Labrel Cases P1

G.R. No.
L-12582
January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598
January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the
Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with the
Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures,
Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures,
Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and
distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental
music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and
that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that
it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any
musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense and
sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and
Sampaguita Pictures, Inc., filed these petitions for review forcertiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of employer-employee relationship between the parties is contested. However, this claim is neither borne out by any legal provision
nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for
certification.
It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented that the alleged musicians-employees of the
respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the other numerous employees of the film companies constituting a proper
bargaining unit under section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is
commonly understood, but a mere investigation of a non-adversary, fact finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to
ascertain the desires of employees as to the matter of their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the
fair and free choice of bargaining representatives by employees. 1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor organization and that ninety-five
(95%) percent of the musicians playing for all the musical recordings of the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc.
denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really contested. Besides, the
substantial difference between the work performed by said musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under which the
1 | L A B O R R E L AT I O N S
services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in
deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is
entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film companies. It does not intend to represent the
other employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the employees of said film companies, including those who are not
musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably chooses, from the musical directors, one who will
furnish the musical background for a film. A price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical background. Thus, the
musical director may compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding compensation of the musicians
under him.
When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked up by the truck of the film company. The film company provides the studio for the use of the musicians for that
particular recording. The musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the musicians and tells what to do in every detail. He
solely directs the performance of the musicians before the camera as director, he supervises the performance of all the action, including the musicians who appear in the scenes so
that in the actual performance to be shown on the screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of the company assist in the operation. Hence, the
work of the musicians is an integral part of the entire motion picture since they not only furnish the music but are also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits between the musicians and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the
United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner Act was designed to avert the 'substantial
obstruction to the free flow of commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result
from the refusal of employers' to bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the purposes of the Act
are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and designation of
representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional legal distinctions, separating them from
'independent contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this Act,
others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies of their
wages, hours and working conditions may characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with the employer as
dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain types of economic relationship. Congress
recognized those economic relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship
may be drawn into common controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times brought into an economic
relationship with 'employers', who are not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful
situations, by underlying economic facts rather than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts involved in the economic relationship. Where all the
conditions of relation require protection, protection ought to be given .
By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of industrial unrest and
consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of
collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the conventional as well in the legal
sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of
collective bargaining. (b) To promote sound stable industrial peace and the advancement of the general welfare, and the best interests of employers and employees by the settlement
of issues respecting terms and conditions of employment through the process of collective bargaining between employers and representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual worker the rights and protection guaranteed by the
Act. The matter is not conclusively determined by a contract which purports to establish the status of the worker, not as an employee.
The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio substantially under the direction and control of the
company.
In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right
to control' test. Under this test an employer-employee relationship exist where the person for whom the services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under them are employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion that
the independent contractors have sufficient authority over the persons working under their immediate supervision to warrant their exclusion from the unit. We shall include in
the unit the employees working under the supervision of the independent contractors, but exclude the contractors.'
'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act where the extent of the employer's control over
them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its
studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies and, therefore,
entitled to right of collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby declared as the sole collective bargaining
representative for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen
Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the management and the workers contracted in the Maligaya cases were
agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage
in said business issued by theCity Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt with
had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor
in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the liability of an employer under the Workmen's Compensation Act,
whereas the cases before us are merely concerned with the right of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and
technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de
Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of
said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under the
"pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, butemployees of said company, because "the requirement imposed on the 'parers' to the effect
that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish their services" as in the
cases before us.
The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services
of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of
soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was an
independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's
Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-appellants and the work of the musicians is not casual. As held in the
order appealed from which, in this respect, is not contested by herein petitioners-appellants "the work of the musicians is an integral part of the entire motion picture." Indeed, one can
hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the
Workmen's Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who
had directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as music
is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation of Republic Act No. 660, which
amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court
of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic
Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other,
whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this
court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details such are left to the leader'sdiscretion."
This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case. Said musical directors control
neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the musical
directors, fix the date, the time and the place of work. The film companies, not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at
dinner time.
What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the company" not the musical director
"supervises the recording of the musicians and tells them what to do in every detail". The motion picture director not the musical director "solely directs and performance of the
musicians before the camera". The motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance
to be shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be
cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director
"directly controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is
illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held
to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said workers.
The aforementioned control over the means to be used" in reading the desired end is possessed and exercised by the film companies over the musicians in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.
LEGEND HOTEL (MANILA), OLWNED BY TITANIUM CORPORATION AND/OR, NELSON NAPUD, IN HIS CAPACITY AS THE PRESIDENT OF PETITIONER CORPORATION, PETITIONER,
VS. HERNANI S. REALUYO, ALSO KNOWN AS JOEY ROA, RESPONDENT. G.R. No. 153511, July 18, 2012
FACTS: This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. August 9, 1999: Realuyo, whose stage name was Joey R. Roa, filed a
complaint for alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive leave pay, and 13th
month pay. He prayed for attorneys fees, moral damages of P100,000.00 and exemplary damages for P100,000.00 Roa averred that he had worked as a pianist at the Legend Hotel s
Tanglaw Restaurant from September 1992 with an initial rate of P400.00/night; and that it had increased to P750.00/night. During his employment, he could not choose the time of performance,
which had been fixed from 7:00PM to 10:00pm for three to six times a week. July 9, 1999: the management had notified him that as a cost-cutting measure, his services as a pianist would no
longer be required effective July 30, 1999. In its defense, petitioner denied the existence of an employer-employee relationship with Roa, insisting that he had been only a talent engaged to
provide live music at Legend Hotels Madison Coffee Shop for three hours/day on two days each week; and stated that the economic crisis that had hit the country constrained management to
dispense with his services. December 29,1999: the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had no employer-employee relationship, because
Roa was receiving talent fee and not salary, which was reinforced by the fact that Roa received his talent fee nightly, unlike the regular employees of the hotel who are paid monthly. NLRC
affirmed the LAs decision on May 31, 2001. CA set aside the decision of the NLRC, saying CA failed to take into consideration that in Roa s line of work, he was supervised and
controlled by the hotels restaurant manager who at certain times would require him to perform only tagalong songs or music, or wear barong tagalong to conform with the Filipinana motif of
the place and the time of his performance is fixed. As to the status of Roa, he is considered a regular employee of the hotel since his job was in furtherance of the restaurant business of the hotel.
Granting that Roa was initially a contractual employee, by the sheer length of service he had rendered for the company, he had been converted into a regular employee. CA held that the
dismissal was due to retrenchment in order to avoid or minimize business losses, which is recognized by law under Art. 283 of the Labor Code.
ISSUES: WON there was employer-employee relationship between the two, and if so,
WON Roa was validly terminated
RULING: YES. Employer-employee relationship existed between the parties. Roa was undeniably employed as a pianist of the restaurant. The hotel wielded the power of selection at the
time it entered into the service contract dated Sept. 1, 1992 with Roa. The hotel could not seek refuge behind the service contract entered into with Roa. It is the law that defines and governs an
employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors, like the nature of the work the employee has been called upon to perform, are also
considered. The law affords protection to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes
the stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-employee relationship generally tips the scales in favor of the employer, such that the
employee is often scarcely provided real and better options. The argument that Roa was receiving talent fee and not salary is baseless. There is no denying that the remuneration denominated
as talent fees was fixed on the basis of his talent, skill, and the quality of music he played during the hours of his performance. Roa s remuneration, albeit denominated as talent fees, was still
considered as included in the term wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration, as per Article 97(f) of the Labor Code.
The power of the employer to control the work of the employee is considered the most significant determinant of the existence of an employer-employee relationship. This is the so-called control
test, and is premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of Discipline, and that the power to terminate the working relationship was mutually
vested in the parties, in that either party might terminate at will, with or without cause. This claim is contrary to the records. Indeed, the memorandum informing respondent of the discountinuance
of his service because of the financial condition of petitioner showed the latter had the power to dismiss him from employment.
NO. Roa was not validly terminated. The conclusion that Roa s termination was by reason of retrenchment due to an authorized cause under the labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management prerogative resorted to by employers to avoid ro to minimize
business losses. On this matter, Article 283 of the Labor Code states: Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. xxx. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. Justifications for retrenchment: a. The expected losses should be substantial and not merely de minimis in extent; b. The substantial losses
apprehended must be reasonably imminent; c. The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and d. The alleged losses, if already incurred,
and the expected imminent losses sought to be forestalled must be proved by sufficient and convincing evidence. In termination cases, the burden of proving that the dismissal was for a valid or
authorized cause rests upon the employer. Here, petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby imminently sustain. It only
claimed that Roas termination was due to its present business/financial condition. This bare statement fell short of the norm to show a valid retrenchment. Hence, there was no valid
cause for the retrenchment of respondent. Since the lapse of time since the retrenchment might have rendered Roa s reinstatement to his former job no longer feasible, Legend Hotel should
pay him separation pay at the rate of one month pay for every year of service computed from September 1992 until the finality of this decision, and full backwages from the time his compensation
was withheld until the finality of this decision. Petition denied.
G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET
AL., respondents.
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June
10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully reinstated without loss to their right of
seniority and of such other rights already acquired by them and/or allowed by law. 1
Now, Dy Keh Beng assigns the following errors
as having been committed by the Court of Industrial Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE
PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.
V
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL
FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic
Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a case
was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng
contended that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each
piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido
Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer relationship was found to have existed
between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis. 4 The issue therefore centered on whether there existed an employee
employer relation between petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15,
1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although their services were compensated on piece basis. Evidence likewise
showed that at times the establishment had eight (8) workers and never less than five (5); including the complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for him to do;
(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous. ,
According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an employee
is referred to as
shall include any employee and shag not be limited to the employee of a particular employer unless the Act explicitly states otherwise and shall include any individual whose
work has ceased as a consequence of, or in connection with any current labor dispute or because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
while an employer
includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or
anyone acting in the capacity of officer or agent of such labor organization.
Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del
Rosario, et al., L-13130, October 31, 1959, where the Court ruled that:
The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to render personal services to or for
the benefit of the other and recognition by them of the right of one to order and control the other in the performance of the work and to direct the manner and method of its
performance.
Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there was no evidence to show
that petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and
that he stayed in the establishment only when there was work.
While this Court upholds the control test 11 under which an employer-employee relationship exists "where the person for whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test
calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 12 Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the
work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the essence of the relation. Units of time
... and units of work are in establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot
construe payment by the piece where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in " Sunrise Coconut Products Co. v. Court of Industrial Relations"
(83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a labor contract -between employers and
employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it concluded that the findings of fact made by
the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial
Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not
reverse the findings of fact of the Court of Industrial Relations when they were supported by substantial evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision being appealed ordered the payment
of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages worked out by Justice Claudio
Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to three years, "subject to deduction where there are
mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances. 17Considering there are no such
circumstances in this case, there is no reason why the Court should not apply the abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without qualification and deduction at the
respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of this award is entrusted to the National Labor Relations Commission.
Costs against petitioner.
SO ORDERED.
G.R. Nos. L-63550-51 January 31, 1984
RJL
MARTINEZ
FISHING
CORPORATION
and/or
PENINSULA
FISHING
CORPORATION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTONIO BOTICARIO, ISIDRO
FARIOLAN, FERNANDO SEVILLA, TOTONG ROLDAN, ROGER ESQUILLA, MARIO
MIRANDA, EDUARDO ESPINOSA, ALBERTO NOVERA, ANTONIO PATERNO,
MARCIANO PIADORA, MARIO ROMERO, CLINITO ESQUILLA, ALEJO BATOY, BOBBY
QUITREZA, ROLANDO DELA TORRE, HERNANI REVATEZ, RODOLFO SEVILLA,
ROLANDO ANG, JUANITO PONPON, HOSPINIANO CALINDEZ, JOSE MABULA,

DEONG DE LEON, MELENCIO CONEL and ALFREDO BULAONG, respondents.
MELENCIO-HERRERA, J.:
Petition for Certiorari, Prohibition and mandamus assailing the Decision of respondent National Labor Relations Commission (NLRC) in Cases Nos. AB-4-11054-81 and AB-8-12354-81
entitled Antonio Boticario, et al. vs. RJL Fishing Corporation and/or Peninsula Fishing Corporation , dated November 26, 1982, as well as the Order, dated February 14, denying petitioners'
Manifestation and Omnibus Motion to dismiss private respondents' appeal. The dispositive portion of the challenged resolution reads:
WHEREFORE, in view of the foregoing considerations, the Decision appealed from is hereby set aside and another one entered, directing respondents-appellees: (1) to
reinstate complainants-appellants to their former work, without loss of seniority rights and other privileges appertaining thereto; (2) to pay complainants-appellants full
backwages computed from the date they were dismissed up to the date they are actually reinstated; (3) to pay complainants-appellants legal holiday pay, emergency living
allowance and 13th month pay in accordance with law; and (4) to pay complainants-appellants who are entitled to incentive leave pay, as herein above determined, according
to law.
The claims for overtime pay and premium pay for holiday and rest day are dismissed.
SO ORDERED. 1
This case was originally assigned to the Second Division but because of the pendency of a lower-numbered case, G.R. No. 63474, entitled RJL Martinez Fishing Corporation vs. National Labor
Relations Commission, et als.before the First Division, involving the same petitioners and their workers (albeit a different group and not exactly Identical issues), this case was transferred to
the latter, Division for proper action and determination. G.R. No. 63474 was dismissed by the First Division on August 17, 1983 for lack of merit.
Petitioner corporations are principally engaged in the deep-sea fishing business. Since 1978, private respondents were employed by them as stevedores at Navotas Fish Port for the unloading
of tuna fish catch from petitioners' vessels and then loading them on refrigerated vans for shipment abroad.
On March 27, 1981, private respondents Antonio Boticario, and thirty (30) others, upon the premise that they are petitioners' regular employees, filed a complaint against petitioners for nonpayment of overtime pay, premium pay, legal holiday pay, emergency allowance under P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713, 1751, 13th month pay (P.D. 851), service incentive leave
pay and night shift differential. 2
Claiming that they were dismissed from employment on March 29, 1981 as a retaliatory measure for their having failed the said complaint private respondents filed on the said complaint,
private respondents filed on April 21, 1981 another complaint against petitioners for Illegal Dismissal and for Violation of Article 118 of the Labor Code, as amended. 3 Upon petitioners'
motion, these two cases were consolidated and tried jointly.
In disputing any employer-employee relationship between them, petitioners contend that private respondents are contract laborers whose work terminated upon completion of each
unloading, and that in the absence of any boat arrivals, private respondents did not work for petitioners but were free to work or seek employment with other fishing boat operators.
On February 25, 1982, the Labor Arbiter upheld petitioners' position ruling that the latter are extra workers, who were hired to perform specific tasks on contractual basis; that their work is
intermittent depending on the arrival of fishing vessels; that if there are no fish to unload and load, they work for some other fishing boat operators; that private respondent Antonio Boticario
had executed an employment contract under which he agreed to act as a labor contractor and that the other private respondents are his men; that even assuming that private respondents
are employees of petitioners, their employer-employee relation is co-terminous with each unloading and loading job; that in the same manner, petitioners are not under any obligation to hire
petitioners exclusively, hence, when they were not given any job on March 29, 1981, no dismissal was effected but that they were merely not rehired. 4
10 | L A B O R R E L A T I O N S
On April 1, 1982, private respondents received the Decision of the Labor Arbiter dismissing their complaints. On April 19, 1982, they filed an appeal before respondent NLRC, which took
cognizance thereof.
In its Decision of November 26, 1982, the NLRC reversed the findings of the Labor Arbiter, and resolved, as previously stated, to uphold the existence of employer-employee relationship
between the parties.
Petitioners resorted to a "Manifestation and Omnibus Motion to Dismiss Appeal and to Vacate and/or to Declare Null and Void the Decision of this Honorable Commission Promulgated on
November 25 (should be 26), 1982" but the same was denied, hence, the instant recourse.
As prayed for, a Temporary Restraining Order to enjoin the enforcement of the questioned decision of respondent NLRC was issued on April 20, 1983, and on August 15, 1983, the Petition was
given due course by the Second Division.
Petitioners submit the following issues for resolution:
I. Whether or not the appeal from the decision of Labor Arbiter filed by private respondents is within the l0-day reglementary period;
II. Whether or not respondent NLRC erred in reversing the decision of the Labor Arbiter despite the failure to furnish petitioners with a copy of the appeal;
III. Whether or not there is an employer-employee relationship between the parties;
IV. Whether or not private respondents are entitled to legal holiday pay, emergency living allowance, thirteenth month pay and incentive leave pay.
1. Petitioners, joined by the Solicitor General, contend that the appeal filed by private respondents from the Decision of the Labor Arbiter was filed out of time considering that they received
copy of the same on April 1, 1982 but that they filed their appeal only on April 19, 1982, or 18 days later. If we were to reckon the 10-day reglementary period to appeal as calendar days, as
held in the case of Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, et al. 5 , private respondents' appeal was, indeed, out of time. However, it was clear from Vir-Jen that the calendar day
basis of computation would apply only "henceforth" or to future cases. That ruling was not affected by this Court's Resolution of November 18, 1983 reconsidering its Decision of July 20,
1982. When the appeal herein was filed on April 19, 1982, the governing proviso was found in Section 7, Rule XIII of the Rules and Regulations implementing the Labor Code along with NLRC
Resolution No. 1, Series of 1977, which based the computation on "working days". They very face of the Notice of Decision itself 6 indicated aggrieved party could appeal within 10 "working
days" from receipt of copy of the resolution appealed from. From April 1 to April 19, 1982 is exactly ten (10) working days considering the Holy Week and the two Saturdays and Sundays that
supervened in between that period. In other words, private respondents' appeal, having been filed during the time that the prevailing period of appeal was ten (10) working days and prior to
the Vir-Jen case promulgated on July 20, 1982, it must be held to have been timely filed.
2. Anent the failure of private respondents to furnish petitioners with a copy of their memorandum on appeal, suffice it to state that the same is not fatal to the appeal.
3. The issue of the existence of an employer-employee relationship between the parties is actually a question of fact, and the finding of the NLRC on this point is bonding upon us, the
exceptions to the general rule being absent in this case. Besides the continuity of employment is not the determining factor, but rather whether the work of the laborer is part of the regular
business or occupation of the employer. 8 We are thus in accord with the findings of respondent NLRC in this regard.
Although it may be that private respondents alternated their employment on different vessels when they were not assigned to petitioners' boats, that did not affect their employee status.
The evidence also establishes that petitioners had a fleet of fishing vessels with about 65 ship captains, and as private respondents contended, when they finished with one vessel, they were
instructed to wait for the next. As respondent NLRC had found:
We further find that the employer-employee relationship between the parties herein is not co-terminous with each loading and unloading job. As earlier shown, respondents
are engaged in the business of fishing. For this purpose, they have a fleet of fishing vessels. Under this situation, respondents' activity of catching fish is a continuous process
and could hardly be considered as seasonal in nature. So that the activities performed by herein complainants, i.e. unloading the catch of tuna fish from respondents' vessel
and then loading the same to refrigerated vans, are necessary or desirable in the business of respondents. This circumstances makes the employment of complainants a
regular one, in the sense that it does not depend on any specific project or seasonal activity. 9
The employment contract signed by Antonio Boticario, 10 which described him as "labor contractor", is not really so inasmuch as wages continued to be paid by petitioners and he and the
other workers were uniformly paid. He was merely asked the petitioners to recruit other workers. Besides, labor-contracting is prohibited under Sec. 9(b), Rule VIII, Book III Rules and
Regulations Implementing the Labor Code as amended. 11 Directly in point and controlling is the ruling in an analogous case, Philippine Fishing Boat Officers and Engineers Union vs.
CIR, 12 reading:
The Court holds, therefore, that the employer-employee relationship existed between the parties notwithstanding evidence to the fact that petitioners Visayas and Bergado,
even during the time that they worked with respondent company alternated their employment on different vessels when they were not assigned on the company's vessels.
For, as was stressed in the above-quoted case ofIndustrial-Commercial-Agricultural Workers Organization vs. CIR, 16 SCRA 562 [1966], "that during the temporary layoff the
laborers are considered free to seek other employment is natural, since the laborers are not being paid, yet must find means of support" and such temporary cessation of
operations "should not mean starvation for employees and their families."
4. Indeed, considering the length of time that private respondents have worked for petitioner since 1978 there is justification to conclude that they were engaged to perform activities
usually necessary or desirable in the usual business or trade of petitioners and are, therefore, regular employees. 13 As such, they are entitled to the benefits awarded them by respondent
NLRC.
WHEREFORE, the instant Petition for Certiorari, Prohibition and Mandamus is hereby dismissed and the Temporary Restraining Order heretofore issued is hereby dissolved.
Costs against petitioners.
SO ORDERED.
PHILIPPINE SOCIETY FOR

