G.R. No.

114250 April 5, 1995

DOMINICO C. CONGSON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO, RAYMUNDO BADAGOS, PATRICIO
SALVADOR, SR., NEHIL BARGO, JOEL MENDOZA, and EMMANUEL CALIXIHAN, respondents.

PADILLA, J.:
Petitioner Dominico C. Congson seeks the nullification of the decision rendered by the National Labor Relations Commission
in Case No. NLRC CA M-000681-92 1 dated 28 May 1993 and its resolution dated 28 January 1994, denying petitioner's
motion for reconsideration..
In the challenged decision*, the NLRC affirmed in toto Labor Arbiter Arturo Aponesto's decision dated 27 September 1991,
holding thus:
WHEREFORE, the appealed decision is hereby AFFIRMED IN TOTO and the instant appeal is DISMISSED for lack of merit.
SO ORDERED. 2
Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates 3 by
petition'er as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to eighty
(80) kilos per movement, that is from the fishing boats down to petitioner's storage plant at a load/unload cycle of work
until the tuna catch reached its final shipment/destination. They did the work of unloading tuna from fishing boats to truck
haulers; unloading them again at petitioner's cold storage plant for filing, storing, cleaning, and maintenance; and finally
loading the processed tuna for shipment. They worked seven (7) days a week.
During the first week of June 1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna movement due
to the scarcity of tuna. Private respondents resisted petitioner's proposed rate reduction. When they reported for work the
next day, they were informed that they had been replaced by a new set of workers, When they requested for a dialogue with
the management, they were instructed to wait for further notice. They waited for the notice of dialogue for a full week but in
vain.
On 15 June 1990, private respondents filed a case against petitioner before the NLRC Sub-Regional Arbitration Branch No.
XI in General Santos City, docketed as Case No. RAB-11-06-50165-90 for underpayment of wages (non-compliance with
Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-day
service incentive leave pay; and for constructive dismissal. With respect to their monetary claims, private respondents
charged petitioner with violation of the minimum wage law, alleging that with petitioner's rates and the scarcity of tuna
catches, private respondents' average monthly earnings each did not exceed ONE THOUSAND PESOS (P1,000.00).
Accusing petitioner of constructive dismissal, private respondents claimed that petitioner refused to give them work
assignments and replaced them with new workers when they showed resistance to the petitioner's proposed reduction of the
rate-per-tuna movement.
On 2 July 1990, private respondents filed another case against petitioner, docketed as Case No. RAB; 11-07-50179-90
containing an additional claim for separation pay should their complaint for constructive dismissal be upheld.
The two (2) cases were consolidated. Conciliation conferences were scheduled. On 24 July 1990, however, Labor Arbiter
Aponesto directed the parties to submit their respective position papers within twenty (20) days from receipt of the directive,
since no amicable settlement was reached in conciliation between the parties.
On 22 August 1990, private respondents filed their position paper reiterating the charges in their complaint for constructive
dismissal, attaching thereto a Bill of Particulars containing the computations of their monetary claims. Petitioner, instead of
filing his position paper, sought, through counsel, an extension of time within which to file his position paper.
On 20 September 1991, petitioner filed his position paper wherein he claimed that the only issue for resolution was private
respondents' monetary claims, and that there was no constructive dismissal. Petitioner further argued that private
respondents were not dismissed but rather, they abandoned their work after learning of petitioner's proposal to reduce tuna
movement rates because of the scarcity of tuna, and that, it took private respondents one (1) month to return to work, but
they could no longer be accommodated as petitioner had already hired their replacements after private respondents failed to
heed petitioner's repeated demands for them to return to work. Upon said premises, petitioner contended that private
respondents were not entitled to separation pay.
On 27 September. 1991, Labor Arbiter Aponesto rendered a decision, with the following disposition:
WHEREFORE, finding that complainants Noe Bargo, Roger Himeno, Raymundo Badagos, Patricio Salvador; Sr., Negil
Barge, Joel Mendoza and Emmanuel Calixihan were (constructively) dismissed from employment without just or
unauthorized cause hence illegal, respondents Southern Fishing Industry and Mr. Dominico Congson are hereby directed to
pay, jointly and severally, their respective separation pay and monetary claims for salary differentials, 13th month pay and
service incentive leave pay, as computed above, in the total sum of FIVE HUNDRED TWO THOUSAND EIGHT HUNDRED
SIXTY FIVE (P502,865.00) PESOS.
The claims for overtime pay, holiday pay and rest day pay are, however, dismissed for lack of factual basis and for reasons
aforecited.
SO ORDERED. 4
In holding petitioner guilty of constructive dismissal, Labor Arbiter Aponesto made the following findings:
After a careful evaluation of the foregoing facts, proofs, evidence, arguments and counter-arguments adduced by the parties
we find that complainants were summarily dismissed from employment t on the first week of June, 1990, when respondent
Dominico Congson arbitrarily replaced them with another group of laborers to do the work of complainants. This was brought
about by their reluctance or resistance to accept a new lower rate proposed by respondent the day before. The advise to wait
for further notice' was indeed a confirmation that complainants were dismissed as underscored by the fact that such notice
 never came even until this date. Having been constructively and illegally dismissed complainants are therefore entitled to
their prayer for separation pay. Their length of service 10 years and 6 years, respectively(supra), which respondent dismally
failed to controvert or refute, shall be the basis of our computation, thus:

1 N. Bargo (P2,670 x 10) P26,700

2 R. Himeno (P2,670 x 10) 26,700
3 R. Badayos (P2,670 x 10) 26,700
4 P. Salvador, Jr. (P2,670 x 6) 16,020
5 Negil Bargo (P2,670 x 10) 26,700
6 J. Mendoza (P2,670 x 6) 16,020
7 E. Calixihan (P2,670 x 6) 16,020

Total P154,860 5

Except for private respondents' claim for overtime pay, holiday pay, and rest day pay which were dismissed, Labor Arbiter
Aponesto granted the monetary claims of private respondents, in this wise:
We likewise grant the monetary claims of complainants for wage differentials, 13th month pay and service incentive leave
pay payment of or exemption from which respondents failed to show. Hence, given the 3-year period covered by their
monetary claims, i.e. from June, 1987 to June, 1990 the monetary awards due complainants are as follows:

Name Wage 13th SIL Total

Diff'l. Mon. Pay
Noe Bargo 42,120 6,510.00 1,085 P49,715.00
R. Himeno 42,120 6,510.00 1,085 49,715.00
R. Badagos 42,120 6,510.00 1,085 49,715.00
P. Salvador 42,120 6,510.00 1,085 49,715.00
N. Bargo 42,120 6,510.00 1,085 49,715.00
J. Mendoza 42,120 6,510.00 1,085 49,715.00
Calixihan. 42,120 6,510.00 1,085 49,715.00

Total P348,005.00

xxx xxx xxx

Pertaining to salary differentials respondent failed to adduce any evidence or document at all to show that under their
peculiar arrangements complainants were receiving compensation at par or above the then existing minimum wage; this,
despite more than sufficient time afforded. Consequently, we have no other alternative but to give credence to complainants'
assertion that their average income (each) did not exceed P1,000.00 a month (Annex "B") complainants' position paper), thus
the differentials. 6
On the other hand, Labor Arbiter Aponesto made short shrift of petitioner's defense by ruling that:
We cannot give credence to the allegations or defenses put up by respondents: As stated, one of the principal claims of
complainants is the payment of their separation pay which was specifically prayed by complainants when they filed the
second case on July 2, 1990; this claim is likewise included in their Bill of particulars (Annex "C" complainants' position
paper). We cannot sustain respondents' theory of abandonment. Record shows that shortly after complainants were
constructively dismissed on the first week of June, 1990 they immediately filed the instant case for constructive dismissal on
June 15,1990. There is also no showing of a deliberate refusal on their part to resume work. Moreover, respondents dismally
failed to substantiate their general allegation that "repeated demands" were made upon complainants to return to work. 7
On appeal by petitioner, respondent NLRC found petitioner guilty of illegal dismissal. Holding that petitioner failed to
substantiate his contention that private respondents abandoned their work, respondent NLRC ruled that petitioner replaced
private respondents with a new set of workers without just cause and the required notice and hearing. Respondent NLRC
therefore affirmed Labor Arbiter Aponesto's findings and monetary awards. Petitioner's motion for reconsideration and
supplemental motion for reconsideration were denied for lack of merit in the challenged resolution dated 28 January 1994.
Hence, the present recourse by petitioner.
Petitioner imputes grave abuse of discretion to respondent NLRC in completely disregarding his motion for reconsideration
and supplemental motion for reconsideration. He contends that said motions for reconsideration raised substantial issues
which respondent NLRC failed to consider and resolve.
Petitioner's motion for reconsideration and supplemental motion for reconsideration raised only two (2) issues: a) the
accuracy of Labor Arbiter Aponesto's computations in arriving at the monetary awards representing salary differentials; and
b) the propriety or correctness of Labor Arbiter Aponesto's grant of separation pay to private respondents.
Petitioner takes issue with the manner Labor Arbiter Aponesto computed private respondents wage differentials. In his
supplemental motion for reconsideration, petitioner argued, thus:
In the Decision rendered, the Arbiter awarded wage differential on the premise that complainants monthly average income is
only P1, 000.00 as alleged in their position paper. This is erroneous. Here is why:
Herein complainants were employed by respondents on a load-unload cycle of hauling "bariles" from the fishing boats to the
truck hauler of the respondents; then from the truck hauler down to the cold storage; the herein complainants were paid P
1.00 per movement t; that is, from the fishing boat to the cold storage, the herein complainants actually received the amount
of P2.00, one (1) peso per movement; that there are two (2) movements from the fishing boat to the cold storage, hence
complainants are actually receiving P2.00 per piece of tuna. The Arbiter must have been on the impression that there is only
one (1) movement from the fishing boat to the cold storage. This is erroneous.
That finally, when the tuna is ready for export, the same is to be transferred from the cold storage to the ocean going vessel
berthed at respondents wharf at Talisay, General Santos City, this time herein complainants are paid P3.00 per piece of tuna
from the cold storage to the ocean going vessel as shown in the herewith attached Annexes.
In fine, all in all, there are three (3)movements from the time the tuna is unloaded from the fishing boat to the fish car then to
the cold storage; and, finally from the cold storage to the vessel.
In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the intestines and liver of the tuna as
part of their salary. That for every tuna delivered, herein complainants extract at least three (3) kilos of intestines and liver.
That the minimum prevailing price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The value of
the tuna intestine and liver should be computed in arriving at the daily wage of herein complainants because the very
essence of the agreement between complainants and respondent is: complainants shall be paid only P1.00 per tuna per
movement BUT the intestines and liver of the tuna delivered shall go to the herein complainants. It should be noted that tuna
intestines and liver are easily disposed of in any public market. Complainants themselves would not have agreed and would
not have served respondent that long period of time if they are only paid P1.00 per tuna movement. What they are after, in
truth and in fact is the tuna intestines and liver which they can easily convert into cash. 8
Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private respondents as
expressly agreed upon by both parties. Petitioner further admits that private respondents, per their request, were entitled to
retrieve the tuna intestines and liver as part of their compensation. Finally, petitioner does not refute Labor Arbiter Aponesto
when the latter fixed private respondents' individual monthly wage at P2,670 computed at the mandatory daily wage of
P89.00.
However, it is the contention of petitioner that notwithstanding the fact that private respondents' actual cash wage fell below
the minimum wage fixed by law, respondent NLRC should have considered as forming a substantial part of private
respondents' total wages the cash value of the tuna liver and intestines private respondents were entitled to retrieve.
Petitioner therefore argues that the combined value of private respondents' cash wage and the monetary value of the tuna
liver and intestines clearly exceeded the minimum wage fixed by law.
Petitioner's foregoing arguments do not impress us.
The Labor Code expressly provides:
Article 102. Forms of Payment. No. employer shall pay the wages of an employee by means of, promissory notes,
vouchers, coupons, tokens tickets, chits, or any object other than legal tender, even when expressly requested by the
employee.
Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of
effectivity of this Code, or is necessary as specified in appropriate regulations to be issued by the Secretary of Labor or as
stipulated in a collective bargaining agreement. (Emphasis supplied)
Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender combined
with tuna liver and intestines runs counter to the above cited provision of the Labor Code. The fact that said method of paying
the minimum wage was not only agreed upon by both parties in the employment agreement but even expressly requested by
private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be paid only by means of
legal tender. The only instance when an employer is permitted to pay wages informs other than legal tender, that is, by
checks or money order, is when the circumstances prescribed in the second paragraph of Article 102 are present.
We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto's award
of salary differentials.
With respect to the issue concerning the propriety or correctness of the grant of separation pay to private respondents,
petitioner contends that; assuming arguendo that Labor Arbiter Aponesto's findings were proper as to private respondents'
illegal dismissal, his decision did not state the reason why instead of reinstatement, separation pay has to be awarded to
private respondents. Petitioner submits that under existing laws and jurisprudence, whenever there is a finding of illegal
dismissal, the available and logical remedy is reinstatement. As a permissible exception to the general rule, separation pay
may be awarded to the employee in lieu of reinstatement, by reason of strained relationship between the employer and
employee. Since there was no finding or even allegation of strained relationship between .petitioner and private respondents,
respondent NLRC should have deleted, according to petitioner, the award of separation pay in Labor Arbiter Aponesto's
decision.
We find petitioner's ratiocination on the impropriety of the award of separation pay to private respondents to be specious.
Petitioner seeks to defeat the award of separation pay, in lieu of reinstatement, on the pretext that inasmuch as the existence
of strained relationship as a permissible exception to an axiomatic order of reinstatement in cases of illegal dismissal
was not adequately established, Labor Arbiter Aponesto should not have entertained at all private respondents' claim for
separation pay.
A careful scrutiny of the records of the case at bench, however, readily discloses the existence of strained relationship
between the petitioner and private respondents.
Firstly, petitioner consistently refused to re-admit private respondents in his establishment. Petitioner even replaced private
respondents with a new set of workers to perform the tasks of private respondents; Moreover, although petitioner ostensibly
argued in his supplemental motion for reconsideration that reinstatement should have been the proper remedy in the case at
bench on his premise that the existence of strained relationship was not adequately established, yet petitioner never
sincerely intended to effect the actual reinstatement of private respondents. For if petitioner were to pursue further the entire
logic of his argument, the prayer in his supplemental motion for reconsideration should have contained not just the mere
deletion of the award of separation pay, but precisely, the reinstatement of private respondents. Quite obviously then,
notwithstanding petitioner's argument for reinstatement he was only interested in the deletion of the award of separation pay
to private respondents.
In the case of Felix Esmalin vs. National Labor Relations Commission (3rd Division) and CARE Philippines, 9 we held that
strained relationship is fairly established if the records of the case showed consistent refusal of the employer to accept the
dismissed employee, to wit:
From the records of the case it can be discerned that reinstatement is no longer viable in view of the strained relations
between petitioner-employee (Felix Esmalin) and private respondent employer (CARE Philippines). This is very evident from
the vehement and consistent stand of CARE Philippines in refusing to accept back petitioner Esmalin. Instead, petitioner
should be awarded separation pay as an alternative for reinstatement.
And secondly, private respondents themselves, from the very start, had already indicated their aversion to their continued
employment in petitioner's establishment. The very filing of their second case before Labor.
Arbiter Aponesto (RAB-1 1-07-90179-90) specifically for separation pay is conclusive of private respondents' intention to
sever their working ties with petitioner.
In the case of Arturo Lagniton, Sr. vs. National Labor Relations Commission, et a1., 10 we ruled that the refusal of the
dismissed employee to be re-admitted is constitutive of strained relations, thus:
It appears that relations between the petitioner and the complainants have been so strained that the complainants are no
longer willing to be reinstated. As such reinstatement would only exacerbate the animosities that have developed between
the parties, the public respondents were correct in ordering instead the grant of separation pay to the dismissed employees
in the interest of industrial peace.
We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto,'s grant
of private respondents' prayer for separation pay in lieu of reinstatement.
WHEREFORE, premises considered, the petition is hereby DISMISSED. The challenged decision of respondent NLRC dated
28 May 1993 is hereby AFFIRMED.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

G.R. No. L-11606 February 28, 1959

EUFROCIO BERMISO, ET AL., petitioners,
vs.
HIJOS DE F. ESCAO, INC., ET AL., respondents.
Delfin N. Mercader for petitioners. Vicente L. Faelnar for the respondent Hijos de F. Escao, Inc. Jose Muaa in his own
behalf and for the other respondents.
LABRADOR, J.:
Petitioners originally numbering 45 and formerly composing the Democratic Labor Association and the Katubsanan sa
Mamumuo instituted this action before the Court of Industrial Relations on August 5, 1952, praying for reinstatement with
back wages, direct payment of wages to the laborers instead of through the union, payment of accrued overtime pay and
wage differentials, prohibition from carrying load in excess of 50 kilos, minimum daily wage of P5.00, vacation and sick leave,
free hospitalization, accident insurance, free choice of labor union and grievance committee. Of the original petitioners only
five continued to take interest in the action, the other having desisted therefrom. After hearing the Court of Industrial
Relations ordered the reinstatement of the said five laborers to their former work and positions in the Sabay group, but
without back wages, but dismissed the other claims. Not satisfied with the decision the five remaining petitioners have filed
this appeal by a petition for certiorari.
The Court of Industrial Relations made the following findings as to the manner in which the union or group to which the
petitioners belong operate:
The Hijos de F. Escao, Inc., hereafter referred to as Escao or Company, is a domestic engaged in the business of carrying
or transporting passengers and goods by water for compensation within the Philippines . . . .
The Katubsanan sa Mamumuo, hereafter called the Union or simply Katubsanan, is a labor organization duly registered with
the Department of Labor and with office address in Cebu City. It is composed mainly of laborers from the Visayas and
Mindanao and has respondent Jose Muaa and Vitaliano Sabay as its general president and general treasurer, respectively.
Its members in Cebu are numerous and divided into several groups, sometimes called chapters. One of them is headed by
respondent Sabay as its foreman or "Cabo" and known as the Sabay group. To this group, in which there are no less than 50
men, formerly belonged some or all of the 45 petitioners.
The Sabay group was organized in 1947. Its members generally perform work similar to that done by laborers of stevedoring
and arrastre firms. They load and unload vessels in the port of Cebu and haul or transport discharged cargo from the
waterfront to the consignees warehouses as well as cargo to be shipped out of Cebu from the shippers' warehouse to the
waterfront. Before the petition was filed with the Court, there were occasions when they also performed for certain persons
not parties to the case work other than loading, unloading and hauling cargo. When the petitioners were still connected with
the group, they almost always participated in every work undertaken by it.
One of the carriers for whom the Sabay men regularly serve as stevedores is the Escao. Their relation had its inception in
1947 when, through the representation made by Muaa and Sabay, Salvador Sala, general manager of said carrier,
permitted the Sabay group to do the work of loading and unloading its vessels to the exclusion of all other persons. From the
beginning the Company has not directly paid Muaa, Sabay or the group any compensation for the loading or unloading
services rendered by Sabay men. Neither has it received any payment for the exclusive privilege enjoyed by the group. The
practice which they have continuously followed is that the group collects from the shippers and consignees the charges for
the handling of the cargo based on a schedule of rates which appears to have been previously approved by all the parties
affected by the work, while the Company receives or collects from the shippers or consignees only the freightage for the
cargo.
Aside from Sabay, the group has a collector, a timekeeper, a paymaster, and several capataces and subcapataces. The first
three assist Sabay in the collection of the handling fees from the shippers and consignees, the recording of names of
members taking part in the work and their working hours, and the payment to them of their respective shares in the earnings
of the group. The capataces and sub-capataces help him in supervising the men. During the loading and unloading of the
Escao boats, however, the shipping manager of the Company, who is usually present, calls their attention to their work.
Furthermore, its checkers aid the men in determining which cargo to load or unload. And whenever expedient or necessary
to finish the work immediately, they are allowed to use the different modern apparatuses of the vessels for the raising and
loading of cargo. In the hauling of the cargo, checkers or agents of the shippers and consignees accompany them and look
over their work.
Generally, only Sabay men are permitted to take part in this work. But when it is voluminous, the group, to avoid delay,
enlists the services of non-members. These recruits are treated as casual laborers and paid on daily basis.
The amount collected from the shippers and consignees is considered as the gross income of the group. From this income
are deducted its expenses if any, for gasoline and spare parts of trucks used, damage to, loss or destruction of, cargo not
imputable to any particular individual or individuals, meals, recreation, wages of casual workers, and an amount equivalent of
two per centum for the Katubsanan for the maintenance of the union clinic and newspaper. The net income is then divided
into equal shares in accordance with the sharing plan under which each common laborers is entitled to one share and the
rest, including the sub-capataces, capataces, Sabay and the other officers of the group, to one and one-fourth, one and one-
half, one and three-fourths, two, three, or more each, depending on the lenght of membership and importance of the position
held in the group. This division of the group's income is done every Saturday and the shares received by the participating
members constitute their wages for the week.
Before the Minimum Wage Law (R. A. No. 602) went into effect, the number of hours each laborers worked was not taken
into account by the group. Even members who did not actually render any service were given shares if their failure to work
was found to have been due a reasonable cause. Certain records were made of the disposition of the group's income but
they, together with some payrolls, were destroyed by water when Cebu was visited by a strong typhoon in 1951. After August
4, 1951, the share was given a fixed value: P0.39, at first P0.40, later, and, finally, P0.50 per hour of work or service. Under
this modified plan, if the computation would result in wages falling short of the legal minimum because there were many
laborers who worked, the group collected additional charges from the shippers and consignees. If further payment was
refused for the reason that the work was delayed by the workers, the group covered the deficit from its so-called sinking fund
which was accumulated from the small undivided or invisible amounts remaining after each distribution of net income. At
times laborers were rotated to obviate the possibility of wage shortage. As regards the expenses, whether or not they were
deductible from the earnings was looked into by the auditor-bookkeeper employed by the Katubsanan. Since the modification
of the sharing plan was made, the group has been using payrolls printed in the name of the union.
The court held that insofar as the stevedores loading and unloading its vessels are concerned, the Hijos de F. Escao is an
employer of the petitioners. With respect, however, to the arrastre service, it held that the question is beyond the scope of the
relationship between it and the petitioners.
After a review of the testimonies given by the petitioners and those given on behalf of the respondents, the court below also
found that the claimants failed to establish any reasonable basis for all their claims except that for their reinstatement and,
therefore, denied them for lack of merit. Claims for overtime pay, wage differentials, maximum load of 50 kilos, minimum
wage of P5.00 a day were dismissed. So were the claims for vacation and sick leave, free hospitalization, accident
insurance, and free choice of labor union and grievance committee, as the latter were not touched upon by the petitioners in
the presentation of their evidence, and that at any rate they should be the subject of collective bargaining under the Industrial
Peace Act. As to the reinstatement of the 5 petitioners, namely, of Eufrocio Bermiso, Fotunato Geteso, Constancio Olaco,
Laureano Amistoso and Vicente Tuyogan, to their former work and positions in the Sabay group; their claim for back wages
were denied. With respect to the direct payment of wages to the laborers, the court found that there was no reason for
changing the practice of apportioning the wages for their joint labor and sharing therein, because of the 150 members only 5
were dissatisfied.
Petitioners argue before us that the decision violates the law on direct payment of wages. The law relied upon by them is
Section 10, par. (b) of Republic Act No. 602, which provides as follows:
SEC. 10. (b) Wages, including wages which may be paid retroactively for whatever reason, shall be paid directly to the
employee to whom they are due, except:
(1) In cases where the employee is insured with his consent by the employer, the latter shall entitled to deduct from the wage
of the employee the amount paid by the employer for premiums on the insurance;
(2) In cases of force majeure rendering such payments impossible; and
(3) In cases where the right of the employee or his union to check-off has been recognized by the employer or authorized in
writing by the individual employees concerned.
There is no question that the work of stevedoring was undertaken by the laborers, not in their individual capacities, but as a
group. The contract to perform the service was made by the leader of the group, for and on behalf of the latter, not for each
and every one of them individually. For the sake of convenience it was necessary that the group must be large enough to be
able to perform the task of loading and unloading in as short time as possible. As the group undertook to render service for
vessels other than those of the Hijos de F. Escao, it was absolutely necessary that some sort of leadership be instituted in
the group to determine which of the members will work for one vessel and which for another. Leadership is also essential to
obtain work for the group as employers naturally prefer to deal with a leader of a group than with each member individually.
Leadership was, therefore, essential not only to secure work for the group but to arrange the laborers who are to perform the
service. The leadership must be paid for and it was not shown that the head of the groups got the lion's share of the cost of
the service rendered. Under the circumstances we are not prepared to say that the provision of law on direct payment of
wages has been violated. The lower court did not find sufficient evidence to show that racketeering was employed by the
leaders. If any existed the remedy can not be found in this court; it is for the group or organize into a closely knitted union
which would secure the privileges that the selves who would not exploit them.
Lastly, the respondent Hijos de F. Escao did not pay for the stevedoring charges. These were collected by the group from
the shippers themselves, without the intervention of the respondent Escao. How can the court order the latter to pay the
charges to the group or its members, when the charges were collected by the latter from the shippers, in accordance with the
practice of the group itself?
We also fine no ground for requiring the respondent Hijos de F. Escao to pay back wages. The latter respondent did not
deal with the petitioners individually, entering into a contract of employment with them. Said respondent dealt with the group
thru its leaders. If the group, thru its leaders, did not allow the petitioners to work and share in the price paid therefor, the one
responsible is not the respondent Escao but the leader thru whom the group itself made the contract for work and
apportioned the time of work for each member and the pay therefor. Again as stated above, the remedy must be sought not
in the tribunals of the country but in the laborers themselves who should organized and thru such organization as they may
establish, as envisioned by the Industrial Peace Act, secure the privileges demanded.
The third error attributed to the court below is its denial of the other claims, such as vacation and sick leave, accident,
insurance, free hospitalization, etc. We agree with the court below that these matters must also be sought for thru labor
organizations, which should take them up with their employers thru collective bargaining.
The decision subject of review is hereby affirmed. Without costs.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L. and Endencia, JJ.,
concur.

