from the
provisions in the contract which appointed private respondent as Acting
Unit Manager, to wit: (a) De los Reyes was to serve exclusively the
company, therefore, he was not an independent contractor; (b) he was
required to meet certain manpower and production quota; and, (c)
petitioner controlled the assignment to and removal of soliciting agents
from his unit.
The NLRC also took into account other circumstances showing that
petitioner exercised employer's prerogatives over De los Reyes, e.g.,
(a) limiting the work of respondent De los Reyes to selling a life
insurance policy known as "Salary Deduction Insurance" only to
members of the Philippine National Police, public and private school
teachers and other employees of private companies; (b) assigning
private respondent to a particular place and table where he worked

whenever he was not in the field; (c) paying private respondent during
the period of twelve (12) months of his appointment as Acting Unit
Manager the amount of P1,500.00 as Unit Development Financing of
which 20% formed his salary and the rest, i.e., 80%, as advance of his
expected commissions; and, (d) promising that upon completion of
certain requirements, he would be promoted to Unit Manager with the
right of petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the
agency contract and the management contract entered into between
petitioner and De los Reyes as contracts of agency. We however hold
otherwise. Unquestionably there exist major distinctions between the
two agreements. While the first has the earmarks of an agency
contract, the second is far removed from the concept of agency in that
provided therein are conditionalities that indicate an employeremployee relationship. The NLRC therefore was correct in finding that
private respondent was an employee of petitioner, but this holds true
only insofar as the management contract is concerned. In view thereof,
the Labor Arbiter has jurisdiction over the case..
It is axiomatic that the existence of an employer-employee relationship
cannot be negated by expressly repudiating it in the management
contract and providing therein that the "employee" is an independent
contractor when the terms of the agreement clearly show otherwise.
For, the employment status of a person is defined and prescribed by
law and not by what the parties say it should be. In determining the
status of the management contract, the "four-fold test" on employment
earlier mentioned has to be applied.
7

Petitioner contends that De los Reyes was never required to go

through the pre-employment procedures and that the probationary
employment status was reserved only to employees of petitioner. On
this score, it insists that the first requirement of selection and
engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent
was appointed as Acting Unit Manager only upon recommendation of
the District Manager. This indicates that private respondent was hired
by petitioner because of the favorable endorsement of its duly
authorized officer. But, this approbation could only have been based on
the performance of De los Reyes as agent under the agency contract
so that there can be no other conclusion arrived under this premise
than the fact that the agency or underwriter phase of the relationship of
De los Reyes with petitioner was nothing more than a trial or
8

probationary period for his eventual appointment as Acting Unit

Manager of petitioner. Then, again, the very designation of the
appointment of private respondent as "acting" unit manager obviously
implies a temporary employment status which may be made permanent
only upon compliance with company standards such as those
enumerated under Sec. 6 of the management contract.
9

On the matter of payment of wages, petitioner points out that

respondent was compensated strictly on commission basis, the amount
of which was totally dependent on his total output. But, the manager's
contract, speaks differently. Thus
4. Performance Requirements. To maintain your
appointment as Acting Unit Manager you must meet the
following manpower and production requirements:
Quarter Active Calendar Year
Production Agents Cumulative FYP
Production
1st 2 P 125,000
2nd 3 250,000
3rd 4 375,000
4th 5 500,000
5.4. Unit Development Financing (UDF). As an
Acting Unit Manager you shall be given during the first
12 months of your appointment a financial assistance
which is composed of two parts:
5.4.1. Free Portion amounting to P300
per month, subject to your meeting
prescribed minimum performance
requirement on manpower and premium
production. The free portion is not
payable by you.
5.4.2. Validate Portion amounting to
P1,200 per month, also subject to
meeting the same prescribed minimum
performance requirements on
manpower and premium production.
The validated portion is an advance

against expected compensation during

the UDF period and thereafter as may
be necessary.
The above provisions unquestionably demonstrate that the
performance requirement imposed on De los Reyes was
applicable quarterly while his entitlement to the free portion (P300) and
the validated portion (P1,200) wasmonthly starting on the first month of
the twelve (12) months of the appointment. Thus, it has to be admitted
that even before the end of the first quarter and prior to the so-called
quarterly performance evaluation, private respondent was already
entitled to be paid both the free and validated portions of the UDF
every month because his production performance could not be
determined until after the lapse of the quarter involved. This indicates
quite clearly that the unit manager's quarterly performance had no
bearing at all on his entitlement at least to the free portion of the UDF
which for all intents and purposes comprised the salary regularly paid
to him by petitioner. Thus it cannot be validly claimed that the financial
assistance consisting of the free portion of the UDF was purely
dependent on the premium production of the agent. Be that as it may, it
is worth considering that the payment of compensation by way of
commission does not militate against the conclusion that private
respondent was an employee of petitioner. Under Art. 97 of the Labor
Code, "wage" shall mean "however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time,
task, price or commission basis . . . ."
10

As to the matter involving the power of dismissal and control by the

employer, the latter of which is the most important of the test, petitioner
asserts that its termination of De los Reyes was but an exercise of its
inherent right as principal under the contracts and that the rules and
guidelines it set forth in the contract cannot, by any stretch of the
imagination, be deemed as an exercise of control over the private
respondent as these were merely directives that fixed the desired result
without dictating the means or method to be employed in attaining it.
The following factual findings of the NLRC however contradict such
claims:
11

A perusal of the appointment of complainant as Acting

Unit Manager reveals that:
1. Complainant was to "exclusively" serve respondent
company. Thus it is provided: . . . 7..7 Other causes of
Termination:

This appointment may likewise be terminated for any of

the following causes: . . . 7..7..2. Your entering the
service of the government or another life insurance
company; 7..7..3. Your accepting a managerial or
supervisory position in any firm doing business in the
Philippines without the written consent of the Company;
...
2. Complainant was required to meet certain manpower
and production quotas.
3. Respondent (herein petitioner) controlled the
assignment and removal of soliciting agents to and from
complainant's unit, thus: . . . 7..2. Assignment of Agents:
Agents recruited and trained by you shall be attached to
your unit unless for reasons of Company policy, no such
assignment should be made. The Company retains the
exclusive right to assign new soliciting agents to the
unit. It is agreed that the Company may remove or
transfer any soliciting agents appointed and assigned to
the said unit. . . .
It would not be amiss to state that respondent's duty to collect the
company's premiums using company receipts under Sec. 7.4 of the
management contract is further evidence of petitioner's control over
respondent, thus:
xxx

xxx

xxx

7.4. Acceptance and Remittance of Premiums. . . . .

the Company hereby authorizes you to accept and to
receive sums of money in payment of premiums, loans,
deposits on applications, with or without interest, due
from policyholders and applicants for insurance, and the
like, specially from policyholders of business solicited
and sold by the agents attached to your unit provided
however, that all such payments shall be duly receipted
by you on the corresponding Company's "Agents'
Receipt" to be provided you for this purpose and to be
covered by such rules and accounting regulations the
Company may issue from time to time on the matter.
Payments received by you shall be turned over to the
Company's designated District or Service Office clerk or

directly to the Home Office not later than the next

working day from receipt thereof . . . .
Petitioner would have us apply our ruling in Insular Life Assurance
Co., Ltd. v. NLRC and Basiao to the instant case under the doctrine
of stare decisis, postulating that both cases involve parties similarly
situated and facts which are almost identical.
12

requirements and his promotion was recommended by the petitioner's

District Manager and Regional Manager and approved by its Division
Manager. As Acting Unit Manager, De los Reyes performed functions
beyond mere solicitation of insurance business for petitioner. As found
by the NLRC, he exercised administrative functions which were
necessary and beneficial to the business of INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC which is closer in
application than Basiao to this present controversy, we found that "the
relationships of the Ruiz brothers and Grepalife were those of
employer-employee. First, their work at the time of their dismissal as
zone supervisor and district manager was necessary and desirable to
the usual business of the insurance company. They were entrusted with
supervisory, sales and other functions to guard Grepalife's business
interests and to bring in more clients to the company, and even with
administrative functions to ensure that all collections, reports and data
are faithfully brought to the company . . . . A cursory reading of their
respective functions as enumerated in their contracts reveals that the
company practically dictates the manner by which their jobs are to be
carried out . . . ." We need elaborate no further.
13

But we are not convinced that the cited case is on all fours with the
case at bar. In Basiao, the agent was appointed Agency Manager
under an Agency Manager Contract. To implement his end of the
agreement, Melecio Basiao organized an agency office to which he
gave the name M. Basiao and Associates. The Agency Manager
Contract practically contained the same terms and conditions as the
Agency Contract earlier entered into, and the Court observed that,
"drawn from the terms of the contract they had entered into, (which)
either expressly or by necessary implication, Basiao (was) made the
master of his own time and selling methods, left to his own judgment
the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the bases of results
obtained. He was not bound to observe any schedule of working hours
or report to any regular station; he could seek and work on his
prospects anywhere and at anytime he chose to and was free to adopt
the selling methods he deemed most effective." Upon these premises,
Basiao was considered as agent an independent contractor of
petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting
Unit Manager, not agency manager. There is no evidence that to
implement his obligations under the management contract, De los
Reyes had organized an office. Petitioner in fact has admitted that it
provided De los Reyes a place and a table at its office where he
reported for and worked whenever he was not out in the field. Placed
under petitioner's Cebu District Service Office, the unit was given a
name by petitioner De los Reyes and Associates and assigned
Code No. 11753 and Recruitment No. 109398. Under the managership
contract, De los Reyes was obliged to work exclusively for petitioner in
life insurance solicitation and was imposed premium production quotas.
Of course, the acting unit manager could not underwrite other lines of
insurance because his Permanent Certificate of Authority was for life
insurance only and for no other. He was proscribed from accepting a
managerial or supervisory position in any other office including the
government without the written consent of petitioner. De los Reyes
could only be promoted to permanent unit manager if he met certain

Exclusivity of service, control of assignments and removal of agents

under private respondent's unit, collection of premiums, furnishing of
company facilities and materials as well as capital described as Unit
Development Fund are but hallmarks of the management system in
which herein private respondent worked. This obtaining, there is no
escaping the conclusion that private respondent Pantaleon de los
Reyes was an employee of herein petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is
DENIED and the Decision of the National Labor Relations Commission
dated 3 March 1995 and its Order of 6 April 1996 sustaining it are
AFFIRMED. Let this case be REMANDED to the Labor Arbiter a
quo who is directed to hear and dispose of this case with deliberate
dispatch in light of the views expressed herein.
SO ORDERED.
Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.

law and the evidence, but the same was denied by the industrial
court en banc.
1awphl.nt

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-18873

September 30, 1963

MANILA HOTEL COMPANY, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, ET AL., respondents.
Government Corporate Counsel Simeon M. Gopengco and Trial
Attorney Jose S. Gomez for petitioner.
Gregorio E. Fajardo and Jesus Jaramillo for respondent Union.
Mariano B. Tuason for respondent Court.