THE PREVENTION OF
CRUELTY TO ANIMALS,
G.R. No. 169752
Petitioners,
- versus COMMISSION ON AUDIT,
DIR. RODULFO J. ARIESGA
(in his official capacity as Director

of the Commission on Audit), MS.
MERLE M. VALENTIN and MS.
SUSAN GUARDIAN (in their official
capacities as Team Leader and Team
Member, respectively, of the audit
Team of the Commission on Audit),
Promulgated:
Respondents.
September 25, 2007
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a special civil action for Certiorari and Prohibition under Rule 65 of the Rules of Court, in relation to Section 2 of Rule 64, filed by the petitioner assailing Office Order No.
2005-021[1] dated September 14, 2005 issued by the respondents which constituted the audit team, as well as its September 23, 2005 Letter[2] informing the petitioner that respondents
audit team shall conduct an audit survey on the petitioner for a detailed audit of its accounts, operations, and financial transactions. No temporary restraining order was issued.
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at the
time it was created, was composed of animal aficionados and animal propagandists. The objects of the petitioner, as stated in Section 2 of its charter, shall be to enforce laws relating to
cruelty inflicted upon animals or the protection of animals in the Philippine Islands, and generally, to do and perform all things which may tend in any way to alleviate the suffering of animals
and promote their welfare.[3]
At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in existence. Act No. 1285 antedated both the Corporation Law and the constitution of
the Securities and Exchange Commission. Important to note is that the nature of the petitioner as a corporate entity is distinguished from the sociedad anonimas under the Spanish Code of
Commerce.
For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the protection of animals, the petitioner was initially imbued under its charter with the power to
apprehend violators of animal welfare laws. In addition, the petitioner was to share one-half (1/2) of the fines imposed and collected through its efforts for violations of the laws related
thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
SEC. 4. The said society is authorized to appoint not to exceed five agents in the City of Manila, and not to exceed two in each of the provinces of the Philippine Islands who shall have all the
power and authority of a police officer to make arrests for violation of the laws enacted for the prevention of cruelty to animals and the protection of animals, and to serve any process in
connection with the execution of such laws; and in addition thereto, all the police force of the Philippine Islands, wherever organized, shall, as occasion requires, assist said society, its
members or agents, in the enforcement of all such laws.
SEC. 5. One-half of all the fines imposed and collected through the efforts of said society, its members or its agents, for violations of the laws enacted for the prevention of cruelty to animals
and for their protection, shall belong to said society and shall be used to promote its objects.
(emphasis supplied)
Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the fines collected for violation of animal-related laws were recalled by virtue of
Commonwealth Act (C.A.) No. 148,[4] which reads, in its entirety, thus:
Be it enacted by the National Assembly of the Philippines:
Section 1. Section four of Act Numbered Twelve hundred and eighty-five as amended by Act Numbered Thirty five hundred and forty-eight, is hereby further amended so as to read as follows:
Sec. 4. The said society is authorized to appoint not to exceed ten agents in the City of Manila, and not to exceed one in each municipality of the Philippines who shall have the authority to
denounce to regular peace officers any violation of the laws enacted for the prevention of cruelty to animals and the protection of animals and to cooperate with said peace officers in the
prosecution of transgressors of such laws.
Sec. 2. The full amount of the fines collected for violation of the laws against cruelty to animals and for the protection of animals, shall accrue to the general fund of the Municipality where
the offense was committed.
Sec. 3. This Act shall take effect upon its approval.
Approved, November 8, 1936. (Emphasis supplied)
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No. 63 dated November 12, 1936, portions of which provide:
Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered One Hundred Forty Eight was enacted depriving the agents of the Society for the Prevention
of Cruelty to Animals of their power to arrest persons who have violated the laws prohibiting cruelty to animals thereby correcting a serious defect in one of the laws existing in our statute
books.
xxxx
Whereas, the cruel treatment of animals is an offense against the State, penalized under our statutes, which the Government is duty bound to enforce;
Now, therefore, I, Manuel L. Quezon, President of the Philippines, pursuant to the authority conferred upon me by the Constitution, hereby decree, order, and direct the Commissioner of
Public Safety, the Provost Marshal General as head of the Constabulary Division of the Philippine Army, every Mayor of a chartered city, and every municipal president to detail and organize
special members of the police force, local, national, and the Constabulary to watch, capture, and prosecute offenders against the laws enacted to prevent cruelty to animals. (Emphasis
supplied)
On December 1, 2003, an audit team from respondent Commission on Audit (COA) visited the office of the petitioner to conduct an audit survey pursuant to COA Office Order No. 2003-051
dated November 18, 2003[5] addressed to the petitioner. The petitioner demurred on the ground that it was a private entity not under the jurisdiction of COA, citing Section 2(1) of Article IX
of the Constitution which specifies the general jurisdiction of the COA, viz:
Section 1. General Jurisdiction. The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned
and controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and officers that have been granted fiscal autonomy under the
Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity.
However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and
appropriate to correct the deficiencies. It shall keep the general accounts of the Government, and for such period as may be provided by law, preserve the vouchers and other supporting
papers pertaining thereto. (Emphasis supplied)
Petitioner explained thus:
a.
Although the petitioner was created by special legislation, this necessarily came about because in January 1905 there was as yet neither a Corporation Law or any other general law
under which it may be organized and incorporated, nor a Securities and Exchange Commission which would have passed upon its organization and incorporation.
b.
That Executive Order No. 63, issued during the Commonwealth period, effectively deprived the petitioner of its power to make arrests, and that the petitioner lost its operational funding,
underscore the fact that it exercises no governmental function. In fine, the government itself, by its overt acts, confirmed petitioners status as a private juridical entity.
The COA General Counsel issued a Memorandum[6] dated May 6, 2004, asserting that the petitioner was subject to its audit authority. In a letter dated May 17, 2004,[7] respondent COA
informed the petitioner of the result of the evaluation, furnishing it with a copy of said Memorandum dated May 6, 2004 of the General Counsel.
Petitioner thereafter filed with the respondent COA a Request for Re-evaluation dated May 19, 2004,[8] insisting that it was a private domestic corporation.
Acting on the said request, the General Counsel of respondent COA, in a Memorandum dated July 13, 2004,[9] affirmed her earlier opinion that the petitioner was a government entity that
was subject to the audit jurisdiction of respondent COA. In a letter dated September 14, 2004, the respondent COA informed the petitioner of the result of the re-evaluation, maintaining its
position that the petitioner was subject to its audit jurisdiction, and requested an initial conference with the respondents.
In a Memorandum dated September 16, 2004, Director Delfin Aguilar reported to COA Assistant Commissioner Juanito Espino, Corporate Government Sector, that the audit survey was not
conducted due to the refusal of the petitioner because the latter maintained that it was a private corporation.
Petitioner received on September 27, 2005 the subject COA Office Order 2005-021 dated September 14, 2005 and the COA Letter dated September 23, 2005.
Hence, herein Petition on the following grounds:
A.
RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT RULED THAT PETITIONER IS SUBJECT TO ITS
AUDIT AUTHORITY.
B.
PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE BEING NO APPEAL, NOR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE TO IT.[10]
The essential question before this Court is whether the petitioner qualifies as a government agency that may be subject to audit by respondent COA.
Petitioner argues: first, even though it was created by special legislation in 1905 as there was no general law then existing under which it may be organized or incorporated, it exercises no
governmental functions because these have been revoked by C.A. No. 148 and E.O. No. 63; second, nowhere in its charter is it indicated that it is a public corporation, unlike, for instance,
C.A. No. 111 which created the Boy Scouts of the Philippines, defined its powers and purposes, and specifically stated that it was An Act to Create a Public Corporation in which, even as
amended by Presidential Decree No. 460, the law still adverted to the Boy Scouts of the Philippines as a public corporation, all of which are not obtaining in the charter of the petitioner; third,
if it were a government body, there would have been no need for the State to grant it tax exemptions under Republic Act No. 1178, and the fact that it was so exempted strengthens its
position that it is a private institution; fourth, the employees of the petitioner are registered and covered by the Social Security System at the latters initiative and not through the
Government Service Insurance System, which should have been the case had the employees been considered government employees; fifth, the petitioner does not receive any form of
financial assistance from the government, since C.A. No. 148, amending Section 5 of Act No. 1285, states that the full amount of the fines, collected for violation of the laws against cruelty to
animals and for the protection of animals, shall accrue to the general fund of the Municipality where the offense was committed; sixth, C.A. No. 148 effectively deprived the petitioner of its
powers to make arrests and serve processes as these functions were placed in the hands of the police force; seventh, no government appointee or representative sits on the board of trustees
of the petitioner; eighth, a reading of the provisions of its charter (Act No. 1285) fails to show that any act or decision of the petitioner is subject to the approval of or control by any
government agency, except to the extent that it is governed by the law on private corporations in general; and finally, ninth, the Committee on Animal Welfare, under the Animal Welfare Act
of 1998, includes members from both the private and the public sectors.
The respondents contend that since the petitioner is a body politic created by virtue of a special legislation and endowed with a governmental purpose, then, indubitably, the COA may audit
the financial activities of the latter. Respondents in effect divide their contentions into six strains: first, the test to determine whether an entity is a government corporation lies in the manner
of its creation, and, since the petitioner was created by virtue of a special charter, it is thus a government corporation subject to respondents auditing power; second, the petitioner exercises
sovereign powers, that is, it is tasked to enforce the laws for the protection and welfare of animals which ultimately redound to the public good and welfare, and, therefore, it is deemed to be
a government instrumentality as defined under the Administrative Code of 1987, the purpose of which is connected with the administration of government, as purportedly affirmed by
American jurisprudence; third, by virtue of Section 23,[11] Title II, Book III of the same Code, the Office of the President exercises supervision or control over the petitioner; fourth, under the
same Code, the requirement under its special charter for the petitioner to render a report to the Civil Governor, whose functions have been inherited by the Office of the President, clearly
reflects the nature of the petitioner as a government instrumentality; fifth, despite the passage of the Corporation Code, the law creating the petitioner had not been abolished, nor had it
been re-incorporated under any general corporation law; and finally, sixth, Republic Act No. 8485, otherwise known as the Animal Welfare Act of 1998, designates the petitioner as a member
of its Committee on Animal Welfare which is attached to the Department of Agriculture.
In view of the phrase One-half of all the fines imposed and collected through the efforts of said society, the Court, in a Resolution dated January 30, 2007, required the Office of the Solicitor
General (OSG) and the parties to comment on: a) petitioner's authority to impose fines and the validity of the provisions of Act No. 1285 and Commonwealth Act No. 148 considering that
there are no standard measures provided for in the aforecited laws as to the manner of implementation, the specific violations of the law, the person/s authorized to impose fine and in what
amount; and, b) the effect of the 1935 and 1987 Constitutions on whether petitioner continues to exist or should organize as a private corporation under the Corporation Code, B.P. Blg. 68 as
amended.
Petitioner and the OSG filed their respective Comments. Respondents filed a Manifestation stating that since they were being represented by the OSG which filed its Comment, they opted to
dispense with the filing of a separate one and adopt for the purpose that of the OSG.
The petitioner avers that it does not have the authority to impose fines for violation of animal welfare laws; it only enjoyed the privilege of sharing in the fines imposed and collected from its
efforts in the enforcement of animal welfare laws; such privilege, however, was subsequently abolished by C.A. No. 148; that it continues to exist as a private corporation since it was created
by the Philippine Commission before the effectivity of the Corporation law, Act No. 1459; and the 1935 and 1987 Constitutions.
The OSG submits that Act No. 1285 and its amendatory laws did not give petitioner the authority to impose fines for violation of laws[12] relating to the prevention of cruelty to animals and
the protection of animals; that even prior to the amendment of Act No. 1285, petitioner was only entitled to share in the fines imposed; C.A. No. 148 abolished that privilege to share in the
fines collected; that petitioner is a public corporation and has continued to exist since Act No. 1285; petitioner was not repealed by the 1935 and 1987 Constitutions which contain transitory
provisions maintaining all laws issued not inconsistent therewith until amended, modified or repealed.
The petition is impressed with merit.
The arguments of the parties, interlaced as they are, can be disposed of in five points.
First, the Court agrees with the petitioner that the charter test cannot be applied.
Essentially, the charter test as it stands today provides:
[T]he test to determine whether a corporation is government owned or controlled, or private in nature is simple. Is it created by its own charter for the exercise of a public function, or by
incorporation under the general corporation law? Those with special charters are government corporations subject to its provisions, and its employees are under the jurisdiction of the Civil
Service Commission, and are compulsory members of the Government Service Insurance System. xxx (Emphasis supplied)[13]
The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime established by the 1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled
by the Government or any subdivision or instrumentality thereof.[14]
The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions. Section 16 of Article XII of the present Constitution provides:
Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be
created or established by special charters in the interest of the common good and subject to the test of economic viability.
Section 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935 Constitution and Section 4 of Article XIV of the 1973 Constitution.
During the formulation of the 1935 Constitution, the Committee on Franchises recommended the foregoing proscription to prevent the pressure of special interests upon the lawmaking body
in the creation of corporations or in the regulation of the same. To permit the lawmaking body by special law to provide for the organization, formation, or regulation of private corporations
would be in effect to offer to it the temptation in many cases to favor certain groups, to the prejudice of others or to the prejudice of the interests of the country.[15]
And since the underpinnings of the charter test had been introduced by the 1935 Constitution and not earlier, it follows that the test cannot apply to the petitioner, which was incorporated by
virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws in general have no retroactive effect, unless the contrary is provided.[16] All statutes are to be construed as
having only a prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language
used. In case of doubt, the doubt must be resolved against the retrospective effect.[17]
There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the law itself so expressly provides; (2) in case of remedial statutes; (3) in case of
curative statutes; (4) in case of laws interpreting others; and (5) in case of laws creating new rights.[18] None of the exceptions is present in the instant case.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise known as the Corporation Law, which had been enacted by virtue of the plenary powers of the
Philippine Commission on March 1, 1906, a little over a year after January 19, 1905, the time the petitioner emerged as a juridical entity. Even the Corporation Law respects the rights and
powers of juridical entities organized beforehand, viz:
SEC. 75. Any corporation or sociedad anonima formed, organized, and existing under the laws of the Philippine Islands and lawfully transacting business in the Philippine Islands on the date
of the passage of this Act, shall be subject to the provisions hereof so far as such provisions may be applicable and shall be entitled at its option either to continue business as such
corporation or to reform and organize under and by virtue of the provisions of this Act, transferring all corporate interests to the new corporation which, if a stock corporation, is authorized to
issue its shares of stock at par to the stockholders or members of the old corporation according to their interests. (Emphasis supplied).
As pointed out by the OSG, both the 1935 and 1987 Constitutions contain transitory provisions maintaining all laws issued not inconsistent therewith until amended, modified or repealed.[19]
In a legal regime where the charter test doctrine cannot be applied, the mere fact that a corporation has been created by virtue of a special law does not necessarily qualify it as a public
corporation.
What then is the nature of the petitioner as a corporate entity? What legal regime governs its rights, powers, and duties?
As stated, at the time the petitioner was formed, the applicable law was the Philippine Bill of 1902, and, emphatically, as also stated above, no proscription similar to the charter test can be
found therein.
The textual foundation of the charter test, which placed a limitation on the power of the legislature, first appeared in the 1935 Constitution. However, the petitioner was incorporated in 1905
by virtue of Act No. 1258, a law antedating the Corporation Law (Act No. 1459) by a year, and the 1935 Constitution, by thirty years. There being neither a general law on the formation and
organization of private corporations nor a restriction on the legislature to create private corporations by direct legislation, the Philippine Commission at that moment in history was well within
its powers in 1905 to constitute the petitioner as a private juridical entity.
Time and again the Court must caution even the most brilliant scholars of the law and all constitutional historians on the danger of imposing legal concepts of a later date on facts of an
earlier date.[20]
The amendments introduced by C.A. No. 148 made it clear that the petitioner was a private corporation and not an agency of the government. This was evident in Executive Order No. 63,
issued by then President of the Philippines Manuel L. Quezon, declaring that the revocation of the powers of the petitioner to appoint agents with powers of arrest corrected a serious defect in
one of the laws existing in the statute books.
As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given retroactive effect, thereby freeing all doubt as to which class of corporations the petitioner
belongs, that is, it is a quasi-public corporation, a kind of private domestic corporation, which the Court will further elaborate on under the fourth point.
Second, a reading of petitioners charter shows that it is not subject to control or supervision by any agency of the State, unlike government-owned and -controlled corporations. No
government representative sits on the board of trustees of the petitioner. Like all private corporations, the successors of its members are determined voluntarily and solely by the petitioner in
accordance with its by-laws, and may exercise those powers generally accorded to private corporations, such as the powers to hold property, to sue and be sued, to use a common seal, and
so forth. It may adopt by-laws for its internal operations: the petitioner shall be managed or operated by its officers in accordance with its by-laws in force. The pertinent provisions of the
charter provide:
Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa,
Josefina R. de Luzuriaga, and such other persons as may be associated with them in conformity with this act, and their successors, are hereby constituted and created a body politic and
corporate at law, under the name and style of The Philippines Society for the Prevention of Cruelty to Animals.
As incorporated by this Act, said society shall have the power to add to its organization such and as many members as it desires, to provide for and choose such officers as it may deem
advisable, and in such manner as it may wish, and to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to levy dues upon its
members and provide for their collection to hold real and personal estate such as may be necessary for the accomplishment of the purposes of the society, and to adopt such by-laws for its
government as may not be inconsistent with law or this charter.
xxxx
Sec. 3. The said society shall be operated under the direction of its officers, in accordance with its by-laws in force, and this charter.
xxxx
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the society shall have full power to locate and establish branch offices of the society wherever it may deem
advisable in the Philippine Islands, such branch offices to be under the supervision and control of the principal office.
Third. The employees of the petitioner are registered and covered by the Social Security System at the latters initiative, and not through the Government Service Insurance System, which
should be the case if the employees are considered government employees. This is another indication of petitioners nature as a private entity. Section 1 of Republic Act No. 1161, as amended
by Republic Act No. 8282, otherwise known as the Social Security Act of 1997, defines the employer:
Employer Any person, natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of
another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned
or controlled by the Government: Provided, That a self-employed person shall be both employee and employer at the same time. (Emphasis supplied)
Fourth. The respondents contend that the petitioner is a body politic because its primary purpose is to secure the protection and welfare of animals which, in turn, redounds to the public
good.
This argument, is, at best, specious. The fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation,
inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good. This class of corporations may be considered
quasi-public corporations, which are private corporations that render public service, supply public wants,[21] or pursue other eleemosynary objectives. While purposely organized for the gain
or benefit of its members, they are required by law to discharge functions for the public benefit. Examples of these corporations are utility,[22] railroad, warehouse, telegraph, telephone,
water supply corporations and transportation companies.[23] It must be stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of
service the former renders to the public: if it performs a public service, then it becomes a quasi-public corporation.[24]
Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide, for the fact is that almost all corporations are nowadays created to promote the interest,
good, or convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public benefit. Private schools and universities are likewise private corporations; and
yet, they are rendering public service. Private hospitals and wards are charged with heavy social responsibilities. More so with all common carriers. On the other hand, there may exist a
public corporation even if it is endowed with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the
State as the latters own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private. Applying the above
test, provinces, chartered cities, and barangays can best exemplify public corporations. They are created by the State as its own device and agency for the accomplishment of parts of its own
public works.[25]
It is clear that the amendments introduced by C.A. No. 148 revoked the powers of the petitioner to arrest offenders of animal welfare laws and the power to serve processes in connection
therewith.
Fifth. The respondents argue that since the charter of the petitioner requires the latter to render periodic reports to the Civil Governor, whose functions have been inherited by the President,
the petitioner is, therefore, a government instrumentality.
This contention is inconclusive. By virtue of the fiction that all corporations owe their very existence and powers to the State, the reportorial requirement is applicable to all corporations of
whatever nature, whether they are public, quasi-public, or private corporationsas creatures of the State, there is a reserved right in the legislature to investigate the activities of a corporation
to determine whether it acted within its powers. In other words, the reportorial requirement is the principal means by which the State may see to it that its creature acted according to the
powers and functions conferred upon it. These principles were extensively discussed in Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on Good Government.[26] Here,
the Court, in holding that the subject corporation could not invoke the right against self-incrimination whenever the State demanded the production of its corporate books and papers,
extensively discussed the purpose of reportorial requirements, viz:
x x x The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It received certain special privileges and franchises, and holds them subject to
the laws of the state and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved
to it so long as it obeys the laws of its creation. There is a reserve[d] right in the legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange
anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed,
and whether they had been abused, and demand the production of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the corporation which is
charged with a criminal violation of the statute may plead the criminality of such corporation as a refusal to produce its books. To state this proposition is to answer it. While an individual may
lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation vested with special privileges and franchises may refuse to
show its hand when charged with an abuse of such privileges. (Wilson v. United States, 55 Law Ed., 771, 780.)[27]
WHEREFORE, the petition is GRANTED. Petitioner is DECLARED a private domestic corporation subject to the jurisdiction of the Securities and Exchange Commission. The respondents are
ENJOINED from investigating, examining and auditing the petitioner's fiscal and financial affairs. SO ORDERED.
G.R. No. L-21278
December 27, 1966
FEATI UNIVERSITY, petitioner,
vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.