G.R. No. 80039 April 18, 1989

ERNESTO M. APODACA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., INC., respondents.
Diego O. Untalan for petitioner.
The Solicitor General for public respondent.
Barcelona, Perlas, Joven & Academia Law Offices for private respondents.

GANCAYCO, J.:
Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve a claim for non-payment of stock
subscriptions to a corporation? Assuming that it has, can an obligation arising therefrom be offset against a money claim of
an employee against the employer? These are the issues brought to this court through this petition for review of a decision of
the NLRC dated September 18, 1987.
The only remedy provided for by law from such a decision is a special civil action for certiorari under Rule 65 of the Rules of
Court based on jurisdictional grounds or on alleged grave abuse of discretion amounting to lack or excess of jurisdiction, not
by way of an appeal by certiorari. Nevertheless, in the interest of justice, this petition is treated as a special civil action for
certiorari.
Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M. Mirasol persuaded petitioner to
subscribe to 1,500 shares of respondent corporation at P100.00 per share or a total of P150,000.00. He made an initial
payment of P37,500.00. On September 1, 1975, petitioner was appointed President and General Manager of the respondent
corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private respondents for the payment of his
unpaid wages, his cost of living allowance, the balance of his gasoline and representation expenses and his bonus
compensation for 1986. Petitioner and private respondents submitted their position papers to the labor arbiter. Private
respondents admitted that there is due to petitioner the amount of P17,060.07 but this was applied to the unpaid balance of
his subscription in the amount of P95,439.93. Petitioner questioned the set-off alleging that there was no call or notice for the
payment of the unpaid subscription and that, accordingly, the alleged obligation is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for P17,060.07 on the ground that the
employer has no right to withhold payment of wages already earned under Article 103 of the Labor Code. Upon the appeal of
the private respondents to public respondent NLRC, the decision of the labor arbiter was reversed in a decision dated
September 18, 1987. The NLRC held that a stockholder who fails to pay his unpaid subscription on call becomes a debtor of
the corporation and that the set-off of said obligation against the wages and others due to petitioner is not contrary to law,
morals and public policy.
Hence, the instant petition.
The petition is impressed with merit.
Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between the stockholder and the corporation
as in the matter of unpaid subscriptions. This controversy is within the exclusive jurisdiction of the Securities and Exchange
Commission. 1
Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said subject matter under the circumstances
of this case, the unpaid subscriptions are not due and payable until a call is made by the corporation for payment. 2 Private
respondents have not presented a resolution of the board of directors of respondent corporation calling for the payment of
the unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner by the respondent
corporation.
What the records show is that the respondent corporation deducted the amount due to petitioner from the amount receivable
from him for the unpaid subscriptions. 3 No doubt such set-off was without lawful basis, if not premature. As there was no
notice or call for the payment of unpaid subscriptions, the same is not yet due and payable.
Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC cannot validly set it off
against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such a deduction from the wages of
the employees by the employer, only in three instances, to wit:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer
for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or
authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor. 4
WHEREFORE, the petition is GRANTED and the questioned decision of the NLRC dated September 18, 1987 is hereby set
aside and another judgment is hereby rendered ordering private respondents to pay petitioner the amount of P17,060.07 plus
legal interest computed from the time of the filing of the complaint on December 19, 1986, with costs against private
respondents.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

GENESIS TRANSPORT SERVICE, INC. and G.R. No. 182114

RELY L. JALBUNA,
Petitioners, Present:

- versus - PUNO, C.J., Chairperson,

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
UNYON NG MALAYANG MANGGAGAWA NG VILLARAMA, JR., JJ.
GENESIS TRANSPORT (UMMGT), and JUAN
TAROY, Promulgated:
Respondents. April 5, 2010
x--------------------------------------------------x

DECISION

CARPIO MORALES, J.:

Respondent Juan Taroy was hired on February 2, 1992 by petitioner Genesis Transport Service, Inc. (Genesis
Transport) as driver on commission basis at 9% of the gross revenue per trip.

On May 10, 2002, Taroy was, after due notice and hearing, terminated from employment after an accident on
April 20, 2002 where he was deemed to have been driving recklessly.

Taroy thus filed on June 7, 2002 a complaint [if !supportFootnotes][1][endif] for illegal dismissal and payment of service
incentive leave pay, claiming that he was singled out for termination because of his union activities, other drivers who had
met accidents not having been dismissed from employment.

Taroy later amended[if !supportFootnotes][2][endif] his complaint to implead his herein co-respondent Unyon ng Malayang
Manggagawa ng Genesis Transport (the union) as complainant and add as grounds of his cause of action unfair labor
practice (ULP), reimbursement of illegal deductions on tollgate fees, and payment of service incentive leave pay.

Respecting the claim for refund of illegal deductions, Taroy alleged that in 1997, petitioner started deducting from
his weekly earnings an amount ranging from P160 to P900 representing toll fees, without his consent and written
authorization as required under Article 113 of the Labor Code and contrary to company practice; and that deductions were
also taken from the bus conductors earnings to thus result to double deduction.

Genesis Transport countered that Taroy committed several violations of company rules for which he was given
warnings or disciplined accordingly; that those violations, the last of which was the April 20, 2002 incident, included poor
driving skills, tardiness, gambling inside the premises, use of shabu, smoking while driving, insubordination and reckless
driving;[if !supportFootnotes][3][endif] and that Taroys dismissal was on a valid cause and after affording him due process.

In support of its claim that Taroy was afforded due process, Genesis Transport cited his preventive suspension;
the directive for him to explain in writing[if !supportFootnotes][4][endif] his involvement in the April 20, 2002 accident; and the conduct
of a hearing during which the expert opinion of its Maintenance Department, as well as an independent entity the Columbian
Motors Corporation,[if !supportFootnotes][5][endif] was considered in the determination of whether the accident was due to his reckless
driving or, as he contended, to faulty brakes.

Genesis Transport went on to claim that as the result of the investigation [if !supportFootnotes][6][endif] showed that the
cause of the accident was Taroys reckless driving, and his immediate past infraction of company rules on January 25, 2001
smoking inside the bus already merited a final warning, [if !supportFootnotes][7][endif] it validly terminated[if !supportFootnotes][8][endif] his
employment.

By Decision[if !supportFootnotes][9][endif] of June 30, 2004, the Labor Arbiter found that Genesis Transport discharged the
burden of proof that Taroys dismissal was on a valid cause; that while Taroys past infractions can not be used against him,
still, they showed habituality; and that Genesis Transport complied with the twin requirements of notice and hearing, hence,
Taroys dismissal was effected with due process.

As to the charge of ULP, the Labor Arbiter ruled that the respondent union failed to prove that Taroys dismissal
was due to his union membership and/or activities.

On the claim for service incentive leave pay, the Labor Arbiter ruled that Taroy was not entitled thereto since he
was a field personnel paid on commission basis.

With respect to Taroys claim for refund, however, the Labor Arbiter ruled in his favor for if, as contended by
Genesis Transport, tollgate fees form part of overhead expense, why were not expenses for fuel and maintenance also
charged to overhead expense. The Labor Arbiter thus concluded that it would appear that the tollgate fees are deducted from
the gross revenues and not from the salaries of drivers and conductors, but certainly the deduction thereof diminishes the
take home pay of the employees.

Thus, the Labor Arbiter disposed:

WHEREFORE, premises considered, judgment is hereby rendered dismissing instant complaint for illegal dismissal for lack
of merit. However, respondents are hereby ordered to refund to complainant the underpayment/differential due him as a
result of the deduction of the tollgate fees from the gross receipts. Actual computation shall be based on and limited to the
evidence at hand, which is in the amount of P5,273.16. For having been compelled to litigate, respondents are hereby also
ordered to pay complainant 10% attorneys fees. (underscoring supplied)

Both parties appealed to the National Labor Relations Commission (NLRC), petitioners questioning the order for
them to refund underpayment and pay attorneys fees, and respondents questioning the Labor Arbiters failure to pass on the
propriety of his preventive suspension, dismissal of his complaint for constructive dismissal and ULP, and failure to award
him service incentive leave pay.

By Resolution of December 29, 2005, the NLRC affirmed the Labor Arbiters decision with modification. It deleted
the award to Taroy of attorneys fees. It brushed aside Taroys claim of having been illegally suspended, it having been raised
for the first time on appeal.

The parties filed their respective motions for reconsideration which were denied.

On respondents appeal, the Court of Appeals, by the assailed Decision of August 24, 2007, partly granted the
same, it ruling that petitioner Genesis Transport violated Taroys statutory right to due process when he was preventively
suspended for more than thirty (30) days, in violation of the Implementing Rules and Regulations of the Labor Code.
The appellate court thus held Taroy to be entitled to nominal damages in the amount of P30,000. And it
reinstated the Labor Arbiters order for petitioners to refund Taroy the underpayment.

Their motion for reconsideration having been denied by Resolution of March 13, 2008, petitioners filed the
present recourse.

On the issue of refund of underpayment, petitioners aver that cases of similar import involving also the
respondent union have been decided with finality in their favor by the NLRC, viz: UMMGT v. Genesis Transport Service, Inc.
(NLRC RAB III Case No. 04-518-03) and Reyes v. Genesis Transport Service, Inc. (NLRC CA No. 04862-04); and Santos v.
Genesis Transport Service, Inc. (NLRC CA No. 041869-04).

Petitioners thus pray that the Court accord respect to the rulings of the NLRC in the above-cited cases and apply
the principle of res judicata vis--vis the present case.

On the appellate courts award of nominal damages, petitioners reiterate that Taroy was not entitled thereto, his
dismissal having been based on a valid cause, and he was accorded due process.

Further, petitioners note that the issue of preventive suspension, on which the appellate court based its ruling
that it violated Taroys right to due process, was raised only on appeal to the NLRC, hence, it should not be considered.

Finally, petitioners assert that the delay in the service of the Notice of Dismissal (dated May 10, 2002, but
received by Taroy only on June 4, 2002) was due to Taroys premeditated refusal to acknowledge receipt thereof.

The petition is partly meritorious.

Absent proof that the NLRC cases cited by petitioners have attained finality, the Court may not consider them to
constitute res judicata on petitioners claim for refund of the underpayment due Taroy.

Neither may the Court take judicial notice of petitioners claim that the deduction of tollgate fees from the gross
earnings of drivers is an accepted and long-standing practice in the transportation industry. Expertravel & Tours, Inc. v. Court
of Appeals[if !supportFootnotes][10][endif] instructs:

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common
and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must
be known to be within the limits of the jurisdiction of the court. The principal guide in determining what facts may be
assumed to be judicially known is that of notoriety. Hence, it can be said that judicial notice is limited to facts evidenced by
public records and facts of general notoriety. Moreover, a judicially noticed fact must be one not subject to a
reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court; or (2)
capable of accurate and ready determination by resorting to sources whose accuracy cannot reasonably be
questionable.
Things of common knowledge, of which courts take judicial matters coming to the
knowledge of men generally in the course of the ordinary experiences of life, or they may be matters
 which are generally accepted by mankind as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally known, and which may be found in encyclopedias,
dictionaries or other publications, are judicially noticed, provided, they are of such universal notoriety
and so generally understood that they may be regarded as forming part of the common knowledge of
every person. As the common knowledge of man ranges far and wide, a wide variety of particular
facts have been judicially noticed as being matters of common knowledge. But a court cannot take
judicial notice of any fact which, in part, is dependent on the existence or non-existence of a
fact of which the court has no constructive knowledge. (emphasis supplied)

None of the material requisites for the Court to take judicial notice of a particular matter was established by petitioners.

Albeit the amounts representing tollgate fees were deducted from gross revenues and not directly from Taroys commissions,
the labor tribunal and the appellate court correctly held that the withholding of those amounts reduced the amount from which
Taroys 9% commission would be computed. Such a computation not only marks a change in the method of payment of
wages, resulting in a diminution of Taroys wages in violation of Article 113 vis--vis Article 100 of the Labor Code, as
amended. It need not be underlined that without Taroys written consent or authorization, the deduction is considered illegal.

Besides, the invocation of the rule on company practice is generally used with respect to the grant of additional
benefits to employees, not on issues involving diminution of benefits.

Respecting the issue of statutory due process, the Court holds that Taroys right thereto was not violated.
Sections 8 and 9 of Rule XXIII, Book V of the Implementing Rules and Regulations of the Labor Code provide:

Section 8. Preventive suspension. The employer may place the worker concerned under preventive suspension if his
continued employment poses a serious and imminent threat to the life or property of the employer or his co-workers.

xxxx

Section 9. Period of Suspension No preventive suspension shall last longer than

thirty (30) days. The employer shall thereafter reinstate the worker in his former or in a substantially
equivalent position or the employer may extend the period of suspension provided that during the
period of extension, he pays the wages and other benefits due to the worker. In such case, the
worker shall not be bound to reimburse the amount paid to him during the extension if the employer
decides, after completion of the hearing, to dismiss the worker. (emphasis supplied)

To the appellate court, Genesis Transports act of placing Taroy under preventive suspension for more than thirty (30) days
was a predetermined effort to dismiss [him] from employment, negating the argument that the delay in the service of the
notice of dismissal was not an issue and that the same was allegedly due to Taroys inaction to receive the same. Hence, the
appellate court concluded, while there was a just and valid cause for the termination of his services, his right to statutory due
process was violated to entitle him to nominal damages, following Agabon v. NLRC.[if !supportFootnotes][11][endif]

The propriety of Taroys preventive suspension was raised by respondents for the first time on appeal, however.
The well-settled rule, which also applies in labor cases, is that issues not raised below cannot be raised for the first time on
appeal. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and
ordinarily will not be, considered by the reviewing court, as they cannot be raised for the first time at that late stage. Basic
considerations of due process impel the adoption of this rule.[if !supportFootnotes][12][endif]

In any event, what the Rules require is that the employer act on the suspended workers status of employment
within the 30-day period by concluding the investigation either by absolving him of the charges, or meting the corresponding
penalty if liable, or ultimately dismissing him. If the suspension exceeds the 30-day period without any corresponding action
on the part of the employer, the employer must reinstate the employee or extend the period of suspension, provided the
employees wages and benefits are paid in the interim.

In the present case, petitioner company had until May 20, 2002 to act on Taroys case. It did by terminating him
through a notice dated May 10, 2002, hence, the 30-day requirement was not violated even if the termination notice was
received only on June 4, 2002, absent any showing that the delayed service of the notice on Taroy was attributable to
Genesis Transport.

Taroys statutory due process not having been violated, he is not entitled to the award of nominal damages.

WHEREFORE, the challenged Court of Appeals Decision of August 24, 2007 and Resolution [if !supportFootnotes][13][endif] of March
13, 2008 are AFFIRMED, with the MODIFICATION that the award of nominal damages to respondent Juan Taroy is
DELETED.

SO ORDERED.

G.R. No. 81477 April 19, 1989

DENTECH MANUFACTURING CORPORATION and JACINTO LEDESMA in his capacity as General Manager,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CCLU, BENJAMIN MARBELLA, ARMANDO TORNO, JUANITO TAJAN,
JR. and JOEL TORNO, respondents.