BAUTISTA ANGELO, J.:

The Pines Hotel Employees Association filed on February 24, 1960
before the Court of Industrial Relations a petition praying, among other
things, that its employees who were working at the Pines Hotel be paid
additional compensation for overtime service rendered due to the
exigencies of the business, as well as additional compensation for
Sunday, legal holiday and nighttime work.
The Manila Hotel filed its answer denying the material averments of the
petition and alleging, among others, that if overtime service was
rendered the same was not authorized but was rendered voluntarily, for
the employees were interested in the "tips" offered by the patrons of the
hotel.
Presiding Judge Jose S. Bautista, to whom the petition was assigned,
after trial, rendered judgment stating that the employees were entitled
to the additional compensation demanded, including that for overtime
work, because an employee who renders overtime service is entitled to
compensation even if he rendered it without prior authority. A motion for
reconsideration was filed on the ground that the order was contrary to

In compliance with the order of the court, the Examining Division of the
Court of Industrial Relations submitted a report in which it stated that
the amount due the employees as additional compensation for
overtime and night services rendered from January to December 31,
1958 was P32,950.69. The management filed its objection to the report
on the ground that it included 22 names of employees who were not
employees of the Pines Hotel at the time the petition was filed so that
insofar as said employees are concerned the petition merely involves a
money claim which comes under the jurisdiction of the regular courts.
The trial judge, however, overruled this objection holding that, while the
22 employees were actually not in the service at the time of the filing of
the petition, they were however subsequently employed even during
the pendency of the incident, and so their claim comes within the
jurisdiction of the Court of Industrial Relations. Hence, the present
petition for review.
There is no merit in this appeal it appearing that while it is true that the
22 employees whose claim is objected to were not actually in the
service at the time the instant petition was filed, they were however,
subsequently reemployed even while the present incident was pending
consideration by the trial court. Moreover, it appears that the
questioned employees were never separated from the service. Their
status is that of regular seasonal employees who are called to work
from time to time, mostly during summer season. The nature of their
relationship with the hotel is such that during off season they are
temporarily laid off but during summer season they are re-employed, or
when their services may be needed. They are not strictly speaking
separated from the service but are merely considered as on leave of
absence without pay until they are re-employed. Their employment
relationship is never severed but only suspended. As such, these
employees can be considered as in the regular employment of the
hotel.
WHEREFORE, the order appealed from is affirmed. No costs.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,
Dizon, Regala and Makalintal, JJ., concur.
Reyes, J.B.L., J., took no part.

bargaining contract, likewise therein referred to, entered into in 1955,

provided:
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21465

March 31, 1966

INDUSTRIAL-COMMERCIAL-AGRICULTURAL WORKERS'
ORGANIZATION (ICAWO), petitioner-appellant,
vs.
COURT OF INDUSTRIAL RELATIONS, CENTRAL AZUCARERA DE
PILAR and/or ANTONIO BELZARENA as Manager, CENTRAL
AZUCARERA DE PILAR ALLIED WORKERS ASSOCIATION
(CAPAWA), respondents-appellees.
A. Velez for the petitioner.
Tirol and Tirol for the respondent.
REYES, J.B.L., J.:
Appeal from a decision of the Court of Industrial Relations (Case No.
44-ULP-Iloilo) dismissing charges for unfair labor practice.
On 9 February 1956, the petitioner, Industrial-Commercial-Agricultural
Workers' Organization (hereinafter referred to as the "ICAWO"),
declared a strike against the respondent Central Azucarera de Pilar.
The strike was amicably settled the following day, and among the
provisions of the "Amicable Settlement" (Exhibit "C") reads:
That the company shall not discriminate against any worker and
the same treatment shall be accorded to workers (ICAWO
affiliates) who declared a strike or not. A petition for Certification
Election will be filed by the ICAWO in view of the other labor
union, CAPAWA, with whom the company has an existing
collective bargaining contract, a union which is considered by
the ICAWO as a company union.

The EMPLOYER agrees that in hiring unskilled employees and

laborers, the members of the WORKERS ASSOCIATION
should be given preference and the management should notify
accordingly the WORKERS ASSOCIATION of any vacancy
existing in all Departments. New employees and laborers hired
who are members of the WORKERS ASSOCIATION will be on
TEMPORARY STATUS and the EMPLOYER agrees that before
they will be considered regular employees and laborers they
have to become members of the CENTRAL AZUCARERA DE
PILAR ALLIED WORKERS' ASSOCIATION within thirty (30)
days from the date of employment and if they refuse to affiliate
with the said labor organization within this time they will be
immediately dismissed by the EMPLOYER;
Among the strikers were 101 seasonal workers, some of whom have
worked as such for the company since pre-war years.
On the opening of the milling season for the year 1956-1957, the
respondent company refused to re-admit these 101 seasonal workers
of the ICAWO on the ground that it was precluded by the closed-shop
clause in its collective bargaining agreement with the CAPAWA. Thus,
on 8 May 1958, the ICAWO filed an unfair labor practice charge against
the company. The Court of Industrial Relations, in its decision dated 27
November 1961, ordered the reinstatement, with back wages, of these
laborers; but on a motion for reconsideration, the said court, en banc,
reversed the said decision in its resolution dated 13 August 1962.
Not satisfied with the reversal, the ICAWO filed the present petition for
certiorari to review the industrial court's resolution.
The arguments gravitate around the status of the seasonal workers, the
petitioner contending that they are regular and old employees and, as
such, they should have been re-hired at the start, in the month of
October, of each milling season, which usually lasts 5 months. The
respondents, on the other hand, urge that these laborers are new, their
employment terminating at the end of each milling season and,
therefore, could not be re-admitted without the company violating the
closed-shop agreement with the CAPAWA.
1wph1.t

The CAPAWA therein referred to is the herein respondent Central

Azucarera de Pilar Allied Workers Association and the collective

In an almost identical case, involving practically the same parties, G.R.

No. L-17422, 28 February 1962, the Court interpreted the closed shop
agreement, jam quot, as referring "to future or new employees or
laborers". This interpretation, however, does not resolve the present
issue because it does not classify the seasonal workers one way or the
other. A direct precedent, however, exists in the case of Manila Hotel
Company vs. Court of Industrial Relations, et al., L-18873, 30
September 1963, wherein this Court, alluding to certain employees in
the Pines Hotel in Baguio, stated:
x x x x Their status is that of regular seasonal employees who
are called to work from time to time, mostly during summer
season. The nature of their relationship with the hotel is such
that during off season they are temporarily laid off but during
summer season they are reemployed, or when their services
may be needed. They are not strictly speaking separated from
the service but are merely considered as on leave of absence
without pay until they are re-employed. Their employment
relationship is never severed but only suspended. As such,
these, employees can be considered as in the regular
employment of the hotel.
The respondent company, however, relies upon the case of Hind Sugar
Company vs. Court of Industrial Relations, et al., L-13364, 26 July
1960. This citation cannot be considered authoritative in the present
case because the Hind case did not actually rule on the temporary
character of the employment of seasonal workers; instead, it affirmed
their reinstatement, which the labor court had ordered under Section 10
of the Industrial Peace Act as a solution to a strike, without regard to
the permanent or seasonal nature of the employment of the strikers.
Definitely, the Hind case did not deal with seasonal employees that had
been recalled to work year after year during the milling season, thereby
creating a reasonable expectation of continued employment; and for
this reason, the Manila Hotel case (supra) sets a rule more in accord
with justice and equity under the conditions shown by the record now
before us.
Our conclusion is that petitioners, even if seasonal workers, were not
"new workers" within the scope of the closed shop contract between
the sugar central and the CAPAWA union; hence their discharge was
illegal.
In filing the unfair labor practice complaint on 8 May 1958, the
petitioner union, under the circumstances, did not incur laches,

because there was no work for these seasonal workers during the offseason, from March to October. Moreover, the seat of the prosecutor's
office was in Cebu, not in Panay, and a certification election had
intervened to absorb the attention of the complainants.
For the foregoing reasons, the resolution under review is hereby set
aside, and the court of origin is directed to order the reinstatement of
the 101 seasonal workers to their former positions in the respondent
sugar milling company.
With regard to the petitioners' claim for backpay, this matter should be
threshed out in the court below where the parties must be given
opportunity to submit evidence to prove or disprove the employer's
good faith as well as the amounts that petitioners have earned or
should have earned during their wrongful lay off, such amounts being
deductible from the backpay due to petitioners (National Labor Union
vs. Zip Venetian Blind Co., L-15827, 31 May 1961; Aboitiz & Co. vs.
C.I.R., L-8418, 29 Nov. 1962).
Let the records be returned to the Court of Industrial Relations for
further proceedings, in consonance with this opinion. So ordered.
Bengzon, C.J., Concepcion, Barrera, Regala, Makalintal, Bengzon,
J.P., Zaldivar and Sanchez, JJ., concur.
Dizon, J., is on leave.
RESOLUTION
August 23, 1966
REYES, J.B.L., J.:
Respondents Central Azucarera de Pilar and its manager have asked
this Court to reconsider and reverse its decision of March 31, 1966.
They insist that the seasonal character of the milling activities of the
respondent Central each year necessarily implies that the employment
of petitioners ceases after each milling season.
We do not find this position tenable. The cessation of the Central's
milling activities at the end of the season is certainly not permanent or
definitive; it is a foreseeable suspension of work, and both Central and
laborers have reason to expect that such activities will be resumed, as
they are in fact resumed, when sugar cane ripe for milling is again

available. There is, therefore, merely a temporary cessation of the

manufacturing process due to passing shortage of raw material that by
itself alone is not sufficient, in the absence of other justified reasons, to
sever the employment or labor relationship between the parties, since
the shortage is not permanent. The proof of this assertion is the
undenied fact that many of the petitioner members of the ICAWO Union
have been laboring for the Central, and reengaged for many seasons
without interruption. Nor does the Central interrupt completely its
operations in the interval between milling seasons; the office and sales
force are maintained, precisely because operations are to be later
resumed.
That during the temporary layoff the laborers are considered free to
seek other employment is natural, since the laborers are not being paid
yet must find means of support. A period during which the Central is
forced to suspend or cease operation for a time (whether by reason of
lack of cane or by some accident to its machinery) should not mean
starvation for the employees and their families. Of course, the stopping
of the milling at the end of each season, and before the next sugar crop
is ready, being regular and foreseen by both parties to the labor
relation, no compensation is expected nor demanded during the
seasonal layoff.
Neither does the fact that the laborers assent to their medical
examination at the beginning of each milling season indicate that a new
labor contract is being entered into, in the absence of stipulation to
such effect. Said examination is in the interest not only of the Central
but also of the labor force itself and is a mere precautionary measure.
The seasonal stoppage of work does not, therefore, negate the
reasonable expectation of the laborers to be subsequently allowed to
resume work unless there be other justifiable reasons for acting
otherwise. We note again that in the Hind case (Hind Sugar Go. vs.
C.I.R., L-13364, July 26, 1960) the pronouncement of the Industrial
Court that reemployment of the seasonal laborers was discretionary in
the employer was not in issue before this Court. All that was declared
therein was that the Company should not be compelled to pay for work
not done as it would be inconsistent with the C.I.R.'s own
pronouncement, the legal correctness of which was not being
contested. In Manila Hotel Co. vs. C.I.R., L-18873, September 30,
1963, on the contrary, it was squarely ruled that the employment of the
seasonal laborers is not severed, but only suspended, during the
seasonal layoff.

In remanding the case to the Court of Industrial Relations for

determination whether the Central acted in good faith and the
employees should be declared entitled to backpay, and the amount due
the latter, this Court took into account that these are matters dependent
upon circumstances that the C.I.R. had not previously inquired into,
and particularly the requirement of the Industrial Peace Act (Republic
Act 875) in its section 5(c), that where a person is found engaging in
any unfair labor practice, the Industrial Court, besides issuing a cease
and desist order, must.
take such affirmative action as will effectuate the policies of this
Act,
a rule that implies exercise of judgment and discretion by the Industrial
Court, based on facts and considerations not now brought to our
attention.
Wherefore, the motion for reconsideration is denied.
Concepcion, Barrera, Dizon, Makalintal, Bengzon, J.P., Zaldivar,
Sanchez and Castro, JJ., concur.
Regala, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-30592 February 25, 1982
PHILIPPINE FISHING BOAT OFFICERS AND ENGINEERS UNION,
SAMAHAN NG MANGDARAGAT SA FILIPINAS, FRANCISCO
VISAYAS AND AMBROCIO BERGADO, petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS, SAN DIEGO FISHERY
ENTERPRISES, INC., BARTOLOME A. SAN DIEGO AND ANATOLIO
LLIDO, respondents.