---------------------------------------G.R. No. L-21462
December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
---------------------------------------G.R. No. L-21500
December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed to file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU hereinafter referred to as Faculty Club wrote a letter to Mrs. Victoria L. Araneta, President of
petitioner Feati University hereinafter referred to as University informing her of the organization of the Faculty Club into a registered labor union. The Faculty Club is composed of
members who are professors and/or instructors of the University. On January 22, 1963, the President of the Faculty Club sent another letter containing twenty-six demands that have
connection with the employment of the members of the Faculty Club by the University, and requesting an answer within ten days from receipt thereof. The President of the University
answered the two letters, requesting that she be given at least thirty days to study thoroughly the different phases of the demands. Meanwhile counsel for the University, to whom the
demands were referred, wrote a letter to the President of the Faculty Club demanding proof of its majority status and designation as a bargaining representative. On February 1, 1963, the
President of the Faculty Club again wrote the President of the University rejecting the latter's request for extension of time, and on the same day he filed a notice of strike with the Bureau of
Labor alleging as reason therefor the refusal of the University to bargain collectively. The parties were called to conferences at the Conciliation Division of the Bureau of Labor but efforts to
conciliate them failed. On February 18, 1963, the members of the Faculty Club declared a strike and established picket lines in the premises of the University, resulting in the disruption of
classes in the University. Despite further efforts of the officials from the Department of Labor to effect a settlement of the differences between the management of the University and the
striking faculty members no satisfactory agreement was arrived at. On March 21, 1963, the President of the Philippines certified to the Court of Industrial Relations the dispute between the
management of the University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and certain incidents related to said dispute, various cases were filed with the Court of Industrial Relations
hereinafter referred to as CIR. The three cases now before this Court stemmed from those cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance
of the writ of preliminary injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the proceedings in
Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order
dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR,
until further order from this Court, "to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)." 1 On December 4,
1963, this Court ordered the injunction bond increased to P100,000.00; but on January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the bond to
P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30 involved in the Case G.R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty Club. As we have stated, the dispute between the University and the Faculty Club
was certified on March 21, 1963 by the President of the Philippines to the CIR. On the strength of the presidential certification, respondent Judge Bautista set the case for hearing on March
23, 1963. During the hearing, the Judge endeavored to reconcile the part and it was agreed upon that the striking faculty members would return to work and the University would readmit
them under a status quo arrangement. On that very same day, however, the University, thru counsel filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over
the case, because (1) the Industrial Peace Act is not applicable to the University, it being an educational institution, nor to the members of the Faculty Club, they being independent
contractors; and (2) the presidential certification is violative of Section 10 of the Industrial Peace Act, as the University is not an industrial establishment and there was no industrial dispute
which could be certified to the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both
parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification. In the same order, the respondent Judge, believing that the dispute could
not be decided promptly, ordered the strikers to return immediately to work and the University to take them back under the last terms and conditions existing before the dispute arose, as per
agreement had during the hearing on March 23, 1963; and likewise enjoined the University, pending adjudication of the case, from dismissing any employee or laborer without previous
authorization from the CIR. The University filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and at the same time asking that the motion
for reconsideration be first heard by the CIR en banc. Without the motion for reconsideration having been acted upon by the CIR en banc, respondent Judge set the case for hearing on the
merits for May 8, 1963. The University moved for the cancellation of said hearing upon the ground that the court en banc should first hear the motion for reconsideration and resolve the
issues raised therein before the case is heard on the merits. This motion for cancellation of the hearing was denied. The respondent Judge, however, cancelled the scheduled hearing when
counsel for the University manifested that he would take up before the Supreme Court, by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the issues
raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of March 30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the
case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had employed professors and/or instructors to take the places of those professors and/or
instructors who had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of court certain parties, alleging that the University refused to
accept back to work the returning strikers, in violation of the return-to-work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the petition for contempt, denying
the allegations of the Faculty Club and alleging by way of special defense that there was still the motion for reconsideration of the order of March 30, 1963 which had not yet been acted upon
by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating that "said replacements are hereby warned and cautioned, for the time being, not to disturb nor in any
manner commit any act tending to disrupt the effectivity of the order of March 30,1963, pending the final resolution of the same." 2 On April 8, 1963, there placing professors and/or
instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that
are sought to be annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963 before the CIR, praying that it be certified as the sole and exclusive bargaining
representative of all the employees of the University. The University filed an opposition to the petition for certification election and at the same time a motion to dismiss said petition, raising
the very same issues raised in Case No. 41-IPA, claiming that the petition did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of the individual contracts of the professors, instructors, and teachers, who are members of
the Faculty Club, would expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the petition because the Industrial Peace Act is not applicable to the
members of the Faculty Club nor to the University. This case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss, however, the
Faculty Club filed on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No. 41-IPA) had already been certified by the President to the CIR and the
issues raised in Case No. 1183-MC were absorbed by Case No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case No. 1183-MC were separate and distinct
from the issues raised in Case No. 41-IPA; that the questions of recognition and majority status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could not
exercise its power of compulsory arbitration unless the legal issue regarding the existence of employer-employee relationship was first resolved. The University prayed that the motion of the
Faculty Club to withdraw the petition for certification election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding that the reasons stated by the
Faculty Club in the motion to withdraw were well taken, on April 6, 1963, issued an order granting the withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that
order of April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials of the University. The Faculty Club, through the Acting Chief Prosecutor of the
CIR, filed with the CIR a complaint docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo Maslog, and Assistant to the
President Jose Segovia, as officials of the University, with indirect contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the order dated March 30,
1963. Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent Judge Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the
above named officials of the University so that they may be dealt with in accordance with law, and the same time fixed the bond for their release at P500.00 each. This order of April 29, 1963
is also one of the orders sought to be annulled in the case, G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent Judge Jose S.
Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V30. Let it be noted that when the petition for certiorari and prohibition with preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA, 1183MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary injunction, admitting some allegations contained in the petition and denying
others, and alleging special defenses which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential
certification, so that it had jurisdiction to issue the questioned orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer
and to the members of the Faculty Club as employees who are affiliated with a duly registered labor union, so that the Court of Industrial Relations had jurisdiction to take cognizance of
Cases Nos. 1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that the petition for certiorari and prohibition with preliminary injunction was prematurely filed
because the orders of the CIR sought to be annulled were still the subjects of pending motions for reconsideration before the CIR en banc when said petition for certiorari and prohibition with
preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club as a labor union,
praying that it be certified as the sole and exclusive bargaining representative of all employees of the University. This petition was opposed by the University, and at the same time it filed a
motion to dismiss said petition. But before Judge Baltazar Villanueva could act on the petition for certification election and the motion to dismiss the same, Faculty Club filed a motion to
withdraw said petition upon the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41-IPA which was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order April 6, 1963, granted the motion to withdraw. The University filed a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for
reconsideration was pending action by the CIR en banc when the petition forcertiorari and prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As
earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963, ordering respondent Judge Bautista, until further order from this Court, to desist
and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution denying the motion for reconsideration of
the order of April 6, 1963 in Case No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the CIR en banc, dated June 5, 1963, denying the motion for
reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the University alleges (1) that the resolution of
the Court of Industrial Relations of June 5, 1963 was null and void because it was issued in violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the issues of
employer-employee relationship, the alleged status as a labor union, majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should
have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA and therefore the motion to withdraw the petition for certification election should not
have been granted upon the ground that the issues in the first case have been absorbed in the second case; and (3) the lower court acted without or in excess of jurisdiction in taking
cognizance of the petition for certification election and that the same should have been dismissed instead of having been ordered withdrawn. The University prayed that the proceedings in
Case No. 1183-MC and the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss Case No. 1183-MC on the ground of lack
of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari; and specially alleging that the lower court's order granting the withdrawal of the
petition for certification election was in accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of the writ of preliminary injunction issued in
Case G.R. No. L-21278 because said writ of injunction was issued against Judge Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge Baltazar Villanueva
who was the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to the strike staged by the members of the Faculty Club and the dispute was certified
by the President of the Philippines to the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction over the case, and on March 30, 1963 Judge
Jose S. Bautista issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction
over the case by virtue of the presidential certification; and in that same order Judge Bautista ordered the strikers to return to work and the University to take them back under the last terms
and conditions existing before the dispute arose; and enjoined the University from dismissing any employee or laborer without previous authority from the court. On April 1, 1963, the
University filed a motion for reconsideration of the order of March 30, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition
for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As we have already stated, this Court in said case G.R. No. L-21278, issued a writ
of preliminary injunction on May 10, 1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises (Cases
Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but actually received and stamped at the Office of the Clerk of the CIR on June 28,
1963, denying the motion for reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but
actually received by said petitioner on July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as G.R. No. L-21500.
In its petition for certiorari the University alleges (1) that the resolution of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null
and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take
cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the certification made by the President of the
Philippines is not authorized by Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective bargaining
purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace Act, and consequently it has no right to strike and picket on the ground of petitioner's
alleged refusal to bargain collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5) that the return-to-work order of March 30, 1963
is improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and
that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on the ground that the petition being filed by way of an appeal from the orders
of the Court of Industrial Relations denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R. No.
L-21500 be taken up when the cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its claim that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in
CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is an educational institution and not an
industrial establishment and hence not an "employer" in contemplation of said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are
independent contractors and, therefore, not employees within the purview of the said Act.
In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts of the Philippines
vs. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L-12015,
April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent thereto, and We find that they do not sustain the contention of the University. It is true that this
Court has ruled that certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion College, and other juridical entities, like the Boy Scouts of
the Philippines and Manila Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no jurisdiction to take cognizance of charges of
unfair labor practice filed against them, but it is nonetheless true that the principal reason of this Court in ruling in those cases that those institutions are excluded from the operation of
Republic Act 875 is that those entities are not organized, maintained and operated for profit and do not declare dividends to stockholders. The decision in the case of University of San
Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and managed by a "religious non-stock corporation duly organized and existing
under the laws of the Philippines." It was organized not for profit or gain or division of the dividends among its stockholders, but solely for religious and educational purposes. It
likewise appears that the Philippine Association of College and University Professors, respondent herein, is a non-stock association composed of professors and teachers in different
colleges and universities and that since its organization two years ago, the university has adopted a hostile attitude to its formation and has tried to discriminate, harass and
intimidate its members for which reason the association and the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of unfair
labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the following grounds:
"(a) That complainants therein being college and/or university professors were not "industrial" laborers or employees, and the Philippine Association of College and University
Professors being composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor organization within the meaning of the laws creating the
Court of Industrial Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an institution established for the purpose of gain or division of profits, and consequently, it is not an
"industrial" enterprise and the members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital Employees Association vs. Sto. Tomas University
Hospital, G.R. No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov.
1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between therein complainants and respondent is not an "industrial" dispute, and the Court of Industrial Relations
has no jurisdiction, notonly on the parties but also over the subject matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an institution established for profit or gain, nor an industrial enterprise, but one established exclusively for
educational purposes, can it be said that its relation with its professors is one of employer and employee that comes under the jurisdiction of the Court of Industrial Relations? In other
words, do the provisions of the Magna Carta on unfair labor practice apply to the relation between petitioner and members of respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice
Montemayor, answered the query in the negative in the following wise:
"The main issue involved in the present case is whether or not a charitable institution or one organized not for profit but for more elevated purposes, charitable, humanitarian,
etc., like the Boy Scouts of the Philippines, is included in the definition of "employer" contained in Republic Act 875, and whether the employees of said institution fall under
the definition of "employee" also contained in the same Republic Act. If they are included, then any act which may be considered unfair labor practice, within the meaning of
said Republic Act, would come under the jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act, particularly, its definitions
of employer and employee, then the Industrial Court would have no jurisdiction at all.
xxx
xxx
xxx
"On the basis of the foregoing considerations, there is every reason to believe that our labor legislation from Commonwealth Act No. 103, creating the Court of Industrial
Relations, down through the Eight-Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature to apply only to industrial employment and to govern the
relations between employers engaged in industry and occupations for purposes of profit and gain, and their industrial employees, but not to organizations and entities which
are organized, operated and maintained not for profit or gain, but for elevated and lofty purposes, such as, charity, social service, education and instruction, hospital and
medical service, the encouragement and promotion of character, patriotism and kindred virtues in youth of the nation, etc.
"In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof regarding labor disputes and unfair labor practice, does not apply to the Boy
Scouts of the Philippines, and consequently, the Court of Industrial Relations had no jurisdiction to entertain and decide the action or petition filed by respondent Araos.
Wherefore, the appealed decision and resolution of the CIR are hereby set aside, with costs against respondent."
There being a close analogy between the relation and facts involved in the two cases, we cannot but conclude that the Court of Industrial Relations has no jurisdiction to entertain the
complaint for unfair labor practice lodged by respondent association against petitioner and, therefore, we hereby set aside the order and resolution subject to the present petition,
with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et al.,G.R. No. L-13748, October 30, 1959, where this Court ruled that:
In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry organized for profit but an institution of learning devoted exclusively to the
education of the youth. The Court of First Instance of Manila in its decision in Civil Case No. 28870, which has long become final and consequently the settled law in the case, found as
established by the evidence adduced by the parties therein (herein petitioner and respondent labor union) that while the University collects fees from its students, all its income is
used for the improvement and enlargement of the institution. The University declares no dividend, and the members of the corporation who founded it, as ordained in its articles of
incorporation, receive no material compensation for the time and sacrifice they render to the University and its students. The respondent union itself in a case before the Industrial
Court (Case No. 314-MC) has averred that "the University of Santo Tomas, like the San Beda College, is an educational institution operated not for profit but for the sole purpose of
educating young men." (See Annex "B" to petitioner's motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo Tomas is not a corporation
created for profit but an educational institution and therefore not an industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court repeated the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court committed an error in holding that it has jurisdiction to act in this case even if it involves unfair labor practice
considering that the La Consolacion College is not a business enterprise but an educational institution not organized for profit.
If the claim that petitioner is an educational institution not operated for profit is true, which apparently is the case, because the very court a quo found that it has no stockholder, nor
capital . . . then we are of the opinion that the same does not come under the jurisdiction of the Court of Industrial Relations in view of the ruling in the case of Boy Scouts of the
Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29, 1958.
It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La Consolacion College, cited above, all involve charges of unfair labor practice under
Republic Act No. 875, and the uniform rulings of this Court are that the Court of Industrial Relations has no jurisdiction over the charges because said Act does not apply to educational
institutions that are not operated or maintained for profit and do not declare dividends. On the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31,
1962, this Court upheld the decision of the Court of Industrial Relations finding the Far Eastern University, also an educational institution, guilty of unfair labor practice. Among the findings of
fact in said case was that the Far Eastern University made profits from the school year 1952-1953 to 1958-1959. In affirming the decision of the lower court, this Court had thereby ratified the
ruling of the Court of Industrial Relations which applied the Industrial Peace Act to educational institutions that are organized, operated and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of San Agustin, the University of Sto. Tomas, and La Consolacion College, this Court
was not unanimous in the view that the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or non-profit organizations which include educational
institutions not operated for profit. There are members of this Court who hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities the only
exception being the Government, including any political subdivision or instrumentality thereof, in so far as governmental functions are concerned. However, in the Far Eastern University case
this Court is unanimous in supporting the view that an educational institution that is operated for profit comes within the scope of the Industrial Peace Act. We consider it a settled doctrine of
this Court, therefore, that the Industrial Peace Act is applicable to any organization or entity whatever may be its purpose when it was created that is operated for profit or gain.
Does the University operate as an educational institution for profit? Does it declare dividends for its stockholders? If it does not, it must be declared beyond the purview of Republic Act No.
875; but if it does, Republic Act No. 875 must apply to it. The University itself admits that it has declared dividends. 3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA which
order was issued after evidence was heard also found that the University is not for strictly educational purposes and that "It realizes profits and parts of such earning is distributed as
dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)" 4 Under this circumstance, and in consonance with the rulings in the decisions of this Court, above
cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it is not an industrial establishment. At most, it says, it is only a lessee of the
services of its professors and/or instructors pursuant to a contract of services entered into between them. We find no merit in this claim. Let us clarify who is an "employer" under the Act.
Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an employer, directly or indirectly, but shall not include any labor organization (otherwise than when acting as an
employer) or any one acting in the capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the
word "means" which the Act uses in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor
practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest. This variation and distinction in terminology and
phraseology cannot be presumed to have been the inconsequential product of an oversight; rather, it must have been the result of a deliberate and purposeful act, more so when we consider
that as legislative records show, Republic Act No. 875 had been meticulously and painstakingly drafted and deliberated upon. In using the word "includes" and not "means", Congress did not
intend to give a complete definition of "employer", but rather that such definition should be complementary to what is commonly understood as employer. Congress intended the term to be
understood in a broad meaning because, firstly, the statutory definition includes not only "a principal employer but also a person acting in the interest of the employer"; and, secondly, the
Act itself specifically enumerated those who are not included in the term "employer", namely: (1) a labor organization (otherwise than when acting as an employer), (2) anyone acting in the
capacity of officer or agent of such labor organization [Sec. 2(c)], and (3) the Government and any political subdivision or instrumentality thereof insofar as the right to strike for the purpose
of securing changes or modifications in the terms and conditions of employment is concerned (Section 11). Among these statutory exemptions, educational institutions are not included;
hence, they can be included in the term "employer". This Court, however, has ruled that those educational institutions that are not operated for profit are not within the purview of Republic
Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of the term "employer". The term encompasses those that are in ordinary parlance
"employers." What is commonly meant by "employer"? The term "employer" has been given several acceptations. The lexical definition is "one who employs; one who uses; one who engages
or keeps in service;" and "to employ" is "to provide work and pay for; to engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's
Compensation Act defines employer as including "every person or association of persons, incorporated or not, public or private, and the legal representative of the deceased employer" and
"includes the owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or manager of the business carried on in the establishment or place
of work but who, for reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there." [Sec. 39(a) of Act No. 3428.]
The Minimum Wage Law states that "employer includes any person acting directly or indirectly in the interest of the employer in relation to an employee and shall include the Government
and the government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any person, natural or juridical, domestic or foreign, who carries in the
Philippines any trade, business, industry, undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve
unfair labor practices and hence within the purview of Republic Act No. 875, defined the term employer as follows:
An employer is one who employs the services of others; one for whom employees work and who pays their wages or salaries (Black Law Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded, especially so if it is considered that every professor, instructor or teacher in the teaching staff of the University, as per
allegation of the University itself, has a contract with the latter for teaching services, albeit for one semester only. The University engaged the services of the professors, provided them work,
and paid them compensation or salary for their services. Even if the University may be considered as a lessee of services under a contract between it and the members of its Faculty, still it is
included in the term "employer". "Running through the word `employ' is the thought that there has been an agreement on the part of one person to perform a certain service in return for
compensation to be paid by an employer. When you ask how a man is employed, or what is his employment, the thought that he is under agreement to perform some service or services for
another is predominant and paramount." (Ballentine Law Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557, 560, 122 S.E.
Rep. 202).
To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is not state that the employers included in the definition of 2 (c) of the Act. This
contention can not be sustained. In the first place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition of the term "employer" are only and
exclusively "industrial establishments"; on the contrary, as stated above, the term "employer" encompasses all employers except those specifically excluded by the Act. In the second place,
even the Act itself does not refer exclusively to industrial establishments and does not confine its application thereto. This is patent inasmuch as several provisions of the Act are applicable to
non-industrial workers, such as Sec. 3, which deals with "employees' right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices; Section 8 which nullifies private
contracts contravening employee's rights; Section 9 which relates to injunctions in any case involving a labor dispute; Section 11 which prohibits strikes in the government; Section 12 which
provides for the exclusive collective bargaining representation for labor organizations; Section 14 which deals with the procedure for collective bargaining; Section 17 which treats of the
rights and conditions of membership in labor organizations; Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation service, compilation of collective
bargaining contracts, advisory labor-management relations; Section 22 which empowers the Secretary of Labor to make a study of labor relations; and Section 24 which enumerates the
rights of labor organizations. (See Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the Industrial Peace Act "refers only to organizations and entities created and operated for
profits, engaged in a profitable trade, occupation or industry". It cannot be denied that running a university engages time and attention; that it is an occupation or a business from which the
one engaged in it may derive profit or gain. The University is not an industrial establishment in the sense that an industrial establishment is one that is engaged in manufacture or trade
where raw materials are changed or fashioned into finished products for use. But for the purposes of the Industrial Peace Act the University is an industrial establishment because it is
operated for profit and it employs persons who work to earn a living. The term "industry", for the purposes of the application of our labor laws should be given a broad meaning so as to cover
all enterprises which are operated for profit and which engage the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor conditions in any field of employment where the objective is earning a
livelihood on the one side and gaining of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases,
Permanent Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would be no employer-employee relationship between it and the striking members of the Faculty Club because the latter are
not employees within the purview of Sec. 2(d) of Republic Act No. 875 but are independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be limited to the employee of a particular employer unless the act explicitly states otherwise and shall include any
individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include", complementary. It embraces not only those who are usually and ordinarily
considered employees, but also those who have ceased as employees as a consequence of a labor dispute. The term "employee", furthermore, is not limited to those of a particular employer.
As already stated, this Court in the cases of The Angat River Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as "one who
employs the services of others; one for whom employees work and who pays their wages or salaries. "Correlatively, an employee must be one who is engaged in the service of another; who
performs services for another; who works for salary or wages. It is admitted by the University that the striking professors and/or instructors are under contract to teach particular courses and
that they are paid for their services. They are, therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites as authority Francisco's Labor Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute, has been regarded as limited to those performing physical labor, it has been held to embrace stenographers and
bookkeepers. Teachers are not included, however.
It is evident from the above-quoted authority that "teachers" are not to be included among those who perform "physical labor", but it does not mean that they are not employees. We have
checked the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the last case
confirms Our view.
That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell
Sporting Goods Co. v. Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases,
Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University case, supra, considered university instructors as employees and declared Republic Act No. 875 applicable to
them in their employment relations with their school. The professors and/or instructors of the University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875
includes among employees any individual whose work has ceased as consequence of, or in connection with a current labor dispute. Striking employees maintain their status as employees of
the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors are independent contractors, because the University does not exercise control over their work, is likewise untenable.
This Court takes judicial notice that a university controls the work of the members of its faculty; that a university prescribes the courses or subjects that professors teach, and when and
where to teach; that the professors' work is characterized by regularity and continuity for a fixed duration; that professors are compensated for their services by wages and salaries, rather
than by profits; that the professors and/or instructors cannot substitute others to do their work without the consent of the university; and that the professors can be laid off if their work is
found not satisfactory. All these indicate that the university has control over their work; and professors are, therefore, employees and not independent contractors. There are authorities in
support of this view.
The principal consideration in determining whether a workman is an employee or an independent contractor is the right to control the manner of doing the work, and it is not the
actual exercise of the right by interfering with the work, but the right to control, which constitutes the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300 Ill.
487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee, and not a contractor, though paid specified sum per square. (Heine v. Hill,
Harris & Co., 2 La. App. 384, 390, in Words and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by wages rather than by profits. (People vs. Distributors Division, Smoked Fish Workers Union Local No. 20377,
Sup. 7 N. Y. S. 2d 185, 187 in Words and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a contractor, are usually characterized by regularity and continuity of work for a fixed period or one of indefinite
duration, as contrasted with employment to do a single act or a series of isolated acts; by compensation on a fixed salary rather than one regulated by value or amount of work; . . .
(Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish contemplated result without consent of contractee, while "employee" cannot substitute another in his place
without consent of his employer. (Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent contractors, still they would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana
Araos, supra, this Court observed that Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United States, and this Act did not exclude
"independent
contractors"
from
the
orbit
of
"employees".
It
was
in
the
subsequent
legislation
the
Labor
Management
Relation
Act
(Taft-Harley
Act) that "independent contractors" together with agricultural laborers, individuals in domestic service of the home, supervisors, and others were excluded. (See Rothenberg on Labor
Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows that they have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of
Labor (Republic Act No. 875) which provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the right to self-organization and to form, join or assist labor organizations of their own choosing for the purpose
of collective bargaining through representatives of their own choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or
protection. . . .
We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside in the instant case, that the right of employees to self-organization is
guaranteed by the Constitution, that said right would exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are engaged in commerce or not. Indeed,
it is Our considered view that the members of the faculty or teaching staff of private universities, colleges, and schools in the Philippines, regardless of whether the university, college or
school is run for profit or not, are included in the term "employees" as contemplated in Republic Act No. 875 and as such they may organize themselves pursuant to the above-quoted
provision of Section 3 of said Act. Certainly, professors, instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of our labor laws
and one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the Faculty Club can not unionize and the Faculty Club can not exist as a valid labor organization is, therefore, without
merit. The record shows that the Faculty Club is a duly registered labor organization and this fact is admitted by counsel for the University. 5a
The other issue raised by the University is the validity of the Presidential certification. The University contends that under Section 10 of Republic Act No. 875 the power of the President of the
Philippines to certify is subject to the following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an industry that is vital to the national interest. The
University maintains that those conditions do not obtain in the instant case. This contention has also no merit.
We have previously stated that the University is an establishment or enterprise that is included in the term "industry" and is covered by the provisions of Republic Act No. 875. Now, was there
a labor dispute between the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating,
fixing, maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether the disputants stand in proximate relation of employer and employees.
The test of whether a controversy comes within the definition of "labor dispute" depends on whether the controversy involves or concerns "terms, tenure or condition of employment" or
"representation." It is admitted by the University, in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the President of the University a letter informing the
latter of the organization of the Faculty Club as a labor union, duly registered with the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which was
attached a list of demands consisting of 26 items, and asking the President of the University to answer within ten days from date of receipt thereof; that the University questioned the right of
the Faculty Club to be the exclusive representative of the majority of the employees and asked proof that the Faculty Club had been designated or selected as exclusive representative by the
vote of the majority of said employees; that on February 1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason therefor the refusal of the
University to bargain collectively with the representative of the faculty members; that on February 18, 1963 the members of the Faculty Club went on strike and established picket lines in the
premises of the University, thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair labor practice against the University, but
which was later dismissed (on April 2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7, 1963 a petition for certification election, Case No. 1183-MC, was filed by the
Faculty Club in the CIR. 6 All these admitted facts show that the controversy between the University and the Faculty Club involved terms and conditions of employment, and the question of
representation. Hence, there was a labor dispute between the University and the Faculty Club, as contemplated by Republic Act No. 875. It having been shown that the University is an
institution operated for profit, that is an employer, and that there is an employer-employee relationship, between the University and the members of the Faculty Club, and it having been
shown that a labor dispute existed between the University and the Faculty Club, the contention of the University, that the certification made by the President is not only not authorized by
Section 10 of Republic Act 875 but is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor dispute in an industry indispensable to the national interest and when such labor dispute is certified by the
President to the Court of Industrial Relations, said Court may cause to be issued a restraining order forbidding the employees to strike or the employer to lockout the employees, and
if no other solution to the dispute is found, the Court may issue an order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act No. 875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No.
L-13178, March 24, 1961, it was held:
It thus appears that when in the opinion of the President a labor dispute exists in an industry indispensable to national interest and he certifies it to the Court of Industrial Relations
the latter acquires jurisdiction to act thereon in the manner provided by law. Thus the court may take either of the following courses: it may issue an order forbidding the employees
to strike or the employer to lockout its employees, or, failing in this, it may issue an order fixing the terms and conditions of employment. It has no other alternative. It can not throw
the case out in the assumption that the certification was erroneous.
xxx
xxx
xxx
. . . The fact, however, is that because of the strike declared by the members of the minority union which threatens a major industry the President deemed it wise to certify the
controversy to the Court of Industrial Relations for adjudication. This is the power that the law gives to the President the propriety of its exercise being a matter that only devolves
upon him. The same is not the concern of the industrial court. What matters is that by virtue of the certification made by the President the case was placed under the jurisdiction of
said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of
the CIR in a certified case is exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the
presidential certification, the CIR may exercise its broad powers as provided in Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship may be
threshed out before the CIR, and the CIR may issue such order or orders as may be necessary to make effective the exercise of its jurisdiction. The parties involved in the case may appeal to
the Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the University "has some 18,000 students and employed approximately 500 faculty members", that `the
continued disruption in the operation of the University will necessarily prejudice the thousand of students", and that "the dispute affects the national interest", 7and certified the dispute to the
CIR, it is not for the CIR nor this Court to pass upon the correctness of the reasons of the President in certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order implementing the same (of April 6,
1963). It alleges that the orders are illegal upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a
return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding the employees to strike or forbidding the employer to
lockout the employees, as the case may be, before either contingency had become a fait accompli; (3) that the taking in by the University of replacement professors was valid, and the
return-to-work order of March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR could not issue said order without having previously determined the legality or
illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial Relations to issue a return-to-work order exercised by it under Commonwealth
Act No. 103 can not be sustained. When a case is certified by the President to the Court of Industrial Relations, the case thereby comes under the operation of Commonwealth Act No. 103,
and the Court may exercise the broad powers and jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing
the terms of employment." This clause is broad enough to authorize the Court to order the strikers to return to work and the employer to readmit them. This Court, in the cases of
the Philippine Marine Officers Association vs. The Court of Industrial Relations, Compania Maritima, et al .; and Compaia Martima, et al. vs. Philippine Marine Radio Officers Association and
CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers' Association that upon certification by the President under Section 10 of Republic
Act 875, the case comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to the national
interest when the President certifies the case to the Court of Industrial Relations. The evident intention of the law is to empower the Court of Industrial Relations to act in such cases,
not only in the manner prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted
authority to find a solution to an industrial dispute and such solution consists in the ordering of employees to return back to work, it cannot be contended that the Court of Industrial
Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its power of conciliation and arbitration if it does not have the power and
jurisdiction to carry into effect the solution it has adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can order the return of the
workers with or without backpay as a term or condition of employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute;
and the solution which the CIR has found under the authority of the presidential certification and conformable thereto cannot be questioned (Radio Operators Association of the Philippines vs.
Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been declared, it being contended that under Section 10 of Republic Act No. 875
the CIR can only prevent a strike or a lockout when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations, et
al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:
There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is limited to the prevention of strikes and lockouts. Even after a strike has
been declared where the President believes that public interest demands arbitration and conciliation, the President may certify the ease for that purpose. The practice has been for
the Court of Industrial Relations to order the strikers to work, pending the determination of the union demands that impelled the strike. There is nothing in the law to indicate that this
practice is abolished." (Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the return-to-work order would be an impairment of its contract with the
replacements. As stated by the CIR in its order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would return to work under the status
quo arrangement and the University would readmit them, and the return-to-work order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot
disregard. The faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The
striking faculty members have not lost their right to go back to their positions, because the declaration of a strike is not a renunciation of their employment and their employee relationship
with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of replacements was not authorized by the CIR. At most, that was a temporary expedient resorted
to by the University, which was subject to the power of the CIR to allow to continue or not. The employment of replacements by the University prior to the issuance of the order of March 30,
1963 did not vest in the replacements a permanent right to the positions they held. Neither could such temporary employment bind the University to retain permanently the replacements.
Striking employees maintained their status as employees of the employer (Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who
took the place of strikers do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)
It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the contract entered into by petitioner with the replacements. Besides, labor
contracts must yield to the common good and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the return-to-work order without having resolved previously the issue of the
legality or illegality of the strike, citing as authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case is not
applicable to the case at bar, the facts and circumstances being very different. The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not
certified by the President. In that case the company no longer needed the services of the strikers, nor did it need substitutes for the strikers, because the company was losing, and it was
imperative that it lay off such laborers as were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this Court in ruling, in that case, that the
legality or illegality of the strike should have been decided first before the issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs
the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking professors and instructors because of impending bankruptcy. On the
contrary, it was imperative for the University to hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike should be decided first before
the issuance of the return-to-work order does not apply to the case at bar. Besides, as We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation
of an agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the members of the Faculty Club to return to their work, as their individual contracts for teaching had expired on
March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for the return-to-work order of the CIR because the contractual relationships having ceased there were
no positions to which the members of the Faculty Club could return to. This contention is not well taken. This argument loses sight of the fact that when the professors and instructors struck
on February 18, 1963, they continued to be employees of the University for the purposes of the labor controversy notwithstanding the subsequent termination of their teaching contracts, for
Section 2(d) of the Industrial Peace Act includes among employees "any individual whose work has ceased a consequence of, or in connection with, any current labor dispute or of any unfair
labor practice and who has not obtained any other substantially equivalent and regular employment."
The question raised by the University was resolved in a similar case in the United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their employment. The company believing it had not committed any unfair labor
practice, refused the employees' offer and claimed the right to employ others to take the place of the strikers, as it might see fit. This constituted discrimination in the hiring and
tenure of the striking employees. When the employees went out on a strike because of the unfair labor practice of the company, their status as employees for the purpose of any
controversy growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed.
1271, 133 A.L.R. 1217.
For the purpose of such controversy they remained employees of the company. The company contended that they could not be their employees in any event since the "contract of
their employment expired by its own terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just pointed out, that the status of the employees on strike became fixed under Sec. 2 (3) of the Act because of the
unfair labor practice of the company which caused the strike.
The University, furthermore, claims that the information for indirect contempt filed against the officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest
were improper, irregular and illegal because (1) the officers of the University had complied in good faith with the return-to-work order and in those cases that they did not, it was due to
circumstance beyond their control; (2) the return-to-work order and the order implementing the same were illegal; and (3) even assuming that the order was legal, the same was not Yet final
because there was a motion to reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision
of that order is valid and legal. Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the
Rules of Court, under the same procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect contempt, among which is "disobedience
or resistance to lawful writ, process, order, judgment, or command of a court," and the person guilty thereof can be punished after a written charge has been filed and the accused has been
given an opportunity to be heard. The last paragraph of said section provides:
But nothing in this section shall be so construed as to prevent the court from issuing process to bring the accused party into court, or from holding him in custody pending such
proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon
which respondent Judge Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly violated was within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the
Supreme Court from any award, order or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for special reason the court shall order that
execution be stayed. Any award, order or decision that is appealed is necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet
final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes and lockouts, may
compel compliance or obedience of its award, order or decision even if the award, order or decision is not yet final because it is appealed, and it follows that any disobedience or noncompliance of the award, order or decision would constitute contempt against the Court of Industrial Relations which the court may punish as provided in the Rules of Court. This power of the
Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience of an award, order or decision, even if not yet final, is a special one and is exercised only in
cases involving strikes and lockouts. And there is reason for this special power of the industrial court because in the exercise of its jurisdiction over cases involving strikes and lockouts the
court has to issue orders or make decisions that are necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout, or to effect the prompt creation of a
situation that would be most beneficial to the management and the employees, and also to the public even if the solution may be temporary, pending the final determination of the case.
Otherwise, if the effectiveness of any order, award, or decision of the industrial court in cases involving strikes and lockouts would be suspended pending appeal then it can happen that the
coercive powers of the industrial court in the settlement of the labor disputes in those cases would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order, award, or decision of the Court of Industrial Relations shall after such order,
award or decision has become final, conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are final (meaning one that is not
appealed) may be the subject of contempt proceedings. We believe that there is no inconsistency between the above-quoted provision of Section 6 and the provision of Section 14 of
Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of Section 14 an order, award or decision of the Court of
Industrial Relations in cases involving strikes and lockouts are immediately executory, so that a violation of that order would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of employment.In every contract of employment whether verbal or written, it is an implied condition that when any dispute between the
employer and the employee or laborer has been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the provisions of this Act . . . and pending
award, or decision by the Court of such dispute . . . the employee or laborer shall not strike or walk out of his employment when so enjoined by the Court after hearing and when
public interest so requires, and if he has already done so, that he shall forthwith return to it, upon order of the Court, which shall be issued only after hearing when public interest so
requires or when the dispute cannot, in its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work, the Court may authorize the employer to
accept other employees or laborers. A condition shall further be implied that while such dispute . . . is pending, the employer shall refrain from accepting other employees or laborers,
unless with the express authority of the Court, and shall permit the continuation in the service of his employees or laborers under the last terms and conditions existing before the
dispute arose. . . . A violation by the employer or by the employee or laborer of such an order or the implied contractual condition set forth in this section shall constitute contempt of
the Court of Industrial Relations and shall be punished by the Court itself in the same manner with the same penalties as in the case of contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of the
CIR in CIR Case V-30, and that order was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged, they were simply ordered arrested to be
brought before the Judge to be dealt with according to law. Whether they are guilty of the charge or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No. L-21278 before this Court in a special civil action for certiorari. The University
did not appeal from that order. In other words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its discretion,
in issuing that order. We hold that the CIR had jurisdiction to issue that order, and neither did it abuse its discretion when it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw
its petition for certification election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of April 6, 1963. The ground of the Faculty
Club in asking for the withdrawal of that petition for certification election was because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The University opposed
the petition for withdrawal, but at the same time it moved for the dismissal of the petition for certification election.
It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee relationship between the University and the Faculty Club, the alleged status of the
Faculty Club as a labor union, its majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No.
1183-MC prior to the determination of the issues in Case No. 41-IPA, and, therefore, the motion to withdraw the petition for certification election should not have been granted upon the
ground that the issues in the first case were absorbed in the second case.
We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by the discussion in this decision of the main issues raised in the principal case,
which is Case G.R. No. L-21278. After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification election had in a way produced the situation
desired by the University. After considering the arguments adduced by the University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR
did not commit any error when it granted the withdrawal of the petition for certification election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the
questions relating to the labor disputes between the University and the Faculty Club may be threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28,
1963, denying the motion for the reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has jurisdiction to issue that order of March 30,
1963, and that order is valid, and We, therefore, hold that the CIR did not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although
dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for therein are denied. The writ
of preliminary injunction issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs in these three
cases against the petitioner-appellant Feati University. It is so ordered.
DIGEST:
Feati University v. Bautista
G.R. No.L-21278
December 27, 1966
Lessons Applicable: Applicability to certain specific persons Professors in national interest
Laws Applicable:
FACTS:
January 14, 1963: the President of Feati University Faculty Club (PAFLU) wrote a letter to Mrs. Victoria L. Araneta, President of Feati University informing her that it registered as a labor
union.
January 22, 1963: PAFLU sent a letter with 26 demands in relation to their employment and requesting an answer within 10 days from receipt thereof.
Araneta answered the letters, requesting that she be given at least 30 days to study thoroughly the different phases of the demands. Meanwhile counsel for Feati, wrote a letter to the
President of PAFLU demanding proof of its majority status and designation as a bargaining representative
February 1, 1963: the President of PAFLU rejected the extension of time and filed a notice of strike with the Bureau of Labor due to Featis refusal to bargain collectively.
Conciliation Division of the Bureau of Labor made efforts to conciliate them but failed.
February 18, 1963: PAFLU declared a strike and established picket lines in the premises of Feati resulting in the disruption of classes in the University.
March 21, 1963: the President of the Philippines certified to the Court of Industrial Relations (CIR) the dispute between Feati and PAFLU pursuant to the provisions of Section 10 of
Republic Act No. 875.
3 cases were filed with the CIR