GANCAYCO, J.:
The principal issue in this Petition is whether or not the private respondents are entitled as a matter of right to a 13th month
pay.
The herein petitioner Dentech Manufacturing Corporation is a domestic corporation organized under Philippine laws. Before
the firm became a corporate entity, it was known as the J.L. Ledesma Enterprises, a sole proprietorship owned by the herein
petitioner Jacinto Ledesma. At present, he is the president and general manager of the corporation as well as the owner of
the controlling interest thereof. The firm is engaged in the manufacture and sale of dental equipment and supplies.
The herein private respondents Benjamin Marbella, Armando Torno, Juanito Tajan, Jr. and Joel Torno are members of the
Confederation of Citizens Labor Union, a labor organization registered with the Department of Labor and Employment. They
used to be the employees of the petitioner firm, working therein as welders, upholsterers and painters. They were already
employed with the company when it was still a sole proprietorship. They were dismissed from the firm beginning February 14,
1985.
On June 26, 1985, the private respondents filed a Complaint with the arbitration branch of the respondent National Labor
Relations Commission (NLRC) against the petitioners for, among others, illegal dismissal and violation of Presidential Decree
No. 851. 1 They were originally joined by another employee, one Raymundo Labarda, who later withdrew his Complaint.
At first, they only sought the payment of their 13th month pay under Presidential Decree No. 851 as well as their separation
pay, and the refund of the cash bond they filed with the company at the start of their employment. Later on, they sought their
reinstatement as well as the payment of their 13th month pay and service incentive leave pay, and separation pay in the
event that they are not reinstated. It is alleged in the Complaint and Position Paper accompanying the same that they were
dismissed from the firm for pursuing union activities. 2
On the other hand, the petitioners alleged in their Position Paper that the private respondents were not dismissed from the
firm on account of their union activities. They maintained that the private respondents abandoned their work without informing
the company about their reasons for doing so and that, accordingly, the private respondents are not entitled to service
incentive leave pay and separation pay.
The petitioners also argued that the private respondents are not entitled to a 13th month pay. They maintained that each of
the private respondents receive a total monthly compensation of more that Pl,000.00 and that under Section 1 of Presidential
Decree No. 851, such employees are not entitled to receive a 13th month pay. The petitioners likewise alleged that the
company is in bad financial shape and that pursuant to Section 3 of the Decree, the firm is exempted from complying with the
provisions of the Decree. 3
A hearing was conducted to allow the parties to further ventilate their views. Thereafter, the labor arbiter assigned to the case
rendered a Decision dated January 28, 1987, the pertinent portions of which are as follows-
Noticeable in this case is that complainants initially made manifest their lack of intent to seek reinstatement and their
preference to collect their separation pay. Towards the end of (the) proceedings this was changed to preference for
reinstatement ... . On the other hand, respondent has indicated with sufficient clarity even at the inception of the case that it is
charging complainant with abandonment and is willing to accept them back to work. In short, while complainants supposedly
wanted to report for work and respondents, supposedly ... willing to accept them back to work, we cannot imagine why the
parties never achieved (an) understanding on this aspect.
In line with the above manifestation of the parties, we hereby order the reinstatement of complainants. We also find
respondent's contention for exemption in the payment of (the) 13th month pay as without validity (sic). The ceiling of
P1,000.00 a month in the matter of 13th month pay has been removed and complainants are entitled to receive from
respondents at least the unprescribed 13th month pay for the last three years based on their uncontroverted pleadings. This
order includes the money value of the service incentive leave pay of complainants and the cash bond ... .
xxx xxx xxx
Premises considered, judgment is hereby rendered ordering respondents to reinstate complainants to their former positions,
without backwages and to pay them the following amounts
1. Benjamin Marbella - P3,921.00
2. Armando Torno - 3,828.00
3. Juanito Tajan Jr. - 3,270.00
4. Joel Torno - 878.00
P1 1,897.00
xxx xxx xxx
All other claims are hereby dismissed. 4
Both parties filed their respective appeals with the NLRC. The petitioners maintained that no provision of law was cited in the
Decision of the labor arbiter to support the view therein that the 13th month pay ceiling of P1,000.00 had been duly
eliminated. The petitioners went on to reiterate that the firm is in bad financial shape and is, therefore, exempted from
complying with the provisions of Presidential Decree No. 851. The petitioners added that the refund of the cash bond filed by
the private respondents should not have been ordered by the labor arbiter inasmuch as the proceeds of the same had
already been given by the company to a certain carinderia 5 to pay for the outstanding accounts of the private respondents
therein. 6
In a Resolution dated November 4,1987, the Third Division of the NLRC affirmed the Decision of the labor arbiter. The
pertinent portions thereof are as follows-
The award of 13th month pay to the complainants is assailed by the respondents for the reason that no provision of law was
cited in the decision supporting the statement that the ceiling of 13th month pay (sic) has been removed.
For the record, Memorandum Order No. 28 issued by President Corazon C. Aquino modified Presidential Decree No. 851 to
the extent that all employers are ... (now) required to pay all their rank-and-file employees 13th month pay, thus in effect
removing from exclusion from entitlement to the (sic) 13th month pay those employees who were receiving a basic salary of
more than P1,000.00 a month.
At any rate the simple assertion of the respondent that it is in financial distress and thus exempt (sic) from payment of 13th
month pay (sic) to the complainants is not in itself sufficient to evade payment of the 13th month pay to which complainants
were entitled prior to the commencement of the respondent's financial problems.
The cash bond required of complainants is likewise in direct contravention to (sic) the provisions of Article 114 of the Labor
Code, as amended. Thus, the refund of the cash bond appears to be in order. 7
On January 29, 1988, the petitioners elevated the case to this Court by way of the instant Petition. The private respondents,
however, decided not to challenge the Resolution of the NLRC.
The main pleading is erroneously captioned "Petition For Review On Certiorari." This error notwithstanding, and in the
interest of justice, this Court resolved to treat the instant Petition as a special civil action for certiorari under Rule 65 of the
Rules of Court on account of a number of jurisdictional issues raised by the petitioners.
The petitioners reiterate their contention that the private respondents abandoned their work. In support of this claim, they call
attention to the alleged testimony of the general manager of the petitioner firm. 8 The petitioners likewise maintain that the
company is a financially distressed firm exempted from complying with the provisions of Presidential Decree No. 851. 9
The petitioners also contend that Memorandum Order No. 28 cited by the NLRC cannot apply to the case at bar. They point
out that the said Memorandum Order was signed into law only in 1986, long after the case was instituted with the NLRC and,
accordingly, the same cannot be given a retroactive effect. 10 It is likewise the position of the petitioners that the refund of the
cash bond filed by the private respondents is improper inasmuch as the proceeds of the same had already been given to a
certain carinderia to pay for the outstanding accounts of the private respondents therein. 11
As instructed by the Court, the respondents filed their respective comments on the Petition. In seeking the dismissal of the
Petition, the Solicitor General points out that each of the private respondents is actually paid less than Pl,000.00 a month and
that, accordingly, they are entitled to a 13th month pay pursuant to Presidential Decree No. 851. The Solicitor General also
argues that under the rules and regulations implementing the said Decree, a distressed employer shall qualify for exemption
from the requirements of the Decree only upon prior authorization from the Secretary of Labor and Employment. The Solicitor
General manifests that no such prior authorization had been obtained by the petitioner firm. The Solicitor General likewise
maintains that the Pl,000.00 ceiling recited in Presidential Decree No. 851 has been eliminated by Presidential Decree No.
1364, promulgated on May 1, 1978. 12
As to the refund of the cash bond filed by the private respondents, the Solicitor General submits that such cash bond
required from the private respondents is disallowed under Article 114 of the Labor Code. 13
After the parties submitted other supplementary pleadings, the Court resolved to give due course to the Petition, and to
consider the case submitted for decision.
The Petition is devoid of merit.
Presidential Decree No. 851 was signed into law in 1975 by then President Ferdinand Marcos. Under the original provisions
of Section 1 thereof, all employers are required to pay all their employees receiving a basic salary of not more than Pl,000.00
a month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year. Under
Section 3 of the rules and regulations implementing said Presidential Decree financially distressed employers, i., e., those
currently incurring substantial losses, are not covered by the Decree. Section 7 thereof requires, however, that such
distressed employers must obtain the prior authorization of the Secretary of Labor and Employment before they may qualify
for such exemption.
On May 1, 1978, Presidential Decree No. 1364 was signed into law. 14 The Decree enjoined the Department of Labor and
Employment to stop accepting applications for exemption under, inter alia, Presidential Decree No. 851.
On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No. 28 which modified Section 1 of
Presidential Decree No. 851. The said issuance eliminated the Pl,000.00 salary ceiling.
From the foregoing, it clearly appears that the petitioners have no basis to claim that the company is exempted from
complying with the pertinent provisions of the law relating to the payment of 13th month compensation.
The Pl,000.00 salary ceiling provided in Presidential Decree No. 851 pertains to basic salary, not total monthly
compensation. The petitioners admit that the private respondents work only five days a week and that they each receive a
basic daily wage of P40.00 only. A simple computation of the basic daily wage multiplied by the number of working days in a
month results in an amount of less than Pl,000.00. Thus, there is no basis for the contention that the company is exempted
from the provision of Presidential Decree No. 851 which mandated the payment of 13th month compensation to employees
receiving less than P1,000.00 a month.
Even assuming, arguendo, that the private respondents are each paid a monthly salary of over Pl,000.00, the company is still
not in a position to claim exemption. The rules and regulations implementing Presidential Decree No. 851 provide that a
distressed employer shall qualify for exemption from the requirements of the Decree only upon prior authorization from the
Secretary of Labor and Employment. As correctly pointed out by the Solicitor General, no such prior authorization had been
obtained by the petitioner firm.
The refund of the cash bond filed by the private respondents is in order. Article 114 of the Labor Code prohibits an employer
from requiting his employees to file a cash bond or to make deposits, subject to certain exceptions, to wit-
Art. 114. Deposits for loss or damage.- No employer shall require his worker to make deposits from which deductions shall
be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied by the employer, except when
the employer is engaged in such trades, occupations or business where the practice of making deductions or requiring
deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.
The petitioners have not satisfactorily disputed the applicability of this provision of the Labor Code to the case at bar.
Considering further that the petitioners failed to show that the company is authorized by law to require the private
respondents to file the cash bond in question, the refund thereof is in order.
The allegation of the petitioners to the effect that the proceeds of the cash bond had already been given to a certain
carinderia to pay for the accounts of the private respondents therein does not merit serious consideration. As correctly
observed by the Solicitor General, no evidence or receipt has been shown to prove such payment.
Accordingly, the Court is not convinced that the respondent National Labor Relations Commission committed a grave abuse
of discretion amounting to loss of jurisdiction in affirming the Decision of the labor arbiter.
WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED for lack of merit. We make no
pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.
G.R. No. 111474 August 22, 1994
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and GILBERTO SABSALON, respondents.
Edgardo G. Fernandez for petitioners.
R E SO L U T I O N

REGALADO, J.:
Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action for certiorari to annul the decision 1 of
respondent National Labor Relations Commission (NLRC) ordering petitioners to pay private respondents Domingo Maldigan
and Gilberto Sabsalon their accumulated deposits and car wash payments, plus interest thereon at the legal rate from the
date of promulgation of judgment to the date of actual payment, and 10% of the total amount as and for attorney's fees.
We have given due course to this petition for, while to the cynical the de minimis amounts involved should not impose upon
the valuable time of this Court, we find therein a need to clarify some issues the resolution of which are important to small
wage earners such as taxicab drivers. As we have heretofore repeatedly demonstrated, this Court does not exist only for the
rich or the powerful, with their reputed monumental cases of national impact. It is also the Court of the poor or the
underprivileged, with the actual quotidian problems that beset their individual lives.
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as taxi drivers 2 and, as such,
they worked for 4 days weekly on a 24-hour shifting schedule. Aside from the daily "boundary" of P700.00 for air-conditioned
taxi or P450.00 for non-air-conditioned taxi, they were also required to pay P20.00 for car washing, and to further make a
P15.00 deposit to answer for any deficiency in their "boundary," for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he already failed to report for work for
unknown reasons. Later, petitioners learned that he was working for "Mine of Gold" Taxi Company. With respect to Sabsalon,
while driving a taxicab of petitioners on September 6, 1983, he was held up by his armed passenger who took all his money
and thereafter stabbed him. He was hospitalized and after his discharge, he went to his home province to recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the same terms and conditions as when he
was first employed, but his working schedule was made on an "alternative basis," that is, he drove only every other day.
However, on several occasions, he failed to report for work during his schedule.
On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for the previous day. Also, he abandoned his
taxicab in Makati without fuel refill worth P300.00. Despite repeated requests of petitioners for him to report for work, he
adamantly refused. Afterwards it was revealed that he was driving a taxi for "Bulaklak Company."
Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily cash deposits for 2 years, but herein
petitioners told him that not a single centavo was left of his deposits as these were not even enough to cover the amount
spent for the repairs of the taxi he was driving. This was allegedly the practice adopted by petitioners to recoup the expenses
incurred in the repair of their taxicab units. When Maldigan insisted on the refund of his deposit, petitioners terminated his
services. Sabsalon, on his part, claimed that his termination from employment was effected when he refused to pay for the
washing of his taxi seat covers.
On November 27, 1991, private respondents filed a complaint with the Manila Arbitration Office of the National Labor
Relations Commission charging petitioners with illegal dismissal and illegal deductions. That complaint was dismissed, the
labor arbiter holding that it took private respondents two years to file the same and such unreasonable delay was not
consistent with the natural reaction of a person who claimed to be unjustly treated, hence the filing of the case could be
interpreted as a mere afterthought.
Respondent NLRC concurred in said findings, with the observation that private respondents failed to controvert the evidence
showing that Maldigan was employed by "Mine of Gold" Taxi Company from February 10, 1987 to December 10, 1990; that
Sabsalon abandoned his taxicab on September 1, 1990; and that they voluntarily left their jobs for similar employment with
other taxi operators. It, accordingly, affirmed the ruling of the labor arbiter that private respondents' services were not illegally
terminated. It, however, modified the decision of the labor arbiter by ordering petitioners to pay private respondents the
awards stated at the beginning of this resolution.
Petitioners' motion for reconsideration having been denied by the NLRC, this petition is now before us imputing grave abuse
of discretion on the part of said public respondent.
This Court has repeatedly declared that the factual findings of quasi-judicial agencies like the NLRC, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect but, at times,
finality if such findings are supported by substantial evidence. 3 Where, however, such conclusions are not supported by the
evidence, they must be struck down for being whimsical and capricious and, therefore, arrived at with grave abuse of
discretion. 4
Respondent NLRC held that the P15.00 daily deposits made by respondents to defray any shortage in their "boundary" is
covered by the general prohibition in Article 114 of the Labor Code against requiring employees to make deposits, and that
there is no showing that the Secretary of Labor has recognized the same as a "practice" in the taxi industry. Consequently,
the deposits made were illegal and the respondents must be refunded therefor.
Article 114 of the Labor Code provides as follows:
Art. 114. Deposits for loss or damage. No employer shall require his worker to make deposits from which deductions shall
be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied by the employer, except when
the employer is engaged in such trades, occupations or business where the practice of making deposits is a recognized one,
or is necessary or desirable as determined by the Secretary of Labor in appropriate rules and regulations.
It can be deduced therefrom that the said article provides the rule on deposits for loss or damage to tools, materials or
equipments supplied by the employer. Clearly, the same does not apply to or permit deposits to defray any deficiency which
the taxi driver may incur in the remittance of his "boundary." Also, when private respondents stopped working for petitioners,
the alleged purpose for which petitioners required such unauthorized deposits no longer existed. In other case, any balance
due to private respondents after proper accounting must be returned to them with legal interest.
However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:
YEAR DEPOSITS SHORTAGES VALES
1987 P 1,403.00 P 567.00 P 1,000.00
1988 720.00 760.00 200.00
1989 686.00 130.00 1,500.00
1990 605.00 570.00
1991 165.00 2,300.00

P 3,579.00 P 4,327.00 P 2,700.00
The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw his deposits through vales or he
incurred shortages, such that he is even indebted to petitioners in the amount of P3,448.00. With respect to Maldigan's
deposits, nothing was mentioned questioning the same even in the present petition. We accordingly agree with the
recommendation of the Solicitor General that since the evidence shows that he had not withdrawn the same, he should be
reimbursed the amount of his accumulated cash deposits. 5
On the matter of the car wash payments, the labor arbiter had this to say in his decision: "Anent the issue of illegal
deductions, there is no dispute that as a matter of practice in the taxi industry, after a tour of duty, it is incumbent upon the
driver to restore the unit he has driven to the same clean condition when he took it out, and as claimed by the respondents
(petitioners in the present case), complainant(s) (private respondents herein) were made to shoulder the expenses for
washing, the amount doled out was paid directly to the person who washed the unit, thus we find nothing illegal in this
practice, much more (sic) to consider the amount paid by the driver as illegal deduction in the context of the law." 6 (Words in
parentheses added.)
Consequently, private respondents are not entitled to the refund of the P20.00 car wash payments they made. It will be noted
that there was nothing to prevent private respondents from cleaning the taxi units themselves, if they wanted to save their
P20.00. Also, as the Solicitor General correctly noted, car washing after a tour of duty is a practice in the taxi industry, and is,
in fact, dictated by fair play.
On the last issue of attorney's fees or service fees for private respondents' authorized representative, Article 222 of the Labor
Code, as amended by Section 3 of Presidential Decree No. 1691, states that non-lawyers may appear before the NLRC or
any labor arbiter only (1) if they represent themselves, or (2) if they represent their organization or the members thereof.
While it may be true that Guillermo H. Pulia was the authorized representative of private respondents, he was a non-lawyer
who did not fall in either of the foregoing categories. Hence, by clear mandate of the law, he is not entitled to attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client a reasonable
compensation for his services 7 necessarily imports the existence of an attorney-client relationship as a condition for the
recovery of attorney's fees, and such relationship cannot exist unless the client's representative is a lawyer. 8
WHEREFORE, the questioned judgment of respondent National Labor Relations Commission is hereby MODIFIED by
deleting the awards for reimbursement of car wash expenses and attorney's fees and directing said public respondent to
order and effect the computation and payment by petitioners of the refund for private respondent Domingo Maldigan's
deposits, plus legal interest thereon from the date of finality of this resolution up to the date of actual payment thereof.
SO ORDERED.
Narvasa, C.J., Padilla, Puno and Mendoza, JJ., concur.

G.R. No. 87449 January 23, 1990

SOUTH MOTORISTS ENTERPRISES, petitioner,
vs.
ROQUE TOSOC, ET AL., and HON. SECRETARY OF LABOR AND EMPLOYMENT, respondents.
Manuel M. Parades for petitioner.
Henry V. Briguera for private respondents.

MELENCIO-HERRERA, J.:
At issue in this special civil action for Certiorari is the jurisdiction of the Regional Directors of the Department of Labor and
Employment to act on money claims. Petitioner South Motorists Enterprises (SOUTH MOTORISTS) maintains that said
officials are bereft of authority to act on such claims as this falls under the original and exclusive jurisdiction of Labor Arbiters.
Respondents maintain otherwise.
The facts are as follows:
Sometime in January of 1983, complaints for non-payment of emergency cost of living allowances were filed by 46 workers,
Tosoc, et als., against SOUTH MOTORISTS before the Naga City District Office of Regional Office No. 5 of the then Ministry
of Labor. On 10 January 1983 a Special Order was issued by the District Labor Officer directing its Labor Regulation Officers
to conduct an inspection and verification of SOUTH MOTORISTS' employment records.
On the date of the inspection and verification, SOUTH MOTORISTS was unable to present its employment records on the
allegation that they had been sent to the main office in Manila. The case was then set for conference on 25 January 1983 but
had to be reset to 8 February 1983 upon the request of SOUTH MOTORISTS to enable it to present all the employment
records on such date. However, on 7 February 1983 SOUTH MOTORISTS asked for another deferment to 16 February 1983
due to its lawyer's tight schedule. On 16 February 1983, SOUTH MOTORISTS again requested for a resetting to 3 March
1983 because of the alleged voluminous records it had to locate and its desire to submit a memorandum regarding
complainants' claims. On 2 March 1983, SOUTH MOTORISTS once again requested an extension of 30 days on the ground
that the documents were still being prepared and collated and that a formal manifestation or motion would follow. Nothing
did.
On 7 March 1983, the assigned Labor Regulation Officers submitted an Inspection Report on the basis of which an Order
dated 14 April 1983 was issued by Labor Officer Domingo Reyes directing SOUTH MOTORISTS to pay Tosoc, et als., the
total amount of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100 Pesos (P184,689.12) representing
the latter's corresponding emergency cost of living allowances.
SOUTH MOTORISTS moved for reconsideration of the Order, which was denied. On 11 July 1988, the Secretary of Labor
and Employment affirmed the appealed Order. On 28 July 1988, SOUTH MOTORISTS moved for reconsideration but this
proved unsuccessful. A Second Motion for Reconsideration was filed, which was likewise denied in an Order dated 7 March
1989.
Hence, this certiorari Petition questioning the monetary award by the Regional Director and, in general, his jurisdiction to
validly award money claims.
The Court resolved to give due course to the Petition and to decide the case.
SOUTH MOTORISTS contends that only the Labor Arbiter, who is a trier of facts, may determine after hearing such
questions as whether or not an employer-employee relationship exists; whether or not the workers were project workers;
whether or not the employees worked continuously or whether or not they should receive emergency cost of living
allowances and if entitled, how much each should receive. Thus, SOUTH MOTORISTS submits that this case should be
referred to the Labor Arbiter for proper proceedings.
Two provisions of law are crucial to the issueArticle 129 and Article 217 of the Labor Code, as recently amended by
Republic Act No. 6715, approved on 2 March 1989. Said amendments, being curative in nature, have retroactive effect and,
thus, should apply in this case (BRIAD AGRO vs. DE LA CERNA, G.R. No. 82805, and CAMUS ENGINEERING vs. DE LA
CERNA, G.R. No. 83225, 9 November 1989). At this juncture, it should be pointed out in the light of these Briad-Agro cases,
including the modificatory Resolution thereon of 9 November 1989, petitioner's invocations of the rulings in Zambales Base
Metals, L-73184-88, 26 November 1986, and kindred cases, is now out-dated.
The aforesaid Articles, as amended, respectively read as follows:
Art. 129. Recovery of wages, simple money claims and other benefits. Upon complaint of any interested party, the
Regional Director of the Department of Labor and Employment or any of the duly authorized hearing officers of the
Department is empowered, through summary proceeding and after due notice, to hear and decide cases involving the
recovery of wages and other monetary claims and benefits, including legal interest, owing to an employee or person
employed in domestic or household service and househelper under this Code, arising from employer-employee relations:
Provided, That such complaint does not include a claim for reinstatement: Provided, further, That the aggregate claim of each
employee or househelper does not exceed five thousand pesos (P5,000.00). . . .
and
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission
of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
xxx xxx xxx
(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding
five thousand pesos (P5,000), whether or not accompanied with a claim for reinstatement.
xxx xxx xxx
Clearly, Regional Directors are empowered to hear and decide, in a summary proceeding, claims for recovery of wages and
other monetary claims and benefits, including legal interest, subject to the concurrence of the following requisites:
1) the claim is presented by an employee or person employed in domestic or household service, or househelper under the
Code;
2) the claim arises from employer-employee relations;
3) the claimant no longer being employed, does not seek reinstatement; and
4) the aggregate money claim of each employee or househelper does not exceed P5,000.00 (Art. 129, Labor Code, as
amended by R.A. 6715).
But where these requisites do not concur, the Labor Arbiters shall have exclusive original jurisdiction over claims arising from
employer-employee relationship except claims for employees' compensation, social security, medicare and maternity benefits
(parag. 6, Art. 217, Labor Code as amended by R.A. 6715).
The records of this case show that the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100
Pesos (P l84,689.12) given by the District Labor Officer on 14 April 1983 is itemized as follows:
1. Anatalio Cado P 3,203.20
2. Macario Gavino 6,332.48
3. Vito T. Euste 6,073.76
4. Domingo Ricafort 3,843.84
5. Roger Paulo 4,176.48
6. Elias Clarianes 4,201.12
7. Ernesto Brequillo 4,176.48
8. Santiago Asares 4,114.88
9. Marcelito Verdadero 4,127.20
10. Elias Pascua 4,348.96
11. Francisco Herrera 3,991.68
12. Efren San Joaquin 3,979.36
13. Dominador Payo 4,201.12
14. Jesus Militante 4,201.12
15. Ubaldo Osoc, Jr. 2,156.00
16. Salvador Clarianes 3,843.84
17. Vicente Lovendino 1,416.80
18. Jose Brequillo 6,049.12
19. Domingo Cis 7,884.80
20. Alberto Agreda 5,396.16
21. Amancio Galona 6,418.72
22. Eduardo Brequillo 2,858.24
23. Luis Clarianes 4,127.20
24. Roque Tosoc 6,418.72
25. Hilarion P. Guinoo 6,086.08
26. Carlos Plegino 1,478.40
27. Felipe Cea 6,024.48
28. Salvador Calamba 4,040.96
29. Ramon Marco 4,669.28
30. Eddie del Castillo 4,201.12
31. Lope Guinoo 3,868.48
32. Marcelino Habla 1,096.48
33. Roberto Guinoo 5,938.24
34. Efren Andalis 4,114.88
35. Solomon Tosoc 2,722.72
36. Cornelio Ballares 3,006.08
37. Ernesto Osoc 6,024.48
38. Bernardo Gabrillo 1,490.72
39. Romeo Abarro 2,722.72
40. Rogelio Usinar 2,722.72
41. Fortunate Sola 1,453.76
42. Romeo Calpi 2,821.28
43. Rogelio Villamor 2,772.00
44. Jose Banday 4,817.12
45. Alberto Cornelio 2,882.88
46. Pablo Olarte 2,192.96

TOTAL P 184,689.12
In accordance with Articles 129 and 217 of the Labor Code, as amended, supra, those awards in excess of P5,000.00,
particularly those given to Macario Gavino, Vito T. Euste, Jose Brequillo, Domingo Cis, Alberto Agreda, Amancio Galona,
Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc, each of which exceeds P5,000.00, should
be ventilated in a proceeding before the Labor Arbiters. The other awards, or those not in excess of P5,000.00 and having no
issue of reinstatement set forth, should be affirmed.
As to the matter that the respondent Secretary of Labor and Employment erred in affirming the award based on a mere
Inspection Report, we see no reason for SOUTH MOTORISTS to complain as it was afforded ample opportunity to present
its side. It failed to present employment records giving as an excuse that they were sent to the main office in Manila, in
violation of Section 11 of Rule X, Book II of the Omnibus Rules Implementing the Labor Code providing that:
All employment records of the employees of the employer shall be kept and maintained in or about the premises of the
workplace. The premises of a workplace shall be understood to mean the main or branch office or establishment, if any,
depending., upon where the employees are regularly assigned. The keeping of the employee's records in another place is
prohibited.
SOUTH MOTORISTS also caused the resettings of all subsequent hearingsfrom 25 January 1983 to 8 February 1983,
then to 16 February 1983, then to 3 March and finally, again requested for another 30-day-extension on the ground that the
documents, were still being prepared and collated. Having been given the opportunity to put forth its case, SOUTH
MOTORISTS has only itself to blame for having failed to avail of the same (Adamson and Adamson, Inc. vs. Judge Amores,
G.R. No. 58292, 23 July 1987,152 SCRA 237). What is more, its repeated failure to attend the hearings, and to submit any
motion as manifested may be construed as a waiver of its right to adduce evidence to controvert the worker's claims.
WHEREFORE, the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100 (P l84,689.12) is
hereby MODIFIED. The individual claims of Macario Gavino, Vito T. Euste Jose, Brequillo, Domingo Cis, Alberto Agreda,
Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc, each of which exceeds
P5,000.00, are hereby remanded to the Labor Arbiter for proper disposition. All other individual awards not in excess of
P5,000.00 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.