TEEHANKEE, J.:
In this petition for review by certiorari, petitioners seek the reversal of
the decision of the now defunct Court of Industrial Relations dismissing
their complaint of unfair labor practices against respondents San Diego
Fishery Enterprises, Inc., Bartolome A. San Diego and Anatolio Llido.
Petitioners Francisco Visayas and Ambrocio Bergado, who were
dismissed by respondent corporation likewise pray that they be granted
backwages from the date of their dismissal on May 9, 1958.
Respondent San Diego Fishery Enterprises, Inc. is a domestic
corporation engaged in deep-sea fishing and respondents Bartolome A.
San Diego and Anatolio Llido are the manager and an employee
thereof while petitioners Philippine Fishing Boat Officers and Engineers
Union and Samahan ng Mangdaragat sa Filipinas are duly registered
labor unions. Petitioners Francisco Visayas and Ambrocio Bergado
were the President and Treasurer, respectively, of the first named
union. The Philippine Fishing Boat Officers and Engineers Union is
composed of officers and engineers, while Samahan ng Mangdaragat
sa Filipinas is composed of crew members, in the employ of
respondent corporation.

On charges instituted by herein petitioners, the prosecution staff of

respondent court, after conducting a preliminary investigation filed a
complaint for unfair labor practices against herein respondents. The
complaint shows that petitioners unions sent letters of demands and
proposals to respondent corporation on May 6, 1958 and June 12,
1958 but respondent corporation failed to answer the said letters within
the reglementary period as provided for in Section 14 of Republic Act
No. 875 and also refused to talk with representatives of petitionersunions. It also appears that on May 9, 1958, respondent corporation,
through its manager Bartolome A. San Diego dismissed petitioners
Visayas and Bergado because of their union activities and their refusal
to resign from the Philippine Fishing Boat Officers and Engineers Union
and join the union being organized by respondents San Diego and
Llido. Consequently, on or about June 24, 1958, petitioners unions
declared a strike.
In their answer, respondents denied all the substantial allegations of
the complaint and maintained that complainants do not constitute
representative groups for collective bargaining purposes and therefore
the strike declared by the employees was not legal. Respondents
likewise denied that petitioners Visayas and Bergado were employees
of the corporation.
What transpired during the hearing of the case can well be seen from
the appealed decision. Petitioners introduced evidence that Visayas
and Bergado had continuously been employed by respondent San
Diego Fishery Enterprises, Inc. since April 1952 and September 1956,
respectively. In the course of their employment, they joined the
Philippine Fishing Boat Officers and Engineers Union and were duly
elected, respectively, as its vice-president and treasurer. On May 6.
1958 and June 12, 1958, petitioners-unions sent letters of demand to
respondent corporation which remained unanswered inspite of the
lapse of the reglementary period provided in Section 14, Republic Act 8
5. Sometime thereafter, respondent San Diego, with the cooperation
and assistance of Llido started gathering information on the employees'
affiliations with the two complaining unions. This was heightened when
on May 8 and 9, 1958 respondent San Diego allegedly called into his
office petitioners Visayas and Bergado and interrogated, coerced and
required them to resign from their union and to cooperate with the
company by joining the union being organized by respondents San
Diego and Llido. When they refused to heed the demands of the
management, Visayas and Bergado were dismissed. As an offshoot of
their dismissal, the two unions staged a strike and threw, picketlines in
the premises of the respondent corporation.

Respondent corporation in turn tried to establish its defense that there

is no employer-employee relationship between petitioners Visayas and
Bergado and the company in view of the peculiar feature of the fishing
industry i.e., the regular dry docking of fishing vessels to make them
seaworthy; the repairs that must be made from time to time or the delay
in the trips because of scarcity of ice. Respondents alleged that the
contract of employment invariably lasts only for the duration of each
fishing trip and terminates on the return of the vessel to its home port;
and that the moment the crew members disembark, they are no longer
considered employees of the company.
Since the record indicated that individual petitioners were not on board
any of the company's fishing vessels at the time of their dismissal,
respondent court ruled in its decision of October 3, 1968 that there
existed no employer-employee relationship between the parties and
therefore respondents could not be held liable for unfair labor practices.
Petitioners timely filed a motion for reconsideration of the decision but
respondent court, in an en banc resolution found the motion to be
without merit, besides the fact that the arguments of petitioners'
counsel were 'not duly verified." Hence, this appeal by certiorari, which
the Court finds to be meritorious.
It is settled that tenure of employment is not considered as the test of
employment. All that is required is hiring. 1For it not the continuity of
employment that renders the employer responsible, but whether the work
of the laborer is part of the regular business or occupation of the
employer. 2 In the case at bar, the employer-employee relationship is
merely suspended during the time the vessels are dry docked or
undergoing repairs or being loaded with the necessary provisions for the
next fishing trip. All these activities form part of the regular operation of the
company's fishing business. Thus, in the analogous case of Manila Hotel
Co. vs. CIR, 3 the Court held that:
Where the nature of the employees' relationship with
the hotel is such that during off season they are
temporarily laid off and during summer season they are
reemployed, or their services may be needed, their
status is that of regular seasonal employees. They are
not strictly speaking separated from the service but are
merely on leave of absence without pay until they are
reemployed. Their employment relationship is never
severed but merely suspended As such these

employees can beconsidered as in the regular

employment of the hotel .
The temporary suspension of the business due to some foreseeable
events, say, the scarcity of ice for the fishing trips or when the fishing
vessels cannot go out to sea due to repairs or strong typhoons does
not sever the employer-employee relationship between the parties.
Under similar circumstances, the Court likewise held inIndustrial
Commercial-Agricultural Worker's Organization vs. CIR, 4 that:
... The cessation of the Central's milling activities at the
end of the season is certainly not permanent or
definitive; it is a foreseeable suspension of work, and
both Central and laborers reason to expect that such
activities will be resumed, as they are in fact resumed,
when sugar cane ripe for milling is available. There is,
therefore, merely a temporary cessation of the
manufacturing process due to passing shortage of raw
materials that by itself alone, is not sufficient, in the
absence of other justified reasons, to sever the
employment or labor relationship between the parties,
since the shortage is not permanent. The proof of this
assertion is the undenied fact that many of the
petitioner members of the ICAWO Union have been
laboring for the Central, and reengaged for many
seasons without interruption. Nor does the Central
interrupt completely its operations in the interval
between milling seasons; the office and sales force are
maintained, precisely because operations are to be
later resumed.
That during the temporary layoff the laborers are
considered free to seek other employment is natural,
since the laborers are not being paid, yet must find
means of support. A period during which the Central is
forced to suspend or cease operation for a time
(whether by reason of lack of cane or by some accident
to its machinery) should not mean starvation for
employees and their families. Of course, the stopping of
the milling at the end of the season, and before the next
sugar crop is ready, being regular and foreseen by both
parties to the labor relation, no compensation is
expected nor demanded during the seasonal layoff.

The Court holds, therefore, that the employer- employee relationship

existed between the parties notwithstanding evidence to the fact that
petitioners Visayas and Bergado, even during the time that they worked
with respondent company alternated their employment on different
vessels when they were not assigned on the company's vessels. For,
as was stressed in the above-quoted case of Industrial-CommercialAgricultural Workers Organization vs. CIR, "that during the temporary
layoff the laborers are considered free to seek other employment is
natural, since the laborers are not being paid, yet must find means of
support" and such temporary cessation of operations "should not mean
starvation for employees and their families." The fact that on the date of
the individuals petitioners dismissal on May 9, 1958, they were not on
board any of the company's fishing vessels does not exonerate
respondents from the charge of unjust dismissal.
It was shown that at the time of the dismissal of said petitioners
Visayas and Bergado, respondent San Diego was not the general
manager of the corporation. The power to hire and dismiss employees
was then exercised by Enrique Diaz, who approved or disapproved
contracts of employment as acting general manager of respondent
corporation. Respondent court ruled that even assuming that
respondents San Diego and Llido coerced the officers and engineers
regarding their union affiliations under threat of dismissal, no evidence
existed to warrant a conclusion that San Diego was acting for and in
behalf of respondent firm as an employer. Respondent court thus ruled
that since respondent San Diego was not, at the time of petitioners'
dismissal, the general manager and president of respondent
corporation but merely a stockholder, he had no power to hire and
dismiss employees and any act imputed to him, even if assumed to be
true, could not bind the corporation. Whatever be the case, the Court
has found the dismissal of petitioners to be unjustified, and it is not San
Diego nor Diaz who are herein held personally liable but respondent
corporation itself as the employer.
Moreover, respondent corporation is undeniably a family corporation
and Bartolome A. San Diego is one of the incorporators and directors.
In Emilio Cano Enterprises, Inc. vs. CIR, 5 the Court ruled that where the
incorporators and directors belong to a single family, the corporation and
its members can be considered as one in order to avoid its being used as
an instrument to commit injustice, and held that
A judgment of unfair labor practice rendered against two
individuals in their capacity as officials of the
corporation may be made against the property of said

corporation, notwithstanding the fact that the

corporation was not a partv to the unfair labor practice
charged, it appearing that the corporation is a closed
family corporation where the incorporators and directors
belong to a single family. This is an instance where the
corporation and its members can be considered, and to
hold such entity liable for the acts of its members is not
to ignore the legal fiction but merely to give meaning to
the principle that such fiction cannot be invoked if it is
used as a shield to further an end subversive of justice.
The fact that the hiring and dismissal of employees was exercised by
Enrique Diaz, the acting general manager of respondent corporation,
does not alter the employer-employee relationship between the parties
and mean that he personally was the employer. It is obvious that
respondent corporation is the statutory employer of petitioners. 6The
intervention of Enrique Diaz, in this case, was merely that of an agent or
intermediary between the owner of the fishing boat and the members of its
crew. In short, Diaz was merely the person charged by respondent
corporation to recruit its officers and crew members to work on its vessels
in pursuance of its regular fishing business. 7
The Court finds as totally unjustifiable respondent court's dismissal of
petitioners' motion for reconsideration on the flimsy ground that the
arguments filed by their new counsel were not duly verified." Such
defect was merely formal and did not affect the validity and efficacy of
the pleading and the arguments submitted. The most respondent court
could have done was to require such formal verification. 8 The Rules of
Court (Rule 1, Sec. 2) prescribe a general directive that procedural rules
be liberallv construed or interpreted in order to promote their objective and
to assist the parties in obtaining just, speedy and inexpensive
determination of their cases. 9 As stated by the now Chief Justice
in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and
Rubber Co. of the Philippines, et al. 10 it is "the well-settled doctrine that in
labor cases before this Tribunal, no undue sympathy is to be accorded to
any claim of a procedural misstep, the Idea being that its power be
exercised according to justice and equity and substantial merits of the
controversy. We find that "respondents committed unfair labor practices in
their refusal to answer the proposals of the petitioners-unions and to
bargain with them, coupled with the unlawful dismissal of petitioners
Francisco Visayas and Ambrocio Bergado.
Accordingly, the decision under review is set aside and respondent San
Diego Fishery Enterprises, Inc. is ordered to cease and desist from
further commission of such acts, and to pay petitioners Francisco

Visayas and Ambrocio Bergado backwages for a period of five (5)

years without qualification and deduction, computed on the basis of
their average yearly earnings at the time of their unlawful dismissal on
May 9, 1958. 11 This decision is immediately executory. With costs against
respondent company. SO ORDERED.
Guerrero, Makasiar, Fernandez, Melencio-Herrera and Plana, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-64313 January 17, 1985
NATIONAL HOUSING CORPORATION, petitioner,
vs.
BENJAMIN JUCO AND THE NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Government Corporate Counsel for petitioner.
Amante A. Pimentel for respondents.