41-IPA PAFLUs petition to declare in contempt of court since Feati refused to accept them back to work in violation of the return-to-work order of March 30, 1963 and
has employed professors and/or instructors to take their places
1183-MC PAFLUs petition for certification election praying that it be certified as the sole and exclusive bargaining representative
Later withdrawn since the Case 41-IPA had already been certified by the President to the CIR and has absorbed the issues herein
V-30 PAFLUs complaint for indirect contempt of court filed against the administrative officials of the Feati reiterating Case 41-IPA
May 10, 1963: Feati filed before the SC a petition for certiorari and prohibition with writ of preliminary injunction which was issued upon the Feati's filing a bond of P50,000 (increased
from P1,000), ordering CIR Judge Jose S. Bautista to desist and refrain from further proceeding
March 23, 1963: On the strength of the presidential certification, Judge Bautista set the case for hearing
Feati, thru counsel filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over the case, because:
1.
the Industrial Peace Act is NOT applicable to the University, it being an educational institution, nor to the members of the Faculty Club, they being independent contractors
2.
the presidential certification is violative of Section 10 of the Industrial Peace Act, as the University is not an industrial establishment and there was no industrial dispute which could be
certified to the CIR
Judge Bautista denied the motion to dismiss and ordered the strikers to return immediately to work and the University to take them back under the last terms and conditions existing
before the dispute arose
Without the motion for reconsideration having been acted upon by the CIR en banc, Judge Bautista set the case for hearing on the merits for May 8, 1963 but was cancelled upon
Featis petition for certiorari alleging that Judge Jose S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the
questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V-30
Feati claims that it is not an employer within the contemplation of R.A. 875, because it is not an industrial establishment
Feati also claims that it is only a lessee of the services of its professors and/or instructors pursuant to a contract of services entered into between them because the University
does not exercise control over their work
ISSUES: W/N Feati can be considered an employer and PAFLU as an employee to be covered by R.A. 875 and have right to unionize
HELD: YES. petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 is dismissed
Section 2(c) of R.A. 875:
The term employer include any person acting in the interest of an employer, directly or indirectly, but shall not include any labor organization (otherwise than when acting as an employer) or
any one acting in the capacity or agent of such labor organization.
Congress did not intend to give a complete definition of "employer", but rather that such definition should be complementary to what is commonly understood as employer
Act itself specifically enumerated those who are not included in the term "employer" and educational institutions are not included; hence, they can be included in the term "employer".
However, those educational institutions that are not operated for profit are not within the purview of Republic Act No. 875.
Feati realizes profits and parts of such earning is distributed as dividends to private stockholders or individuals
It embraces not only those who are usually and ordinarily considered employees, but also those who have ceased as employees as a consequence of a labor dispute.
employee must be one who is engaged in the service of another; who performs services for another; who works for salary or wages
"workers" limited to those performing physical labor
embrace stenographers and bookkeepers
Teachers are not included
Feati controls the work of the members of its faculty
prescribes the courses or subjects that professors teach, and when and where to teach
professors' work is characterized by regularity and continuity for a fixed duration
professors are compensated for their services by wages and salaries, rather than by profits
professors and/or instructors cannot substitute others to do their work without the consent of the university
professors can be laid off if their work is found not satisfactory
Moreover, even if university professors are considered independent contractors, still they would be covered by Rep. Act No. 875
professors, instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of our labor laws and one such law is Republic
Act No. 875.
The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating,
fixing, maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether the disputants stand in proximate relation of employer and employees.
To certify a labor dispute to the CIR is the prerogative of the President under the law (Because the strike declared by the members of the minority union threatens a major industry of
18,000 students which affects the national interest), and this Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case
is exclusive. The parties involved in the case may appeal to the Supreme Court from the order or orders thus issued by the CIR.
Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing the terms of employment." This clause is broad enough to authorize the Court
to order the strikers to return to work and the employer to readmit them
The return-to-work order cannot be considered as an impairment of the contract entered into with the replacements. Besides, labor contracts must yield to the common good and
such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects
G.R. No. L-26461
November 27, 1968
ASSOCIATED LABOR UNION, petitioner,