G.R. No. L-44169 December 3, 1985

ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES CORPORATION, and CESAR R. ROXAS, Deputy
Sheriff of Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.

PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on March 30, 1976, affirming the
decision of the Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one of the tenants in Trinity Building at T.M. Kalaw
Street, Manila, while petitioner Rosario A. Gaa was then the building administrator. On December 12, 1973, Europhil
Industries commenced an action (Civil Case No. 92744) in the Court of First Instance of Manila for damages against
petitioner "for having perpetrated certain acts that Europhil Industries considered a trespass upon its rights, namely, cutting of
its electricity, and removing its name from the building directory and gate passes of its officials and employees" (p. 87 Rollo).
On June 28, 1974, said court rendered judgment in favor of respondent Europhil Industries, ordering petitioner to pay the
former the sum of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00 as exemplary damages and to
pay the costs.
The said decision having become final and executory, a writ of garnishment was issued pursuant to which Deputy Sheriff
Cesar A. Roxas on August 1, 1975 served a Notice of Garnishment upon El Grande Hotel, where petitioner was then
employed, garnishing her "salary, commission and/or remuneration." Petitioner then filed with the Court of First Instance of
Manila a motion to lift said garnishment on the ground that her "salaries, commission and, or remuneration are exempted
from execution under Article 1708 of the New Civil Code. Said motion was denied by the lower Court in an order dated
November 7, 1975. A motion for reconsideration of said order was likewise denied, and on January 26, 1976 petitioner filed
with the Court of Appeals a petition for certiorari against filed with the Court of Appeals a petition for certiorari against said
order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition for certiorari. In dismissing the petition, the Court of Appeals
held that petitioner is not a mere laborer as contemplated under Article 1708 as the term laborer does not apply to one who
holds a managerial or supervisory position like that of petitioner, but only to those "laborers occupying the lower strata." It
also held that the term "wages" means the pay given" as hire or reward to artisans, mechanics, domestics or menial
servants, and laborers employed in manufactories, agriculture, mines, and other manual occupation and usually employed to
distinguish the sums paid to persons hired to perform manual labor, skilled or unskilled, paid at stated times, and measured
by the day, week, month, or season," citing 67 C.J. 285, which is the ordinary acceptation of the said term, and that "wages"
in Spanish is "jornal" and one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision of the Court of Appeals, petitioner questions the
correctness of the interpretation of the then Court of Appeals of Article 1708 of the New Civil Code which reads as follows:
ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for debts incurred for food, shelter,
clothing and medical attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a responsibly place employee," of El Grande
Hotel, "responsible for planning, directing, controlling, and coordinating the activities of all housekeeping personnel" (p. 95,
Rollo) so as to ensure the cleanliness, maintenance and orderliness of all guest rooms, function rooms, public areas, and the
surroundings of the hotel. Considering the importance of petitioner's function in El Grande Hotel, it is undeniable that
petitioner is occupying a position equivalent to that of a managerial or supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or physical labor, but as
commonly and customarily used and understood, it only applies to one engaged in some form of manual or physical labor.
That is the sense in which the courts generally apply the term as applied in exemption acts, since persons of that class
usually look to the reward of a day's labor for immediate or present support and so are more in need of the exemption than
are other. (22 Am. Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602, 20 SE 40; Miller vs. Dugas, 77 Ga 4 Am St Rep 192;
State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs. Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338;
Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in determining whether a particular laborer or
employee is really a "laborer," the character of the word he does must be taken into consideration. He must be classified not
according to the arbitrary designation given to his calling, but with reference to the character of the service required of him by
his employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all men who earn compensation by labor or work
of any kind, whether of the head or hands, including judges, laywers, bankers, merchants, officers of corporations, and the
like, are in some sense "laboring men." But they are not "laboring men" in the popular sense of the term, when used to refer
to a must presume, the legislature used the term. The Court further held in said case:
There are many cases holding that contractors, consulting or assistant engineers, agents, superintendents, secretaries of
corporations and livery stable keepers, do not come within the meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v.
Wasson, 25 N.Y. 482; Short v. Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun. 463;
Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v. Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a traveling salesman, selling by sample, did not
come within the meaning of a constitutional provision making stockholders of a corporation liable for "labor debts" of the
corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon Hardware Co., supra, it was held that a laborer, within
the statute exempting from garnishment the wages of a "laborer," is one whose work depends on mere physical power to
perform ordinary manual labor, and not one engaged in services consisting mainly of work requiring mental skill or business
capacity, and involving the exercise of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act making stockholders in a corporation liable for
debts due "laborers, servants and apprentices" for services performed for the corporation, held that a "laborer" is one who
performs menial or manual services and usually looks to the reward of a day's labor or services for immediate or present
support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that "laborer" is a term ordinarily
employed to denote one who subsists by physical toil in contradistinction to those who subsists by professional skill. And in
Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057, 12 L.R.A. 476, it was stated that
"laborers" are those persons who earn a livelihood by their own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be exempted from
attachment and execution. The term "wages" as distinguished from "salary", applies to the compensation for manual labor,
skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while "salary" denotes a higher
degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term wages "
indicates considerable pay for a lower and less responsible character of employment, while "salary" is suggestive of a larger
and more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein
it was said: "'Wages' are the compensation given to a hired person for service, and the same is true of 'salary'. The words
seem to be synonymous, convertible terms, though we believe that use and general acceptation have given to the word
'salary' a significance somewhat different from the word 'wages' in this: that the former is understood to relate to position of
office, to be the compensation given for official or other service, as distinguished from 'wages', the compensation for labor."
Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code to operate in favor of any
but those who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look
to the reward of a day's labor for immediate or present support, and such persons are more in need of the exemption than
any others. Petitioner Rosario A. Gaa is definitely not within that class.
We find, therefore, and so hold that the Trial Court did not err in denying in its order of November 7, 1975 the motion of
petitioner to lift the notice of garnishment against her salaries, commission and other remuneration from El Grande Hotel
since said salaries, Commission and other remuneration due her from the El Grande Hotel do not constitute wages due a
laborer which, under Article 1708 of the Civil Code, are not subject to execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without merit and hereby AFFIRM the decision of the
Court of Appeals, with costs against petitioner.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.
Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.
G.R. No. L-56568 May 20, 1987
REPUBLIC OF THE PHILIPPINES, represented by the Bureau of Customs and the Bureau of Internal Revenue,
petitioner,
vs.
HONORABLE E.L. PERALTA, PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, BRANCH XVII,
QUALITY TABACCO CORPORATION, FRANCISCO, FEDERACION OBRERO DE LA INDUSTRIA TABAQUERA Y
OTROS TRABAJADORES DE FILIPINAS (FOITAF) USTC EMPLOYEES ASSOCIATION WORKERS UNION-PTGWO,
respondents.
Oscar A. Pascua for assignee F. Candelaria.
Teofilo C. Villarico for respondent Federation.
Pedro A. Lopez for respondent USTC.

FELICIANO, J.:
The Republic of the Philippines seeks the review on certiorari of the Order dated 17 November 1980 of the Court of First
Instance of Manila in its Civil Case No. 108395 entitled "In the Matter of Voluntary Insolvency of Quality Tobacco
Corporation, Quality Tobacco Corporation, Petitioner," and of the Order dated 19 January 1981 of the same court denying
the motion for reconsideration of the earlier Order filed by the Bureau of Internal Revenue and the Bureau of Customs for the
Republic.
In the voluntary insolvency proceedings commenced in May 1977 by private respondent Quality Tobacco Corporation (the
"Insolvent"), the following claims of creditors were filed:
(i) P2,806,729.92, by the USTC Association of Employees and workers Union-PTGWO USTC as separation pay for their
members. This amount plus an additional sum of P280,672.99 as attorney's fees had been awarded by the National Labor
Relations Commission in NLRC Case No. RB-IV-9775-77. 1
(ii) P53,805.05 by the Federacion de la Industria Tabaquera y Otros Trabajadores de Filipinas ("FOITAF), as separation pay
for their members, an amount similarly awarded by the NLRC in the same NLRC Case.
(iii) P1,085,188.22 by the Bureau of Internal Revenue for tobacco inspection fees covering the period 1 October 1967 to 28
February 1973;
(iv) P276,161.00 by the Bureau of Customs for customs duties and taxes payable on various importations by the Insolvent.
These obligations appear to be secured by surety bonds. 2 Some of these imported items are apparently still in customs
custody so far as the record before this Court goes.
In its questioned Order of 17 November 1980, the trial court held that the above-enumerated claims of USTC and FOITAF
(hereafter collectively referred to as the "Unions") for separation pay of their respective members embodied in final awards of
the National Labor Relations Commission were to be preferred over the claims of the Bureau of Customs and the Bureau of
Internal Revenue. The trial court, in so ruling, relied primarily upon Article 110 of the Labor Code which reads thus:
Article 110. Worker preference in case of bankruptcy In the event of bankruptcy or liquidation of an employer's business,
his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Union paid wages shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer.
The Solicitor General, in seeking the reversal of the questioned Orders, argues that Article 110 of the Labor Code is not
applicable as it speaks of "wages," a term which he asserts does not include the separation pay claimed by the Unions.
"Separation pay," the Solicitor General contends,
is given to a laborer for a separation from employment computed on the basis of the number of years the laborer was
employed by the employer; it is a form of penalty or damage against the employer in favor of the employee for the latter's
dismissal or separation from service. 3
Article 97 (f) of the Labor Code defines "wages" in the following terms:
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 and
reasonable value' shall not include any profit to the employer or to any person affiliated with the employer.(emphasis
supplied)
We are unable to subscribe to the view urged by the Solicitor General. We note, in this connection, that in Philippine
Commercial and Industrial Bank (PCIB) us. National Mines and Allied Workers Union, 4 the Solicitor General took a different
view and there urged that the term "wages" under Article 110 of the Labor Code may be regarded as embracing within its
scope severance pay or termination or separation pay. In PCIB, this Court agreed with the position advanced by the Solicitor
General. 5 We see no reason for overturning this particular position. We continue to believe that, for the specific purposes of
Article 110 and in the context of insolvency termination or separation pay is reasonably regarded as forming part of the
remuneration or other money benefits accruing to employees or workers by reason of their having previously rendered
services to their employer; as such, they fall within the scope of "remuneration or earnings for services rendered or to be
rendered ." Liability for separation pay might indeed have the effect of a penalty, so far as the employer is concerned. So
far as concerns the employees, however, separation pay is additional remuneration to which they become entitled because,
having previously rendered services, they are separated from the employer's service. The relationship between separation
pay and services rendered is underscored by the fact that separation pay is measured by the amount (i.e., length) of the
services rendered. This construction is sustained both by the specific terms of Article 110 and by the major purposes and
basic policy embodied in the Labor Code. 6 It is also the construction that is suggested by Article 4 of the Labor Code which
directs that doubts assuming that any substantial rather than merely frivolous doubts remain-in the interpretation of the
provisions of the labor Code and its implementing rules and regulations shall be "resolved in favor of labor."
The resolution of the issue of priority among the several claims filed in the insolvency proceedings instituted by the Insolvent
cannot, however, rest on a reading of Article 110 of the labor Code alone.
Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must
be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits,
which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-
preferred, may be adjudicated in a binding manner. 7 It is thus important to begin by outlining the scheme constituted by the
provisions of the Civil Code on this subject.
Those provisions may be seen to classify credits against a particular insolvent into three general categories, namely:
(a) special preferred credits listed in Articles 2241 and 2242,
(b) ordinary preferred credits listed in Article 2244; and
(c) common credits under Article 2245.
Turning first to special preferred credits under Articles 2241 and 2242, it should be noted at once that these credits constitute
liens or encumbrances on the specific movable or immovable property to which they relate. Article 2243 makes clear that
these credits "shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal
provisions governing insolvency." It should be emphasized in this connection that "duties, taxes and fees due [on specific
movable property of the insolvent] to the State or any subdivision thereof" (Article 2241 [1]) and "taxes due upon the
[insolvent's] land or building (2242 [1])"stand first in preference in respect of the particular movable or immovable property to
which the tax liens have attached. Article 2243 is quite explicit: "[T]axes mentioned in number 1, Article 2241 and number 1,
Article 2242 shall first be satisfied. " The claims listed in numbers 2 to 13 in Article 2241 and in numbers 2 to 10 in Articles
2242, all come after taxes in order of precedence; such claims enjoy their privileged character as liens and may be paid only
to the extent that taxes have been paid from the proceeds of the specific property involved (or from any other sources) and
only in respect of the remaining balance of such proceeds. What is more, these other (non-tax) credits, although constituting
liens attaching to particular property, are not preferred one over another inter se. Provided tax liens shall have been satisfied,
non-tax liens or special preferred credits which subsist in respect of specific movable or immovable property are to be treated
on an equal basis and to be satisfied concurrently and proportionately. 8 Put succintly, Articles 2241 and 2242 jointly with
Articles 2246 to 2249 establish a two-tier order of preference. The first tier includes only taxes, duties and fees due on
specific movable or immovable property. All other special preferred credits stand on the same second tier to be satisfied, pari
passu and pro rata, out of any residual value of the specific property to which such other credits relate.
Credits which are specially preferred because they constitute liens (tax or non-tax) in turn, take precedence over ordinary
preferred credits so far as concerns the property to which the liens have attached. The specially preferred credits must be
discharged first out of the proceeds of the property to which they relate, before ordinary preferred creditors may lay claim to
any part of such proceeds. 9
If the value of the specific property involved is greater than the sum total of the tax liens and other specially preferred credits,
the residual value will form part of the "free property" of the insolvent i.e., property not impressed with liens by operation of
Articles 2241 and 2242. If, on the other hand, the value of the specific movable or immovable is less than the aggregate of
the tax liens and other specially preferred credits, the unsatisfied balance of the tax liens and other such credits are to the
treated as ordinary credits under Article 2244 and to be paid in the order of preference there set up. 10
In contrast with Articles 2241 and 2242, Article 2244 creates no liens on determinate property which follow such property.
What Article 2244 creates are simply rights in favor of certain creditors to have the cash and other assets of the insolvent
applied in a certain sequence or order of priority. 11
Only in respect of the insolvent's "free property" is an order of priority established by Article 2244. In this sequence, certain
taxes and assessments also figure but these do not have the same kind of overriding preference that Articles 2241 No. 1 and
2242 No. I create for taxes which constituted liens on the taxpayer's property. Under Article 2244,
(a) taxes and assessments due to the national government, excluding those which result in tax liens under Articles 2241 No.
1 and 2242 No. 1 but including the balance thereof not satisfied out of the movable or immovable property to which such
liens attached, are ninth in priority;
(b) taxes and assessments due any province, excluding those impressed as tax liens under Articles 2241 No. 1 and 2242 No.
1, but including the balance thereof not satisfied out of the movable or immovable property to which such liens attached, are
tenth in priority; and
(c) taxes and assessments due any city or municipality, excluding those impressed as tax liens under Articles 2241 No. I and
2242 No. 2 but including the balance thereof not satisfied out of the movable or immovable property to which such liens
attached, are eleventh in priority.
It is within the framework of the foregoing rules of the Civil Code that the question of the relative priority of the claims of the
Bureau of Customs and the Bureau of Internal Revenue, on the one hand, and of the claims of the Unions for separation pay
of their members, on the other hand, is to be resolved. A related vital issue is what impact Article 110 of the labor Code has
had on those provisions of the Civil Code.
A. Claim of the Bureau of Customs for Unpaid Customs Duties and Taxes-
Under Section 1204 of the Tariff and Customs Code, 12 the liability of an importer
for duties, taxes and fees and other charges attaching on importation constitute a personal debt due from the importer to the
government which can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing It
also constitutes a lien upon the articles imported which may be enforced while such articles are in the custody or subject to
the control of the government. (emphasis supplied)
Clearly, the claim of the Bureau of Customs for unpaid customs duties and taxes enjoys the status of a specially preferred
credit under Article 2241, No. 1, of the Civil Code. only in respect of the articles importation of which by the Insolvent resulted
in the assessment of the unpaid taxes and duties, and which are still in the custody or subject to the control of the Bureau of
Customs. The goods imported on one occasion are not subject to a lien for customs duties and taxes assessed upon other
importations though also effected by the Insolvent. Customs duties and taxes which remain unsatisfied after levy upon the
imported articles on which such duties and taxes are due, would have to be paid out of the Insolvent's "free property" in
accordance with the order of preference embodied in Article 2244 of the Civil Code. Such unsatisfied customs duties and
taxes would fall within Article 2244, No. 9, of the Civil Code and hence would be ninth in priority.
B. Claims of the Bureau of Internal Revenue for Tabacco Inspection Fees
Under Section 315 of the National Internal Revenue Code ("old Tax Code"), 13 later reenacted in Identical terms as Section
301 of the Tax Code of 1977, 14 an unpaid "internal revenue tax," together with related interest, penalties and costs,
constitutes a lien in favor of the Government from the time an assessment therefor is made and until paid, "upon all property
and rights to property belonging to the taxpayer."
Tobacco inspection fees are specifically mentioned as one of the miscellaneous taxes imposed under the National Internal
Revenue Code, specifically Title VIII, Chapter IX of the old Tax Code and little VIII, Chapter VII of the Tax Code of 1977. 15
Tobacco inspection fees are collected both for purposes of regulation and control and for purposes of revenue generation:
half of the said fees accrues to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No.
3179, while the other half accrues to the Cultural Center of the Philippines. Tobacco inspection fees, in other words, are
imposed both as a regulatory measure and as a revenue-raising measure. In Commissioner of Internal Revenue us.
Guerrero, et al 16 this Court held, through Mr. Chief Justice Concepcion, that the term "tax" is used in Section 315 of the old
Tax Code:
not in the limited sense [of burdens imposed upon persons and/or properties, by way of contributions to the support of the
Government, in consideration of general benefits derived from its operation], but, in a broad sense, encompassing all
government revenues collectible by the Commissioner of Internal Revenue under said Code, whether involving taxes, in the
strict technical sense thereof, or not. x x x As used in Title IX of said Code, the term 'tax' includes 'any national internal
revenue tax, fee or charge imposed by the Code. 17
It follows that the claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees constitutes a claim for unpaid
internal revenue taxes 18 which gives rise to a tax lien upon all the properties and assets, movable and immovable, of the
Insolvent as taxpayer. Clearly, under Articles 2241 No. 1, 2242 No. 1, and 2246-2249 of the Civil Code, this tax claim must
be given preference over any other claim of any other creditor, in respect of any and all properties of the Insolvent. 19
C. Claims of the Unions for Separation Pay of Their Members
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon
all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at
all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the
extent that such claims for unpaid wages are already covered by Article 2241, number 6. "claims for laborers' wages, on the
goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals or other works." To the
extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come
within the ambit of the category of ordinary preferred credits under Article 2244.
Applying Article 2241, number 6 to the instant case, the claims of the Unions for separation pay of their members constitute
liens attaching to the processed leaf tobacco, cigars and cigarettes and other products produced or manufactured by the
Insolvent, but not to other assets owned by the Insolvent. And even in respect of such tobacco and tobacco products
produced by the Insolvent, the claims of the Unions may be given effect only after the Bureau of Internal Revenue's claim for
unpaid tobacco inspection fees shall have been satisfied out of the products so manufactured by the Insolvent.
Article 2242, number 3, also creates a lien or encumbrance upon a building or other real property of the Insolvent in favor of
workmen who constructed or repaired such building or other real property. Article 2242, number 3, does not however appear
relevant in the instant case, since the members of the Unions to whom separation pay is due rendered services to the
Insolvent not (so far as the record of this case would show) in the construction or repair of buildings or other real property, but
rather, in the regular course of the manufacturing operations of the Insolvent. The Unions' claims do not therefore constitute a
lien or encumbrance upon any immovable property owned by the Insolvent, but rather, as already indicated, upon the
Insolvent's existing inventory (if any of processed tobacco and tobacco products.
We come to the question of what impact Article 110 of the Labor Code has had upon the complete scheme of classification,
concurrence and preference of credits in insolvency set out in the Civil Code. We believe and so hold that Article 110 of the
Labor Code did not sweep away the overriding preference accorded under the scheme of the Civil Code to tax claims of the
government or any subdivision thereof which constitute a lien upon properties of the Insolvent. It is frequently said that taxes
are the very lifeblood of government. The effective collection of taxes is a task of highest importance for the sovereign. It is
critical indeed for its own survival. It follows that language of a much higher degree of specificity than that exhibited in Article
110 of the Labor Code is necessary to set aside the intent and purpose of the legislator that shines through the precisely
crafted provisions of the Civil Code. It cannot be assumed simpliciter that the legislative authority, by using in Article 110 the
words "first preference" and "any provision of law to the contrary notwithstanding" intended to disrupt the elaborate and
symmetrical structure set up in the Civil Code. Neither can it be assumed casually that Article 110 intended to subsume the
sovereign itself within the term "other creditors" in stating that "unpaid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of employer." Insistent considerations of public policy prevent us from giving to
"other creditors" a linguistically unlimited scope that would embrace the universe of creditors save only unpaid employees.
We, however, do not believe that Article 110 has had no impact at all upon the provisions of the Civil Code. Bearing in mind
the overriding precedence given to taxes, duties and fees by the Civil Code and the fact that the Labor Code does not
impress any lien on the property of an employer, the use of the phrase "first preference" in Article 110 indicates that what
Article 110 intended to modify is the order of preference found in Article 2244, which order relates, as we have seen, to
property of the Insolvent that is not burdened with the liens or encumbrances created or recognized by Articles 2241 and
2242. We have noted that Article 2244, number 2, establishes second priority for claims for wages for services rendered by
employees or laborers of the Insolvent "for one year preceding the commencement of the proceedings in insolvency." Article
110 of the Labor Code establishes "first preference" for services rendered "during the period prior to the bankruptcy or
liquidation, " a period not limited to the year immediately prior to the bankruptcy or liquidation. Thus, very substantial effect
may be given to the provisions of Article 110 without grievously distorting the framework established in the Civil Code by
holding, as we so hold, that Article 110 of the Labor Code has modified Article 2244 of the Civil Code in two respects: (a)
firstly, by removing the one year limitation found in Article 2244, number 2; and (b) secondly, by moving up claims for unpaid
wages of laborers or workers of the Insolvent from second priority to first priority in the order of preference established I by
Article 2244.
Accordingly, and by way of recapitulating the application of Civil Code and Labor Code provisions to the facts herein, the trial
court should inventory the properties of the Insolvent so as to determine specifically: (a) whether the assets of the Insolvent
before the trial court includes stocks of processed or manufactured tobacco products; and (b) whether the Bureau of
Customs still has in its custody or control articles imported by the Insolvent and subject to the lien of the government for
unpaid customs duties and taxes.
In respect of (a), if the Insolvent has inventories of processed or manufactured tobacco products, such inventories must be
subjected firstly to the claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees. The remaining value of
such inventories after satisfaction of such fees (or should such inspection fees be satisfied out of other properties of the
Insolvent) will be subject to a lien in favor of the Unions by virtue of Article 2241, number 6. In case, upon the other hand, the
Insolvent no longer has any inventory of processed or manufactured product, then the claim of the Unions for separation pay
would have to be satisfied out of the "free property" of the Insolvent under Article 2244 of the Civil Code. as modified by
Article 110 of the Labor Code.
Turning to (b), should the Bureau of Customs no longer have any importations by the Insolvent still within customs custody or
control, or should the importations still held by the Bureau of Customs be or have become insufficient in value for the
purpose, customs duties and taxes remaining unpaid would have only ninth priority by virtue of Article 2244, number 9. In
respect therefore of the Insolvent's "free property, " the claims of the Unions will enjoy first priority under Article 2244 as
modified and will be paid ahead of the claims of the Bureau of Customs for any customs duties and taxes still remaining
unsatisfied.
It is understood that the claims of the Unions referred to above do not include the 10% claim for attorney's fees. Attorney's
fees incurred by the Unions do not stand on the same footing as the Unions' claims for separation pay of their members.
WHEREFORE, the petition for review is granted and the Orders dated 17 November 1980 and 19 January 1981 of the trial
court are modified accordingly. This case is hereby remanded to the trial court for further proceedings in insolvency
compatible with the rulings set forth above. No pronouncement as to costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin, Sarmiento and
Cortes, JJ., concur,