GUTIERREZ, JR., J.:

Are employees of the National Housing Corporation (NHC) covered by
the Labor Code or by laws and regulations governing the civil service?
The background facts of this case are stated in the respondentappellee's brief as follows:
The records reveal that private respondent (Benjamin
C. Juco) was a project engineer of the National Housing
Corporation (NHC) from November 16, 1970 to May 14,
1975. For having been implicated in a crime of theft
and/or malversation of public funds involving 214 pieces
of scrap G.I. pipes owned by the corporation which was
allegedly committed on March 5, 1975. Juco's services
were terminated by (NHC) effective as of the close of
working hours on May 14, 1975. On March 25, 1977 he
filed a complaint for illegal dismissal against petitioner
(NHC) with Regional Office No. 4, Department of Labor
(now Ministry of Labor and Employment) docketed as
R04-3-3309-77 (Annex A, Petition). The said complaint

was certified by Regional Branch No. IV of the NLRC

for compulsory arbitration where it was docketed as
Case No. RB-IV-12038-77 and assigned to Labor
Arbiter Ernilo V. Pealosa. The latter conducted the
hearing. By agreement of the parties, the case was
submitted for resolution upon submission of their
respective position papers. Private respondent (Juco)
submitted his position paper on July 15, 1977. He
professed innocence of the criminal acts imputed
against him contending "that he was dismissed based
on purely fabricated charges purposely to harass him
because he stood as a witness in the theft case filed
against certain high officials of the respondent's
establishment" (NHC) and prayed for 'his immediate
reinstatement to his former position in the (NHC)
without loss of seniority rights and the consequent
payment of his will back wages plus all the benefits
appertaining thereto. On July 28, 1977, the NHC also
filed its position paper alleging that the Regional Office
Branch IV, Manila, NLRC, "is without authority to
entertain the case for lack of jurisdiction, considering
that the NHC is a government owned and controlled
corporation; that even assuming that this case falls
within the jurisdiction of this Office, respondent firm
(now petitioner) maintains that respondent (Juco), now
private respondent, was separated from the service for
valid and justified reasons, i.e., for having sold company
properties consisting of 214 pieces of scrap G.I. pipes
at a junk shop in Alabang, Muntinlupa, Metro Manila,
and thereafter appropriating the proceeds thereof to his
own benefit."
The pertinent portion of the decision of respondent National Labor
Relations Commission (NLRC) reads:
The fact that in the early case of Fernandez v.
Cedro (NLRC Case No. 201165-74, May 19, 1975) the
Commission, (Second Division) ruled that the
respondent National Housing Corporation is a
government-owned or controlled corporation does not
preclude us from later taking a contrary stand if by
doing so the ends of justice could better be served.

For although adherence to precedents (stare decisis) is

a sum formula for achieving uniformity of action and
conducive to the smooth operation of an office,
Idolatrous reverence for precedents which have outlived
their validity and usefulness retards progress and
should therefore be avoided. In fact, even courts do
reverse themselves for reasons of justice and equity.
This Commission as an Administrative body performing
quasi judicial function is no exception.
WHEREFORE, in the light of the foregoing, the decision
appealed from is hereby, set aside. In view, however, of
the fact that the Labor Arbiter did not resolve the issue
of illegal dismissal we have opted to remand this case
to the Labor Arbiter a quo for resolution of the
aforementioned issue.
The NHC is a one hundred percent (100%) government-owned
corporation organized in accordance with Executive Order No. 399, the
Uniform Charter of Government Corporations, dated January 5, 1951.
Its shares of stock are owned by the Government Service Insurance
System the Social Security System, the Development Bank of the
Philippines, the National Investment and Development Corporation,
and the People's Homesite and Housing Corporation. Pursuant to
Letter of Instruction No. 118, the capital stock of NHC was increased
from P100 million to P250 million with the five government institutions
above mentioned subscribing in equal proportion to the increased
capital stock. The NHC has never had any private stockholders. The
government has been the only stockholder from its creation to the
present.
There should no longer be any question at this time that employees of
government-owned or controlled corporations are governed by the civil
service law and civil service rules and regulations.
Section 1, Article XII-B of the Constitution specifically provides:
The Civil Service embraces every branch, agency,
subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation. ...

The 1935 Constitution had a similar provision in its Section 1, Article XI

I which stated:
A Civil Service embracing all branches and subdivisions
of the Government shall be provided by law.
The inclusion of "government-owned or controlled corporations" within
the embrace of the civil service shows a deliberate effort of the framers
to plug an earlier loophole which allowed government-owned or
controlled corporations to avoid the full consequences of the an
encompassing coverage of the civil service system. The same explicit
intent is shown by the addition of "agency" and "instrumentality" to
branches and subdivisions of the Government. All offices and firms of
the government are covered.
The amendments introduced in 1973 are not Idle exercises or a
meaningless gestures. They carry the strong message that t civil
service coverage is broad and an- embracing insofar as employment in
the government in any of its governmental or corporate arms is
concerned.
The constitutional provision has been implemented by statute.
Presidential Decree No. 807 is unequivocal that personnel of
government-owned or controlled corporations belong to the civil service
and are subject to civil service requirements.
It provides:
SEC. 56. Government-owned or Controlled
Corporations Personnel. All permanent personnel of
government-owned or controlled corporations whose
positions are now embraced in the civil service shall
continue in the service until they have been given a
chance to qualify in an appropriate examination, but in
the meantime, those who do not possess the
appropriate civil service eligibility shag not be promoted
until they qualify in an appropriate civil service
examination. Services of temporary personnel may be
terminated any time.
The very Labor Code, P. D. No. 442 as amended, which the respondent
NLRC wants to apply in its entirety to the private respondent provides:

ART. 277. Government employees. The terms and

conditions of employment of all government employees,
including employees of government-owned and
controlled corporations shall be governed by the Civil
Service Law, rules and regulations. Their salaries shall
be standardized by the National Assembly as provided
for in the New Constitution. However, there shall be
reduction of existing wages, benefits and other terms
and conditions of employment being enjoyed by them at
the time of the adoption of the Code.
Our decision in Alliance of Government Workers, et al v. Honorable
Minister of Labor and Employment et all. (124 SCRA 1) gives the
background of the amendment which includes government-owned or
controlled corporations in the embrace of the civil service.
We stated:
Records of the 1971 Constitutional Convention show
that in the deliberation held relative to what is now
Section 1(1), Article XII-B, supra, the issue of the
inclusion of government-owned or controlled
corporations figured prominently.
The late delegate Roberto S. Oca, a recognized labor
leader, vehemently objected to the inclusion of
government-owned or controlled corporations in the
Civil Service. He argued that such inclusion would put
asunder the right of workers in government
corporations, recognized in jurisprudence under the
1935 Constitution, to form and join labor unions for
purposes of collective bargaining with their employers in
the same manner as in the private section (see: records
of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to the
1971 Constitutional Convention enlightened the
members of the Committee on Labor on the divergent
situation of government workers under the 1935
Constitution, and called for its rectification. Thus, in a
Position Paper dated November 22, 197 1, submitted to
the Committee on Labor, 1971 Constitutional

Convention, then Acting Commissioner of Civil Service

Epi Rey Pangramuyen declared:
It is the stand, therefore, of this
Commission that by reason of the
nature of the public employer and the
peculiar character of the public service,
it must necessary regard the right to
strike given to unions in private industry
as not applying to public employees and
civil service employees. It has been
stated that the Government, in contrast
to the private employer, protects the
interests of all people in the public
service, and that accordingly, such
conflicting interests as are present in
private labor relations could not exist in
the relations between government and
those whom they employ.
Moreover, determination of employment
conditions as well as supervision of the
management of the public service is in
the hands of legislative bodies. It is
further emphasized that government
agencies in the performance of their
duties have a right to demand undivided
allegiance from their workers and must
always maintain a pronounced esprit de
corps or firm discipline among their staff
members. It would be highly
incompatible with these requirements of
the public service, if personnel took
orders from union leaders or put
solidarity with members of the working
class above solidarity with the
Government. This would be inimical to
the public interest.
Moreover, it is asserted that public
employees by joining labor unions may
be compelled to support objectives
which are political in nature and thus
jeopardize the fundamental principle

that the governmental machinery must

be impartial and non-political in the
sense of party politics. (See: Records of
1971 Constitutional Convention).
Similar, Delegate Leandro P. Garcia, expressing for the
inclusion of government-owned or controlled
corporations in the Civil Service, argued:
It is meretricious to contend that
because Government-owned or
controlled corporations yield profits, their
employees are entitled to better wages
and fringe benefits than employees of
Government other than Governmentowned and controlled corporations
which are not making profits. There is
no gainsaying the fact that the capital
they use is the people's money. (see:
Records of the 1971 Constitutional
Convention).
Summarizing the deliberations of the 1971
Constitutional Convention on the inclusion of
Government-owned or controlled corporation Dean
Joaquin G. Bernas, SJ., of the Ateneo de Manila
University Professional School of Law, stated that
government-owned corporations came under attack as
g cows of a privileged few enjoying salaries far higher
than their counterparts in the various branches of
government, while the capital of these corporations
belongs to the Government and government money is
pumped into them whenever on the brink of disaster,
and they should therefore come under the strict
surveillance of the Civil Service System. (Bernas, The
1973 Philippine Constitution, Notes and Cases, 1974
ed., p. 524).
Applying the pertinent provisions of the Constitution, the Labor Code as
amended, and the Civil Service Decree as amended and the precedent
in the Alliance of Government Workers decision, it is clear that the
petitioner National Housing Corporation comes under the jurisdiction of
the Civil Service Commission, not the Ministry of Labor and
Employment.

This becomes more apparent if we consider the fact that the NHC
performs governmental functions and not proprietary ones.
The NHC was organized for the governmental objectives stated in its
amended articles of incorporation as follows:
SECOND: That the purpose for which the corporation is
organized is to assist and carry out the coordinated
massive housing program of the government, principally
but not limited to low-cost housing with the integration
cooperation and assistance of all governmental
agencies concerned, through the carrying on of any or
all the following activities:
l) The acquisition, development or reclamation of lands
for the purpose of construction and building therein
preferably low-cost housing so as to provide decent and
durable dwelling for the greatest number of inhabitants
in the country;
2) The promotion and development of physical social
and economic community growth through the
establishment of general physical plans for urban,
suburban and metropolitan areas to be characterized by
efficient land use patterns;
3) The coordination and implementation of all projects
of the government for the establishment of nationwide
and massive low cost housing;
4) The undertaking and conducting of research and
technical studies of the development and promotion of
construction of houses and buildings of sound
standards of design liability, durability, safety, comfort
and size for improvement of the architectural and
engineering designs and utility of houses and buildings
with the utilization of new and/or native materials
economics in material and construction, distribution,
assembly and construction and of applying advanced
housing and building technology.
5) Construction and installation in these projects of lowcost housing privately or cooperatively owned water

and sewerage system or waste disposal facilities, and

the formulations of a unified or officially coordinated
urban transportation system as a part of a
comprehensive development plan in these areas.
The petitioner points out that it was established as an instrumentality of
the government to accomplish governmental policies and objectives
and extend essential services to the people. It would be incongruous if
employees discharging essentially governmental functions are not
covered by the same law and rules which govern those performing
other governmental functions. If government corporations discharging
proprietary functions now belong to the civil service with more reason
should those performing governmental functions be governed by civil
service law.
The respondent NLRC cites a 1976 opinion of the Secretary of Justice
which holds that the phrase "government-owned or controlled
corporations" in Section 1, Article XII-B of the Constitution
contemplates only those government-owned or controlled
corporations created by special law. The opinion states that since the
Constitution provides for the organization or regulation of private
corporations only by "general law", expressly excluding governmentowned or controlled corporations, it follows that whenever the
Constitution mentions government-owned or controlled corporations, it
must refer to those created by special law. P.D. No. 868 which repeals
all charters, laws, decrees, rules, and provisions exempting any
branch, agency, subdivision, or instrumentality of the government,
including government- owned or controlled corporations from the civil
service law and rules is also cited to show that corporations not
governed by special charters or laws are not to be brought within civil
service coverage. The discussions in the Constitutional Convention are
also mentioned. It appears that at the time the Convention discussed
government-owned or controlled corporations, all such corporations
were organized only under special laws or charters.
The fact that "private" corporations owned or controlled by the
government may be created by special charter does not mean that
such corporations not created by special law are not covered by the
civil service. Nor does the decree repealing all charters and special
laws granting exemption from the civil service law imply that
government corporations not created by special law are exempt from
civil service coverage. These charters and statutes are the only laws
granting such exemption and, therefore, they are the only ones which
could be repealed. There was no similar exempting provision in the