vs.
JUDGE JOSE C. BORROMEO and ANTONIO LUA doing business under the name
CEBU HOME & INDUSTRIAL SUPPLY, respondents.
CONCEPCION, C.J.:
Original action for certiorari and prohibition, with preliminary injunction, to annul writs of preliminary injunction issued in Case No. R-9414 of the Court of First Instance of Cebu, entitled "Cebu
Home and Industrial Supply and Antonio Lua vs. Associated Labor Union", and to restrain the Honorable Jose C. Borromeo, as Judge of that Court, from hearing said case.
Petitioner herein, Associated Labor Union hereinafter referred to as ALU is a duly registered labor organization. Among the members thereof are employees of Superior Gas and
Equipment Company of Cebu, Inc. hereinafter referred to as SUGECO a domestic corporation with offices at Juan Luna Street, Cebu City and a factory plant in Basak, Mandaue, province of
Cebu. On January 1, 1965, ALU and SUGECO entered into a collective bargaining contract, effective up to January 1, 1966. Negotiations for the renewal of the contract between ALU and
SUGECO were begun prior to the date last mentioned. While said negotiations were going on, late in February, 1966, twelve (12) SUGECO employees resigned from ALU. Thereupon, the
negotiations stopped. On March 1, 1966, ALU wrote SUGECO requesting that the twelve (12) resigned employees be not allowed to report for work unless they produced a clearance from
ALU;1 but this request was immediately rejected by SUGECO, upon the ground that it would cause irreparable injury, that the bargaining contract had lapsed already, and that SUGECO could
no longer demand said clearance from its employees. SUGECO intimated, however, that, should the twelve (12) men rejoin ALU, negotiations "for the renewal of the collective bargaining
contract" could be resumed.
On the same date, ALU wrote SUGECO charging that the latter was bargaining in bad faith and that its supervisors had campaigned for the resignation of ALU members, as well as serving
notice that, unless these unfair labor practice acts were stopped immediately and a collective bargaining contract between SUGECO and ALU forthwith entered into, the latter would declare a
strike and establish the corresponding picket lines "in any place where your business may be found." Counsel for SUGECO replied to the ALU, on March 3, 1966, stating that, with the
resignation of the aforementioned ALU members, ALU no longer represented the majority of the SUGECO employees for purposes of negotiation and recognition.
On March 4, 1966, ALU struck and picketed the SUGECO plant in Mandaue. The next day, March 5, SUGECO commenced Civil Case No. R-9221 of the Court of First Instance of Cebu, against
ALU, to restrain the same from picketing said plant and the SUGECO offices at Cebu City and elsewhere in the Philippines. Forthwith, the Honorable Amador E. Gomez, as Judge of the Court of
First Instance of Cebu, Branch II, caused to be issued, ex parte, the writ of preliminary injunction prayed for by SUGECO.
On the same date,2 ALU preferred, in the Court of Industrial Relations hereinafter referred to as CIR unfair labor practice charges against SUGECO, its general manager, Concepcion Y. Lua
hereinafter referred to as Mrs. Lua and its two (2) supervisors, alleging, inter alia, that these respondents had coerced and exerted pressure upon the aforementioned ALU members to
resign, as they did resign from ALU, and that their resignations were seized upon by SUGECO to refuse further negotiations with ALU. On April 29, 1966, an acting prosecutor of the CIR filed
therein against SUGECO the corresponding complaint for unfair labor practice. 3
Meanwhile, ALU had moved for a reconsideration of the order of Judge Gomez, dated March 5, 1966, sanctioning the issuance of the writ of preliminary injunction against ALU. This motion
was later denied by Judge Jose C. Borromeo, who presided Branch IV of the Court of First Instance of Cebu. 4 Hence, on May 9, 1966, ALU instituted Case No. L-25999 of the Supreme Court, for
certiorari and prohibition, with preliminary injunction, against Judges Gomez and Borromeo and the SUGECO, and prayed therein that the CFI of Cebu be declared without jurisdiction over the
subject-matter of said Case No. R-9221; that the writ of preliminary injunction therein issued be annulled; that Judges Gomez and Borromeo be directed to dismiss said case; and that,
meanwhile, they be ordered to desist from further proceedings in said case, and from enforcing the writ aforementioned. On May 16, 1966, we issued the writ of preliminary injunction sought
by ALU in L-25999. Subsequently, or on February 9, 1967, we rendered judgment therein in favor of ALU, annulling the writ of preliminary injunction issued in said Case No. R-9221, on March
5, 1966, directing respondent Judges to dismiss the same, and declaring permanent the writ of preliminary injunction issued by us on May 16, 1966.
Soon after the issuance of the latter writ, ALU resumed the picketing of the SUGECO plant in Mandaue. Moreover, it began to picket the house of Mrs. Lua, SUGECO's general manager, and
her husband Antonio Lua hereinafter referred to as Mr. Lua at Abellana Street, Cebu City, and the store of the Cebu Home and Industrial Supply hereinafter referred to as Cebu Home
at Gonzalez Street, Cebu City. The Cebu Home, which belongs to and is managed by Mr. Lua, deals in general merchandise, among which are oxygen, acetylene and cooking gas produced
by SUGECO. On June 21, 1966, Cebu Home and Mr. Lua hereinafter referred to as respondents filed a complaint, docketed as Civil Case No. 9414 of the CFI of Cebu, against ALU, to
restrain the latter from picketing the store and residence aforementioned and to recover damages. Thereupon, Judge Borromeo issued an order requiring the ALU to show cause why the writ
sought should not be issued. In a memorandum filed on June 25, 1966 and a motion to dismiss dated June 29, 1966, the ALU assailed the Court's jurisdiction to hear the case upon the ground
that it had grown out of a labor dispute. This, notwithstanding, on June 30, 1966, Judge Borromeo issued an order the dispositive part of which reads:
WHEREFORE, upon filing of a bond by the petitioners 5 in the amount of P3,000.00 to answer for damages which the respondent 6 may be entitled, let a writ of preliminary injunction be
issued, restraining the respondent, its officers, employees, agents or persons acting in its behalf:
1) From picketing the office of the Cebu Home and Industrial Supply in Gonzales Street, Cebu City and the residence of the petitioner Antonio Lua in Abellana Street, Cebu City;
2) From preventing the employees of the petitioners from entering inside or going out the office of the Cebu Home and Industrial Supply and the residence of the petitioner Antonio
Lua;
3) From stopping the car, truck or other vehicles entering or going out the office of Cebu Home and Industrial Supply and the residence of Antonio Lua;
4) From preventing the sale and distribution by the petitioners of its merchandise in connection with its business; and
5) From performing acts which cause disturbance of the tranquility and privacy of the petitioner and his family.
On July 4, 1966, respondents herein moved to amend the foregoing order so as to broaden its scope. Upon the other hand, on July 6, 1966, ALU sought a reconsideration of said order and the
lifting of the writ of preliminary injunction issued on June 30, 1966. Acting upon a motion to amend of respondents herein, Judge Borromeo issued, on July 22, 1966, another order, from which
we quote:
Considering the evidence presented and the facts stated in the previous order of the Court, it is believed that the petition is justified and that the acts complained of, if not restrained,
will render the writ of preliminary injunction ineffective.
WHEREFORE, in connection with the writ of preliminary injunction which was previously issued, the respondent union, its members, agents or persons acting in its behalf are hereby
restrained:
a) From preventing the petitioners, their employees or representatives from unloading their merchandise and other supplies coming from Manila or other places and from
hauling them from the waterfront for the purpose of delivering them to the place of the petitioners;
b) From preventing the petitioners or their representatives from delivering and loading their empty tanks and other supplies to the boat or other means of transportation for
Manila or other places; and
c) From preventing, obstructing or molesting the petitioners, their employees or representatives from performing acts in connection with their business.
On July 25, 1966, Judge Borromeo denied ALU's motion to dismiss Case No. R-9414 and to reconsider his order and dissolve the writ of preliminary injunction of June 30, 1966. Thereupon, or
on August 26, 1966, ALU commenced the present action for certiorari and prohibition with preliminary injunction, to annul the writs of preliminary injunction issued, on June 30 and July 22,
1966, in Case No. R-9414 and to restrain the lower court from hearing the same.
ALU maintains that the lower Court has no jurisdiction over Case No. R-9414 because it had grown out of a labor dispute, is intimately connected with an unfair labor practice case pending
before the CIR and involves a strike the injunction against which had already been lifted by the Supreme Court in G.R. No. L-25999. 7 Moreover, ALU claims that even if the lower court had
jurisdiction over Case No. R-9414, the writs of preliminary injunction issued therein are null and void, not only because of said lack of jurisdiction, but, also, because it failed to observe the
requirements of Sec. 9(f) of Republic Act No. 875, as well as the provisions of Sec. 9 (d) (5) of the same Act, requiring findings of facts on matters enumerated therein.
Upon the other hand, respondents argue that the issue in the lower court does not fall within the jurisdiction of the CIR, there being no employer-employee relationship and "no labor dispute"
between the ALU members and Cebu Home; and that, at any rate, the SUGECO products distributed and sold by Cebu Home, came, not from the SUGECO plant in Mandaue, but from other
parts of the Philippines. Respondents further deny that the residence of Mr. Lua was being used as a place to store and refill SUGECO gas for resale.
Respondents' pretense is untenable. To begin with, Section 5 (a) of Republic Act No. 875 8 vests in the Court of Industrial Relations exclusive jurisdiction over the prevention of any unfair labor
practice. Moreover, for an issue "concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining,
changing, or seeking to arrange terms or conditions of employment" to partake of the nature of a "labor dispute", it is not necessary that "the disputants stand in the proximate relation of
employer and employee."9
Then, again, in order to apply the provisions of Sec. 9 of Republic Act No. 875, governing the conditions under which "any restraining order" or "temporary or permanent injunction" may issue
in any "case involving or growing out of a labor dispute", it is not indispensable that the persons involved in the case be "employees of the same employer", although this is the usual case.
Sec. 9,10 likewise, governs cases involving persons: 1) "who are engaged in the same industry, trade, craft, or occupation"; or 2) "who ... have direct or indirect interests therein", or 3) "who
are members of the same or an affiliated organization of employers or employees"; or 4) "when the case involves any conflicting or competing interests in a "labor dispute" (as hereinbefore
defined) or "persons participating or interested" therein (as hereinafter defined)". Furthermore, "a person or association shall be held to be a person participating or interested in a labor
dispute if relief is sought against him or it" and "he or it is engaged in the same industry, trade, craft, or occupation in which such dispute occurs, or has a direct or indirectinterest therein, or
is a member, officer, or agent of any association composed in whole or in part of employees or employers engaged in such industry, trade, craft, or occupation." 11
Now, then, there is no dispute regarding the existence of a labor dispute between the ALU and SUGECO-Cebu; that SUGECO's general manager, Mrs. Lua, is the wife of the owner and
manager of Cebu Home, Antonio Lua; and that Cebu Home is engaged in the marketing of SUGECO products. It is, likewise, clear that as managing member of the conjugal partnership
between him and his wife, Mr. Lua has an interest in the management by Mrs. Lua of the business of SUGECO and in the success or failure of her controversy with the ALU, considering that
the result thereof may affect the condition of said conjugal partnership. Similarly, as a distributor of SUGECO products, the Cebu Home has, at least, an indirect interest in the labor dispute
between SUGECO and the ALUand in Case No. R-9221. In other words, respondents herein have an indirect interest in said labor dispute, for which reason, we find that Section 9 of Republic
Act No. 875 squarely applies to Case No. R-9414.
Thus, in Goldfinger v. Feintuch,12 it was held:

Within the limits of peaceful picketing, however, picketing may be carried on not only against the manufacturer but against a non-union product sold by one in unity of interest with
the manufacturer who is in the same business for profit. Where a manufacturer pays less than union wages, both it and the retailers who sell its products are in a position to undersell
competitors who pay the higher scale, and this may result in unfair reduction of the wages of union members. Concededly the defendant union would be entitled to picket peacefully
the plant of the manufacturer. Where the manufacturer disposes of the product through retailers in unity of interest with it, 13 unless the union may follow the product to the place
where it is sold and peacefully ask the public to refrain from purchasing it, the union would be deprived of a fair and propermeans of bringing its plea to the attention of the public.
Besides, the ALU introduced evidence to the effect that the SUGECO products had been brought to Cebu Home and were being distributed in the latter, as a means to circumvent, defeat or
minimize the adverse effects of the picketing conducted in the SUGECO plant and offices in Mandaue and Cebu City respectively by ALU. It is true that respondents averred that said products
were purchased by Cebu Home before the strike was declared against SUGECO and that some of said products were obtained from SUGECO in other parts of the country; but, even if true,
these circumstances did not place the picketing of the Cebu Home beyond the pale of the aforesaid Section 9 of Republic Act No. 875 because, as distributor of SUGECO products, Cebu
Home was engaged in the same trade as SUGECO. Neither does the claim that some SUGECO products marketed by Cebu Home had come, not from the Mandaue plant, but from other parts
of the Philippines, detract from the applicability of said provisions, considering that ALU had struck against SUGECO and had announced, as early as March 1, 1966 or three (3) days before
it struck its intent to picket "any place where your business may be found" and that SUGECO in Cebu is a sister company of SUGECO elsewhere in the Philippines.
For, a similar reason, in American Brake Shoe Co. v. District Lodge 9 of International Association of Machinists, 14the Supreme Court of Pennsylvania ruled:
Where corporate employer had separate plants in Missouri and Pennsylvania, and labor dispute existed atMissouri plant, but not at the Pennsylvania plant, peaceful picketing at
Pennsylvania plant by members of union representing employees at Missouri plant was not an unfair labor practice as defined by Labor Management Relations Act.... 15
In the language of the American Jurisprudence: 16
It seems now generally agreed that a state cannot either by its common law or by statute prohibit the peaceful picketing of a place of business solely on the ground that the picketing
is carried on by personsnot employed therein. The United States Supreme Court has held that the constitutional guaranty of free speech is infringed by the judicial policy of a state to
forbid peaceful picketing on the ground that it is being conducted by strangers to the employer affected, that is, by persons not in the relation of employer and employee with him.
Rules limiting picketing to the occasion of a labor dispute are not offended by the act of a union having a grievance against a manufacturer in picketing a retail establishment in which
its products are sold when there is a unity of interest between the manufacturer and the retailer; this is true even when the shopkeeper is the sole person required to run his business.
And the right of employees on strike at one plant of an employer to picket another plant of the same employer has been upheld even though some of the employees of the picketed
plant as a result refused to work despite a no-strike agreement. Also, a union may picket a retail store selling goods made in a nonunion factory between which and the union there is
an industrial dispute, provided there is a unity of interest between the retailer and the manufacturer.17
Apart from the foregoing, it will be recalled that, prior to the expiration of the collective bargaining contract between ALU and SUGECO, on January 1, 1966, negotiations had started for the
renewal of said contract; that during said negotiations, late in February 1966, twelve (12) SUGECO employees resigned from ALU, owing according to charges preferred by ALU and
confirmed by a complaint filed by a CIR prosecutor to unfair labor practices allegedly committed by SUGECO and its supervisors who, it was also claimed, had induced and coerced said
employees to quit the ALU, which they did; that, thereupon, SUGECO stopped negotiating with ALU alleging that, with the resignation of said twelve (12) members, ALU no longer represented
a majority of the SUGECO employees; that on March 4, 1966, ALU declared a strike and picketed the SUGECO plant in Mandaue; that the next day, SUGECO filed Case No. R-9221 of the CFI of
Cebu, which forthwith issued a writ of preliminary injunction restraining ALU from picketing, not only the plant, but, also, the SUGECO offices elsewhere in the Philippines; that said injunction
was dissolved by the Supreme Court on May 16, 1966; 18 and that the premises of respondents herein were not picketed until after our injunction was enforced, subsequently to May 16, 1966.
This factual background reveals that, from sometime before January 1, 1966 when negotiations for the renewal of the collective bargaining agreement between SUGECO and ALU were
begun to sometime after May 16, 1966, 19 or, at least, from late in February 1966 when the aforementioned unfair labor practices were allegedly committed by SUGECO to sometime
before June 21, 1966,20 there was ample opportunity to store SUGECO products in respondents' premises. There was, therefore, reasonable ground for the ALU to believe or suspect that
SUGECO was using said premises to circumvent and blunt the ALU strike and picketing in the SUGECO plant in Mandaue or to defeat or offset the adverse effects of both.
Respondent Judge seemed to be of the opinion that, for the subject-matter of Case No. 9414 to be within the exclusive jurisdiction of the CIR, it was necessary to establish, as a fact, the truth
of ALU's contention that respondents' premises were being used as an outlet for SUGECO products.
Such view suffers from a basic flaw. It overlooks the fact that the jurisdiction of a court or quasi-judicial or administrative organ is determined by the issues raised by the parties, not by their
success or failure in proving the allegations in their respective pleadings.21 Said view would require the reception of proof, as a condition precedent to the assumption of jurisdiction, when
precisely jurisdiction must exist before evidence can be taken, since the authority to receive it is in itself an exercise of jurisdiction. Moreover, it fails to consider that, to affect the jurisdiction
of said court, or organ, the main requirement is that the issue raised be a genuine one. In other words, the question posed must be one that is material to the right of action or which could
affect the result of the dispute or controversy. 22 Such is, manifestly, the nature of ALU's contention in the lower court, which should have, accordingly, granted the motion to dismiss and lifted
the writs of preliminary injunction complained of.
Finally, respondents herein have not alleged, let alone proved, that the conditions enumerated in Section 9 (d) of Republic Act No. 875, 23 as a prerequisite to an injunction in labor disputes,
have been complied with. Such failure is, as has been repeatedly held 24 fatal to the validity of said injunction.
WHEREFORE, the orders of respondent Judge dated June 30, and July 22, 1966 and the writs of preliminary injunction issued in accordance therewith are hereby declared null and void ab
initio, with costs against respondents herein, the Cebu Home and Industrial Supply and Antonio Lua. It is so ordered.
G.R. No. L-52824 March 16, 88