[G.R. No. 107487. September 29, 1997]

THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity as Statutory
Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION, VICTOR L. MENDOZA,
RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior Officers similarly
situated; HORACE REYES and 14 other Senior Managers similarly situated; AURORA VILLACERAN and 34 other
Assistant Managers similarly situated; CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C. BERMUDEZ,
FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers similarly situated, respondents.
[G.R. No. 107902. September 29, 1997]
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity as Statutory
Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION-NCR, LABOR ARBITER
FELIPE PATI and VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and
19 other Senior Officers similarly situated; HORACE REYES, JOSE BELMONTE and 14 other Senior Managers and
53 Managers similarly situated; AURORA VILLACERAN and 34 other Assistant Managers similarly situated;
CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C. BERMUDEZ, FLORYPEE ABRIGO, EMMA
BALDERAMA, and 211 other Junior Officers similarly situated, respondents.
DECISION
KAPUNAN, J.:
The principal issue presented for resolution in these petitions for certiorari[if !supportFootnotes][1][endif] under Rule 65 of the Rules of
Court is whether or not public respondent National Labor Relations Commission (NLRC) committed grave abuse of discretion
in affirming with slight modifications Labor Arbiter Felipe Patis decision awarding herein private respondents claim of
P193,338,212.33 consisting of:
1. Wage increase of 25% of gross monthly wage from January 1985 to December 1988;
2. Christmas Bonus of one and one-half (1-1/2) months pay from December 1985 to December 1987;
3. Mid-year Bonus of one (1) month pay from 1985 to 1988, inclusive;
4. Profit Sharing of 5% of net profit for 1985 and 1986;
5. Differentials on accrued leaves, retirement benefits and Christmas and Mid-year bonuses;
6. Longevity pay, Loyalty Bonus and Medical, Dental and Optical Benefits;
7. Uniform allowance of P600.00 per year from January 1985 to January 1988, inclusive;
8. One-half (1/2) month pay 1987 Christmas Bonus which was deducted from the retirement benefit of each complainant;
9. Travel Plan and Car Plan with respect to the 23 complainants Senior Officers; and
10. Car Plan and Gasoline Allowance benefits with respect to the 15 complainants, Senior Managers and 54 Assistant
Managers.
annual interest thereon of 12% and attorneys fees amounting to 10% of the said amount.
The antecedents show that on June 5, 1984, petitioner Manila Banking Corporation (Manilabank) was placed under
comptrollership by then Central Bank Governor Jose B. Fernandez in view of the banks financial distress. [if !supportFootnotes][2][endif]
The decision of the Monetary Board of the Central Bank was based on the findings that the bank was experiencing liquidity
problems and had incurred chronic reserve deficiencies against deposit liabilities. In fact on May 23, 1984, a month before it
was placed under comptrollership, Manilabank was prohibited by the Monetary Board from granting new loans and making
new investments except investments in government securities with Central Bank support, and from declaring cash or stock
dividends.[if !supportFootnotes][3][endif]
A February 19, 1986 Central Bank report on Manilabanks financial condition as of December 31, 1985 disclosed, among
other things, that the banks operations for the preceding year resulted in a net loss of P362.4 million. It likewise revealed that
the banks financial condition continued to deteriorate. [if !supportFootnotes][4][endif]
Consequently, on May 22, 1987, the Monetary Board issued Resolution No. 505 prohibiting Manilabank from doing business
in the Philippines. The said resolution reads:
Finding to be true the statements of the Assistant to the Governor and Officer-in-Charge, Supervision and Examination
Sector (SES) Department I, in his memorandum dated April 28, 1987 submitting a report on the financial condition of the
Manila Banking Corporation (TMBC) as of March 31, 1987, that the financial condition of TMBC is one of insolvency and its
continuance in business would involve probable loss to its depositors and creditors and considering, among other things,
that:
1. During the 3-month period January 1 to March 31, 1987, TMBC incurred losses of 62.3 million , before interest on Central
Bank overdraft and penalties on reserve deficiencies (242.9 million for the three months);
2. Prior notices had been made to TMBC of a condition which may be considered as one indicating insolvency as defined
under Sec. 29 of R.A. No. 265, as amended, in various letters of Mr. Antonio T. Castro, Jr., Special Assistant to the Governor
and Head, SES Department I, dated December 9, 1985, December 13, 1985 and October 16, 1986 and in a letter of the
Governor, dated February 27, 1987;
3. Mr. Vicente G. Puyat, in response to his request conveyed by Mrs. Reyes to the Monetary Board, for a chance to appear
before the Monetary Board in representation of the majority stockholders of TMBC, in connection with the rehabilitation plan
for TMBC, had been invited three times to appear before the Board: first, on May 13, 1987, then on May 18, 1987 upon his
request, and on May 22, 1987, which invitations he did not respond to himself and neither did he attend the Board meetings
held on May 18, 1987 and May 22, 1987;
4. TMBC has not submitted a rehabilitation plan accepted to the Central Bank; and
5. The said Assistant to the Governor, who was present during the Monetary Board meeting held on May 22, 1987, had
categorically confirmed that, after considering all the adjustments, TMBC would still be insolvent even with an additional
capital infusion of P500 million.
the Board decided as follows:
1. To prohibit TMBC to do business in the Philippines and place its assets and affairs under receivership in accordance with
the provisions of Section 29 of R.A. No. 265, as amended; and
2. To designate the Assistant to the Governor and Officer-in-Charge, SES Department I, as Receiver of TMBC, to
immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors exercising all the powers necessary for these purposes including, but not
limited to, bringing suits and foreclosing mortgages in its name. [if !supportFootnotes][5][endif]
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He immediately took charge of the banks assets and liabilities.
He likewise terminated the employment of about 343 officers and top managers of the bank. All these officers and top
managers, who are private respondents herein, were paid whatever separation and/or retirement benefits were due them.
On November 11, 1988, the Monetary Board issued Resolution No. 1003 ordering the liquidation of Manilabank on account
of insolvency. The resolution reads as follows:
Having determined and confirmed on the basis of the memorandum of the Special Assistant to the Governor and Head,
Supervision and Examination Sector (SES) Department I, and Receiver, The Manila Banking Corporation (TMBC), dated
November 4, 1988, submitting a report on the financial condition of TMBC as of July 31, 1988, that the financial condition of
the bank continues to be one of insolvency and it can no longer resume business with safety to its depositors, creditors and
the general public, considering the opinion of the Central Bank legal counsel that, with the Supreme Courts decision dated
March 10, 1988 (a) setting aside the decision of the Court of Appeals sustaining the decision of the Regional Trial Court to
issue a writ of preliminary injunction dated July 14, 1987 against the enforcement of Monetary Board Resolution No. 505
dated May 22, 1987, (b) dissolving the said writ of preliminary injunction, and (c) making permanent the temporary restraining
order issued by the Supreme Court on February 16, 1988, the liquidation of TMBC may now be ordered by the Monetary
Board and that its authority to order such liquidation is not affected by the pendency of Civil Case No. 87-40659 nor of the
Supreme Courts resolution of March 10, 1988 (enjoining the Court of Appeals from interfering in the receivership of TMBC),
the Board decided as follows:
1. To order the liquidation of TMBC in accordance with Section 29 of R.A. No. 265, as amended; and
2. To designate Mr. Renan V. Santos, Special Assistant to the Governor, and Head, Supervision and Examination Sector
Department V, as Liquidator of TMBC.[if !supportFootnotes][6][endif]
Of even date, private respondents filed a complaint against ManilaBank and its statutory receiver with the arbitration branch
of the National Labor Relations Commission (NLRC) claiming entitlement to the following additional benefits alleged to have
accrued from 1984 to their effective dates of termination, viz: (a) Wage increases; (b) Christmas bonuses; (c) Mid-year
bonuses; (d) Profit sharing; (e) Car and travel plans; (f) Gasoline allowances; (g) Differentials on accrued leaves, retirement
and other bonuses; (h) Longevity pay and loyalty pay; (i) Medical, dental and optical benefits; and (j) Uniform allowances. [if
!supportFootnotes][7][endif] Such claims to entitlement of the foregoing benefits was based on Manilabanks alleged practice, policy

and tradition of awarding said benefits. They contended that the policy has ripened into vested property rights in their favor.
Manila bank, on its part, alleged that the additional benefits sought are without basis in fact and in law. It argued that the
same are conferred by management only when it deems necessary to do so. The award of the said benefits is in the nature
of a management prerogative which, it contended, can be withheld by management upon a clear showing that the company
is not in a position to grant them either because of financial difficulties or circumstances which do not warrant conferment of
such benefits. And since it was experiencing financial distress, it claimed that it was in no position to give the benefits sought.
Additionally, it asseverated that it was deprived of its right to present evidence in a full-blown trial by the labor arbiter.
On November 14, 1989, Labor Arbiter Felipe Pati rendered his decision ordering Manilabank and its statutory receiver to pay
in full all the claims of private respondents amounting to P193,338,212.33, plus 12% interest annually and 10% of the total
award as attorneys fees. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the complainants and against the respondents, ordering and
authorizing the Receiver RENAN V. SANTOS to pay, pursuant to the provisions of Article 110 of the Labor Code, as
amended:
1.The complainants the net amount of claims due appearing opposite the name of each complainant listed in the
Computation of Net Claim consisting of six (6) pages hereto attached and made part of this Decision;
2.The complainants counsel the amount equal to 10% of the total amount awarded to complainants in this action as attorneys
fees.
SO ORDERED.[if !supportFootnotes][8][endif]
On November 25, 1989, petitioners Manilabank and the CB statutory receiver appealed to the NLRC and posted an appeal
bond in the form of a certification from the Central Bank to the effect that the portion of Manilabanks funds in an amount
equal to that of the total award of the labor arbiter, has been reserved and set aside by the Central Bank to answer for the
private respondents claims should they finally be adjudged to be entitled thereto.
On December 8, 1989, private respondents opposed the appeal and filed a motion for the issuance of a writ of execution of
the labor arbiters judgment on the ground that the Central Bank certification cannot be considered as an appeal bond.
On June 21, 1991, the NLRC issued an order requiring petitioners to deposit with the Cashier of the NLRC a cash bond or its
equivalent in treasury bills, warrants and/or other government securities in the amount of P193,000,000.00, plus ten percent
(10%) thereof as attorneys fees within ten (10) days from receipt thereof.
On July 5, 1991, petitioners moved to reconsider said order. However, pending resolution of said motion for reconsideration,
petitioners submitted to the NLRC a Certificate of Time Deposit issued by the Philippine National Bank (PNB) in the amount
of P212,700,000.00, payable to the receiver of Manilabank.
On January 16, 1992, the NLRC held a hearing where the parties agreed that the certificate of time deposit submitted by
Manilabank to the NLRC be considered substantial compliance of the requirement of an appeal bond, on the condition that it
will be periodically renewed and re-deposited with the NLRC Cashier upon its maturity, and that the securities deposited
should be free from any other claims or liens.
On September 9, 1992, the NLRC issued a resolution on the merits of the case and, as above-stated, affirmed with slight
modifications, the decision of the labor arbiter. The decretal portion of the same reads:
WHEREFORE, except for the modification we provided on the manner medical, dental and optical benefits should be
claimed/paid, and our awarding annual interest of 12% to whatever has been awarded below, the appealed decision is
hereby affirmed and respondents appeal is hereby dismissed.
SO ORDERED.[if !supportFootnotes][9][endif]
Petitioners filed a motion for reconsideration from the aforequoted resolution.
On October 14, 1992, private respondents filed an ex parte motion for the issuance of a writ of execution. Petitioners
opposed the same, reasoning that the assets of Manilabank are exempt from execution and that the NLRC resolution had not
become final and executory.
On October 22, 1992, the NLRC issued an order directing petitioners, under pain of contempt, to renew the certificate of time
deposit and to have the same issued in the name of , and deposited with, the cashier of the NLRC.
In response, petitioners Manilabank and Arnulfo Aurellano filed petition for certiorari before this Court, docketed as G.R. No.
107487, to set aside said order alleging that the same was issued with grave abuse of discretion because it (as re-phrased):
a. violated an existing statute.[if !supportFootnotes][10][endif]
b. arbitrary compelled the Receiver to violate his statutory duty to preserve Manilabanks assets for the benefit of all
creditors.[if !supportFootnotes][11][endif]
c. whimsically deprived petitioners of their right to file a motion for reconsideration of the Order. [if !supportFootnotes][12][endif]
d. was not anchored upon any cogent reason other than to preempt petitioners from invoking the corrective powers of this
Honorable Court of last resort.[if !supportFootnotes][13][endif]
On November 26, 1992, petitioners earlier motion for reconsideration of the NLRC Decision dated September 9, 1992 was
denied for lack of merit in an order which dispositively reads as follows:
Wherefore, premises considered, order is hereby issued:
1. denying respondents motion for reconsideration;
2. directing the NLRC Cashier to hold in her custody re-submitted Certificate of Time Deposit No. 890530-D dated October
27, 1992 with maturity date on December 28, 1992;
3. directing the respondents to post an additional bond, either in cash, surety, or certificate of time deposit drawn in the name
of the Cashier, NLRC, in the amount of P76,572,000.00 to cover, the additional award detailed in our September 9, 1992
resolution;
4. directing, accordingly, the Executive Clerk to cause the personal service of this Order upon the parties, particularly the
respondents and their counsel; and
5. holding in abeyance the execution of our September 9, 1992 resolution (despite its finality now) for a period of ten (10)
calendar days from respondents receipt of this Order, with the warning, however, that should this Commission not receive a
restraining order from the Supreme Court within said period of ten (10) calendar days, then a writ of execution will be issued
to enforce our now final judgment.
SO ORDERED.[if !supportFootnotes][14][endif]
Consequently, petitioners filed another petition for certiorari before this Court, this time docketed as G.R. No. 107902,
contending that:
a. Public respondents, in grave abuse of discretion, effectively violated petitioners right due process because-
(1) The monstrous award totaling about P212 million was decided based purely on private respondents worthless papers
which were never identified nor supported by any single affidavit.
(2) The Labor Arbiter proceeded to decide the case solely on the bases of the pleadings filed, despite the enormity of the
claims and the reapeted demands for a full-dress trial (which, ironically, were initially granted by the Office of the Labor
Arbiter), made necessary by the conflicting factual allegations of the parties and the worthless papers passed off by private
respondents as their evidence.[if !supportFootnotes][15][endif]
b. Public respondents unlawfully arrogated unto themselves the jurisdiction to pass upon the question of Manilabanks
insolvency, despite the pleaded pendency of that prejudicial question before the RTC of Manila which had aquired exclusive
jurisdiction to rule on the issue to the exclusion of all others.[if !supportFootnotes][16][endif]
c. The money award adjudged against the insolvent Manilabank violates all notions of justice and equity, considering that the
beneficiaries thereof are former officers and top managers of Manilabank who, being part of management, were partly to
blame for the banks financial decline.[if !supportFootnotes][17][endif]
d. A statutory receiver has the power to adopt and implement prudent policies aimed at preserving the assets of an insolvent
bank including regulating, according to his own discretion and judgment, all aspects of employment. [if !supportFootnotes][18][endif]
e. Public respondents arbitrary findings that salary increases, Christmas and mid-year bonuses and other benefits have been
regularly and unconditionally paid by Manilabank to private respondents, and that Manilabank earned profits in 1984, 1985
and 1986, are contrary to the evidence on record and are based on pure unsubstantiated guesswork. [if !supportFootnotes][19][endif]
f. The award of attorneys fees is unconscionable, especially in light of its dissipative effect of the remaining assets of the
insolvent Manilabank and its prejudicial consequences on Manilabanks stockholders and creditors. [if !supportFootnotes][20][endif]
g. The NLRCs award of legal interest on the amount awarded by the labor arbiter and its order to deposit an additional bond
to cover such interest have no legal basis and give an undue advantage to other creditors of the insolvent Manilabank. [if
!supportFootnotes][21][endif]