general law which called for repeal. And finally, the fact that the
Constitutional Convention discussed only corporations created by
special law or charter cannot be an argument to exclude petitioner
NHC from civil service coverage. As stated in the cited speech
delivered during the convention sessions of March 9, 1972, all
government corporations then in existence were organized under
special laws or charters. The convention delegates could not possibly
discuss government-owned or controlled corporations which were still
non-existent or about whose existence they were unaware.
Section I of Article XII-B, Constitution uses the word "every" to modify
the phrase "government-owned or controlled corporation."
"Every" means each one of a group, without exception It means all
possible and all taken one by one. Of course, our decision in this case
refers to a corporation created as a government-owned or controlled
entity. It does not cover cases involving private firms taken over by the
government in foreclosure or similar proceedings. We reserve judgment
on these latter cases when the appropriate controversy is brought to
this Court.
The infirmity of the respondents' position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the
Constitution It would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation Code
funded by a willing legislature. A government-owned corporation could
create several subsidiary corporations. These subsidiary corporations
would enjoy the best of two worlds. Their officials and employees would
be privileged individuals, free from the strict accountability required by
the Civil Service Decree and the regulations of the Commission on
Audit. Their incomes would not be subject to the competitive restraints
of the open market nor to the terms and conditions of civil service
employment. Conceivably, all government-owned or controlled
corporations could be created, no longer by special charters, but
through incorporation under the general law. The constitutional
amendment including such corporations in the embrace of the civil
service would cease to have application. Certainly, such a situation
cannot be allowed to exist.
WHEREFORE, the petition is hereby GRANTED. The questioned
decision of the respondent National Labor Relations Commission is
SET ASIDE. The decision of the Labor Arbiter dismissing the case
before it for lack of jurisdiction is REINSTATED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L.
PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR
RELATIONS COMMISSION, MINISTRY OF LABOR AND
EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL
SERVICES CORPORATION AND ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L.
Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the
decision * of the Third Division, National Labor Relations Commission in Case No. 11-4944-83
dated 28 November 1984 and its resolution dated 16 January 1985 denying motions for
reconsideration of said decision.

Eugenia C. Credo was an employee of the National Service

Corporation (NASECO), a domestic corporation which provides
security guards as well as messengerial, janitorial and other similar
manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18

July 1975. Through the years, she was promoted to Clerk Typist, then
Personnel Clerk until she became Chief of Property and Records, on
10 March 1980. 1
Sometime before 7 November 1983, Credo was administratively
charged by Sisinio S. Lloren, Manager of Finance and Special Project
and Evaluation Department of NASECO, stemming from her noncompliance with Lloren's memorandum, dated 11 October 1983,
regarding certain entry procedures in the company's Statement of
Billings Adjustment. Said charges alleged that Credo "did not comply
with Lloren's instructions to place some corrections/additional remarks
in the Statement of Billings Adjustment; and when [Credo] was called
by Lloren to his office to explain further the said instructions, [Credo]
showed resentment and behaved in a scandalous manner by shouting
and uttering remarks of disrespect in the presence of her coemployees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then
Acting General Manager of NASECO, to explain her side before Perez
and NASECO's Committee on Personnel Affairs in connection with the
administrative charges filed against her. After said meeting, on the
same date, Credo was placed on "Forced Leave" status for 1 5 days,
effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983,
Credo filed a complaint, docketed as Case No. 114944-83, with the
Arbitration Branch, National Capital Region, Ministry of Labor and
Employment, Manila, against NASECO for placing her on forced leave,
without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983,
NASECO's Committee on Personnel Affairs deliberated and evaluated
a number of past acts of misconduct or infractions attributed to her. 5 As
a result of this deliberation, said committee resolved:
1. That, respondent [Credo] committed the following
offenses in the Code of Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and
employee of client company or officer of the
Corporation.

OFFENSE vs. Public Moral

No. 7 Exhibit marked discourtesy in the course of
official duties or use of profane or insulting language to
any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any
instructions of a superior officer.
2. That, Management has already given due
consideration to respondent's [Credo] scandalous
actuations for several times in the past. Records also
show that she was reprimanded for some offense and
did not question it. Management at this juncture, has
already met its maximum tolerance point so it has
decided to put an end to respondent's [Credo] being an
undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of
benefits. 7
On 1 December 1983, Credo was called age to the office of Perez to be
informed that she was being charged with certain offenses. Notably,
these offenses were those which NASECO's Committee on Personnel
Affairs already resolved, on 22 November 1983 to have been
committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on
Personnel Affairs, Credo was made to explain her side in connection
with the charges filed against her; however, due to her failure to do
so, 8 she was handed a Notice of Termination, dated 24 November 1983,
and made effective 1 December 1983. 9 Hence, on 6 December 1983,
Credo filed a supplemental complaint for illegal dismissal in Case No. 114944-83, alleging absence of just or authorized cause for her dismissal and
lack of opportunity to be heard. 10
After both parties had submitted their respective position papers,
affidavits and other documentary evidence in support of their claims
and defenses, on 9 May 1984, the labor arbiter rendered a decision: 1)
dismissing Credo's complaint, and 2) directing NASECO to pay Credo

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

of dismissal within a reasonable period from receipt of

such notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
Section 6. Decision to dismiss. The employer shall
immediately notify a worker in writing of a decision to
dismiss him stating clearly the reasons therefor. 17

Besides, Credo's mere non-compliance with Lorens memorandum

regarding the entry procedures in the company's Statement of Billings
Adjustment did not warrant the severe penalty of dismissal of the NLRC
correctly held that:

Likewise, a reading of the guidelines in consonance with the express

provisions of law on protection to labor 18(which encompasses the right to
security of tenure) and the broader dictates of procedural due process
necessarily mandate that notice of the employer's decision to dismiss an
employee, with reasons therefor, can only be issued after the employer has
afforded the employee concerned ample opportunity to be heard and to
defend himself.

... on the charge of gross discourtesy, the CPA found in

its Report, dated 22 November 1983 that, "In the
process of her testimony/explanations she again
exhibited a conduct unbecoming in front of NASECO
Officers and argued to Mr. S. S. Lloren in a sarcastic
and discourteous manner, notwithstanding, the fact that
she was inside the office of the Acctg. General
Manager." Let it be noted, however, that the Report did
not even describe how the so called "conduct
unbecoming" or "discourteous manner" was done by
complainant. Anent the "sarcastic" argument of
complainant, the purported transcript 19 of the meeting
held on 7 November 1983 does not indicate any sarcasm
on the part of complainant. At the most, complainant may
have sounded insistent or emphatic about her work being
more complete than the work of Ms. de Castro, yet, the
complaining officer signed the work of Ms. de Castro and
did not sign hers.

In the case at bar, NASECO did not comply with these guidelines in
effecting Credo's dismissal. Although she was apprised and "given the
chance to explain her side" of the charges filed against her, this chance
was given so perfunctorily, thus rendering illusory Credo's right to
security of tenure. That Credo was not given ample opportunity to be
heard and to defend herself is evident from the fact that the compliance
with the injunction to apprise her of the charges filed against her and to
afford her a chance to prepare for her defense was dispensed in only a
day. This is not effective compliance with the legal requirements
aforementioned.

As to the charge of insubordination, it may be

conceded, albeit unclear, that complainant failed to
place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed.
However, under the circumstances obtaining, where
complainant strongly felt that she was being
discriminated against by her superior in relation to other
employees, we are of the considered view and so hold,
that a reprimand would have sufficed for the infraction,
but certainly not termination from services. 20

The fact also that the Notice of Termination of Credo's employment (or
the decision to dismiss her) was dated 24 November 1983 and made
effective 1 December 1983 shows that NASECO was already bent on
terminating her services when she was informed on 1 December 1983
of the charges against her, and that any hearing which NASECO
thought of affording her after 24 November 1983 would merely be pro
forma or an exercise in futility.

As this Court has ruled:

These guidelines mandate that the employer furnish an employee

sought to be dismissed two (2) written notices of dismissal before a
termination of employment can be legally effected. These are the notice
which apprises the employee of the particular acts or omissions for
which his dismissal is sought and the subsequent notice which informs
the employee of the employer's decision to dismiss him.

... where a penalty less punitive would suffice, whatever

missteps may be committed by labor ought not to be
visited with a consequence so severe. It is not only
because of the law's concern for the working man.
There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on
those dependent on the wage-earner. 21

Of course, in justifying Credo's termination of employment, NASECO

claims as additional lawful causes for dismissal Credo's previous and
repeated acts of insubordination, discourtesy and sarcasm towards her
superior officers, alleged to have been committed from 1980 to July
1983. 22
If such acts of misconduct were indeed committed by Credo, they are
deemed to have been condoned by NASECO. For instance, sometime
in 1980, when Credo allegedly "reacted in a scandalous manner and
raised her voice" in a discussion with NASECO's Acting head of the
Personnel Administration 23 no disciplinary measure was taken or meted
against her. Nor was she even reprimanded when she allegedly talked 'in a
shouting or yelling manner" with the Acting Manager of NASECO's Building
Maintenance and Services Department in 1980 24 or when she allegedly
"shouted" at NASECO's Corporate Auditor "in front of his subordinates
displaying arrogance and unruly behavior" in 1980, or when she allegedly
shouted at NASECO's Internal Control Consultant in 1981. 25 But then, in
sharp contrast to NASECO's penchant for ignoring the aforesaid acts of
misconduct, when Credo committed frequent tardiness in August and
September 1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors)
were satisfactorily proven, NASECO's condonation thereof is gleaned
from the fact that on 4 October 1983, Credo was given a salary
adjustment for having performed in the job "at least
[satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards
job performance, particularly in terms of quality of work, quantity of work,
dependability, cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment
was sought to be legally terminated were insufficiently proved, as to
justify dismissal, reinstatement is proper. For "absent the reason which
gave rise to [the employee's] separation from employment, there is no
intention on the part of the employer to dismiss the employee
concerned." 29 And, as a result of having been wrongfully dismissed,
Credo is entitled to three (3) years of backwages without deduction and
qualification. 30
However, while Credo's dismissal was effected without procedural
fairness, an award of exemplary damages in her favor can only be
justified if her dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner. 31 A judicious examination of the record
manifests no such conduct on the part of management. However, in view
of the attendant circumstances in the case, i.e., lack of due process in

effecting her dismissal, it is reasonable to award her moral damages. And,

for having been compelled to litigate because of the unlawful actuations of
NASECO, a reasonable award for attorney's fees in her favor is in order.

In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that

the NLRC has no jurisdiction to order Credo's reinstatement. NASECO
claims that, as a government corporation (by virtue of its being a subsidiary
of the National Investment and Development Corporation (NIDC), a
subsidiary wholly owned by the Philippine National Bank (PNB), which in
turn is a government owned corporation), the terms and conditions of
employment of its employees are governed by the Civil Service Law, rules
and regulations. In support of this argument, NASECO cites National
Housing Corporation vs. JUCO, 33 where this Court held that "There should
no longer be any question at this time that employees of governmentowned or controlled corporations are governed by the civil service law and
civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case
should not be given retroactive effect, that is, to cases that arose before
its promulgation on 17 January 1985. To do otherwise would be
oppressive to Credo and other employees similarly situated, because
under the same 1973 Constitution ,but prior to the ruling in National
Housing Corporation vs. Juco, this Court had recognized the
applicability of the Labor Code to, and the authority of the NLRC to
exercise jurisdiction over, disputes involving terms and conditions of
employment in government owned or controlled corporations, among
them, the National Service Corporation (NASECO). 34
<re||an1w>

Furthermore, in the matter of coverage by the civil service of

government-owned or controlled corporations, the 1987 Constitution
starkly varies from the 1973 Constitution, upon which National Housing
Corporation vs. Juco is based. Under the 1973 Constitution, it was
provided that:
The civil service embraces every branch, agency,
subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,

including government-owned or controlled corporations

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

THE PRESIDING OFFICER (Mr.

Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. I beg the indulgence of
the Committee. I was reading the wrong
provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions,
instrumentalities, and agencies of the government,
including government-owned or controlled corporations.
My query: Is Philippine Airlines covered by this
provision? MR. FOZ. Will the Commissioner please
state his previous question?
MR. ROMULO. The phrase on line 4 of
Section 1, subparagraph 1, under the
Civil Service Commission, says:
"including government-owned or
controlled corporations.' Does that
include a corporation, like the Philippine
Airlines which is government-owned or
controlled?
MR. FOZ. I would like to throw a
question to the Commissioner. Is the
Philippine Airlines controlled by the
government in the sense that the
majority of stocks are owned by the
government?
MR. ROMULO. It is owned by the GSIS.
So, this is what we might call a tertiary
corporation. The GSIS is owned by the
government. Would this be covered
because the provision says "including
government-owned or controlled
corporations."

MR. FOZ. The Philippine Airlines was

established as a private corporation.
Later on, the government, through the
GSIS, acquired the controlling stocks. Is
that not the correct situation?
MR. ROMULO. That is true as
Commissioner Ople is about to explain.
There was apparently a Supreme Court
decision that destroyed that distinction
between a government-owned
corporation created under the
Corporation Law and a governmentowned corporation created by its own
charter.
MR. FOZ. Yes, we recall the Supreme
Court decision in the case of NHA vs.
Juco to the effect that all government
corporations irrespective of the manner
of creation, whether by special charter
or by the private Corporation Law, are
deemed to be covered by the civil
service because of the wide-embracing
definition made in this section of the
existing 1973 Constitution. But we recall
the response to the question of
Commissioner Ople that our intendment
in this provision is just to give a general
description of the civil service. We are
not here to make any declaration as to
whether employees of governmentowned or controlled corporations are
barred from the operation of laws, such
as the Labor Code of the Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr.
Presiding Officer, since my name has
been mentioned by both sides.
MR. ROMULO. I yield part of my time.

THE PRESIDING OFFICER

(Mr.Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the
coverage of the Civil Service Law in
Section 1 (1), may I volunteer some
information that may be helpful both to
the interpellator and to the Committee.
Following the proclamation of martial
law on September 21, 1972, this issue
of the coverage of the Labor Code of the
Philippines and of the Civil Service Law
almost immediately arose. I am, in
particular, referring to the period
following the coming into force and
effect of the Constitution of 1973, where
the Article on the Civil Service was
supposed to take immediate force and
effect. In the case of LUZTEVECO,
there was a strike at the time. This was
a government-controlled and
government-owned corporation. I think it
was owned by the PNOC with just the
minuscule private shares left. So, the
Secretary of Justice at that time,
Secretary Abad Santos, and myself sat
down, and the result of that meeting was
an opinion of the Secretary of Justice
which 9 became binding immediately on
the government that government
corporations with original charters, such
as the GSIS, were covered by the Civil
Service Law and corporations spun off
from the GSIS, which we called second
generation corporations functioning as
private subsidiaries, were covered by
the Labor Code. Samples of such
second generation corporations were
the Philippine Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very
well. In fact, all of these companies I have mentioned as
examples, except for the Manila Hotel, had collective

bargaining agreements. In the Philippine Airlines, there

were, in fact, three collective bargaining agreements;
one, for the ground people or the PALIA one, for the
flight attendants or the PASAC and one for the pilots of
the ALPAC How then could a corporation like that be
covered by the Civil Service law? But, as the Chairman
of the Committee pointed out, the Supreme Court
decision in the case of NHA vs. Juco unrobed the whole
thing. Accordingly, the Philippine Airlines, the Manila
Hotel and the Hyatt are now considered under that
decision covered by the Civil Service Law. I also recall
that in the emergency meeting of the Cabinet convened
for this purpose at the initiative of the Chairman of the
Reorganization Commission, Armand Fabella, they
agreed to allow the CBA's to lapse before applying the
full force and effect of the Supreme Court decision. So,
we were in the awkward situation when the new
government took over. I can agree with Commissioner
Romulo when he said that this is a problem which I am
not exactly sure we should address in the deliberations
on the Civil Service Law or whether we should be
content with what the Chairman said that Section 1 (1)
of the Article on the Civil Service is just a general
description of the coverage of the Civil Service and no
more.

MR. ROMULO. Would the Committee

indicate that is the intent of this
provision?

Thank you, Mr. Presiding Officer.

MR. MONSOD. Perhaps if

Commissioner Romulo would like a
definitive understanding of the coverage
and the Gentleman wants to exclude
government-owned or controlled
corporations like Philippine Airlines, then
the recourse is to offer an amendment
as to the coverage, if the Commissioner
does not accept the explanation that
there could be a distinction of the rules,
including salaries and emoluments.

MR. MONSOD. Mr. Presiding Officer, I

do not think the Committee can make
such a statement in the face of an
absolute exclusion of governmentowned or controlled corporations.
However, this does not preclude the
Civil Service Law to prescribe different
rules and procedures, including
emoluments for employees of
proprietary corporations, taking into
consideration the nature of their
operations. So, it is a general coverage
but it does not preclude a distinction of
the rules between the two types of
enterprises.
MR. FOZ. In other words, it is something
that should be left to the legislature to
decide. As I said before, this is just a
general description and we are not
making any declaration whatsoever.

MR. ROMULO. Mr. Presiding Officer, for

the moment, I would be satisfied if the
Committee puts on records that it is not
their intent by this provision and the
phrase "including government-owned or
controlled corporations" to cover such
companies as the Philippine Airlines.
MR. FOZ. Personally, that is my view.
As a matter of fact, when this draft was
made, my proposal was really to
eliminate, to drop from the provision, the
phrase "including government- owned or
controlled corporations."

MR. ROMULO. So as not to delay the

proceedings, I will reserve my right to
submit such an amendment.
xxx xxx xxx

THE PRESIDING OFFICE (Mr. Trenas)

Commissioner Romulo is recognized.

THE PRESIDING OFFICER (Mr.

Trenas). What does the Committee say?

MR. ROMULO. On page 2, line 5, I

suggest the following amendment after
"corporations": Add a comma (,) and the
phrase EXCEPT THOSE EXERCISING
PROPRIETARY FUNCTIONS.

MR. FOZ. Just one question, Mr.

Presiding Officer. By the term "original
charters," what exactly do we mean?

THE PRESIDING OFFICER (Mr.

Trenas). What does the Committee say?
SUSPENSION OF SESSION

MR. ROMULO. We mean that they were

created by law, by an act of Congress,
or by special law.
MR. FOZ. And not under the general
corporation law.

MR. MONSOD. May we have a

suspension of the session?

MR. ROMULO. That is correct. Mr.

Presiding Officer.

THE PRESIDING OFFICER (Mr.

Trenas). The session is suspended.

MR. FOZ. With that understanding and

clarification, the Committee accepts the
amendment.

It was 7:16 p.m.

RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session
is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending
my original proposed amendment to now read as
follows: "including government-owned or controlled
corporations WITH ORIGINAL CHARTERS." The
purpose of this amendment is to indicate that
government corporations such as the GSIS and SSS,
which have original charters, fall within the ambit of the
civil service. However, corporations which are
subsidiaries of these chartered agencies such as the
Philippine Airlines, Manila Hotel and Hyatt are excluded
from the coverage of the civil service.

MR. NATIVIDAD. Mr. Presiding officer,

so those created by the general
corporation law are out.
MR. ROMULO. That is correct: 38
On the premise that it is the 1987 Constitution that governs the instant
case because it is the Constitution in place at the time of decision
thereof, the NLRC has jurisdiction to accord relief to the parties. As an
admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the
NASECO is a government-owned or controlled corporation without
original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto
in his concurring opinion in Gomez vs. Government Insurance
Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also
published in 78 Phil. 221) on the effectivity of the principle of social
justice embodied in the 1935 Constitution, said:
Certainly, this principle of social justice in our
Constitution as generously conceived and so tersely
phrased, was not included in the fundamental law as a

mere popular gesture. It was meant to (be) a vital,

articulate, compelling principle of public policy. It should
be observed in the interpretation not only of future
legislation, but also of all laws already existing on
November 15, 1935. It was intended to change the spirit
of our laws, present and future. Thus, all the laws which
on the great historic event when the Commonwealth of
the Philippines was born, were susceptible of two
interpretations strict or liberal, against or in favor of
social justice, now have to be construed broadly in
order to promote and achieve social justice. This may
seem novel to our friends, the advocates of legalism but
it is the only way to give life and significance to the
above-quoted principle of the Constitution. If it was not
designed to apply to these existing laws, then it would
be necessary to wait for generations until all our codes
and all our statutes shall have been completely charred
by removing every provision inimical to social justice,
before the policy of social justice can become really
effective. That would be an absurd conclusion. It is
more reasonable to hold that this constitutional principle
applies to all legislation in force on November 15, 1935,
and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the
NLRC is AFFIRMED with modifications. Petitioners in G.R. No. 69870,
who are the private respondents in G.R. No. 70295, are ordered to: 1)
reinstate Eugenia C. Credo to her former position at the time of her
termination, or if such reinstatement is not possible, to place her in a
substantially equivalent position, with three (3) years backwages, from
1 December 1983, without qualification or deduction, and without loss
of seniority rights and other privileges appertaining thereto, and 2) pay
Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for
attorney's fees.
If reinstatement in any event is no longer possible because of
supervening events, petitioners in G.R. No. 69870, who are the private
respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo,
in addition to her backwages and damages as above described,
separation pay equivalent to one-half month's salary for every year of
service, to be computed on her monthly salary at the time of her
termination on 1 December 1983.
SO ORDERED.

Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin,

Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ.,
concur.
Narvasa, J., is on leave.
Gutierrez, Jr., J., in the result.

terminated. The events leading to his dismissal from his job are not
disputed.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 100947 May 31, 1993

PNOC ENERGY DEVELOPMENT CORPORATION and MARCELINO
TONGCO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MANUEL S.
PINEDA, respondents.
Alikpala, Gomez & Associates Law Office for petitioners.
Filomeno A. Zieta for private respondent.

NARVASA, C.J.:
The applicability to private respondent Manuel S. Pineda of Section 66
of the Election Code is what is chiefly involved in the case at bar. Said
section reads as follows:
Sec. 66. Candidates holding appointive office or
position. Any person holding a public appointive office
or position, including active members of the Armed
Forces of the Philippines, and officers and employees in
government-owned or controlled corporations, shall be
considered ipso facto resigned from his office upon the
filing of his certificate of candidacy.
Manuel S. Pineda was employed with the Philippine National Oil Co.Energy Development Corp. (PNOC-EDC), as subsidiary of the
Philippine National Oil Co., from September 17, 1981, when he was
hired as clerk, to January 26, 1989, when his employment was

In November, 1987, while holding the position of Geothermal

Construction Secretary, Engineering and Construction Department, at
Tongonan Geothermal Project, Ormoc City, Pineda decided to run for
councilor of the Municipality of Kananga, Leyte, in the local elections
scheduled in January, 1988, and filed the corresponding certificate of
candidacy for the position. Objection to Pineda's being a candidate
while retaining his job in the PNOC-EDC was shortly thereafter
registered by Mayor Arturo Cornejos of Kananga, Leyte. The mayor
communicated with the PNOC-EDC thru Engr. Ernesto Patanao,
Resident Manager, Tongonan Geothermal Project to express the
view that Pineda could not actively participate in politics unless he
officially resigned from PNOC-EDC. 1 Nothing seems to have resulted
from this protest.
The local elections in Leyte, scheduled for January, 1988, were reset to
and held on February 1, 1988. Pineda was among the official
candidates voted for, and eventually proclaimed elected to, the office of
councilor. Some vacillation appears to have been evinced by Pineda at
about this time. On February 8, 1988, he wrote to the COMELEC
Chairman, expressing his desire to withdraw from the political contest
on account of what he considered to be election irregularities; 2 and on
March 19, 1988, he wrote to the Secretary of Justice seeking legal opinion
on the question, among others, of whether or not he was "considered
automatically resigned upon . . . filing of . . . (his) certificate of candidacy,"
and whether or not, in case he was elected, he could "remain appointed to
any corporate offspring of a government-owned or controlled
corporation." 3 Nevertheless, Pineda took his oath of office in June, 1988 as
councilor-elect of the Municipality of Kananga, Leyte. 4 And despite so
qualifying as councilor, and assuming his duties as such, he continued
working for PNOC-EDC as the latter's Geothermal Construction Secretary,
Engineering and Construction Department, at Tongonan Geothermal
Project, Ormoc City.
On June 7, 1988, Marcelino M. Tongco, Department Manager of the
Engineering and Construction Department, PNOC-EDC, addressed an
inquiry to the latter's Legal Department regarding the status of Manuel
S. Pineda as employee in view of his candidacy for the office of
municipal councilor. 5 In response, the Legal Department rendered an
opinion to the effect that Manuel S. Pineda should be considered ipso
facto resigned upon the filing of his Certificate of Candidacy in November,
1987, in accordance with Section 66 of the Omnibus Election Code. 6

Pineda appealed the PNOC-EDC Legal Department's ruling to N.C.