REYNALDO BAUTISTA, petitioner,
vs.
HON. AMADO C. INCIONG, in his capacity as Deputy Minister of Labor and
ASSOCIATED LABOR UNIONS (ALU), respondents.
GUTIERREZ, JR., J.:
This is an illegal dismissal case. The respondent Deputy Minister dismissed the complaint of herein petitioner principally on the ground that no employer-employee relationship existed
between the petitioner and respondent Associated Labor Unions (ALU).
The facts as found by the National Capital Region Director of the then ministry of Labor (MOL) Region IV are as follows:
Complainant (petitioner) was employed by ALU as 'Organizer' in 1972 with a starting salary of P250.00 a month. As such he paid his monthly SSS contributions, with the
respondent as his employer. On March 15, 1979, He was left in the office of ALU while his other co-organizers were in Cainta, Rizal attending a certification election at Chrysler
Philippines, as he was not the organizer assigned in said company. On March 16, 1979, he went on sick leave for ten (10) days. His SSS sickness benefit application form
signed by ALU's physician was given to ALU for submission to the SSS. On March 16, 1979, complainant reported back for work upon expiration of his leave but was informed
by ALU's Area Vice-President for Luzon of his termination effective March 15, 1979. Hence, this complaint filed on March 28, 1979. On April 18, 1979, however, ALU filed a
clearance application to terminate complainant's services effective March 16, 1979 on the ground of abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of the petitioner and ordered the respondent Union to reinstate the petitioner to his former position with full backwages and to pay him
emergency allowance, 13th month pay and to refund his Mutual Aid Fund Deposit in the amount of P 370.00
Respondent ALU appealed to the Ministry of Labor. On October 23,1979, the respondent Deputy Minister set aside the order of the Director and dismissed the petitioner's complaint for lack of
merit. In his order, the Deputy Minister found that the petitioner was merely accomodated by the respondent union after he was dismissed by his former employer sometime in 1972 and that
his membership coverage with the SSS which shows that respondent ALU is the one paying the employer's share in the premiums is not conclusive proof that respondent is the petitioner's
employer because such payments were performed by the respondent as a favor for all those who were performing full time union activities with it to entitle them to SSS benefits. The Deputy
Minister further ruled that the non-existence of an employer-employee relationship between the parties is bolstered by the fact that respondent ALU is not an entity for profit but a duly
registered labor union whose sole purpose is the representation of its bona fide organization units where it is certified as such.
In this petition, the petitioner contends that the respondent Deputy minister committed grave abuse of discretion in holding that there was no employer-employee relationship between him
and the respondent union so much so that he is not entitled to the benefits that he is praying for.
We agree with the petitioner.
There is nothing in the records which support the Deputy minister's conclusion that the petitioner is not an employee of respondent ALU. The mere fact that the respondent is a labor union
does not mean that it cannot be considered an employer of the persons who work for it. Much less should it be exempted from the very labor laws which it espouses as labor organization. In
case of es v. Brotherhood Labor Unity Movement in the Phillipines Zamora, , (147 SCRA 49, 54), we outlined the factors in ascertaining an employer-employee realtionship:
In determining the existence of an employer-employee relationship, the elements that are generally considered are the following : (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which the
work is to be accomplished. It is the so-called 'control test' that is the most important element (Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA
492; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72)
In the case at bar, the Regional director correctly found that the petitioner was an employee of the respondent union as reflected in the latter's individual payroll sheets and shown by the
petitioner's membership with the Social Security System (SSS) and the respondent union's share of remittances in the petitioner's favor. Even more significant, is the respondent union's act
of filing a clearance application with the MOL to terminate the petitioner's services. Bautista was selected and hired by the Union. He was paid wages by the Union. ALU had the power to
dismiss him as indeed it dismissed him. And definitely, the Union tightly controlled the work of Bautista as one of its organizers. There is absolutely no factual or legal basis got deputy
Minister Inciong's decision.
We are, thus, constrained to reverse the findings of the respondent Deputy Minister. However, the records show that antipathy and antagonism between the petitioner and the respondent
union militate against the former's reinstatement. ALU would not want to have a union organizer whom it does not trust and who could sabotage its efforts to unionize commercial and
industrial establishments. Severance pay, therefore, is more proper in order. As we have ruled in the case of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et al., (G.R. No. 56398, July 23,
1987) quoting the cast of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the backwages are being awarded on the basis of equity or in the nature of severance pay. This means that a monetary award is to be paid to
the employees as an alternative to reinstatement which can no longer be effected in view of the long passage of time or because of the realities of the situation . (Emphasis
supplied)
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Deputy Minister is ANNULLED and SET ASIDE. The Order of Regional Director Francisco L. Estrella is
REINSTATED and ordered executed but instead of returning the petitioner to his former position, the private respondent is ordered to pay him an amount equal to his backwages for only three
years and the separation pay to which he may be entitled as of the end of the three year period under the applicable law or collective bargaining agreement.
SO ORDERED.
[G.R. No. 129315. October 2, 2000]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP,
SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA FLORES, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or
TRINIDAD LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National Labor Relations Commission (First Division),[1] in NLRC NCR
Case No. 00-04-03163-95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited October 17th Resolution affirmed the Decision dated September 28,
1996 of Labor Arbiter Potenciano S. Caizares dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not regular employees of private respondent Lao
Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the
two female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao
Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned and managed by Mr. Vicente Lao. In or about January 1982, the
children of Vicente Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong as President of the said
corporation. Upon its incorporation, the respondent company took over the assets, equipment, and properties of the New Look Barber Shop and continued the business. All the petitioners
were allowed to continue working with the new company until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was located
had been sold and that their services were no longer needed.[2]
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and salary
differentials. Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of employment. The petitioners also
sought the refund of the P1.00 that the respondent company collected from each of them daily as salary of the sweeper of the barber shop.
Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent commission of the amount charged to customers. Thus, there
was no employer-employee relationship between them and petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are not entitled to
separation pay because the cessation of operations of the barber shop was due to serious business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not take over the
management of the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and again that the partnership may fold up anytime because nobody in the
family had the time to be at the barber shop to look after their interest; that New Look Barber Shop had always been a joint venture partnership and the operation and management of the
barber shop was left entirely to petitioners; that her father's contribution to the joint venture included the place of business, payment for utilities including electricity, water, etc. while
petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April 1995 by the children because they wanted to give the partners a
chance at making it work. Eventually, they were forced to close the barber shop because they continued to lose money while petitioners earned from it. Trinidad also added that private
respondents had no control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they received fifty percent to sixty percent of the gross paid by
customers. Trinidad explained that some of the petitioners were allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only as an act of
accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered with the Social Security
System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for 13th month pay and separation pay have no basis in fact and in law.[3]
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the complaint on the basis of his findings that the complainants and the
respondents were engaged in a joint venture and that there existed no employer-employee relation between them. The Labor Arbiter also found that the barber shop was closed due to
serious business losses or financial reverses and consequently declared that the law does not compel the establishment to pay separation pay to whoever were its employees.[4]
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by the Supreme Court. It is a common practice in the Barber Shop
industry that barbers supply their own scissors and razors and they split their earnings with the owner of the barber shop. The only capital of the owner is the place of work whereas the
barbers provide the skill and expertise in servicing customers. The only control exercised by the owner of the barber shop is to ascertain the number of customers serviced by the barber in
order to determine the sharing of profits. The barbers maybe characterized as independent contractors because they are under the control of the barber shop owner only with respect to the
result of the work, but not with respect to the details or manner of performance. The barbers are engaged in an independent calling requiring special skills available to the public at large.[5]
Its motion for reconsideration denied in the Resolution[6] dated March 5, 1997, petitioners filed the instant petition assigning that the NLRC committed grave abuse of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT
CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS.[7]
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent contractors. They contend that they were employees of the
respondent company and cannot be considered as independent contractors because they did not carry on an independent business. They did not cut hair, manicure, and do their work in their
own manner and method. They insist they were not free from the control and direction of private respondents in all matters, and their services were engaged by the respondent company to
attend to its customers in its barber shop. Petitioners also stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments, work premises
and other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail
polishes, nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were
registered with the Social Security System as regular employees of the respondent company. The SSS employment records in common show that the employer's ID No. of Vicente Lao/Barber
and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS employment records were painstakingly detailed by the
petitioners in their position paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not even mention said
employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and finality on appeal. We have long settled that this Court will not
uphold erroneous conclusions unsupported by substantial evidence.[8] We must also stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise
of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.[9]
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners and private respondent Lao Enteng Company, Inc. The Labor
Arbiter has concluded that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that the petitioners were independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It should be noted that aside from the self-serving affidavit of
Trinidad Lao Ong, there were no other evidentiary documents, nor written partnership agreements presented. We have ruled that even the sharing of proceeds for every job of petitioners in
the barber shop does not mean they were not employees of the respondent company.[10]
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they supplied their own working implements, shared in the earnings of
the barber shop with the owner and chose the manner of performing their work. They stressed that as far as the result of their work was concerned the barber shop owner controlled them.
An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business and undertakes the contract work on his own account under his
own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except
as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of
the business.[11]
Juxtaposing this provision vis--vis the facts of this case, we are convinced that petitioners are not "independent contractors". They did not carry on an independent business. Neither did they
undertake cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and method. The services of the petitioners were engaged by the respondent
company to attend to the needs of its customers in its barber shop. More importantly, the petitioners, individually or collectively, did not have a substantial capital or investment in the form
of tools, equipment, work premises and other materials which are necessary in the conduct of the business of the respondent company. What the petitioners owned were only combs,
scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these be considered substantial capital necessary to operate a barber shop. From the records, it can
be gleaned that petitioners were not given work assignments in any place other than at the work premises of the New Look Barber Shop owned by the respondent company. Also, petitioners
were required to observe rules and regulations of the respondent company pertaining, among other things, observance of daily attendance, job performance, and regularity of job output. The
nature of work performed by were clearly directly related to private respondent's business of operating barber shops. Respondent company did not dispute that it owned and operated three
(3) barber shops. Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be present for an employer-employee relationship to exist: (1) the
selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter assuming
primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the services of the petitioners to work as barbers and manicurists in the New Look Barber
Shop, then a single proprietorship owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as Lao
Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and continued the business; that the respondent company
retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in petitioners' and private respondent's working arrangements.
Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it essential for
the employer to actually supervise the performance of duties of the employee. It is enough that the employer has the right to wield that power.[12] As to the "control test", the following facts
indubitably reveal that respondent company wielded control over the work performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents;
(2) they were required to report daily and observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time working in the New Look
Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5) that petitioner Patricia Nas was
instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any or all of them for just and
valid cause. Petitioners were unarguably performing work necessary and desirable in the business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since the policy is now to encourage even the self-employed
dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with private respondents that petitioners were registered with the Social Security System as their
employees only as an accommodation. As we have earlier mentioned private respondent showed no proof to their claim that petitioners were the ones who solely paid all SSS contributions. It
is unlikely that respondents would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that they were indeed their employees.[13]
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and respondent company closed its barber shop
because the building where the barber shop was located was sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or protect investment
of its stockholders. In the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets
and properties which may bring about the dismissal or termination of its employees in the process.[14]
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such, they are to be accorded the benefits provided under the Labor
Code, specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's business which is equivalent to one (1) month pay for every year of
service.[15] Likewise, they are entitled to the protection of minimum wage statutes. Hence, the separation pay due them may be computed on the basis of the minimum wage prevailing at
the time their services were terminated by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th Month
Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month. Such employees are entitled to
the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month
during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid accordingly.[16]
Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process; P10,000.00 as moral damages; refund of P1.00 per day paid to the
sweeper; salary differentials for petitioner Nas; attorney's fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby
ordered to pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of service, to be computed at the
then prevailing minimum wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents. SO ORDERED.
[G.R. No. 121605. February 2, 2000]

PAZ MARTIN JO and CESAR JO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and PETER MEJILA, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari seeks to set aside the Decision [1] of National Labor Relations Commission (Fifth Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995,
which denied petitioners motion for reconsideration.
Private respondent Peter Mejila worked as barber on a piece rate basis at Dinas Barber Shop. In 1970, the owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All
the employees, including private respondent, were absorbed by the new owners. The name of the barbershop was changed to Windfield Barber Shop.
The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the fee paid for every haircut or shaving job done, while one-third (1/3) went to the
owners of the shop.
In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker became physically unfit. Private respondents duties as caretaker, in addition to his
being a barber, were: (1) to report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or whenever water or electric power supply was interrupted; (2) to
call the laundry woman to wash dirty linen; (3) to recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this additional job, he was given an honorarium
equivalent to one-third (1/3) of the net income of the shop.
When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place nearby was rented by petitioners and the barbershop resumed operations as
Cesars Palace Barbershop and Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a fixed monthly honorarium as caretaker, to wit: from
February 1986 to 1990 - P700; from February 1990 to March 1991 - P800; and from July 1992 P1,300.
In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings, characterized by constant exchange of personal insults during working hours,
became serious so that private respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official immediately summoned private respondent and petitioners
to a conference. Upon investigation, it was found out that the dispute was not between private respondent and petitioners; rather, it was between the former and his fellow barber.
Accordingly, Atty. Macaraya directed petitioners counsel, Atty. Prudencio Abragan, to thresh out the problem.
During the mediation meeting held at Atty. Abragans office a new twist was added. Despite the assurance that he was not being driven out as caretaker-barber, private respondent demanded
payment for several thousand pesos as his separation pay and other monetary benefits. In order to give the parties enough time to cool off, Atty. Abragan set another conference but private
respondent did not appear in such meeting anymore.
Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he turned over the duplicate keys of the shop to the cashier and took away all his
belongings therefrom. On January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in Iligan City.
On January 12, 1993, private respondent filed a complaint [2] for illegal dismissal with prayer for payment of separation pay, other monetary benefits, attorneys fees and damages.
Significantly, the complaint did not seek reinstatement as a positive relief.
In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of petitioners, and that private respondent was not dismissed but had left his job
voluntarily because of his misunderstanding with his co-worker. [3] The Labor Arbiter dismissed the complaint, but ordered petitioners to pay private respondent his 13th month pay and
attorneys fees.
Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiters judgment. The NLRC sustained the labor arbiters finding as to the existence of
employer-employee relationship between petitioners and private respondent, but it ruled that private respondent was illegally dismissed. Hence, the petitioners were ordered to reinstate
private respondent and pay the latters backwages, 13th month pay, separation pay and attorneys fees, thus:
"For failure of respondents to observe due process before dismissing the complainant, We rule and hold that he was illegally terminated. Consequently, he should be
reinstated and paid his backwages starting from January 1, 1993 up to the time of his reinstatement and payment of separation pay, should reinstatement not be feasible on
account of a strained employer-employee relationship.
As complainants income was mixed, (commission and caretaker), he becomes entitled to 13th month pay only in his capacity as caretaker at the last rate of pay given to him.
With respect to separation pay, even workers paid on commission are given separation pay as they are considered employees of the company. Complainant should be
adjudged entitled to separation pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at one-half month pay of his earning as a barber; and as a
caretaker the same should be reckoned from 1977 up to December 31, 1992.
As complainant has been assisted by counsel not only in the preparation of the complaint, position paper but in hearings before the Labor Arbiter a quo, attorneys fees
equivalent to 10% of the money awards should likewise be paid to complainant.
WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in accordance with the above-findings and awards.
SO ORDERED."[4]
Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the instant petition.
The issues for resolution are as follows:
1. Whether or not there exists an employer-employee relationship between petitioners and private respondent.
2. Whether or not private respondent was dismissed from or had abandoned his employment.
Petitioners contend that public respondent gravely erred in declaring that private respondent was their employee. They claim that private respondent was their "partner in trade" whose
compensation was based on a sharing arrangement per haircut or shaving job done. They argue that private respondents task as caretaker could be considered an employment because the
chores are very minimal.
At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the
NLRC shall be accorded not only respect but even finality when supported by ample evidence. [5]
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the
payment of wages by whatever means; and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. The power of control refers to the
existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that
the employer has the right to wield that power.[6]
Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial partnership, we entertain no doubt that private respondent was employed
by petitioners as caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing the latter in their employ. Undoubtedly, the
services performed by private respondent as barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped private respondent to serve
concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private respondent
sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-
third (1/3) of the shops net income but subsequently pegged at a fixed amount per month. As a barber, private respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job
done. Furthermore, the following facts indubitably reveal that petitioners controlled private respondents work performance, in that: (1) private respondent had to inform petitioners of the
things needed in the shop; (2) he could only recommend the hiring of barbers and masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could
leave only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key. [7] These duties were complied with by private respondent upon instructions of
petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On the contrary, it was crucial to the business operation of petitioners as shown in the preceding
discussion. Hence, there was enough basis to declare private respondent an employee of petitioners. Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and
NLRC on the existence of employer-employee relationship between herein private parties.
With regard to the second issue, jurisprudence has laid out the rules regarding abandonment as a just and valid ground for termination of employment. To constitute abandonment, there
must be concurrence of the intention to abandon and some overt acts from which it may be inferred that the employee concerned has no more interest in working. [8] In other words, there
must be a clear, deliberate and unjustified refusal to resume employment and a clear intention to sever the employer-employee relationship on the part of the employee. [9]
In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work on his own volition because he could no longer bear the incessant squabbles
with his co-worker. Nevertheless, public respondent did not give credence to petitioners claim that private respondent abandoned his job. On this score, public respondent gravely erred as
hereunder discussed.
At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case
and reexamine the questioned findings.[10]
In this case, the following circumstances clearly manifest private respondents intention to sever his ties with petitioners. First, private respondent even bragged to his co-workers his plan to
quit his job at Cesars Palace Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-workers. [11] Second, he surrendered the shops keys and took away all his
things from the shop. Third, he did not report anymore to the shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a regular employment in
another barbershop, despite previous assurance that he could remain in petitioners employ. Fifth, he filed a complaint for illegal dismissal without praying for reinstatement.
Moreover, public respondents assertion that the institution of the complaint for illegal dismissal manifests private respondents lack of intention to abandon his job [12] is untenable. The rule
that abandonment of work is inconsistent with the filing of a complaint for illegal dismissal is not applicable in this case. Such rule applies where the complainant seeks reinstatement as a
relief. Corollarily, it has no application where the complainant does not pray for reinstatement and just asks for separation pay instead [13] as in the present case. It goes without saying that
the prayer for separation pay, being the alternative remedy to reinstatement, [14] contradicts private respondents stance. That he was illegally dismissed is belied by his own pleadings as well
as contemporaneous conduct.
We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent left his job voluntarily for reasons not attributable to petitioners. It was error and grave
abuse of discretion for the NLRC to hold petitioners liable for illegal dismissal of private respondent.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC are reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is
hereby reinstated. No costs.
SO ORDERED.
JOSE MEL BERNARTE, G.R. No. 192084
Petitioner,
PHILIPPINE BASKETBALL
ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and Promulgated:
PERRY MARTINEZ,
Respondents. September 14, 2011
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of
the National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an
employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of Commissioner Emilio Bernardino, they were made to
sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of their employment.
Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during the
second conference when he was made to sign a one and a half month contract for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing his unsatisfactory performance on and off the
court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he
signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the
assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15,
2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA decided not to renew their contracts.
Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply not renewed. PBA had the prerogative of whether
or not to renew their contracts, which they knew were fixed.4
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of
petitioner and the payment of backwages, moral and exemplary damages and attorneys fees, to wit:
WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from
the date of receipt of this decision and to solidarily pay complainants:
1. backwages from January 1, 2004 up to the finality of this Decision, which to date is
2. moral damages
3. exemplary damages
JOSE MEL BERNARTE
P536,250.00
100,000.00
50,000.00
RENATO GUEVARRA
P211,250.00
100,000.00
50,000.00
4. 10% attorneys fees
TOTAL
or a total of P1,152,250.00
68,625.00
P754,875.00
36,125.00
P397,375.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the NLRCs decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals decision
reads:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008 of the National Labor Relations Commission are ANNULLED
and SET ASIDE. Private respondents complaint before the Labor Arbiter is DISMISSED.
SO ORDERED.10
The Court of Appeals Ruling
The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and methods by which petitioner performed his work
as a basketball referee. The Court of Appeals held:
While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and making calls during basketball games, it, nevertheless, theorized that the said acts refer
to the means and methods employed by the referees in officiating basketball games for the illogical reason that said acts refer only to the referees skills. How could a skilled referee perform
his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the Contracts of Retainer show that petitioners have control over private respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents repeated hiring made them regular employees by operation of law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for failure of respondents to appeal with the NLRC within the reglementary
period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of respondents to appeal with the NLRC within the prescribed period. Petitioner
claims that the Labor Arbiters decision was constructively served on respondents as early as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way
beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In
this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents the
Postmasters Certification to prove constructive service of the Labor Arbiters decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005 by the addressee. The second
and third notices were issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention period elapsed. Said registered letter was
dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court
otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever
date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the addressee of the registered mail; and (2)
constructive service the completeness of which is determined upon expiration of five days from the date the addressee received the first notice of the postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee.14 Not only is it required that notice of the
registered mail be issued but that it should also be delivered to and received by the addressee.15 Notably, the presumption that official duty has been regularly performed is not applicable in
this situation. It is incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.16
The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued or sent but also as to how, when and to
whom the delivery and receipt was made. The mailman may also testify that the notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the post office was made. There is no
conclusive evidence showing that the post office notices were actually received by respondents, negating petitioners claim of constructive service of the Labor Arbiters decision on
respondents. The Postmasters Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the
three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of
completed constructive service of the Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal was considered in the interest of substantial justice. We agree with the
NLRC. The ends of justice will be better served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an
employee linger and remain unsettled due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of this Court. However, this rule admits of
exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present
case.18
To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished. The so-called control test
is the most important indicator of the presence or absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in
the retainer contract. PBA can terminate the retainer contract for petitioners violation of its terms and conditions.
However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor and not an employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the performance of his work. Petitioner cites the following
stipulations in the retainer contract which evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized
by the PBA, at least one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee
agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical,
mental, and emotional condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball game
outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest standards of honesty or morality; and (6)
imposition of various sanctions for violation of the terms and conditions of the contract.
The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee officiating a PBA basketball game. The contractual
stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to
maintain the integrity of the professional basketball league. As correctly observed by the Court of Appeals, how could a skilled referee perform his job without blowing a whistle and making
calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of its talents, the Court held that not all rules imposed by
the hiring party on the hired party indicate that the latter is an employee of the former. The Court held:
We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards
of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means used to achieve it.22
We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to when and how a call or decision is to
be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The referees are the only, absolute,
and final authority on the playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows
the whistle because such authority exclusively belongs to the referees. The very nature of petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control
by respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work only when PBA games are scheduled, which is
three times a week spread over an average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to report for work only when PBA games are scheduled
or three times a week at two hours per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from
employees salaries. These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent judgment are required specifically for such position
and cannot possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an employee of
defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District
Court ruled:
Generally, if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details by which the result is achieved, an
employer/employee relationship is likely to exist. The Court must be careful to distinguish between control[ling] the conduct of another party contracting party by setting out in detail his
obligations consistent with the freedom of contract, on the one hand, and the discretionary control an employer daily exercises over its employees conduct on the other.
Yonan asserts that the Federation closely supervised his performance at each soccer game he officiated by giving him an assessor, discussing his performance, and controlling what clothes
he wore while on the field and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather
evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent
contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x
It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In
a similar vein, subjecting Yonan to qualification standards and procedures like the Federations registration and training requirements does not create an employer/employee relationship. x x x
A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other hand, suggests an employment
relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level, requires a great deal of skill and natural ability. Yonan asserts that it was
the Federations training that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled
significantly or negated when the putative employers activity is the result of a statutory requirement, not the employers choice. x x x
In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the players vicarious
liability claim against the association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not supervise regular season games. It does
not tell an official how to conduct the game beyond the framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by which
the umpires work.
In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired party to be considered an employee, the hiring party
must have control over the means and methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the
renewal of the contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever other
reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of
petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals. SO ORDERED.
RAUL G. LOCSIN and G.R. No. 185251
EDDIE B. TOMAQUIN,
Petitioners,
- versus PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision[1] and November 4, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No.
97398, entitled Philippine Long Distance Telephone Company v. National Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of
the National Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision dated February 13, 2004 of the Labor Arbiter. The assailed
resolution, on the other hand, denied petitioners motion for reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services
Agreement[3] (Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday pay, premium pay for holiday and rest day,
service incentive leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were found to be employees of PLDT and not of SSCP. Such
conclusion was arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural
due process before termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The dispositive portion of the Labor Arbiters Decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance and Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie
Tomaquin their separation pay and back wages computed as follows:
NAME SEPARATION PAY BACKWAGES
1.
Raul E. Locsin P127,500.00 P240,954.67
2.
Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34
All other claims are DISMISSED for want of factual basis.
Let the computation made by the Computation and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA rendered the
assailed decision granting PLDTs petition and dismissing petitioners complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and August 28, 2006 of the National Labor Relations Commission are ANNULLED and SET
ASIDE. Private respondents complaint against Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the parties but did not find such relationship. It determined that SSCP was
not a labor-only contractor and was an independent contractor having substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing the
Agreement whereby it was stipulated that there shall be no employer-employee relationship between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners after the
Agreement. This fact allegedly proved that petitioners continued to be employees of SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.
Hence, we have this petition.
The Issues
1.
Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001, the effectivity of the termination of the contract of complainants agency SSCP,
up to September 30, 2002, without a renewed contract, constitutes an employer-employee relationship between respondent and the complainants.
2.
Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants extended services to the respondent for another one (1) year without a contract be
considered as contractual employment.
3.
Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants thirteen (13) years of service to the respondent with manifestation to the
respondent thirteen (13) years renewal of its security contract with the complainant agency SSCP, can be considered only as seasonal in nature or fixed as [specific projects] or undertakings
and its completion or termination can be dictated as [controlled] by the respondent anytime they wanted to.
4.
Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen (13) years as they were then covered by a contract, becomes regular
employees of the respondent as the one (1) year extended services of the complainants were not covered by a contract, and can be considered as direct employment pursuant to the
provision of the Article 280 of the Labor Code.
5.
Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the labor [arbiters] decision and of the NLRCs resolution declaring the
dismissal of the complainant as illegal.[6]
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first assignment to respondent by SSCP in 1988 until the alleged
termination of the Agreement between respondent and SSCP. In fact, this was the conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone Company,[7]
where we ruled that petitioners therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners were among those declared to be
employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the Agreement was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are employees of
SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT with the required security guards, while furnishing PLDT with a
performance bond in the amount of PhP 707,000. Moreover, the CA gave weight to the provision in the Agreement that SSCP warranted that it carry on an independent business and has
substantial capital or investment in the form of equipment, work premises, and other materials which are necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express provision of the Agreement, stating that no employer-employee
relationship existed between the parties herein. The CA disregarded the pay slips of Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of the Agreement. Notably, in its Comment dated March 10, 2009,[8]
respondent never denied that petitioners remained at their post until September 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to
remain at their post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their salaries would be coursed through SSCP as per
arrangement with PLDT, it does not state why they were not made to vacate their posts. Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with whom the owners or managers have severed ties with to
continue to stay within the business premises. This is because upon the termination of the owners or managers agreement with the security agency, the agencys undertaking of liability for
any damage that the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such security guards, it would be the
business owners and/or managers who would be liable and not the agency. The business owners or managers would, therefore, be opening themselves up to liability for acts of security
guards over whom the owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining at their posts, and would have a clear understanding of the
circumstances of the guards stay. It is but logical that responsible business owners or managers would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing respondents premises despite the termination of their Agreement.
Obviously, it would only be respondent that would benefit from such a situation. And it is seriously doubtful that a security agency that was established for profit would allow its security
guards to secure respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the instructions of respondent. We can further conclude that respondent
dictated upon petitioners that the latter perform their regular duties to secure the premises during operating hours. This, to our mind and under the circumstances, is sufficient to establish
the existence of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more believable than the irrational denials made by respondent. Thus, we ruled in Lee
Eng Hong v. Court of Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself such as the common experience and observation of mankind can
approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant
to these belongs to the miraculous and is outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement, petitioners remained at their post securing the premises of respondent
while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable
to conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia of control that respondent exercised over
petitioners.
Such power of control has been explained as the right to control not only the end to be achieved but also the means to be used in reaching such end.[10] With the conclusion that respondent
directed petitioners to remain at their posts and continue with their duties, it is clear that respondent exercised the power of control over them; thus, the existence of an employer-employee
relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft repeated rule that control is the most important element in the determination of the existence of an
employer-employee relationship:
In the determination of whether an employer-employee relationship exists between two parties, this Court applies the four-fold test to determine the existence of the elements of such
relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (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. It is the so-called control test which constitutes the most
important index of the existence of the employer-employee relationship 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. Stated otherwise, an employer-employee relationship exists where the person for whom
the services are performed reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed
by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and
directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the
provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code,
including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the termination of the Agreement onwardsas this was the only time that
any evidence of control was exhibited by respondent over petitioners and in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and
benefits of employees of respondent, including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398. We hereby REINSTATE the Labor Arbiters Decision dated February 13,
2004 and the NLRCs Resolutions dated October 28, 2005 and August 28, 2006.
No costs. SO ORDERED.
CESAR C. LIRIO, doing business under the name and style of CELKOR AD
SONICMIX,
Petitioner,
- versus WILMER D. GENOVIA,
Respondent.
G.R. No. 169757
Promulgated: November 23, 2011
DECISION
PERALTA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated September 21, 2005, denying
petitioners motion for reconsideration.
The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor Arbiter with modification, finding that respondent is an employee of
petitioner, and that respondent was illegally dismissed and entitled to the payment of backwages and separation pay in lieu of reinstatement.
The facts are as follows:
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission
and award of moral and exemplary damages.
In his Position Paper,[1] respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording
Studio (Celkor). He was employed to manage and operate Celkor and to promote and sell the recording studio's services to music enthusiasts and other prospective clients. He received a
monthly salary of P7,000.00. They also agreed that he was entitled to an additional commission of P100.00 per hour as recording technician whenever a client uses the studio for recording,
editing or any related work. He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but most of the time, he still
rendered eight hours of work or more. All the employees of petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record to avoid
paying the employees overtime pay.
Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him about his project to produce an album for his 15-year-old daughter,
Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would draft a contract to assure
respondent of his compensation for such services. As agreed upon, the additional services that respondent would render included composing and arranging musical scores only, while the
technical aspect in producing the album, such as digital editing, mixing and sound engineering would be performed by respondent in his capacity as studio manager for which he was paid on
a monthly basis. Petitioner instructed respondent that his work on the album as composer and arranger would only be done during his spare time, since his other work as studio manager was
the priority. Respondent then started working on the album.
Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer and arranger of the album. Petitioner verbally assured him that he
would be duly compensated. By mid-November 2001, respondent finally finished the compositions and musical arrangements of the songs to be included in the album. Before the month
ended, the lead and back-up vocals in the ten (10) songs were finally recorded and completed. From December 2001 to January 2002, respondent, in his capacity as studio manager, worked
on digital editing, mixing and sound engineering of the vocal and instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with various radio stations, malls, publishers, record companies and
manufacturers, record bars and other outlets in preparation for the promotion of the said album. By early February 2002, the album was in its manufacturing stage. ELECTROMAT,
manufacturer of CDs and cassette tapes, was tapped to do the job. The carrier single of the album, which respondent composed and arranged, was finally aired over the radio on February 22,
2002.
On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and arranger of the album. Petitioner told respondent that since he was
practically a nobody and had proven nothing yet in the music industry, respondent did not deserve a high compensation, and he should be thankful that he was given a job to feed his family.
Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the gross sales of the album, and that the salaries he received and would continue to receive as
studio manager of Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that he be properly compensated. On March 14, 2002, petitioner verbally
terminated respondents services, and he was instructed not to report for work.
Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was conducted before he was terminated, in violation of his constitutional
right to due process. Having worked for more than six months, he was already a regular employee. Although he was a so called studio manager, he had no managerial powers, but was
merely an ordinary employee.
Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation pay, backwages and overtime pay; and that he be awarded unpaid
commission in the amount of P2,000.00 for services rendered as a studio technician as well as moral and exemplary damages.
Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by petitioner,[2] and Petty Cash Vouchers[3] evidencing receipt of payroll
payments by respondent from Celkor.
In defense, petitioner stated in his Position Paper[4] that respondent was not hired as studio manager, composer, technician or as an employee in any other capacity of Celkor. Respondent
could not have been hired as a studio manager, since the recording studio has no personnel except petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a former contract
artist of ABS-CBN Star Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he decided to produce an album for his daughter and established a
recording studio, which he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the songs for the said album. In July 2001, Bob Santiago, his
son-in-law, introduced him to respondent, who claimed to be an amateur composer, an arranger with limited experience and musician without any formal musical training. According to
petitioner, respondent had no track record as a composer, and he was not known in the field of music. Nevertheless, after some discussion, respondent verbally agreed with petitioner to coproduce the album based on the following terms and conditions: (1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs; (3)
respondent shall act as composer and arranger of all the lyrics and the music of the five songs he already composed and the revival songs; (4) petitioner shall have exclusive right to market
the album; (5) petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw
advances of P7,000.00 a month, which shall be deductible from his share of the net profits and only until such time that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that respondent was just an amateur composer with no track record whatsoever in
the music industry, had no definite source of income, had limited experience as an arranger, had no knowledge of the use of sound mixers or digital arranger and that petitioner would help
and teach him how to use the studio equipment; that petitioner would shoulder all the expenses of production and provide the studio and equipment as well as his knowledge in the use
thereof; and Celine Mei Lirio would sing the songs. They embarked on the production of the album on or about the third week of August 2002.
Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal partnership under Article 1767[5] of the New Civil Code, since they
agreed to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and manner by which
respondent composed or arranged the songs, except on the result thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that
no employer-employee relationship existed between him and the respondent, and there was no illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision,[6] finding that an employer-employee relationship existed between petitioner and respondent, and that
respondent was illegally dismissed. The dispositive portion of the decision reads:
WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as
regular employee and, consequently, ORDERING said respondents:
1)
To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision and, in lieu of reinstatement, to [pay] his separation pay of one (1) month
pay per year of service reckoned from [the] date of hire on August 15, 2001 until finality of this decision, which as of date amounts to full backwages total of 145,778.6 (basic P7,000.00 x
19.6 mos.=P133,000.00 + 1/12 thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x 1.58 yrs.=P1,695.27); separation pay of P22,750.00
(P7,000.00 x 3.25 yrs.);
2)
To pay complainant's unpaid commission of P2,000.00;
3)
To pay him moral and exemplary damages in the combined amount of P75,000.00.
Other monetary claims of complainant are dismissed for lack of merit.[7]