h. The NLRCs threat to execute the judgment would be unlawful if carried out, because Manilabanks assets are legally
exempt from execution.[if !supportFootnotes][22][endif]
On December 9, 1992, this Court ordered that G.R. No. 107902 be consolidated with G.R. No. 107487.[if !supportFootnotes][23][endif]
On December 16, 1992, this Court issued a Resolution temporarily enjoining public respondent NLRC from enforcing and/or
carrying out the decision of the labor arbiter dated November 14, 1989 and its resolution dated September 9, 1992 and order
dated November 26, 1992, all issued in NLRC NCR Case No. 00-11-04624-88.[if !supportFootnotes][24][endif]
G.R. No. 107902 is impressed with merit.
Both the Labor Arbiter and the NLRC opted to award all the additional benefits claimed by the 343 private respondents who
had already been duly paid separation pay and/or retirement benefits upon termination of their employment. The NLRC
erroneously adopted the findings of the labor arbiter, misapplying the time-honored rule that factual findings of quasi-judicial
agencies are accorded not only respect but even finality if supported by substantial evidence. It declared that the additional
benefits sought are in the nature of bonuses which when made part of the wage or salary or compensation of an employee
become demandable and enforceable.[if !supportFootnotes][25][endif]
Both the Labor Arbiters and the NLRCs findings and conclusions are flawed.
By definition, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of
right.[if !supportFootnotes][26][endif] It is something given in addition to what is ordinarily received by or strictly due the recipient. The
granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the employees basic salaries or
wages,[if !supportFootnotes][27][endif] especially so if it is incapable of doing so.
In Philippine Education Co., Inc. v. Court of Industrial Relations,[if !supportFootnotes][28][endif] cited in Philippine duplicators, Inc. v.
NLRC,[if !supportFootnotes][29][endif] the Court expounded on the nature of a bonus, thus:
As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the
success of the employers business and made possible the realization of profits. It is an act of generosity of the employer for
which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of bigger profits. xxx From the legal point of view, a bonus is
not a demandable and enforceable obligation. It is so when it is made part of the wage or salary or compensation. In such a
case the latter would be fixed amount and the former would be a contingent one dependent upon the realization of profits.
xxx . (Italics supplied).[if !supportFootnotes][30][endif]
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success in business or
realization of profits. How then can an employer be made liable to pay additional benefits in the nature of bonuses to its
employees when it has been operating on considerable net losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80s. As early as 1984, the Central
Bank found that Manilabank had been suffering financial losses. Presumably, the problems commenced even before their
discovery in 1984. As earlier chronicled, the Central Bank placed petitioner bank under comptrollership in 1984 because of
liquidity problems and excessive interbank borrowings. In 1987, it was placed under receivership and was ordered to close
operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and 1986, thus, resulting
to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no success in business or realization of profits to
speak of that would warrant the conferment of additional benefits sought by private respondents. No company should be
compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law when it is
plagued by economic difficulties and financial losses. No act of enlightened generosity and self-interest can be exacted from
near empty, if not empty, coffers.
Consequently, on the ten (10) items awarded to herein private respondents (enumerated at page 3) which represent
additional benefits, they having already been paid separation and retirement benefits, we rule as follows:
First. The award of 5% profit sharing of petitioner banks net profits for the years 1985 and 1986 is deleted as there were
clearly no profits to share during that period given the banks financial status in 1985 and 1986 when it was operating on net
losses.
Second. The award of wage increases and Christmas and mid-year bonuses from 1985 to 1988, being in the nature of
gratuities and dependent as they on the petitioners liberality and capability to give, is likewise deleted for same reasons
above stated.
Third. The award of differentials on accrued leaves, retirement benefits and Christmas and mid-year bonuses is also deleted
as a necessary and logical consequence of the denial of the wage increases and Christmas and mid-year bonuses.
Fourth. The award of medical, dental and optical benefits is well-taken and, therefore, affirmed.
Fifth. The claim for travel plans for 23 senior officers, and car plans and gasoline allowances for 23 senior officers, 15 senior
managers and 54 assistant managers may only be granted to those officers who have not yet availed of the said benefit
subject to the proper determination by the labor arbiter.
Sixth and last. Claims for longevity pay, loyalty bonuses and uniform allowance of P600.00 for 1985 may be granted given
the apparent loyalty and allegiance shown by herein private respondents to petitioner bank despite rough sailing during the
said period of time.
That disposes of G.R. No. 107902.
With respect to G.R. No. 107487, the same is dismissed, the issues raised therein having been rendered moot and academic
by the foregoing disquisitions and disposition. Besides, it is beyond dispute that employees indeed enjoy first preference in
the event of bankruptcy or liquidation of an employers business. [if !supportFootnotes][31][endif]
WHEREFORE, premises considered, G.R. No. 107902 is GRANTED and is hereby REMANDED to the Labor Arbiter
for the proper computation of the monetary awards in accordance with the foregoing disquisition and with reasonable
dispatch. G.R. No. 107487 is hereby DISMISSED.
SO ORDERED.
[G.R. No. 146572. January 14, 2005]
CIRINEO BOWLING PLAZA, INC., petitioner, vs. GERRY SENSING, BELEN FERNANDEZ, MIRASOL DIAZ,
MARGARITA ABRIL, DARIO BENITEZ, MANUEL BENITEZ, RONILLO TANDOC, EDGAR DIZON, JOVELYN QUINTO,
KAREN REMORAN, JENIFFER RINGOR, DEPARTMENT OF LABOR AND EMPLOYMENT and COURT of APPEALS,
respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a special civil action for certiorari filed by petitioner assailing the Resolution[1] dated August 31, 2000 of the Court
of Appeals (CA) which dismissed petitioners petition for certiorari; and the Resolution[2] dated November 10, 2000 which
denied petitioners motion for reconsideration.
The antecedent facts are as follows:
On November 27, 1995, Eligio Paolo, Jr., an employee of petitioner, filed a letter complaint with the Department of Labor and
Employment (DOLE for short), Dagupan District Office, Dagupan City, requesting for the inspection/investigation of petitioner
for various labor law violations like underpayment of wages, 13 th month pay, non-payment of rest day pay, overtime pay,
holiday pay and service incentive leave pay.[3] Pursuant to the visitorial and enforcement powers of the Secretary of Labor
and Employment, his duly authorized representative under Article 128 of the Labor Code, as amended, conducted
inspections on petitioners establishment the following day. In his inspection report,[4] Labor and Employment Officer III,
Crisanto Rey Dingle, found that petitioner has thirteen [5] employees and had committed the following violations:
underpayment of minimum wage, 13th month pay, holiday premiums, overtime premiums, and non-payment of rest day. The
findings in the inspection report were explained to petitioners officer-in-charge, Ma. Fe Boquiren, who signed the same.
The first hearing of the case was scheduled on December 27, 1995, but petitioner failed to appear, thus, the hearing was
reset to January 10, 1996. On the date set, Boquiren, as petitioners representative, appeared with the information that
petitioners President/General Manager Luisito Cirineo was sick and confined in a hospital.
On the January 19, 1996 hearing, Cirineo appeared and asked for more time to settle with his employees. The case was
again set on January 26, 1996 but Cirineo failed to appear.
On April 22, 1996, an Order[6] was issued by the DOLE Regional Office, the dispositive portion of which reads:
WHEREFORE, premises considered and considering further that the amount computed constitutes part of the lawful
remunerations of thirteen affected employees, respondent is hereby ordered to pay them the total amount of THREE
HUNDRED SEVENTY SEVEN THOUSAND FIVE HUNDRED PESOS AND 58/100. (P377,500.58), representing their
unpaid/underpaid wages, 13th month pay, holiday premiums, rest day pay and overtime premiums distributed as follows:
NAME AMOUNT
1. Gerry Sensing P 9,505.68
2. Belen Fernandez 14,258.52
3. Mirasol Diaz 12,458.52
4. Margarita Abril 31,557.12
5. Lamberto Solano 53,151.12
6. Dario Benitez 53,151.12
7. Manuel Benitez 53,151.12
8. Ronillo Tandoc 36,951.12
9. Edgar Dizon 14,637.78
10. Jovelyn Quinto 22,769.88
11. Karen Remoran 21,387.78
12. Jennifer Ringor 37,304.82
13. Eligio Paolo, Jr. 12,810.00
TOTAL P 373,094.58
and to submit the proof of payment to this Office within ten (10) days from receipt hereof. Otherwise, a Writ of Execution will
be issued to enforce this order.
Respondent is further ORDERED to adjust the salaries of its employees to the applicable daily minimum wages and to
submit the proof thereof within the same period.
SO ORDERED.[7]
copy of which was received by petitioners counsel on May 17, 1996. No motion for reconsideration or appeal memorandum
was filed by petitioner.
On May 27, 1996, petitioners representative, Carmen Zapata, appeared before the DOLE Regional Office and submitted the
quitclaims, waivers and releases of employees-awardees, Lamberto Solano, Jovelyn Quinto, Manuel Benitez, Edgar Dizon,
Ronillo Tandoc, Eligio Paolo, Jr., and Dario Benitez. Later, however, Benitez, Tandoc, Quinto and Dizon wrote DOLE a letter
denying having received any amount from petitioner. Thus, DOLEs inspector Dingle went to petitioners establishment to
confirm the authenticity of the quitclaims and releases and talked to the employees concerned who stated that they signed
the document without knowing its contents but they are willing to settle if they will be given the amount computed by DOLE.
On June 19, 1996, Luisito Cirineo and a certain Fe Cirineo Octaviano, owner of Esperanza Seafoods Kitchenette stationed in
petitioners establishment, wrote DOLE a letter requesting that the case be endorsed to the National Labor Relations
Commission since the resolution of the case required evidentiary matters not disclosed or verified in the normal course of
inspection. They also submitted documents to show that petitioner and Esperanza Seafoods Kitchenette are separate and
distinct business entities and that some of the employees-awardees are actually employees of the Esperanza Seafoods
Kitchenette.
On September 12, 1996, DOLE issued its Order[8] stating among others:
Records show that respondent, Luisito Cirineo and his representative appeared before this Office during the summary
investigation of this instant case but they never once mentioned the issue of separate juridical personalities. Respondent
had always been bent on settling the respective claims of all thirteen (13) concerned employees. In the process,
however, he acknowledged being their employer. He cannot at this juncture therefore say, that some of the
awardees in our ORDER are employees of another business entity. This being the case, we cannot grant his request for
indorsement to the NLRC.
WHEREFORE, premises considered, the case of employees Eligio Paolo, Jr. and Lamberto Solano whose respective claims
had been settled by respondent is hereby DISMISSED. The ORDER for the payment of the monetary claims of the eleven
(11) other cash awardees STANDS. Let execution follow immediately. [9] (Emphasis supplied)
On October 21, 1996, DOLE Regional Director Maximo B. Lim issued a writ of execution. [10] On November 13, 1996,
petitioner filed a motion to quash[11] the writ of execution alleging the following grounds:
I. The Writ of Execution seeks to satisfy the monetary awards given to employees who are not employees of Cirineo Bowling
Plaza, Inc..
II. The Writ of Execution seeks to satisfy monetary awards given to employees of Fe Esperanza C. Octaviano who was not
impleaded.
III. The Writ of Execution seeks to satisfy monetary awards wrongfully given to employees employed by establishments
employing less than ten (10) employees, who are not for this reason entitled to holiday and holiday premium pay, nor to
underpayment of wages.
IV. The Writ of Execution seeks to satisfy the award of benefits in excess of the jurisdictional amount allowed by law.
V. The Writ of Execution seeks to enforce an Order issued beyond the quasi-judicial authority of the Regional Director[12].
In an Order[13] dated February 7, 1997, DOLE Regional Director Lim denied petitioners motion to quash the writ of execution.
Petitioner filed its Memorandum of Appeal to the Secretary of Labor and Employment[14] who dismissed the appeal on the
ground that same was filed out of time.[15] On motion for reconsideration, the appeal was granted and the appeal was given
due course.
However, on March 30, 1999, DOLE Undersecretary Jose Espaol dismissed the appeal and affirmed the order dated
February 7, 1997 of the DOLE Regional Director with the following disquisitions:
In support thereof, respondent alleges that it had only eight (8) employees as the other claimants of labor benefits . . . are
employees of Fe Esperanza Octaviano doing business under the name and style Esperanza Seafoods Kitchenette. Thus, it
points out that:
...
Hence, under the Labor Code, Article 94 thereof the employees of the appellant are not entitled to holiday pay and holiday
premium pay.
Under Republic Act 6727 and its Implementing Rules, Chapter 1, Section 1 thereof, establishments employing less than ten
(10) employees are exempted from compliance with minimum wage rates. Hence, the wages given to respondents do not
constitute under payments. As to their claims for overtime pay and rest day pay, there is no proof that respondents rendered
overtime or restday work, hence they are not entitled to the same. (Cagampanan vs. NLRC, 195 SCRA 533)
We do not agree.
The records show that during the summary investigation respondent never refuted the findings of the labor inspector
particularly the identity of the thirteen (13) concerned employees nor raised the issue of separate juridical personalities of
respondent Cirineo and Esperanza Seafoods Kitchenette. Thus, in the Order dated 07 February 1997, the Regional Director
ruled:
. . . Respondents actuation during and after the summary investigation disclosed that it was bent on settling all the claims of
the claimant-awardees and never did it refute the identity of the concerned awardees. Otherwise, respondent could have
easily raised the issue by admitting evidence such as payrolls, daily time records and any similar document which could have
pinpointed the real employer of the claimants.
...
The documents submitted to this Office by respondent could be interpreted as a desperate attempt to mislead this Office and
to evade liability.
On the issue of jurisdiction, we rule that the Regional Director has jurisdiction over the instant case.
The old rule limiting the jurisdiction of the Secretary of Labor and Employment or his duly authorized representatives to
money claims not exceeding P5,000.00 has been repealed by the passage of R.A. No. 7730, Section 1 of which reads:
Section 1. Paragraph (b) of Article 128 of the Labor Code. As amended, is hereby further amended to read as follows:
Art. 128. Visitorial and Enforcement Power.
...
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representative shall have the
power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation
based on the finding of the labor employment and enforcement officer or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for
the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not considered in the course of
inspection.
Pursuant to R.A. 7730, the jurisdictional limitations imposed by Article 129 on the visitorial and enforcement powers of this
Office under Article 128 of the Labor Code, have been repealed. The phrase notwithstanding the provision of Articles 129
and 217 of the Labor Code to the contrary, erases all doubts as to the amendatory nature of R.A. No. 7730. The amendment,
in effect, overturned the rulings in the Aboitiz and Servandos cases insofar as the restrictive effect of Article 129 on the use of
the power under Article 128 is concerned.
Indeed, the Supreme Court in Nazareno Furniture vs. Hon. Secretary of Labor and Employment and Tomas Mendoza (G.R.
No. 128546, April 30, 1997), already ruled that:
Petitioner is incorrect in stating that R.A. 7730 did not specifically amend Art. 217 of the Labor Code. In fact, it is plainly
stated that the amendment applies notwithstanding the provisions of Articles 129 and 217 to the contrary. Even if Article 217
confers original and exclusive jurisdiction over cases such as the one subject of this petition, this has been modified by the
later enactment of R.A. 7730. . . .[16]
Petitioners motion for reconsideration was denied in a Resolution dated April 18, 2000. [17]
Petitioner filed a petition for certiorari with prayer for the issuance of temporary restraining order with the CA.
On August 31, 2000, the CA dismissed the petition for failure of petitioner to (1) attach a copy of the letter complaint filed by
petitioners employees and the Order dated February 7, 1997 of the DOLE Regional Director and (2) state the material date
when the assailed Orders/Resolutions were received pursuant to Section 1 of Rule 65 and Section 3 of Rule 46 of the 1997
Rules of Civil Procedure. Petitioner filed a motion for reconsideration which was also denied by the CA on November 10,
2000, copy of which was received by petitioner on November 24, 2000.
Petitioner comes to us by way of a petition for certiorari under Rule 65 raising the sole issue:
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DISMISSED THE INSTANT PETITION AND OUTRIGHT DISMISSAL OF PETITIONERS MOTION
FOR RECONSIDERATION DUE TO MERE TECHNICALITIES.
Respondents did not file their comment on the petition.
We dismiss the petition.
We find no grave abuse of discretion committed by the CA in issuing the assailed resolutions. The CA dismissed the petition
for certiorari for failure of petitioner to attach certain documents and to state the material date. While petitioner filed its motion
for reconsideration, attaching the required documents, the CA correctly found that it still did not state the material date when
it received the DOLEs Resolution dated April 18, 2000 denying its motion for reconsideration. Thus, without the date of
receipt of the denial of such motion, the CA could not determine whether the petition was filed within the reglementary period
of sixty days for filing the petition for certiorari under Rule 65 of the Rules of Court. Under Section 3, Rule 46 of the 1997
Rules of Civil Procedure, as amended by SC Circular No. 39-98, in original actions for certiorari filed with the CA, the petition
must include the following material dates, to wit:
Section 3. Contents and filing of petition; effect of non-compliance with requirements.-
...
In actions filed under Rule 65, the petition shall further indicate the material dates showing when the notice of the judgment
or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and
when notice of the denial thereof was received.
...
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the
petition.
It bears stressing that the timely perfection of an appeal is a mandatory requirement, which cannot be trifled with as a mere
technicality to suit the interest of a party. The rules on periods for filing appeals are to be observed religiously, and parties
who seek to avail themselves of the privilege must comply with the rules. [18] The failure to perfect an appeal as required by
law renders the judgment final and executory. [19]
While there are exceptional cases where we set aside procedural defects to correct a patent injustice, there should be an
effort on the part of the party invoking liberality to at least explain its failure to comply with the rules. [20] It appears that
petitioners new counsel failed to state the material date twice, first in its petition filed with the CA and, second, in its motion
for reconsideration. Petitioners explanation focused on the fact that its President, Luisito Cirineo, only learned of the DOLEs
denial of its motion for reconsideration on August 1, 2000 when he came back from a trip from Europe; that efforts to
communicate with its former counsel remained futile. We find such explanation unsatisfactory since the material dates can
easily be verified from the files of the DOLE office.
Even if we disregard technicality, we find the arguments raised by petitioner without merit. As correctly held by the DOLE
Regional Director and sustained by the DOLE Undersecretary, records show that petitioner never refuted the findings of the
labor inspector as to the identity of the thirteen employees nor raised the issue of separate juridical personalities of petitioner
Cirineo and Esperanza Seafoods Kitchenette during the investigation and on the hearings conducted.
Likewise, we sustain the jurisdiction of the DOLE Regional Director. The visitorial and enforcement powers of the DOLE
Regional Director to order and enforce compliance with labor standard laws can be exercised even where the individual claim
exceeds P5,000.00.[21] In Allied Investigation Bureau, Inc. vs. Secretary of Labor and Employment,[22] we elucidated:
Petitioner argues that the power to adjudicate money claims belongs to the Labor Arbiter who has exclusive jurisdiction over
employees claims where the aggregate amount of the claims of each employee exceeds P5,000.00; and, that the Labor
Arbiter has jurisdiction over all other claims arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos (P5,000.00), whether or not accompanied with a
claim for reinstatement.
Petitioners arguments are untenable.
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear and decide cases
where the aggregate money claims of each employee exceeds P5,000.00, said provisions of law do not contemplate nor
cover the visitorial and enforcement powers of the Secretary of Labor or his duly authorized representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code (as amended by R.A. No. 7730) thus:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to
employers records and premises at any time of the day or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued
pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for
the enforcement of their orders, except in cases where the employer contests the finding of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not considered in the course of
inspection.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involved a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in the order appealed from.
...
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase
(N)otwithstanding the provisions of Articles 129 and 217 of this Code to the contrary . . . thereby retaining and further
strengthening the power of the Secretary of Labor or his duly authorized representative to issue compliance orders to give
effect to the labor standards provisions of said Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of inspection.
In the case at bar, the Office of respondent Regional Director conducted inspection visits at petitioners establishment on
February 9 and 14, 1995 in accordance with the above-mentioned provision of law. In the course of said inspection, several
violations of the labor standard provisions of the Labor Code were discovered and reported by Senior Labor Enforcement
Officer Eduvigis A. Acero in his Notice of Inspection Results. It was on the bases of the aforesaid findings (which petitioner
did not contest), that respondent Regional Director issued the assailed Order for petitioner to pay private respondents the
respective wage differentials due them.
Clearly, as the duly authorized representative of respondent Secretary of Labor, and in the lawful exercise of the Secretarys
visitorial and enforcement powers under Article 128 of the Labor Code, respondent Regional Director had jurisdiction to issue
his impugned Order.
In a recent case, the Supreme Court ruled in this wise:
Assailed in this special civil action for certiorari is the Order dated August 1, 1995 issued by public respondent Regional
Director Romeo A. Young of the Department of Labor and Employment (DOLE) in Case No. NCROO-9503-IS-035, ordering
petitioner Lord and Lady Salon to pay private respondent Ateldo Barroga the sum of P14,099.05 representing his underpaid
wages and premium pay for work on holidays. This suit is an offshoot of the complaint for payment of salary differentials filed
by private respondent against petitioner on March 20, 1995. Upon investigation conducted by public respondents office,
petitioner was found to have committed the following violations: (1) underpayment of wages, (2) non-implementation of
premium pay for worked legal holidays, and (3) non-availability of records at the time of inspection. Consequent to the parties
failure to reach an amicable settlement, public respondent issued the assailed resolution. Petitioner asserts that public
respondent exceeded his jurisdiction in taking cognizance of the complaint and ordering the payment of P14,099.05 to
private respondent because the award of the latter amount goes over the jurisdictional amount of P5,000.00 for cases filed
before the Regional Director, thus, is properly cognizable by the Labor Arbiter instead.
We dismiss the petition. Pursuant to Section 1 of Republic Act 7730 [Approved on June 2, 1994] which amended Article 128
(b) of the Labor Code, the Secretary of Labor and Employment or his duly authorized representative, in the exercise of their
visitorial and enforcement powers, are now authorized to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection, sans any restriction with respect to the jurisdictional amount of
P5,000.00 provided under Article 129 and Article 217 of the Code.
The instant case therefore falls squarely within the coverage of the aforecited amendment as the assailed order was issued
to enforce compliance with the provisions of the Code with respect to the payment of proper wages. Hence, petitioners claim
of lack of jurisdiction on the part of public respondent is bereft of merit. [23]
WHEREFORE, the instant petition is DISMISSED for lack of merit.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
NESTOR J. BALLADARES, G.R. No. 161794
ROLDAN L. GUANIZO,
ARNULFO E. MERTO,
GERONIMO G. GOBUYAN, Present:
EDGARDO O. AVILA, and
EDUARD F. RAMOS, JR., YNARES-SANTIAGO, J.,
Petitioners, Chairperson,
CHICO-NAZARIO,
- versus - VELASCO, JR.,
NACHURA, and
PEAK VENTURES CORPORATION/ PERALTA, JJ.
EL TIGRE SECURITY AND INVESTIGATION
AGENCY and
YANGCO MARKET OWNERS Promulgated:
ASSOCIATION/LAO TI SIOK BEE,
Respondents. June 16, 2009

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the decision[if !supportFootnotes][1][endif] of the Court of Appeals (CA) dated September 16,
2003 and the resolution[if !supportFootnotes][2][endif] denying the motion for reconsideration thereof in CA-G.R. SP No. 67587.