Vasquez, the Vice-President of PNOC-EDC, on July 14, 1988. In his
letter of appeal, 7 he invoked a "court ruling in the case of Caagusan
and Donato vs. PNOC-Exploration Corp. . . . (to the effect that) while the
government-owned or controlled corporations are covered by the Civil
Service Law (as is taken to mean in Sec. 66 of the Omnibus Election Code
of 1985) (sic), the subsidiaries or corporate offsprings are not." In the same
letter he declared his wish to continue resign from his position as
councilor/member of the Sangguniang Bayan.
He also wrote a letter dated October 1, 1988 to the Department of
Local Government inquiring about the status of his employment with
PNOC-EDC in relation to his election as member of the Sangguniang
Bayan. He was advised by DLG Undersecretary Jacinto T. Rubillo, Jr.,
by letter dated March 31, 1989, that there was no legal impediment to
his continuing in his employment with PNOC-EDC while holding at the
same time the elective position of municipal councilor. Cited as basis
by Undersecretary Rubillo was Section 2(1) Article IX-B of the 1987
Constitution and this Court's ruling in NASECO vs. NLRC, 168 SCRA
122. Undersecretary Rubillo went on to say that Pineda could receive
his per diems as municipal councilor as well as the corresponding
representation and transportation allowance [RATA] "provided the
PNOC-EDC charter does not provide otherwise and public shall not be
prejudiced." 8
The PNOC-EDC did not, however, share the Undersecretary's views.
On January 26, 1989, the PNOC-EDC, through Marcelino Tongco
(Manager, Engineering and Construction Department), notified Manuel
S. Pineda in writing (1) that after having given him "ample time" to
make some major adjustments before . . . separation from the
company," his employment was being terminated pursuant to Section
66 of the Omnibus Election Code, effective upon receipt of notice, and
(2) that he was entitled to "proper compensation" for the services
rendered by him from the time he filed his certificate of candidacy until
his actual separation from the service. 9
On October 16, 1989, Pineda lodged a complaint for illegal dismissal in
the Regional Arbitration Branch No. VIII, NLRC, Tacloban City.
Impleaded as respondents were the PNOC-EDC and the Manager of
its Engineering and Construction Department, Marcelino M. Tongco. 10
After due proceedings, Labor Arbiter Araceli H. Maraya, to whom the
case was assigned, rendered a decision on December 28,
1990, 11 declaring Manuel S. Pineda's dismissal from the service illegal,

and ordering his reinstatement to his former position without loss of

seniority rights and payment of full back wages corresponding to the period
from his illegal dismissal up to the time of actual reinstatement. The Arbiter
pointed out that the ruling relied upon by PNOC-EDC to justify Pineda's
dismissal from the service, i.e., NHA v. Juco, 12 had already been
abandoned; and that "as early as November 29, 1988," the governing
principle laid down by case law in light of Section 2 (1), Article IX-B of
the 1987 Constitution 13 has been that government-owned or controlled
corporations incorporated under the Corporation Code, the general law
as distinguished from those created by special charter are not deemed
to be within the coverage of the Civil Service Law, and consequently their
employees, like those of the PNOC-EDC, are subject to the provisions of
the Labor Code rather than the Civil Service Law. 14

The PNOC-EDC filed an appeal with the National Labor Relations

Commission. The latter dismissed the appeal for lack of merit in a
decision dated April 24, 1991. 15 PNOC-EDC sought reconsideration; 16 its
motion was denied by the Commission in a Resolution dated June 21,
1991. 17
It is this decision of April 24, 1991 and the Resolution of June 21, 1991
that the PNOC-EDC seeks to be annulled and set aside in the special
civil action for certiorari at bar. It contends that the respondent
Commission gravely abused its discretion:
1) when it ruled that Manuel S. Pineda was not covered
by the Civil Service Rules when he filed his candidacy
for the 1988 local government elections in November
1987;
2) when it ruled that Pineda was not covered by the
Omnibus Election Code at the time he filed his
certificate of candidacy for the 1988 local elections;
3) when it ruled that Pineda was illegally dismissed
despite the fact that he was considered automatically
resigned pursuant to Section 66 of the Omnibus
Election Code; and
4) when it ruled that Pineda could occupy a local
government position and be simultaneously employed
in a government-owned or controlled corporation, a
situation patently violative of the constitutional
prohibition on additional compensation.

Acting on the petition, this Court issued a temporary restraining order

enjoining the respondent NLRC from implementing or enforcing its
decision and resolution dated April 24, 1991 and June 21, 1991,
respectively.

The civil service embraces all branches, subdivisions,

instrumentalities, and agencies of the Government,
including government-owned or controlled corporations
with original charters.

In the comment required of him by the Court, the Solicitor General

expressed agreement with the respondent Commission's holding that
Manuel Pineda had indeed been illegally separated from his
employment in the PNOC-EDC; in other words, that his running for
public office and his election thereto had no effect on his employment
with the PNOC-EDC, a corporation not embraced within the Civil
Service.

Implicit in the provision is that government-owned or controlled

corporations without original charters i.e., organized under the
general law, the Corporation Code are not comprehended within the
Civil Service Law. So has this Court construed the provision. 21

Petitioner PNOC-EDC argues that at the time that Pineda filed his
certificate of candidacy for municipal councilor in November, 1987, the
case law "applicable as far as coverage of government-owned or
controlled corporations are concerned . . . ( was to the following
effect): 18
As correctly pointed out by the Solicitor General, the
issue of jurisdiction had been resolved in a string of
cases starting with the National Housing Authority
vs. Juco (134 SCRA 172) followed byMetropolitan
Waterworks and Sewerage System vs. Hernandez (143
SCRA 602) and the comparatively recent case
of Quimpo vs. Sandiganbayan (G.R. No. 72553, Dec. 2,
1986) in whichthis Court squarely ruled that PNOC
subsidiaries, whether or not originally created as
government-owned or controlled corporations are
governed by the Civil Service Law.
This doctrine, petitioner further argues, was not "automatically
reversed" by the 1987 Constitution because not "amended or repealed
by the Supreme Court or the Congress;" 19 and this Court's decision in
November, 1988, inNational Service Corporation vs. NLRC, supra 20
abandoning the Juco ruling "cannot be given retroactive effect . . . (in
view of ) the time-honored principle . . . that laws (judicial decisions
included) shall have no retroactive effect, unless the contrary is provided
(Articles 4 and 8 of the New Civil Code of the Philippines)."
Section 2 (1), Article IX of the 1987 Constitution provides as follows:

In National Service Corporation (NASECO), et al. v. NLRC, et al.,

etc., 22 decided on November 29, 1988, it was ruled that the 1987
Constitution "starkly varies" from the 1973 charter upon which the Juco
doctrine rested in that unlike the latter, the present constitution qualifies
the term, "government-owned or controlled corporations," by the phrase,
"with original charter;" hence, the clear implication is that the Civil Service
no longer includes government-owned or controlled corporations without
original charters, i.e., those organized under the general corporation
law. 23 NASECO further ruled that the Juco ruling should not apply
retroactively, considering that prior to its promulgation on January 17,
1985, this Court had expressly recognized the applicability of the Labor
Code to government-owned or controlled corporations. 24
Lumanta, et al. v. NLRC, et al., 25 decided on February 8, 1989, made the
same pronouncement: that Juco had been superseded by the 1987
Constitution for implicit in the language of Section 2 (1), Article IX thereof,
is the proposition that government-owned or controlled
corporations without original charter do not fall under the Civil Service Law
but under the Labor Code.
And in PNOC-EDC v. Leogardo, etc., et al., 26 promulgated on July 5,
1989, this Court ruled that conformably with the apparent intendment of
the NASECO case, supra, since the PNOC-EDC, a government-owned or
controlled company had been incorporated under the general Corporation
Law, its employees are subject to the provisions of the Labor Code.
It is thus clear that the Juco doctrine prevailing at the time of the
effectivity of the fundamental charter in 1987 i.e., that governmentowned or controlled corporations were part of the Civil Service and its
employees subject to Civil Service laws and regulations, 27 regardless of
the manner of the mode of their organization or incorporation is no
longer good law, being at "stark variance," to paraphrase NASECO, with
the 1987 Constitution. In other words, and contrary to the petitioner's view,
as of the effectivity of the 1987 Constitution, government-owned or
controlled corporations without original charters, or, as Mr. Justice Cruz

insists in his concurring opinion in NASECO v. NLRC, 28 a legislative

charter (i.e., those organized under the Corporation Code), ceased to
pertain to the Civil Service and its employees could no longer be
considered as subject to Civil Service Laws, rules or regulations.

The basic question is whether an employee in a government-owned or

controlled corporations without an original charter (and therefore not
covered by Civil Service Law) nevertheless falls within the scope of
Section 66 of the Omnibus Election Code, viz.:
Sec. 66. Candidates holding appointive office or
position. Any person holding a public appointive office
or position, including active members of the Armed
Forces of the Philippines, and officers and employees in
government-owned or controlled corporations, shall be
considered ipso facto resigned from his office upon the
filing of his certificate of candidacy.
When the Congress of the Philippines reviewed the Omnibus Election
Code of 1985, in connection with its deliberations on and subsequent
enactment of related and repealing legislation i.e., Republic Acts
Numbered 7166: "An Act Providing for Synchronized National and
Local Elections and for Electoral Reforms, Authorizing Appropriations
Therefor, and for Other Purposes" (effective November 26, 1991),
6646: "An Act Introducing Additional Reforms in the Electoral System
and for Other Purposes" (effective January 5, 1988) and 6636: "An Act
Resetting the Local Elections, etc., (effective November 6, 1987), it was
no doubt aware that in light of Section 2 (1), Article IX of the 1987
Constitution: (a) government-owned or controlled corporations were of
two (2) categories those with original charters, and those organized
under the general law and (b) employees of these corporations were
of two (2) kinds those covered by the Civil Service Law, rules and
regulations because employed in corporations having original charters,
and those not subject to Civil Service Law but to the Labor Code
because employed in said corporations organized under the general
law, or the Corporation Code. Yet Congress made no effort to
distinguish between these two classes of government-owned or
controlled corporations or their employees in the Omnibus Election
Code or subsequent related statutes, particularly as regards the rule
that any employee "in government-owned or controlled corporations,
shall be considered ipso facto resigned from his office upon the filing of
his certificate of candidacy." 29

Be this as it may, it seems obvious to the Court that a governmentowned or controlled corporation does not lose its character as such
because not possessed of an original charter but organized under the
general law. If a corporation's capital stock is owned by the
Government, or it is operated and managed by officers charged with
the mission of fulfilling the public objectives for which it has been
organized, it is a government-owned or controlled corporation even if
organized under the Corporation Code and not under a special statute;
and employees thereof, even if not covered by the Civil Service but by
the Labor Code, are nonetheless "employees in government-owned or
controlled corporations," and come within the letter of Section 66 of the
Omnibus Election Code, declaring them "ipso facto resigned from . . .
office upon the filing of . . . (their) certificate of candidacy."
What all this imports is that Section 66 of the Omnibus Election Code
applies to officers and employees in government-owned or controlled
corporations, even those organized under the general laws on
incorporation and therefore not having an original or legislative charter,
and even if they do not fall under the Civil Service Law but under the
Labor Code. In other words, Section 66 constitutes just cause for
termination of employment in addition to those set forth in the Labor
Code, as amended.
The conclusions here reached make unnecessary discussion and
resolution of the other issues raised in this case.
WHEREFORE, the petition is GRANTED; the decision of public
respondent National Labor Relations Commission dated April 24, 1991
and its Resolution dated June 21, 1991 are NULLIFIED AND SET
ASIDE; and the complaint of Manuel S. Pineda is DISMISSED. No
costs.
SO ORDERED.
Padilla, Regalado and Nocon, JJ., concur.

to his former position, without loss of seniority rights, and with

backwages from I February 1978 up to his actual reinstatement.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58494 July 5, 1989
PHILIPPINE NATIONAL OIL COMPANY-ENERGY DEVELOPMENT
CORPORATION, petitioner,
vs.
HON. VICENTE T. LEOGARDO, DEPUTY MINISTER OF LABOR
AND VICENTE D. ELLELINA, respondents.