The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome respondents positive assertion and documentary evidence proving that petitioner hired
respondent as his employee.[8]
Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).
In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The dispositive portion of the Resolution reads:
WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case
for lack of merit.[9]
The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC agreed that respondent was able to prove that he received gross pay less
deduction and net pay, with the corresponding Certification of Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to
proved with substantial evidence that he was selected and engaged by petitioner, that petitioner had the power to dismiss him, and that they had the power to control him not only as to the
result of his work, but also as to the means and methods of accomplishing his work.
Respondents motion for reconsideration was denied by the NLRC in a Resolution9 dated December 14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision[10] reversing and setting aside the resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with modification in
regard to the award of commission and damages. The Court of Appeals deleted the award of commission, and moral and exemplary damages as the same were not substantiated. The
dispositive portion of the Court of Appeals decision reads:
WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14, 2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated
October 31, 2003 of the Labor Arbiter is REINSTATED, with the modification that the awards of commission and damages are deleted.[11] (Emphasis supplied.)
Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution[12] dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will prosper only if there is a showing of grave abuse of discretion or an act
without or in excess of jurisdiction on the part of the NLRC.[13] However, petitioner contends that the Court of Appeals decided the case not in accordance with law and applicable rulings of
this Court as petitioner could not find any portion in the Decision of the Court of Appeals ruling that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by the NLRC raised before it on a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner contends that it was error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether there
exists an employer-employee relationship between the parties.
Petitioners argument lacks merit.
It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals in
accordance with the decision of the Court in St. Martin Funeral Home v. NLRC,[14] which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to
petitions for certiorari under Rule 65. Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts
as the appropriate forum for the relief desired.[15]
The Court of Appeals stated in its decision that the issue it had to resolve was whether or not the public respondent [NLRC] committed grave abuse of discretion when it declared that no
employer-employee relationship exists between the petitioner and the private respondents, since the petitioner failed to prove such fact by substantial evidence.[16]
Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari, which is merely confined to issues of jurisdiction or grave
abuse of discretion.[17] By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown that the
discretion was exercised arbitrarily or despotically.[18]
The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot make this determination without looking into the evidence of the parties.[19]
Necessarily, the appellate court can only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the
NLRC, in relation to all other evidence on record.[20] Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding of facts of the NLRC and the evidence of the
parties to determine whether the NLRC gravely abused its discretion in finding that no employer-employee relationship existed between petitioner and respondent.[21]
Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.
II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS.
III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS
AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.[22]
Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by way of any document evincing their alleged partnership agreement,
the Court of Appeals agreed with the Labor Arbiter that petitioner failed to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiters finding, thus:
In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to manage
and operate the recording studio and to promote and sell its services to music enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed monthly
compensation of P7,000.00, with commission of P100.00 per hour when serving as recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points to
complainant's hiring as employee so that the case comes within the purview of our jurisdiction on labor disputes between an employer and an employee. x x x.
Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion thereto, in the face of complainant's evidence, constitute but a self-serving
assertion, without probative value, a mere invention to justify the illegal dismissal.
xxxx
Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to respondent's Lirio's insistences on merely giving him 20% based on net profit
on sale of the album which he composed and arranged during his free time and, moreover, that salaries which he received would be deducted therefrom, which obviously, soured the
relations from the point of view of respondent Lirio.[23]
Hence, based on the finding above and the doctrine that if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter,[24] the Court of Appeals reversed the resolution of the NLRC and reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals was remiss in not stating it
in definite terms, it is implied that the Court of Appeals found that the NLRC gravely abused its discretion in finding that no employer-employee relationship existed between petitioner and
respondent based on the evidence on record.
We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in accordance with law, or whether or not the Court of Appeals erred in
reversing and setting aside the decision of the NLRC, and reinstating the decision of the Labor Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not ironclad.[25] Where the issue is shrouded by a conflict of factual perceptions by the
lower court or the lower administrative body, in this case, the NLRC, this Court is constrained to review the factual findings of the Court of Appeals.[26]
Before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship existed between petitioner and respondent.[27]
The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish it.[28]
It is settled that no particular form of evidence is required to prove the existence of an employer-employee relationship.[29] Any competent and relevant evidence to prove the relationship
may be admitted.[30]
In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001
to March 15, 2002) certified correct by petitioner,[31] which showed that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every
30th of the month) with the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers,[32] showing the amounts he received and signed for in
the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that
he was verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to the existence of the power.
[33] It is not essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient that the former has a right to wield the power.[34] Nevertheless,
petitioner stated in his Position Paper that it was agreed that he would help and teach respondent how to use the studio equipment. In such case, petitioner certainly had the power to check
on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership. Such claim was not supported by any written agreement. The Court notes that in
the payroll dated July 31, 2001 to March 15, 2002,[35] there were deductions from the wages of respondent for his absence from work, which negates petitioners claim that the wages paid
were advances for respondents work in the partnership. In Nicario v. National Labor Relations Commission,[36] the Court held:
It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. It is a timehonored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the
formers favor. The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State
to give maximum aid and protection of labor. This rule should be applied in the case at bar, especially since the evidence presented by the private respondent company is not convincing. x x
x[37]
Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed that an employer-employee relationship existed between petitioner
and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made.[38] Article 277 (b) of the Labor Code[39]
puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the
dismissal.[40] For an employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process.[41] Procedural due process requires
the employer to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is
sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and
to be heard on his defense.[42] Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly affirmed the Labor Arbiters finding that respondent was
illegally dismissed, and entitled to the payment of backwages, and separation pay in lieu of reinstatement.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED.
No costs.
SO ORDERED.
BITOY JAVIER
(DANILO P. JAVIER),
Petitioner,
- versus FLY ACE CORPORATION/
FLORDELYN CASTILLO,
Respondents.
G.R. No. 192558
Promulgated: February 15, 2012
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision[1] of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in CA-G.R. SP No.
109975, which reversed the May 28, 2009 Decision[3] of the National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that
petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. He alleged that he was an employee of Fly Ace since September
2007, performing various tasks at the respondents warehouse such as cleaning and arranging the canned items before their delivery to certain locations, except in instances when he would
be ordered to accompany the companys delivery vehicles, as pahinante; that he reported for work from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in the afternoon;
that during his employment, he was not issued an identification card and payslips by the company; that on May 6, 2008, he reported for work but he was no longer allowed to enter the
company premises by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes of begging to the guard to allow him to enter, he saw Ong
whom he approached and asked why he was being barred from entering the premises; that Ong replied by saying, Tanungin mo anak mo; [6] that he then went home and discussed the
matter with his family; that he discovered that Ong had been courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and
convince him to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated from his employment without notice; and that he was neither given the
opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a stevedore or pahinante of Fly Ace from September 2007 to January 2008. The
said affidavit was subscribed before the Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as extra
helper on a pakyaw basis at an agreed rate of 300.00 per trip, which was later increased to 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month
whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he was their
employee, Fly Ace insisted that there was no illegal dismissal.[8] Fly Ace submitted a copy of its agreement with Milmar Hauling Services and copies of acknowledgment receipts evidencing
payment to Javier for his contracted services bearing the words, daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any document showing that he received the benefits accorded to regular employees of the Respondents.
His contention that Respondent failed to give him said ID and payslips implies that indeed he was not a regular employee of Fly Ace considering that complainant was a helper and that
Respondent company has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is a regular hauler to deliver its products, we give credence to Respondents
claim that complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of workers on pakiao basis has evidentiary weight because although the signature of
the complainant appearing thereon are not uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not liable for salary differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately concluded that he was not a regular employee simply because he failed to
present proof. It was of the view that a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship. Payment by result x x x is a method of compensation
and does not define the essence of the relation. It is a mere method of computing compensation, not a basis for determining the existence or absence of an employer-employee relationship.
[10] The NLRC further averred that it did not follow that a worker was a job contractor and not an employee, just because the work he was doing was not directly related to the employers
trade or business or the work may be considered as extra helper as in this case; and that the relationship of an employer and an employee was determined by law and the same would
prevail whatever the parties may call it. In this case, the NLRC held that substantial evidence was sufficient basis for judgment on the existence of the employer-employee relationship. Javier
was a regular employee of Fly Ace because there was reasonable connection between the particular activity performed by the employee (as a pahinante) in relation to the usual business or
trade of the employer (importation, sales and delivery of groceries). He may not be considered as an independent contractor because he could not exercise any judgment in the delivery of
company products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to present proof of a valid cause for his termination, Fly Ace was found to be
liable for illegal dismissal of Javier who was likewise entitled to backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially GRANTED. The assailed Decision of the labor arbiter is VACATED and a new one is hereby entered holding respondent FLY
ACE CORPORATION guilty of illegal dismissal and non-payment of 13th month pay. Consequently, it is hereby ordered to pay complainant DANILO Bitoy JAVIER the following:
1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The CA
exercised its authority to make its own factual determination anent the issue of the existence of an employer-employee relationship between the parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause. However, before a case for illegal dismissal can prosper, an employeremployee relationship must first be established. x x x it is incumbent upon private respondent to prove the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners, but he failed to discharge his burden. The non-issuance of a company-issued
identification card to private respondent supports petitioners contention that private respondent was not its employee.[12]
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of evidence to bolster his contention, pointed to the inescapable conclusion that he was not an
employee of Fly Ace. Further, it found that Javiers work was not necessary and desirable to the business or trade of the company, as it was only when there were scheduled deliveries, which
a regular hauling service could not deliver, that Fly Ace would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier did not pass the control
test.
He contracted work outside the company premises; he was not required to observe definite hours of work; he was not required to report daily; and he was free to accept other work elsewhere
as there was no exclusivity of his contracted service to the company, the same being co-terminous with the trip only.[13] Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude his regular employment with the company. Even the acknowledgment receipts bearing his
signature and the confirming receipt of his salaries will not show the true nature of his employment as they do not reflect the necessary details of the commissioned task. Besides, Javiers
tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in the importation and sale of grocery items. On days when there were no
scheduled deliveries, he worked in petitioners warehouse, arranging and cleaning the stored cans for delivery to clients.[15] More importantly, Javier was subject to the control and
supervision of the company, as he was made to report to the office from Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list of deliverable goods,
together with the corresponding clients and their respective purchases and addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected to compliance with
company rules and regulations as regards working hours, delivery schedule and output, and his other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to a worker on a per trip basis is not significant because this is merely a method of computing
compensation and not a basis for determining the existence of employer-employee relationship. Javier likewise invokes the rule that, in controversies between a laborer and his master, x x x
doubts reasonably arising from the evidence should be resolved in the formers favour. The policy is reflected is no less than the Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters failure to observe substantive and procedural due process. Since his dismissal was not
based on any of the causes recognized by law, and was implemented without notice, Javier is entitled to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having a service contract with Milmar Hauling Services for the purpose of
transporting and delivering company products to customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere per trip basis. Javier, who was actually a loiterer in the area,
only accompanied and assisted the company driver when Milmar could not deliver or when the exigency of extra deliveries arises for roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded company products. With the vehicle and products in their custody, the driver and Javier would
leave the company premises using their own means, method, best judgment and discretion on how to deliver, time to deliver, where and [when] to start, and manner of delivering the
products.[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations, he presented nothing to substantiate his status as an employee. It is a basic rule of
evidence that each party must prove his affirmative allegation. If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own
evidence and not upon the weakness of his opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can prosper,
an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, which are unfortunately not supported by proof, documentary or otherwise.[23] Javier
simply assumed that he was an employee of Fly Ace, absent any competent or relevant evidence to support it. He performed his contracted work outside the premises of the respondent; he
was not even required to report to work at regular hours; he was not made to register his time in and time out every time he was contracted to work; he was not subjected to any disciplinary
sanction imposed to other employees for company violations; he was not issued a company I.D.; he was not accorded the same benefits given to other employees; he was not registered with
the Social Security System (SSS) as petitioners employee; and, he was free to leave, accept and engage in other means of livelihood as there is no exclusivity of his contracted services with
the petitioner, his services being co-terminus with the trip only. All these lead to the conclusion that petitioner is not an employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and methods by which Javier would perform his work or by which the same is to be accomplished.[25] In
other words, Javier and the company driver were given a free hand as to how they would perform their contracted services and neither were they subjected to definite hours or condition of
work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its principal business of importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the business of inland transportation. Lastly, the acknowledgment receipts bearing Javiers signature and words pakiao rate,
referring to his earned salaries on a per trip basis, have evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier was not an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an employer-employee relationship between him and Fly Ace. This is essentially a question of
fact. Generally, the Court does not review errors that raise factual questions. However, when there is conflict among the factual findings of the antecedent deciding bodies like the LA, the
NLRC and the CA, it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings.[26] In dealing with factual issues in labor cases, substantial evidence that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting and deficient. The Court is constrained to agree. Although Section 10, Rule VII of the
New Rules of Procedure of the NLRC[28] allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. Labor
officials are enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to technicalities or formalities but nowhere in the rules are they provided a
license to completely discount evidence, or the lack of it. The quantum of proof required, however, must still be satisfied. Hence, when confronted with conflicting versions on factual matters,
it is for them in the exercise of discretion to determine which party deserves credence on the basis of evidence received, subject only to the requirement that their decision must be
supported by substantial evidence.[29] Accordingly, the petitioner needs to show by substantial evidence that he was indeed an employee of the company against which he claims illegal
dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is, therefore, incumbent upon the Court to determine whether the party on
whom the burden to prove lies was able to hurdle the same. No particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be admitted. Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects.[30] Although substantial evidence is not a function of quantity but rather
of quality, the x x x circumstances of the instant case demand that something more should have been proffered. Had there been other proofs of employment, such as x x x inclusion in
petitioners payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the requisite quantum of evidence.[32] Whoever claims entitlement to the
benefits provided by law should establish his or her right thereto x x x.[33] Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of evidence on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to
depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the company premises during weekdays arranging and cleaning grocery items for
delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said document,
all Valenzuela attested to was that he would frequently see Javier at the workplace where the latter was also hired as stevedore.[34] Certainly, in gauging the evidence presented by Javier,
the Court cannot ignore the inescapable conclusion that his mere presence at the workplace falls short in proving employment therein. The supporting affidavit could have, to an extent,
bolstered Javiers claim of being tasked to clean grocery items when there were no scheduled delivery trips, but no information was offered in this subject simply because the witness had no
personal knowledge of Javiers employment status in the company. Verily, the Court cannot accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of an employer-employee relationship, viz: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct. Of these elements, the most important criterion is
whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be
accomplished.[35]
In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could not submit competent proof that Fly Ace engaged his services as a regular
employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javiers allegations did not establish that his
relationship with Fly Ace had the attributes of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Aces assertion
that it had an agreement with a hauling company to undertake the delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to
the company. In short, all that Javier laid down were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary
proof that Javier was indeed paid on a pakyaw basis per the acknowledgment receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the signatures
affixed therein cannot automatically sway us to ignore the documents because forgery cannot be presumed and must be proved by clear, positive and convincing evidence and the burden of
proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the settled rule that payment by the piece is just a method of compensation and does not define the essence of the relation.[37]
Payment on a piece-rate basis does not negate regular employment. The term wage is broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the
essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employer-employee relationship. However, in determining whether the relationship is that of
employer and employee or one of an independent contractor, each case must be determined on its own facts and all the features of the relationship are to be considered.[38] Unfortunately
for Javier, the attendant facts and circumstances of the instant case do not provide the Court with sufficient reason to uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its rights which are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for the less privileged in life, the Court has
inclined, more often than not, toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every
case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED. SO ORDERED.
G.R. No. 142293
February 27, 2003
VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and