Petitioners Nestor J. Balladares, Roldan L. Guanizo, Arnulfo E. Merto, Geronimo G. Gobuyan, Edgardo O. Avila, and Eduard
F. Ramos, Jr.

were employed by respondent Peak Ventures Corporation/El Tigre Security and Investigation Agency (Peak Ventures) as
security guards and were assigned at the premises of respondent Yangco Market Owners and Administrators Association
(YMOAA). They filed a complaint for underpayment of wages against their employer, Peak Ventures, with the Department of
Labor and Employment (DOLE).

Acting on the complaint, DOLE conducted an inspection of Peak Ventures on March 4, 1999, and the following violations
were noted:

[if !supportLists]- [endif]underpayment of the minimum wage and other auxiliary benefits;

[if !supportLists]- [endif]pertinent employment records (payrolls, daily time records, contract of employment)
were not available at the time of inspection.[if !supportFootnotes][3][endif]

A Notice of Inspection Result was issued to and received by the Human Resource Department Manager, Ms. Cristina Q.
Villacrusis. Peak Ventures was instructed to effect restitution and/or to file its objections within five (5) working days from
receipt thereof.

Respondent failed to correct the violations or contest the findings as required; hence, the parties were
summoned for hearing. During the scheduled hearing on March 26, 1999, both complainants and Peak Ventures moved to
implead its client, YMOAA, represented by its President, Ms. Lao Ti Siok Bee, as party respondent. YMOAA opposed on the
ground that it was not the employer of petitioners. On May 25, 1999, Peak Ventures filed a Third-Party Complaint and/or
Position Paper with leave of court, alleging that Peak Ventures was entitled to indemnity or subrogation from YMOAA in
respect to the monetary claims of petitioners, because the cause of the underpayment of wages, if any, arose from the failure
of the YMOAA to pay the security agency the correct amount due petitioners as prescribed by various Wage Orders. [if
!supportFootnotes][4][endif]

In the Order dated July 21, 1999, Regional Director Maximo Baguyot Lim rendered judgment in favor of
petitioners and ruled that the contractor was jointly and severally liable with the principal, pursuant to the law and
jurisprudence on the matter.[if !supportFootnotes][5][endif] He further stated that:

In view of the respondents failure to controvert the complainants contentions and

repeated denial to give access to its employment records despite demands by the labor inspector
and hearing officer, it is deemed to have waived its constitutional right to due process, therefore, this
is an implied admission of the violations discovered, hence, we have no other recourse but to rule in
favor of the complainants and compute the salary differentials due them based on their affidavits x x
x.

xxxx

WHEREFORE, premises considered, respondents PEAK VENTURES CORP./EL TIGRE

SECURITY AND INVESTIGATION AGENCY AND/OR YANGCO MARKET OWNERS AND
ADMINISTRATORS ASSOCIATION/MS. LAO TI SIOK BEE are hereby jointly and severally ordered
to pay complainants NESTOR BALLADARES AND TEN (10) OTHER SIMILARLY SITUATED
EMPLOYEES the sum opposite their names or a total amount of ONE MILLION ONE HUNDRED
SIX THOUSAND TWO HUNDRED NINETY EIGHT PESOS AND 07/100 (P1,106,298.07)
corresponding to their claims within ten (10) calendar days from receipt hereof, otherwise, WRIT OF
EXECUTION shall be issued unless an Appeal shall have been filed within the reglementary period
together with a Cash or Surety Bond equivalent to the monetary award. [if !supportFootnotes][6][endif]

Respondent Peak Ventures filed a Motion for Reconsideration which was denied for lack of merit.

Respondent appealed the Order to the Office of the Secretary of Labor positing that the Regional Director
committed serious errors in awarding the amount of P1,106,298.00 to petitioners, which it alleged to be quite excessive.

On December 7, 2000, respondents appeal was dismissed. [if !supportFootnotes][7][endif] A subsequent motion for
reconsideration was, likewise, denied by the Secretary of Labor in a Resolution dated September 11, 2001. [if
!supportFootnotes][8][endif]

Undaunted, respondent Peak Ventures elevated the case to the CA, alleging that public respondent Secretary of
DOLE acted without, or in excess of, jurisdiction or with grave abuse of discretion. [if !supportFootnotes][9][endif]

The CA granted the petition, ruling that the Regional Director had no jurisdiction to hear and decide the case,
because the claims of each of the petitioners exceeded P5,000.00, and the power to adjudicate such claims belonged to the
Labor Arbiter, pursuant to Servandos, Inc. v. Secretary of Labor.[if !supportFootnotes][10][endif] The appellate court ratiocinated that
this exclusive jurisdiction of the Labor Arbiters was confirmed by Article 129 of the Labor Code, which excludes from the
jurisdiction of the Regional Directors or any hearing officer of the DOLE the power to hear and decide claims of employees
arising from employer-employee relations exceeding the amount of P5,000.00 for each employee. The dispositive portion of
the decision, thus, reads as follows:
WHEREFORE, petition is GRANTED. The Order of public respondent Secretary of Labor and Employment dated
December 7, 2000 and the Resolution dated September 11, 2001 are SET ASIDE and declared null
and void. The case is REFERRED to the appropriate Labor Arbiter for proper determination.[if
!supportFootnotes][11][endif]

Petitioners now come to this Court assigning the following errors:

The Court of Appeals, Third Division erred in applying Article 129 of the Labor Code instead of Article 128.

The Court of Appeals, Third Division erred in applying the Servandos, Inc. versus Secretary of Labor, which had
long been abandoned.[if !supportFootnotes][12][endif]

Only Peak Ventures filed its comment. Several resolutions of the Court sent to respondent YMOAA were returned unserved,
despite earnest efforts to obtain its current address. Meanwhile, the Court received a letter in the vernacular, dated May 16,
2006, from petitioner Nestor Balladares, for and on behalf of petitioners. Therein, petitioners expressed their apprehension
over the sale by Lao Siok Bee of Section 9 of Yangco Market to her nephew, Kay Ken Wah, which may be detrimental to
their cause, with a request for justice in this case. The letter was noted by the Court in the Resolution dated June 28, 2006.[if
!supportFootnotes][13][endif]

In its comment, Peak Ventures averred that the CA did not err in applying Article 129 and Article 217 of the Labor Code,
because the instant case arose from a complaint for recovery of wages, simple money claims and other benefits, and the
claims exceeded P5,000.00. It argued that the inspection conducted by the DOLE using the visitorial and enforcement
powers of the Secretary of Labor and Employment did not, in any way, convert the case to one falling under Article 128,
otherwise, there would be no need for Article 129. [if !supportFootnotes][14][endif] It reiterated that Article 129[if !supportFootnotes][15][endif] and
Article 217[if !supportFootnotes][16][endif] provide that it is the Labor Arbiter which has jurisdiction over claims arising from employer-
employee relations, including those of persons in domestic or household service involving an amount exceeding P5,000.00.

We uphold the jurisdiction of the DOLE Regional Director.

 It should be noted that petitioners complaint involved underpayment of wages and other benefits. In order to
verify the allegations in the complaint, DOLE conducted an inspection, which yielded proof of violations of labor standards.
By the nature of the complaint and from the result of the inspection, the authority of the DOLE, under Article 128, came into
play regardless of the monetary value of the claims involved. [if !supportFootnotes][17][endif] The extent of this authority and the powers
flowing therefrom are defined and set forth in Article 128 of the Labor Code, as amended by R.A. No. 7730, [if
!supportFootnotes][18][endif] the pertinent portions of which read as follows:

ART. 128. Visitorial and enforcement power. (a) The Secretary of Labor or his duly authorized representatives, including
labor regulation officers, shall have access to employers records and premises at any time of the day or night whenever work
is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor
law, wage order or rules and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer
contests the finding of the labor employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter. In case said order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from.

xxxx

This Court has held in a plethora of cases[if !supportFootnotes][19][endif] that reliance on the Servando ruling is no longer tenable in
view of the enactment of R.A. No. 7730, amending Article 128 (b) of the Labor Code. The Secretary of Labor or his duly
authorized representatives is now empowered to hear and decide, in a summary proceeding, any matter involving the
recovery of any amount of wages and other monetary claims arising out of employer-employee relations at the time of the
inspection, even if the amount of the money claim exceeds P5,000.00. In Ex-Bataan Veterans Security Agency, Inc. v.
Laguesma,[if !supportFootnotes][20][endif] the Court elucidated:

In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:

While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction
 to hear and decide cases where the aggregate money claims of each
employee exceeds P5,000.00, said provisions of law do not contemplate nor
cover the visitorial and enforcement powers of the Secretary of Labor or his
duly authorized representatives. Rather, said powers are defined and set
forth in Article 128 of the Labor Code (as amended by R.A. No. 7730) x x x

The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor
Code by the phrase (N)otwithstanding the provisions of Articles 129 and 217
of this Code to the contrary x x x thereby retaining and further strengthening
the power of the Secretary of Labor or his duly authorized representatives to
issue compliance orders to give effect to the labor standards provisions of
said Code and other labor legislation based on the findings of labor
employment and enforcement officer or industrial safety engineer made in
the course of inspection.

This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing, where we sustained the
jurisdiction of the DOLE Regional Director and held that :the visitorial and enforcement powers of
the DOLE Regional director to order and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds P5,000.

However, if the labor standards case is covered by the exception clause in Article 128 (b) of the Labor Code,
then the Regional Director will have to endorse the case to the appropriate Arbitration Branch of the
NLRC. In order to divest the Regional Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the findings of the labor regulations officer
and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.
The rules also provide that the employer shall raise such objections during the hearing of the case or
at any time after receipt of the notice of inspection results.

In this case, the Regional Director validly assumed jurisdiction over the money claims of private respondents
even if the claims exceeded P5,000 because such jurisdiction was exercised in accordance with
Article 128(b) of the Labor Code and the case does not fall under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor regulations officer during the hearing or
after receipt of the notice of inspection results. It was only in its supplemental motion for
reconsideration before the Regional Director that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the claims of private
respondent. But even if this was the case, the Regional Director and the Secretary of Labor still
looked into and considered EBVSAIs documentary evidence and found that such did not warrant the
reversal of the Regional Directors order. The Secretary of Labor also doubted the veracity and
authenticity of EBVSAIs documentary evidence. Moreover, the pieces of evidence presented by
EBVSAI were verifiable in the normal course of inspection because all the employment records of the
employees should be kept and maintained in or about the premises of the workplace, which in this
case is in Ambuklao Plant, the establishment where the private respondents were regularly
assigned.[if !supportFootnotes][21][endif]

Accordingly, we find no sufficient reason to warrant the certification of the instant case to the Labor Arbiter and divest the
Regional Director of jurisdiction. Respondent did not contest the findings of the labor regulations officer. Even during the
hearing, respondent never denied that petitioners were not paid correct wages and benefits. This was, in fact, even admitted
by respondent in its petition filed before the CA.[if !supportFootnotes][22][endif] In its defense, respondent tried to pass the buck to
YMOAA, which failed to pay the correct wages pursuant to the wage orders. Considering that the liability of the principal and
the contractor is joint and solidary, respondent thereby prayed for a re-computation of the awards it claimed to be quite
excessive. In the motion for reconsideration filed before the Regional Director, respondent submitted its own computation of
the salary adjustment due petitioners in the amount of P533,220.33 as wage differentials, deducting further the amount of
P39,371.52, which was already allegedly received by petitioners, as shown in petitioners sample pay slips and earning
cards.[if !supportFootnotes][23][endif] This contention, however, was unacceptable, as the Secretary of Labor ruled:

The arguments of the respondents that the award of the Regional Director is excessive
considering that it has only a total amount of P533,220.00 as they have computed, does not warrant
consideration.

As correctly pointed out by the Regional Director, the alleged salary adjustment of the
complainants for the years 1996, 1997, 1998 and 1999 failed to show from what source and on what
basis have respondent arrived at the said computations. Likewise, the documents presented is not
sufficient to re-compute the award.

With regard to the salary differentials paid to eight guards for the period covering June 30, 1997 as evidenced by the
payment, but unfortunately nowhere in their annexes can we find a clear indication of such payment. However, complainants
admitted having received such salary differentials from respondents, but the same was intended as wage adjustments under
Wage Order No. 1, No. NCR-03. Their claims in this instant case are backpay for Wage Order Nos. NCR-04, NCR-5 and
NCR-6. Hence, the amount of P39,371.52 cannot be deducted from the computed monetary award of P1,106,298.00.

We find no cogent reason to deviate from the foregoing.[if !supportFootnotes][24][endif]

It bears stressing that this petition clearly involves a labor standards case, and it is in keeping with the law that the worker
need not litigate to get what legally belongs to him, for the whole enforcement machinery of the DOLE exists to insure its
expeditious delivery to him free of charge.[if !supportFootnotes][25][endif] We, therefore, sustain the jurisdiction of the DOLE Regional
Director in this case.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated September 16, 2003 is
REVERSED and SET ASIDE. The decision of the Secretary of Labor is REINSTATED.

SO ORDERED.

VICTOR METEORO, REY CAGA, JIMMY G.R. No. 171275

CORONEL, COSME TAMOR, FELIXES
LATONERO, ENRIQUE SALAZAR, MAYLA
LAQUI, ORLY BANUA, BERNARDO MADRID,
ARIEL REYES, ALFREDO REYES, JAVIER
TIMERESA, ARMANDO MACA, JR., ROLANDO
FALQUERA, JOSE BENITEZ, RODOLFO
TIMERESA, ROLANDO LUCENA, NOEL Present:
SUBTINIENTE, GUILLERMA QUIMADO,
BENIGNO REGALADO, RANDY DELA CRUZ, YNARES-SANTIAGO, J.,
JUVY MACA, AMBROSIO CANARIA, JR., Chairperson,
FELICIANO PAJARO, PETER BADIANA, CHICO-NAZARIO,
DANILO JORDAN, DENNIS EDIESCA, JOGIL VELASCO, JR.,
AVILA, ABRAHAM BURCE, ONOFRE VINAS, NACHURA, and
DENNIS VITARA, ARIEL GALUPO and ALBERT PERALTA, JJ.
AUSTERO,
Petitioners,

- versus -

CREATIVE CREATURES, INC.,

Respondent.

Promulgated:

July 13, 2009

x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

Assailed in this petition for review on certiorari are the Court of Appeals Decision[if !supportFootnotes][1][endif] dated May
31, 2005 and Resolution[if !supportFootnotes][2][endif] dated January 27, 2006 in CA-G.R. SP No. 76942.

The facts of the case are as follows:

Respondent is a domestic corporation engaged in the business of producing, providing, or procuring the production of set
designs and set construction services for television exhibitions, concerts, theatrical performances, motion pictures and the
like. It primarily caters to the production design requirements of ABS-CBN Broadcasting Corporation in Metro Manila and
nationwide.[if !supportFootnotes][3][endif] On the other hand, petitioners were hired by respondent on various dates as artists,
carpenters and welders. They were tasked to design, create, assemble, set-up and dismantle props, and provide sound
effects to respondents various TV programs and movies.[if !supportFootnotes][4][endif]

Sometime in February and March 1999, petitioners filed their respective complaints for non-payment of night shift differential
pay, overtime pay, holiday pay, 13th month pay, premium pay for Sundays and/or rest days, service incentive leave pay,
paternity leave pay, educational assistance, rice benefits, and illegal and/or unauthorized deductions from salaries against
respondent, before the Department of Labor and Employment (DOLE), National Capital Region (NCR). Their complaints
were consolidated and docketed as NCR00-9902-IS-011.[if !supportFootnotes][5][endif]
After the inspection conducted at respondents premises, the labor inspector noted that the records were not made available
at the time of the inspection; that respondent claimed that petitioners were contractual employees and/or independent talent
workers; and that petitioners were required to punch their cards. [if !supportFootnotes][6][endif]

In its position paper, respondent argued that the DOLE-NCR had no jurisdiction over the complaint of the petitioners because
of the absence of an employer-employee relationship. It added that petitioners were free-lance individuals, performing special
services with skills and expertise inherently exclusive to them like actors, actresses, directors, producers, and script writers,
such that they were treated as special types of workers. [if !supportFootnotes][7][endif]

Petitioners, on the other hand, averred that they were employees of respondent, as the elements of an employer-
employee relationship existed.

Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal against petitioner, with prayer for payment of
overtime pay, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13 th month pay and attorneys
fees before the National Labor Relations Commission (NLRC). The case was docketed as NLRC-NCR Case No. 00-04-
04459-9.[if !supportFootnotes][8][endif]

On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued an Order [if !supportFootnotes][9][endif] directing
respondent to pay petitioners the total amount of P2,694,709.00. The dispositive portion of the Order reads as follows:

WHEREFORE, premises considered, this Office finds merit in the complaint. Accordingly, Respondent Creative
Creatures, Inc. and/or Mr. Edmond Ty, is hereby ordered to pay thirty three (33) Complainants, within
ten (10) days from receipt hereof, the total amount of TWO MILLION SIX HUNDRED NINETY FOUR
THOUSAND SEVEN HUNDRED NINE PESOS (P2,694,709.00) representing unpaid 13 th month pay,
vacation and sick leave benefits, regular holiday pay, rest day and holiday premiums, overtime pay,
educational allowance, and rice allowance presented as follows:

xxxx
 Failure to pay Complainants within the given period will constrain this Office to issue a
WRIT OF EXECUTION for the immediate enforcement of this order.

SO ORDERED.[if !supportFootnotes][10][endif]

The Regional Director sustained petitioners claim on the existence of an employer-employee relationship using the
determinants set forth by the Labor Code, specifically, the elements of control and supervision, power of dismissal, payment
of wages, and the selection and engagement of employees. He added that since the petitioners had worked for more than
one year doing the same routine work, they were regular employees with respect to the activity in which they were employed.
Lastly, he upheld the DOLE-NCRs jurisdiction to hear and determine cases in violation of labor standards law. [if
!supportFootnotes][11][endif]

On appeal, then DOLE Secretary Patricia A. Sto. Tomas affirmed the findings of the DOLE Regional Director. [if
!supportFootnotes][12][endif] In upholding the jurisdiction of the DOLE-NCR, she explained that the Secretary of Labor or his duly

authorized representative is allowed to use his visitorial and enforcement powers to give effect to labor legislation, regardless
of the amount involved, pursuant to Article 128 of the Labor Code, as amended by Republic Act (R.A.) No. 7730.
For failure to obtain a favorable decision, respondent elevated the matter to the Court of Appeals in CA-G.R. SP No. 76942.
On May 31, 2005, the appellate court rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the instant petition is GRANTED. For lack of jurisdiction, the Orders dated October 18,
2002 and February 5, 2003, issued by respondent Secretary are hereby declared NULL and VOID. However, in view of the
filing of a similar case before the NLRC, referral of the instant case to the NLRC for appropriate determination is no longer
necessary.

SO ORDERED.[if !supportFootnotes][13][endif]

While recognizing the visitorial and enforcement powers of the Regional Director and his jurisdiction to entertain money
claims, the appellate court noted that Article 128 of the Labor Code provides an instance when he (Regional Director) may be
divested of jurisdiction. The CA pointed out that respondent had consistently disputed the existence of employer-employee
relationship, thereby placing the case beyond the jurisdiction of the Regional Director.

Petitioners now come before this Court in this petition for review on certiorari raising the lone issue of:

Whether or not the Court of Appeals committed an error when it ruled that the instant case falls within the
exception clause of Article 128 (b) of the Labor Code, as amended, and in annulling and setting
aside the Orders of the Secretary of Labor which affirmed the Order of the Regional Director of
DOLE-NCR awarding the claims of the petitioners for benefits under the Labor Standards laws,
namely, 13th month benefit, overtime pay, night shift differentials, premium on rest days, vacation and
sick leave and other benefits accorded to employees of the responden[t] in the exercise of its
visitorial powers pursuant to Article 128 (b) of the Labor Code as amended. [if !supportFootnotes][14][endif]
 In fine, we are tasked to determine which body/tribunal has jurisdiction over petitioners money claims --- the
DOLE Secretary or his duly authorized representative, or the NLRC.

We sustain the appellate courts conclusion that the instant case falls within the exclusive jurisdiction of the
NLRC.

The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have
jurisdiction to enforce compliance with labor standards laws under the broad visitorial and enforcement powers conferred by
Article 128 of the Labor Code, and expanded by Republic Act (R.A.) No. 7730,[if !supportFootnotes][15][endif] to wit:[if
!supportFootnotes][16][endif]

Art. 128. Visitorial and Enforcement Power

(a) The Secretary of Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employers records and premises at anytime of the day or
night whenever work is being undertaken therein, and the right to copy therefrom, to question any
employee and investigate any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules
and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee relation still exists, the Secretary of Labor
and Employment or his duly authorized representatives shall have the power to issue compliance
orders to give effect to the labor standards provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement officers or industrial safety engineers made in
the course of inspection. The Secretary or his duly authorized representatives shall issue writs of
execution, to the appropriate authority for the enforcement of their orders, except in cases where the
employer contests the findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.

xxxx
 As it is now worded, and as consistently held in a number of cases, [if !supportFootnotes][17][endif] the visitorial and
enforcement powers of the Secretary, exercised through his representatives, encompass compliance with all labor standards
laws and other labor legislation, regardless of the amount of the claims filed by workers.