MELENCIO-HERRERA, J.:
Through this Petition for Certiorari, Philippine National Oil CompanyEnergy Development Corporation (PNOC-EDC) seeks to declare null
and void, for lack of jurisdiction, the Order of public respondent, the
Deputy Minister of Labor, sustaining his jurisdiction over the instant
controversy.
Petitioner PNOC-EDC is a subsidiary of the Philippine National Oil
Company (PNOC). On 20 January 1978, it filed with the Ministry of
Labor and Employment, Regional Office No. VII, Cebu City (MOLE), a
clearance application to dismiss/ terminate the services of private
respondent, Vicente D. Ellelina, a contractual employee.
The application for clearance was premised on Ellelina's alleged
commission of a crime (Alarm or Public Scandal) during a Christmas
party on 19 December 1977 at petitioner's camp in Uling, Cebu, when,
because of the refusal of the raffle committee to give him the prize
corresponding to his lost winning ticket, he tried to grab the armalite
rifle of the PC Officer outside the building despite the warning shots
fired by the latter.
Clearance to dismiss was initially granted by MOLE but was
subsequently revoked and petitioner was ordered to reinstate Ellelina

Petitioner appealed to the Minister of Labor who, acting through public

respondent, affirmed, on 14 August 1981, the appealed Order. Hence,
this Petition predicated substantially on the following grounds:
1. Under Article 277 of the Labor Code, the Ministry of Labor and
Employment has no jurisdiction over petitioner because it is a
government-owned or controlled corporation;
2. Ellelina's dismissal is valid and just because it is based upon the
commission of a crime.
On the other hand, public respondent contends:
(a) While the petitioner is a subsidiary of the PNOC, it is still covered by
the Labor Code and, therefore, within the jurisdiction of the Ministry of
Labor inasmuch as petitioner was organized as a private corporation
under the Corporation Law and registered with the Securities and
Exchange Commission;
(b) Petitioner is estopped from assailing the Labor Department's
jurisdiction, having subjected itself to the latter when it filed the
application for clearance to terminate Ellelina's services; and
(c) Dismissal is too harsh a penalty.
The issues that confront us, therefore, are (1) whether or not public
respondent committed grave abuse of discretion in holding that
petitioner is governed by the Labor Code; and (2) whether or not
Ellelina's dismissal was justified.
Under the laws then in force, employees of government-owned and/or
controlled corporations were governed by the Civil Service Law and not
by the Labor Code. Thus, Article 277 of the Labor Code (PD 442) then
provided:
The terms and conditions of employment of all government employees,
including employees of government- owned and controlled corporations
shall be governed by the Civil Service Law, rules and regulations ... .

In turn, the 1973 Constitution provided:

The Civil Service embraces every branch, agency, subdivision and
instrumentality of the government, including government-owned or
controlled corporations.
In National Housing Corporation vs. Juco (L-64313, January 17, 1985,
134 SCRA 172), we laid down the doctrine that employees of
government-owned and/or controlled corporations, whether created by
special law or formed as subsidiaries under the general Corporation
Law, are governed by the Civil Service Law and not by the Labor Code.
However, the above doctrine has been supplanted by the present
Constitution, which provides:
The Civil Service embraces all branches, subdivisions, instrumentalities
and agencies of the Government, including government-owned or
controlled corporations with original charters. (Article IX-B, Section 2
[1])

We hold, therefore, that the PNOC-EDC having been incorporated

under the general Corporation Law, is a government-owned or
controlled corporation whose employees are subject to the provisions
of the Labor Code. This is apparently the intendment in the NASECO
case notwithstanding the fact that the NASECO therein was a
subsidiary of the PNB, a government-owned corporation.
In so far as Ellelina is concerned, we hold that the reinstatement
ordered by public respondent, without loss of seniority rights, is proper.
However, consistent with the rulings of the Court, backwages should be
limited to three years from 1 February 1978. The dismissal ordered by
petitioner was a bit too harsh considering the nature of the act which he
had committed and that it was his first offense.
WHEREFORE, the Petition is DISMISSED, and the judgment of
respondent public official is hereby AFFIRMED. No costs.
SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.

Thus, under the present state of the law, the test in determining
whether a government-owned or controlled corporation is subject to the
Civil Service Law is the manner of its creation such that government
corporations created by special charter are subject to its provisions
while those incorporated under the general Corporation Law are not
within its coverage.
In NASECO vs. NLRC (G.R. No. 69870, November 29,1988), we had
occasion to apply the present Constitution in deciding whether or not
the employees of NASECO (a subsidiary of the NIDC, which is in turn a
subsidiary wholly-owned by the PNB, a government-owned
corporation) are covered by the Civil Service Law or the Labor Code
notwithstanding that the case arose at the time when the 1973
Constitution was still in effect. We held that the NLRC has jurisdiction
over the employees of NASECO "on the premise that it is the 1987
Constitution that governs because it is the Constitution in place at the
time of decision;" and that being a corporation without an original
charter, the employees of NASECO are subject to the provisions of the
Labor Code.
We see no reason to depart from the ruling in the aforesaid case.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

However, in August, 1987, the NPDC was ordered by the SEC to show
cause why its Certificate of Registration should not be suspended for:
(a) failure to submit the General Information Sheet from 1981 to 1987;
(b) failure to submit its Financial Statements from 1981 to 1986; (c)
failure to register its Corporate Books; and (d) failure to operate for a
continuous period of at least five (5) years since September 27, 1967.

G.R. No. 87676 December 20, 1989

On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr.,

informed SEC that his Office had no objection to the suspension,
cancellation, or revocation of the Certificate of Registration of NPDC.

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL

PARKS DEVELOPMENT COMMITTEE,petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL PARKS
DEVELOPMENT SUPERVISORY ASSOCIATION & THEIR
MEMBERS, respondents.

By virtue of Executive Order No. 120 dated January 30, 1989, the
NPDC was attached to the Ministry (later Department) of Tourism and
provided with a separate budget subject to audit by the Commission on
Audit.

Bienvenido D. Comia for respondents.

GRIO-AQUINO, J.:
The Regional Trial Court of Manila, Branch III, dismissed for lack of
jurisdiction, the petitioner's complaint in Civil Case No. 88- 44048
praying for a declaration of illegality of the strike of the private
respondents and to restrain the same. The Court of Appeals denied the
petitioner's petition for certiorari, hence, this petition for review.
The key issue in this case is whether the petitioner, National Parks
Development Committee (NPDC), is a government agency, or a private
corporation, for on this issue depends the right of its employees to
strike.
This issue came about because although the NPDC was originally
created in 1963 under Executive Order No. 30, as the Executive
Committee for the development of the Quezon Memorial, Luneta and
other national parks, and later renamed as the National Parks
Development Committee under Executive Order No. 68, on September
21, 1967, it was registered in the Securities and Exchange Commission
(SEC) as a non-stock and non-profit corporation, known as "The
National Parks Development Committee, Inc."

On September 10, 1987, the Civil Service Commission notified NPDC

that pursuant to Executive Order No. 120, all appointments and other
personnel actions shall be submitted through the Commission.
Meanwhile, the Rizal Park Supervisory Employees Association,
consisting of employees holding supervisory positions in the different
areas of the parks, was organized and it affiliated with the Trade Union
of the Philippines and Allied Services (TUPAS) under Certificate No.
1206.
On June 15, 1987, two collective bargaining agreements were entered
into between NPDC and NPDCEA (TUPAS local Chapter No. 967) and
NPDC and NPDCSA (TUPAS Chapter No. 1206), for a period of two
years or until June 30, 1989.
On March 20, 1988, these unions staged a stake at the Rizal Park, Fort
Santiago, Paco Park, and Pook ni Mariang Makiling at Los Banos,
Laguna, alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila,
Branch III, a complaint against the union to declare the strike illegal and
to restrain it on the ground that the strikers, being government
employees, have no right to strike although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted
the restraining order for lack of jurisdiction. It held that the case
"properly falls under the jurisdiction of the Department of Labor,"

because "there exists an employer-employee relationship" between

NPDC and the strikers, and "that the acts complained of in the
complaint, and which plaintiff seeks to enjoin in this action, fall under
paragraph 5 of Article 217 of the Labor Code, ..., in relation to Art. 265
of the same Code, hence, jurisdiction over said acts does not belong to
this Court but to the Labor Arbiters of the Department of Labor." (p.
142, Rollo.).
Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No.
14204). On March 31, 1989, the Court of appeals affirmed the order of
the trial court, hence, this petition for review. The petitioner alleges that
the Court of Appeals erred:
1) in not holding that the NPDC employees are covered
by the Civil Service Law; and
2) in ruling that petitioner's labor dispute with its
employees is cognizable by the Department of Labor.
We have considered the petition filed by the Solicitor General on behalf
of NPDC and the comments thereto and are persuaded that it is
meritorious.
In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 8463739, August 2, 1989, we ruled that the NPDC is an agency of the
government, not a government-owned or controlled corporation, hence,
the Sandiganbayan had jurisdiction over its acting director who
committed estafa. We held thus:
The National Parks Development Committee was
created originally as an Executive Committee on
January 14,1963, for the development of the Quezon
Memorial, Luneta and other national parks (Executive
Order No. 30). It was later designated as the National
Parks Development Committee (NPDC) on February 7,
1974 (E.O. No. 69). On January 9, 1966, Mrs. Imelda R.
Marcos and Teodoro F. Valencia were designated
Chairman and Vice- Chairman respectively (E.O. No.
3). Despite an attempt to transfer it to the Bureau of
Forest Development, Department of Natural Resources,
on December 1, 1975 (Letter of Implementation No. 39,
issued pursuant to PD No. 830, dated November 27,

1975), the NPDC has remained under the Office of the

President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees
listed NPDC as a regular government agency under the
Office of the President and allotments for its
maintenance and operating expenses were issued
direct to NPDC (Exh. 10-A Perlas, Item No. 2, 3). (Italics
ours.)
Since NPDC is a government agency, its employees are covered by
civil service rules and regulations (Sec. 2, Article IX, 1987 Constitution).
Its employees are civil service employees (Sec. 14, Executive Order
No. 180).
While NPDC employees are allowed under the 1987 Constitution to
organize and join unions of their choice, there is as yet no law
permitting them to strike. In case of a labor dispute between the
employees and the government, Section 15 of Executive Order No. 180
dated June 1, 1987 provides that the Public Sector LaborManagement Council, not the Department of Labor and Employment,
shall hear the dispute. Clearly, the Court of Appeals and the lower court
erred in holding that the labor dispute between the NPDC and the
members of the NPDSA is cognizable by the Department of Labor and
Employment.
WHEREFORE, the petition for review is granted. The decision of the
Court of Appeals in CA-G.R. SP No. 14204 is hereby set aside. The
private respondents' complaint should be filed in the Public Sector
Labor-Management Council as provided in Section 15 of Executive
Order No. 180. Costs against the private respondents.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.