SBT1 TRUCKING CORPORATION,petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision 2 of the Court of Appeals dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the decision 3 of the National
Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also pray for the reinstatement of the decision 4 of the Labor Arbiter in NLRC NCR Case
No. 00-09-06717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot 5 started working as a truck helper for petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck
driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all
these changes in names and for 36 years, private respondent continuously served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments. Particularly causing him pain was his left thigh, which greatly
affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his
premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II (Annexes "G-5" and "G-3",
pp. 48, 104, respectively),6 HPM, UTI, Osteoarthritis (Annex "G-4", p. 105), 7 and heart enlargement (Annex G, p. 107). 8 On said grounds, Belen Paulino of the SBT Trucking Service
management told him to file a formal request for extension of his leave. At the end of his week-long absence, Sahot applied for extension of his leave for the whole month of June, 1994. It
was at this time when petitioners allegedly threatened to terminate his employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work, But he could not retire on pension because petitioners never paid his correct SSS premiums.
The fact remained he could no longer work as his left thigh hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work, effective June 30,
1994. He ended up sick, jobless and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the recovery of
separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs Trucking and SBT Trucking, herein
petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent was not illegally dismissed as a
driver because he was in fact petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then did respondent Sahot
become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work for almost seven days. On June 1, 1994, Sahot asked permission to
extend his leave of absence until June 30, 1994. It appeared that from the expiration of his leave, private respondent never reported back to work nor did he file an extension of his leave.
Instead, he filed the complaint for illegal dismissal against the trucking company and its owners.
Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should be deemed to have voluntarily resigned from his work. They contended
that Sahot had all the time to extend his leave or at least inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled " Manuelito Jimenez et al. vs. T.
Paulino Trucking Service," as a defense in view of the alleged similarity in the factual milieu and issues of said case to that of Sahots, hence they are in pari material and Sahots complaint
ought also to be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in Sahots case. Private respondent had failed to report to work.
Moreover, said the Labor Arbiter, petitioners and private respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay "financial
assistance" of P15,000 to Sahot for having served the company as a regular employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private respondent was an employee, not an industrial partner, since the
start. Private respondent Sahot did not abandon his job but his employment was terminated on account of his illness, pursuant to Article 284 9 of the Labor Code. Accordingly, the NLRC
ordered petitioners to pay private respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the appellate court affirmed with modification the judgment of the NLRC. It
held that private respondent was indeed an employee of petitioners since 1958. It also increased the amount of separation pay awarded to private respondent to P74,880, computed at the
rate of P2,080 per year for 36 years of service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND
EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation pay. 10
Hence, the instant petition anchored on the following contentions:
I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED
NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF THE CIVIL CODE. 11
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS
THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES
VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).12
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION. 13
Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners and respondent Sahot; (2) Whether or not there was valid dismissal; and
(3) Whether or not respondent Sahot is entitled to separation pay.
Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. 14
Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not an employee but was in fact, petitioners industrial partner. 15 It is
contended that it was the Labor Arbiter who heard the case and had the opportunity to observe the demeanor and deportment of the parties. The same conclusion, aver petitioners, is
supported by substantial evidence. 16 Moreover, it is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the following
pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter when he concluded that complainant was an industrial partner prior to 1994. A computation of the age of
complainant shows that he was only twenty-three (23) years when he started working with respondent as truck helper. How can we entertain in our mind that a twenty-three (23) year old
man, working as a truck helper, be considered an industrial partner. Hence we rule that complainant was only an employee, not a partner of respondents from the time complainant started
working for respondent.17
Because the Court of Appeals also found that an employer-employee relationship existed, petitioners aver that the appellate courts decision gives an "imprimatur" to the "illegal" finding and
conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an industrial partner of petitioners. There was no written agreement, no proof that he received a share in petitioners profits, nor was
there anything to show he had any participation with respect to the running of the business. 18
The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it. 19
As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and by their own allegations, they determined private respondents wages and rest
day.20 Records of the case show that private respondent actually engaged in work as an employee. During the entire course of his employment he did not have the freedom to determine
where he would go, what he would do, and how he would do it. He merely followed instructions of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the CA,
private respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under the latters control.
Article 176721 of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of
dividing the profits among themselves. 22 Not one of these circumstances is present in this case. No written agreement exists to prove the partnership between the parties. Private respondent
did not contribute money, property or industry for the purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of course,
during the period when the trucking business was under operation. Neither is there any proof that he had actively participated in the management, administration and adoption of policies of
the business. Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994.
On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994. The
existence of an employer-employee relationship is ultimately a question of fact 23 and the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but
finality when supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 24
Time and again this Court has said that "if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter." 25 Here,
we entertain no doubt. Private respondent since the beginning was an employee of, not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by petitioners?
Petitioners contend that it was private respondent who refused to go back to work. The decision of the Labor Arbiter pointed out that during the conciliation proceedings, petitioners
requested respondent Sahot to report back for work. However, in the same proceedings, Sahot stated that he was no longer fit to continue working, and instead he demanded separation pay.
Petitioners then retorted that if Sahot did not like to work as a driver anymore, then he could be given a job that was less strenuous, such as working as a checker. However, Sahot declined
that suggestion. Based on the foregoing recitals, petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition that he did not report for work anymore.
In his decision, the Labor Arbiter concluded that:
While it may be true that respondents insisted that complainant continue working with respondents despite his alleged illness, there is no direct evidence that will prove that complainants
illness prevents or incapacitates him from performing the function of a driver. The fact remains that complainant suddenly stopped working due to boredom or otherwise when he refused to
work as a checker which certainly is a much less strenuous job than a driver. 26
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of Appeals, held that:
While it was very obvious that complainant did not have any intention to report back to work due to his illness which incapacitated him to perform his job, such intention cannot be construed
to be an abandonment. Instead, the same should have been considered as one of those falling under the just causes of terminating an employment. The insistence of respondent in making
complainant work did not change the scenario.
It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost requirement (sic). Complainant started working with respondent as truck helper
at age twenty-three (23), then as truck driver since 1965. Complainant was already fifty-nine (59) when the complaint was filed and suffering from various illness triggered by his work and
age.
x x x27
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made. 28 Article 277(b) of the Labor Code puts the
burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the
dismissal.29 For an employees dismissal to be valid, (a) the dismissal must be for a valid cause and (b) the employee must be afforded due process. 30
Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: xxx
However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by competent public health authority that the disease is of such nature or at such a stage that it
cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee
but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Italics supplied).
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, 31 the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it
would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the protection of labor.
In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T. (International)
Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear the burden of showing that the requisites for a valid dismissal
due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employees
dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal
was not illegal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not
arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work. 32
In addition, we must likewise determine if the procedural aspect of due process had been complied with by the employer.
From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by the management of the trucking company. The employer is
required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is
sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and
to be heard on his defense. 33 These, the petitioners failed to do, even only for record purposes. What management did was to threaten the employee with dismissal, then actually implement
the threat when the occasion presented itself because of private respondents painful left thigh.
All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to separation pay. The law is clear on the matter. An employee who is terminated because of disease is
entitled to "separation pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is greater xxx." 34Following the formula set in Art. 284 of
the Labor Code, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after noting that his last
monthly salary was P4,160.00 so that one-half thereof is P2,080.00. Finding no reversible error nor grave abuse of discretion on the part of appellate court, we are constrained to sustain its
decision. To avoid further delay in the payment due the separated worker, whose claim was filed way back in 1994, this decision is immediately executory. Otherwise, six percent (6%)
interest per annum should be charged thereon, for any delay, pursuant to provisions of the Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime Sahot his separation pay
for 36 years of service at the rate of one-half monthly pay for every year of service, amounting to P74,880.00, with interest of six per centum (6%) per annum from finality of this decision
until fully paid.
Costs against petitioners.
SO ORDERED.
[G.R. No. 87098. November 4, 1996]

ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L.
DOGELIO and BENJAMIN LIMJOCO, respondents.
DECISION
TORRES, JR., J.:
Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul and set aside the resolution of the National Labor Relations Commission, Third Division, in NLRC Case
No. RB IV-5158-76, dated December 28, 1988, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED, and the instant appeal is hereby DISMISSED for
lack of merit.
SO ORDERED.[1]
Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica and was in charge of selling petitioners products through some sales
representatives. As compensation, private respondent received commissions from the products sold by his agents. He was also allowed to use petitioners name, goodwill and logo. It was,
however, agreed upon that office expenses would be deducted from private respondents commissions. Petitioner would also be informed about appointments, promotions, and transfers of
employees in private respondents district.
On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business. Then on October 30, 1975, he filed a complaint against petitioner Encyclopaedia
Britannica with the Department of Labor and Employment, claiming for non-payment of separation pay and other benefits, and also illegal deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity) was not its employee but an independent dealer authorized to promote and sell its
products and in return, received commissions therefrom. Limjoco did not have any salary and his income from the petitioner company was dependent on the volume of sales
accomplished. He also had his own separate office, financed the business expenses, and maintained his own workforce. The salaries of his secretary, utility man, and sales representatives
were chargeable to his commissions. Thus, petitioner argued that it had no control and supervision over the complainant as to the manner and means he conducted his business
operations. The latter did not even report to the office of the petitioner and did not observe fixed office hours. Consequently, there was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was assigned in the sales department, and was earning an average of P4,000.00 monthly as
his sales commission. He was under the supervision of the petitioners officials who issued to him and his other personnel, memoranda, guidelines on company policies, instructions and other
orders. He was, however, dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result thereof, Limjoco asserts that in accordance with the established company
practice and the provisions of the collective bargaining agreement, he was entitled to termination pay equivalent to one month salary, the unpaid benefits (Christmas bonus, midyear bonus,
clothing allowance, vacation leave, and sick leave), and the amounts illegally deducted from his commissions which were then used for the payments of office supplies, office space, and
overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an employee of the petitioner company. Petitioner had control over Limjoco since the latter
was required to make periodic reports of his sales activities to the company.All transactions were subject to the final approval of the petitioner, an evidence that petitioner company had
active control on the sales activities. There was therefore, an employer-employee relationship and necessarily, Limjoco was entitled to his claims. The decision also ordered petitioner
company to pay the following:
1. To pay complainant his separation pay in the total amount of P16,000.00;
2. To pay complainant his unpaid Christmas bonus for three years or the amount of P12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or the total amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days per year of service, or the total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total amount of P600.00; and
6. To pay complainant his accrued sick leave equivalent to 15 days per year of service or the total amount of P6,000.00.[2]
On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed decision. The Commission opined that there was no evidence supporting the allegation
that Limjoco was an independent contractor or dealer. The petitioner still exercised control over Limjoco through its memoranda and guidelines and even prohibitions on the sale of products
other than those authorized by it. In short, the petitioner company dictated how and where to sell its products. Aside from that fact, Limjoco passed the costs to the petitioner chargeable
against his future commissions. Such practice proved that he was not an independent dealer or contractor for it is required by law that an independent contractor should have substantial
capital or investment.
Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in this petition for certiorari and injunction with prayer for preliminary injunction. On April
3, 1989, this Court issued a temporary restraining order enjoining the enforcement of the decision dated December 7, 1982.
The following are the arguments raised by the petitioner:
I
The respondent NLRC gravely abused its discretion in holding that appellants contention that appellee was an independent contractor is not supported by evidence on record.
II
Respondent NLRC committed grave abuse of discretion in not passing upon the validity of the pronouncement of the respondent Labor Arbiter granting private respondents claim for payment
of Christmas bonus, Mid-year bonus, clothing allowance and the money equivalent of accrued and unused vacation and sick leave.
The NLRC ruled that there existed an employer-employee relationship and petitioner failed to disprove this finding. We do not agree.
In determining the existence of an employer-employee relationship the following elements must be present: 1) selection and engagement of the employee; 2) payment of wages; 3)
power of dismissal; and 4) the power to control the employees conduct. Of the above, control of employees conduct is commonly regarded as the most crucial and determinative indicator of
the presence or absence of an employer-employee relationship. [3] Under the control test, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end. [4]
The fact that petitioner issued memoranda to private respondents and to other division sales managers did not prove that petitioner had actual control over them. The different
memoranda were merely guidelines on company policies which the sales managers follow and impose on their respective agents. It should be noted that in petitioners business of selling
encyclopedias and books, the marketing of these products was done through dealership agreements. The sales operations were primarily conducted by independent authorized agents who
did not receive regular compensations but only commissions based on the sales of the products. These independent agents hired their own sales representatives, financed their own office
expenses, and maintained their own staff. Thus, there was a need for the petitioner to issue memoranda to private respondent so that the latter would be apprised of the company policies
and procedures. Nevertheless, private respondent Limjoco and the other agents were free to conduct and promote their sales operations. The periodic reports to the petitioner by the agents
were but necessary to update the company of the latters performance and business income.
Private respondent was not an employee of the petitioner company. While it was true that the petitioner had fixed the prices of the products for reason of uniformity and private
respondent could not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the marketing operations. He selected his own personnel and the only
reason why he had to notify the petitioner about such appointments was for purpose of deducting the employees salaries from his commissions. This he admitted in his testimonies, thus:
Q. Yes, in other words you were on what is known as P&L basis or profit and loss basis?
A. That is right.
Q. If for an instance, just example your sales representative in any period did not produce any sales, you would not get any money from Britannica, would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as division manager was merely making it easy for you to concentrate all your effort in selling and you dont worry about
accounting, isnt that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you merely hire that person and notify Britannica so that Encyclopaedia Britannica will give the salaries and deduct it from your
earnings, isnt that so?
A. In certain cases I just hired people previously employed by Encyclopaedia Britannica.

xxx
Q. In this Exhibit 2 you were informing Encyclopaedia Britannica that you have hired a certain person and you were telling Britannica how her salary was going to be taken cared of,
is it not?
A. Yes, sir.
Q. You said here, please be informed that we have appointed Miss Luz Villan as division trainer effective May 1, 1971 at P550.00 per month her salary will be chargeable to the
Katipunan and Bayanihan Districts, signed by yourself. What is the Katipunan and Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired this person and you should charge her salary to me, is that right?
A. Yes, sir.[5]
Private respondent was merely an agent or an independent dealer of the petitioner. He was free to conduct his work and he was free to engage in other means of livelihood. At the time
he was connected with the petitioner company, private respondent was also a director and later the president of the Farmers Rural Bank. Had he been an employee of the company, he could
not be employed elsewhere and he would be required to devote full time for petitioner. If private respondent was indeed an employee, it was rather unusual for him to wait for more than a
year from his separation from work before he decided to file his claims. Significantly, when Limjoco tendered his resignation to petitioner on June 14, 1974, he stated, thus:
"Re: Resignation
I am resigning as manager of the EB Capitol Division effective 16 June 1974.
This decision was brought about by conflict with other interests which lately have increasingly required my personal attention. I feel that in fairness to the company and to the people under
my supervision I should relinquish the position to someone who can devote full-time to the Division.
I wish to thank you for all the encouragement and assistance you have extended to me and to my group during my long association with Britannica.
Evidently, Limjoco was aware of conflict with other interests which xxx have increasingly required my personal attention (p. 118, Records). At the very least, it would indicate that
petitioner has no effective control over the personal activities of Limjoco, who as admitted by the latter had other conflict of interest requiring his personal attention.
In ascertaining whether the relationship is that of employer-employee or one of independent contractor, each case must be determined by its own facts and all features of the
relationship are to be considered.[6] The records of the case at bar showed that there was no such employer-employee relationship.
As stated earlier, the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of
work, and in turn is compensated according to the result of his efforts and not the amount thereof, we should not find that the relationship of employer and employee exists. [7] In fine, there is
nothing in the records to show or would indicate that complainant was under the control of the petitioner in respect of the means and methods [8] in the performance of complainants work.
Consequently, private respondent is not entitled to the benefits prayed for.

In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is hereby REVERSED AND SET ASIDE.
SO ORDERED.

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G.R. No.

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

as having been committed by the Court of Industrial Relations:

ROLANDO ANG, JUANITO PONPON, HOSPINIANO CALINDEZ, JOSE MABULA,

PHILIPPINE SOCIETY FOR

(in his official capacity as Director

FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.

December 27, 1966

Lessons Applicable: Applicability to certain specific persons Professors in national interest

3 cases were filed with the CIR

Section 2(c) of R.A. 875:

"workers" limited to those performing physical labor

embrace stenographers and bookkeepers

Teachers are not included

Feati controls the work of the members of its faculty

professors' work is characterized by regularity and continuity for a fixed duration

professors can be laid off if their work is found not satisfactory

G.R. No. L-26461

November 27, 1968

ASSOCIATED LABOR UNION, petitioner,

Thus, in Goldfinger v. Feintuch,12 it was held:

G.R. No. L-52824 March 16, 88

[G.R. No. 121605. February 2, 2000]

Raul E. Locsin P127,500.00 P240,954.67

Eddie B. Tomaquin P127,500.00 P240,954.67

To pay complainant's unpaid commission of P2,000.00;

Other monetary claims of complainant are dismissed for lack of merit.[7]

Respondent raised before the Court of Appeals the following issues:

G.R. No. 142293

February 27, 2003

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and

[G.R. No. 87098. November 4, 1996]

A. In certain cases I just hired people previously employed by Encyclopaedia Britannica.

Consequently, private respondent is not entitled to the benefits prayed for.

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