It is well to note that the Regional Directors visitorial and enforcement powers have undergone a series of
amendments. Confusion was engendered with the promulgation of the decision in Servandos Inc. v. Secretary of Labor and
Employment.[if !supportFootnotes][18][endif] In that case, this Court held that to harmonize Articles 217 (a) (6), [if !supportFootnotes][19][endif]
129,[if !supportFootnotes][20][endif] and 128 of the Labor Code, the Secretary of Labor should be deemed as clothed with plenary
visitorial powers to order the inspection of all establishments where labor is employed, and to look into all possible violations
of labor laws and regulations; but the power to hear and decide employees claims exceeding P5,000.00 for each employee
should be left to the Labor Arbiter as the exclusive repository of the power to hear and decide such claims.

Jurisprudence, however, rendered the Servando ruling inapplicable. In Guico, Jr. v. Quisumbing,[if
!supportFootnotes][21][endif]
Allied Investigation Bureau, Inc. v. Sec. of Labor,[if !supportFootnotes][22][endif] and Cirineo Bowling Plaza, Inc. v.
Sensing,[if !supportFootnotes][23][endif] we had occasion to explain that while it is true that under Articles 129 and 217 of the Labor
Code, the Labor Arbiter has jurisdiction to hear and decide cases where the aggregate money claim of each employee
exceeds P5,000.00, these provisions of law do not contemplate or cover the visitorial and enforcement powers of the
Secretary of Labor or his duly authorized representatives. Thus, we upheld the jurisdiction of the Regional Director,
notwithstanding the fact that the amount awarded exceeded P5,000.00 per employee.

In order to do away with the jurisdictional limitations imposed by the Servando ruling and to finally settle any
lingering doubts on the extent of the visitorial and enforcement powers of the Secretary of Labor and Employment, R.A. 7730
was enacted, amending Article 128 (b) to its present formulation, so as to free it from the jurisdictional restrictions found in
Articles 129 and 217.

This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of employees is
not absolute. The last sentence of Article 128 (b) of the Labor Code, otherwise known as the exception clause, provides an
instance when the Regional Director or his representatives may be divested of jurisdiction over a labor standards case.

Under prevailing jurisprudence, the so-called exception clause has the following elements, all of which must
concur:

(a) that the employer contests the findings of the labor regulations officer and raises issues thereon;

(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and
(c) that such matters are not verifiable in the normal course of inspection. [if !supportFootnotes][24][endif]

In the present case, the CA aptly applied the exception clause. At the earliest opportunity, respondent registered
its objection to the findings of the labor inspector. The labor inspector, in fact, noted in its report that respondent alleged that
petitioners were contractual workers and/or independent and talent workers without control or supervision and also supplied
with tools and apparatus pertaining to their job. [if !supportFootnotes][25][endif] In its position paper, respondent again insisted that
petitioners were not its employees. It then questioned the Regional Directors jurisdiction to entertain the matter before it,
primarily because of the absence of an employer-employee relationship. Finally, it raised the same arguments before the
Secretary of Labor and the appellate court. It is, therefore, clear that respondent contested and continues to contest the
findings and conclusions of the labor inspector.

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is
need to examine evidentiary matters. The following elements constitute the reliable yardstick to determine such relationship:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employees conduct. [if !supportFootnotes][26][endif] There is no hard and fast rule designed to establish
the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status. [if !supportFootnotes][27][endif] These pieces of evidence are readily available,
as they are in the possession of either the employee or the employer; and they may easily be looked into by the labor
inspector (in the course of inspection) when confronted with the question of the existence or absence of an employer-
employee relationship.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises,
because that juridical relation spawns obligations connected with workmens compensation, social security, medicare,
termination pay, and unionism.[if !supportFootnotes][28][endif] Thus, in addition to the above-mentioned documents, other pieces of
evidence are considered in ascertaining the true nature of the parties relationship. This is especially true in determining the
element of control. The most important index of an employer-employee relationship is the so-called control test, that is,
whether the employer controls or has reserved the right to control the employee, not only as to the result of the work to be
done, but also as to the means and methods by which the same is to be accomplished. [if !supportFootnotes][29][endif]

In the case at bar, whether or not petitioners were independent contractors/project employees/free lance workers
is a question of fact that necessitates the examination of evidentiary matters not verifiable in the normal course of inspection.
Indeed, the contracts of independent services, as well as the check vouchers, were kept and maintained in or about the
premises of the workplace and were, therefore, verifiable in the course of inspection. However, respondent likewise claimed
that petitioners were not precluded from working outside the service contracts they had entered into with it (respondent); and
that there were instances when petitioners abandoned their service contracts with the respondent, because they had to work
on another project with a different company. Undoubtedly, the resolution of these issues requires the examination of
evidentiary matters not verifiable in the normal course of inspection. Verily, the Regional Director and the Secretary of Labor
are divested of jurisdiction to decide the case.

We would like to emphasize that to contest means to raise questions as to the amounts complained of or the
absence of violation of labor standards laws; or, as in the instant case, issues as to the complainants right to labor standards
benefits. To be sure, raising lack of jurisdiction alone is not the contest contemplated by the exception clause. [if
!supportFootnotes][30][endif] It is necessary that the employer contest the findings of the labor regulations officer during the hearing or

after receipt of the notice of inspection results.[if !supportFootnotes][31][endif] More importantly, the key requirement for the Regional
Director and the DOLE Secretary to be divested of jurisdiction is that the evidentiary matters be not verifiable in the course of
inspection. Where the evidence presented was verifiable in the normal course of inspection, even if presented belatedly by
the employer, the Regional Director, and later the DOLE Secretary, may still examine it; and these officers are not divested of
jurisdiction to decide the case.[if !supportFootnotes][32][endif]

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised issues
the resolution of which necessitated the examination of evidentiary matters not verifiable in the normal course of inspection.
Hence, the Regional Director was divested of jurisdiction and should have endorsed the case to the appropriate Arbitration
Branch of the NLRC.[if !supportFootnotes][33][endif] Considering, however, that an illegal dismissal case had been filed by petitioners
wherein the existence or absence of an employer-employee relationship was also raised, the CA correctly ruled that such
endorsement was no longer necessary.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated May 31,
2005 and its Resolution dated January 27, 2006 in CA-G.R. SP No. 76942, are AFFIRMED.

SO ORDERED.

G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND VILMA L. CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO., LTD., respondents.

REGALADO, J.:
This petition for certiorari seeks the nullification of the decision 1 of the National Labor Relations Commission (NLRC)
promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its resolution dated August 27, 1993 denying
petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex
Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and prorated
performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90. 2
First, the undisputed facts.
Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but they were dismissed on
November 1, 1990 when their positions were declared redundant. A special redundancy benefit was paid to them, which
included payment of accrued vacation leave and fifty percent (50%) of unused current sick leave, special redundancy benefit,
equivalent to three (3) months salary for every year of service; and additional cash benefits, in lieu of other benefits provided
by the company or required by law. 3
Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than twenty
(20) years, from August 26, ]970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965; petitioner Lopez,
exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970. 4
Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the
redundancy package, She claimed that they should receive their respective service awards and other prorated bonuses
which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have
already been budgeted in a fund distinct and apart from redundancy fund. 5
Thereafter, private respondent required petitioners to execute a "Release and Quitclaim," 6 and petitioners complied but with
a written protest reiterating their previous demand that they were nonetheless entitled to receive their service awards.
On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment 7 whether
respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's Manual.
About three months later the labor department issued its opinion, with pertinent authorities, responding to petitioners' query
as follows:
xxx xxx xxx
This Department believes that your query presents several issues. These shall be addressed point by point, thus:
First, the Department deems the service award to be part of the benefits of the employees of Insular Life. Company policies
and practices are fertile sources of employee's rights. These must be applied uniformly as interpretation cannot vary from
one employee to another. . . .
xxx xxx xxx
While it may be argued that the above-cited case applies only to retirement benefits, we find solace in the cases of Liberation
Steamship Co., Inc. vs. CIR and National Development Company vs. Unlicensed Crew members of Three Dons vessels (23
SCRA 1105) where the Supreme Court held that a gratuity or bonus, by reason of its long and regular concession indicating
company practice, may become regarded as part of regular compensation and thus demandable.
xxx xxx xxx
Second, the award is earned at the pertinent anniversary date. At this time, entitlement to the award becomes vested. The
anniversary date is the only crucial determining factor. Since the award accrues on that date, it is of no moment that the
entitled employee is separated from service (for whatever cause) before the awards are physically handed out.
xxx xxx xxx
Third, even if the award has not accrued as when an employee is separated from service because of redundancy before
the applicable 5th year anniversary, the material benefits of the award must be given, prorated, by Insular Life. This is
especially true (in) redundancy, wherein he/she had no control.
xxx xxx xxx
Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the material benefits of
the service award. . . . 8
Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the management approved the
grant of an anniversary bonus equivalent to one (1) month salary only to permanent and probationary employees as of
November 15, 1990. 9
On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees and
supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary, respectively, as
of December 30, 1990. The performance bonus, however, would be given only to permanent employees as of March 30,
1991. 10
Despite the aforequoted opinion of the Department of Labor and Employment, private respondent refused to pay petitioners
service awards. This prompted the latter to file a consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez,
for payment of their service awards, including performance and anniversary bonuses.
In their complaint, petitioners contended that they are likewise entitled to the performance and anniversary bonuses because,
at the time the performance bonus was announced to be given, they were only short of two (2) months service to be entitled
to the full amount thereof as they had already served the company for ten (10) months prior to the declaration of the grant of
said benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the anniversary bonus when it was
announced to be given to employees as of November 15, 1990.
In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay petitioners their service awards,
anniversary bonuses and prorated performance bonuses, including ten percent (10%) thereof as attorney's fees.
Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor arbiter
in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that petitioners were
estopped from claiming the same as said benefits had already been given to them.
In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed by
petitioners. For this conclusion, it rationalized that "(c)ertainly, before complainants signed the quitclaim and release, they are
aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the same. Hence,
we can safely say that they were not placed under duress or were compelled by means of force to sign the document." 11
Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent upon
separation, which entitled the former to other renumerations or benefits. On the contrary, they voluntarily accepted the
redundancy benefit package, otherwise, they would not have been separated from employment." 12
Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC committed reversible
error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners
are not entitled to payment of service awards and other bonuses. 13 The Solicitor General public respondent NLRC and
private respondent company duly filed their respective comments. 14
In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private
respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length of
service had rendered slim, if not eliminated, their chances of getting employed somewhere else." 15
On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of petitioners'
claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in executing the
release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof. 16
The petition being meritorious, we find for petitioners.
Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not necessarily
result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding
benefits to which he is legally entitled. 17
We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and why
they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the employer and
the employee obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must
have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are
deemed not have waived any of their rights. Renuntiatio non praesumitur. 18
Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do
not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that
such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of
termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there
maybe possible exceptions to this holding, we do not perceive any in the case at bar.
Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and quitclaim,
they made a written manifestation reserving their right to demand the payment of their service awards. 20 The element of total
voluntariness in executing that instrument is negated by the fact that they expressly stated therein their claim for the service
awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.
As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and
how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore
their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive their separation pay.
We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al., 21 that:
While rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law.
Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers concerned
to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This
runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another.
We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of
respondent NLRC, called attention to the fact that "contrary to private respondent's contention, the "additional" redundancy
package does not and could not have covered the payment of the service awards, performance and anniversary bonuses
since the private respondent company has initially maintained the position that petitioners are not legally entitled to the same.
. . . Surprisingly, in a sudden turnabout, private respondent now claims . . . that the subject awards and bonuses are
integrated in the redundancy package. It is evident, therefore, that private respondent has not truly consolidated the payment
of the subject awards and bonuses in the redundancy package paid to the petitioners. 22
We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards
and other benefits, thus:
Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation
from employment, respondent should be paid their service awards for 1990.
We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of gratuity
which the complainants have no right to demand. Service awards are governed by respondent's employee's manual and
(are) therefore contractual in nature.
On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an
anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary
bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15
November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days before :the
respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses;
that for its commendable performance in 1990, respondent declared a performance bonus; that per terms of this declaration,
only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were
employees of respondents for the first 10 months of 1990.
We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were
given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to
complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case of
performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to employees
who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991.
We believe that the prerogative of the employer to determine who among its employee shall be entitled to receive bonuses
which are, as a matter of practice, given periodically cannot be exercised arbitrarily. 23 (Emphasis and corrections in
parentheses supplied.)
The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life
Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court ruled that "as to the service award differentials claimed by
some respondent union members, the company policy shall likewise prevail, the same being based on the employment
contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their policies
on the matter, the service award differential is given at the end of the year to an employee who has completed years of
service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be
given. 25 The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which
may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay.
While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which
the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after
performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a
certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of
time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the
stipulated time, on the ground that it was a promise of a mere gratuity.
This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is
made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the
employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in
case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26
The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a
promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee. 27
However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the
number of months that petitioners actually served respondent company in the year 1990. This observation should be taken
into account in the computation of the amounts to be awarded to petitioners.
WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commission are hereby SET
ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED.
SO ORDERED.
Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.
G.R. No. 103575. April 5, 1993.
BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC., AND RAUL LOCSIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NEMESIO MOYA ALFREDO AMANTE, EDWIN BERSAMINA, SAMUEL
CUELA, ROMEO DELA CRUZ, MANUEL DE JESUS, SEVERINO DELA CRUZ, DANILO ESPIRITU, ANGEL FLORES,
DANILO FRANCISCO, FLORENCIO GLORIOSO, GERARDO MANUEL, ARMANDO MENDOZA, PEDRO MORELOS,
ALEXON ORBETA, ROMEO PEREZ, ALFREDO SABANDO, NESTOR SANTOS, ALFREDO SEPTRIMO, OSCAR
SEVILLA, EDUARDO SIOSON, REYMUNDO TIONGCO, TERESITA REYES, CARMENCITA CARPIO, GENARO
NABUTAS, DANILO NAMPLATA, AND ROLANDO GAMIT, respondents.
Quisumbing, Torres & Evangelista for petitioners.
Reynaldo M. Maraan for private respondents.
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; EMPLOYER MAY NOT, IN THE GUISE
OF EXERCISING MANAGEMENT PREROGATIVES, PAY SEPARATION BENEFITS UNEQUALLY; CASE AT BAR.
Petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of business operations, is
recognized by law, but it may not pay separation benefits unequally for such discrimination breeds resentment and ill-will
among those who have been treated less generously than others. "Granting that the 16 May 1988 termination was a
retrenchment scheme, and the 31 July 1988 and the 28 February 1989 were due to closure, the law requires the granting of
the same amount of separation benefits to the affected employees in any of the cases. The respondent argued that the giving
of more separation benefit to the second and third batches of employees separated was their expression of gratitude and
benevolence to the remaining employees who have tried to save and make the company viable in the remaining days of
operations. This justification is not plausible. there are workers in the first batch who have rendered more years of service
and could even be said to be more efficient than those separated subsequently, yet, they did not receive the same
recognition. Understandably, their being retained longer in their job and be not included in the batch that was first terminated,
was a concession enough and may already be considered as favor granted by the respondents to the prejudice of the
complainants. As it happened, there are workers in the first batch who have rendered more years in service but received
lesser separation pay, because of that arrangement made by the respondents in paying their termination benefits . . ."
Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits.
The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management
prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but
are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC, 190
SCRA 758). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of
closure of the establishment or reduction of personnel (Abella vs. NLRC, 152 SCRA 141, 145).
2. ID.; ID.; CORPORATE OFFICER NOT PERSONALLY LIABLE FOR MONEY CLAIMS OF DISCHARGED CORPORATE
EMPLOYEES; EXCEPTION. A corporate officer is not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in terminating their employment. There is no evidence in this
case that Locsin acted in bad faith or with malice in carrying out the retrenchment and eventual closure of the company
(Garcia vs. NLRC, 153 SCRA 640), hence, he may not be held personally and solidarily liable with the company for the
satisfaction of the judgment in favor of the retrenched employees.
3. ID.; GRANT OF BONUS; A PREROGATIVE, NOT AN OBLIGATION, OF EMPLOYER; ENTIRELY DEPENDENT ON
FINANCIAL CAPABILITY OF EMPLOYER TO GIVE IT. It is settled do trine that the grant of a bonus is a prerogative, not
an obligation, of the employer (Traders Royal Bank vs. NLRC, 189 SCRA 274). The matter of giving a bonus over and above
the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact
that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private respondents did
not work up to the middle of the year (they were discharge in May 1988) were valid reasons for not granting them a mid-year
bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company for its generosity
to those workers who remained with the company "till the end" of its days. (Traders Royal Bank vs. NLRC, supra.) The award
must therefore be deleted.
DECISION
GRIO-AQUINO, J p:
In this petition for certiorari, the Businessday Information Systems and Services Inc. (or BSSI for brevity) and its
president/manager, Raul Locsin, seek to annul and set aside the decision dated February 13, 1991 of the National Labor
Relations Commission (NLRC) which affirmed the Labor Arbiter's finding that they (petitioners) are liable to pay the private
respondents separation pay differentials and mid-year bonus.
BSSI was engaged in the manufacture and sale of computer forms. Due to financial reverses, its creditors, the Development
Bank of the Philippines (DBP) and the Asset Privatization Trust (APT), took possession of its assets, including a
manufacturing plant in Marilao, Bulacan.
As a retrenchment measure, some plant employees, including the private respondents, were laid off on May 16, 1988, after
prior notice, and were paid separation pay equivalent to one-half (1/2) month pay for every year of service. Upon receipt of
their separation pay, the private respondents signed individual releases and quitclaims in favor of BSSI.
BSSI retained some employees in an attempt to rehabilitate its business as a trading company.
However, barely two and a half months later, these remaining employees were likewise discharged because the company
decided to cease business operations altogether. Unlike the private respondents, that batch of employees received
separation pay equivalent to a full month's salary for every year of service plus mid-year bonus.
Protesting against the discrimination in the payment of their separation benefits, the twenty-seven (27) private respondents
filed three (3) separate complaints against the BSSI and Raul Locsin. These cases were later consolidated.
At the conciliation proceedings before Labor Arbiter Manuel P. Asuncion, petitioners denied that there was unlawful
discrimination in the payment of separation benefits to the employees. They argued that the first batch of employees was
paid "retrenchment" benefits mandated by law, while the remaining employees were granted higher "separation" benefits
because their termination was on account of the closure of the business.
Based on the pleadings of the parties, Labor Arbiter Asuncion rendered a decision on April 25, 1989 in favor of the
complainants, now private respondents, the dispositive portion of which reads:
"WHEREFORE, the respondents are hereby ordered to pay the complainants their separation pay differentials and mid-year
bonus for the year 1988." (p- 38, Rollo).
Upon appeal by the company to the NLRC, the Second Division on February 13, 1991, affirmed the decision of the Labor
Arbiter.
Petitioners' motion for reconsideration of the resolution having been denied, they have taken the present recourse.
In case of retrenchment of a company to prevent losses and closure of business operation, the law provides:
Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any
employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy,
the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at least one half (l /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." (Labor Code; emphasis
supplied.)
Undoubtedly, petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of business
operations, is recognized by law, but it may not pay separation benefits unequally for such discrimination breeds resentment
and ill-will among those who have been treated less generously than others.
The following observations of the Commission are relevant:
"The respondents cited financial business difficulties to justify their termination of the complainants' employment on 16 May
1988. They were given one-half (1/2) month of their salary for every year of service. Due to continuing losses, which is a sign
that business, after the termination did not improve, they closed operations on 31 July 1989, where they dismissed the
second batch of employees who were given one (1) month pay for every year they served. The third batch of employees
were terminated on 28 February 1989, who were likewise given one (1) monthly pay for every year of service. The business
climate obtaining on 16 May 1988 when the complainants were terminated did not at all defer (sic) improvement-wise, with
that of 31 July 1988 nor to 28 February 1989. The internal between the dates of termination was so close to each other, so
that, no improvement in business maybe likely expected. In fact, the respondents suffered continuous losses, hence, there is
no difference in the circumstances of the business to distinguish.
"Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988 and the 28 February 1989
were due to closure, the law requires the granting of the same amount of separation benefits to the affected employees in
any of the cases. The respondent argued that the giving of more separation benefit to the second and third batches of
employees separated was their expression of gratitude and benevolence to the remaining employees who have tried to save
and make the company viable in the remaining days of operations. This justification is not plausible. There are workers in the
first batch who have rendered more years of service and could even be said to be more efficient than those separated
subsequently, yet they did not receive the same recognition. Understandably, their being retained longer in their job and be
not included in the batch that was first terminated, was a concession enough and may already be considered as favor
granted by the respondents to the prejudice of the complainants. As it happened, there are workers in the first batch who
have rendered more years in service but received lesser separation pay, because of that arrangement made by the
respondents in paying their termination benefits . . ."
(pp. 36-37, Rollo)
Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits.
The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management
prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but
are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC, 190
SCRA 758). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of
closure of the establishment or reduction of personnel (Abella vs. NLRC, 152 SCRA 141, 145).
With regard to the private respondents' claim for the mid-year bonus, it is settled doctrine that the grant of a bonus is a
prerogative, not an obligation, of the employer (Traders Royal Bank vs. NLRC, 189 SCRA 274). The matter of giving a bonus
over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer
to give it. The fact that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private
respondents did not work up to the middle of the year (they were discharged in May 1988) were valid reasons for not granting
them a mid-year bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company
for its generosity to those workers who remained with the company till the end" of its days. (Traders Royal Bank vs. NLRC,
supra.) The award must therefore be deleted.
There is merit in the contention of petitioner Raul Locsin that the complaint against him should be dismissed. A corporate
officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice
and bad faith in terminating their employment. There is no evidence in this case that Locsin acted in bad faith or with malice
in carrying out the retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he may not
be held personally and solidarily liable with the company for the satisfaction of the judgment in favor of the retrenched
employees.
WHEREFORE, the resolution of the NLRC ordering the petitioner company to pay separation pay differentials to the private
respondents is AFFIRMED. However, the award of mid-year bonus to them is hereby deleted and set aside. Petitioner Raul
Locsin is absolved from any personal liability to the respondent employees. No costs.
SO ORDERED.
Cruz, Bellosillo and Quiason, JJ ., concur.