FIRST DIVISION

[ G.R. NO. 148490, November 22, 2006 ]

7K CORPORATION, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, RENE A. CORONA, AND ALEX B.
CATINGAN,RESPONDENTS. 

DECISION

AUSTRIA-MARTINEZ, J.: 

Before the Court is a Petition for Review on Certiorari assailing

the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No.
56597 dated September 29, 2000 as well as its
Resolution[2] dated May 25, 2001.

The antecedents are as follows:

In February of 1997, 7K Corporation (petitioner) and Universal

Janitorial and Allied Services (Universal) entered into a service
contract where Universal bound itself to provide petitioner with
drivers at the rate of P4,637.00 per driver a month.

Sometime in March and April of 1997, Rene A. Corona and Alex

B. Catingan (private respondents) were interviewed by petitioner.
Corona then started working with petitioner on March 7, 1997
while Catingan started on April 11, 1997. Pursuant to the service
contract, petitioner paid Universal the sum of P4,637.00 per
driver. As to overtime pay however, petitioner directly paid the
private respondents.

A controversy arose when the overtime paid by the accounting

department of petitioner was short of the actual overtime
rendered by the private respondents. Private respondents' time-
cards reflected overtime of up to 70 hours, however, the
accounting personnel reduced them to only 20 hours. After their
grievances were repeatedly ignored, respondents filed separate
complaints for illegal dismissal, payment of salary differentials,
unpaid overtime, and reinstatement with backwages, against
Universal and/or petitioner before the Labor Arbiter (LA). The
cases, docketed as RAB-11-11-01127-97 and RAB-11-12-01138-
97, were consolidated and tried jointly.[3] Only petitioner and the
private respondents filed their position papers.[4]

On November 20, 1998, LA Antonio M. Villanueva rendered a

Decision declaring Universal as the employer of the private
respondents. He also held that the respondents were illegally
dismissed, thus entitled to backwages and separation pay. He
gave weight to the service contract between petitioner and
Universal which provided that:
The Contractor [Universal] shall continue to be the employer of
the workers assigned to the client's [petitioner's] premises and
shall assume all responsibilities of an employer as provided for
under the Labor Code of the Philippines, and shall be solely
responsible to its employees for labor laws, rules and regulations,
particularly those relating to minimum wage, overtime pay,
holiday pay, thirteenth month pay and similar labor
standards...The Contractor shall exercise in full its power of
control and supervision over the workers assigned. The
Contractor shall monitor the conduct of its workers in their
working conditions.[5]
The LA disposed of the case as follows:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:

(1.) Declaring the Universal Janitorial & Allied Services as the

employer of complainants;

(2.) Declaring the termination of complainants as illegal and

awarding them six months backwages plus separation pay in the
total amount of P52,650.00 (R. Corona – P26,325.00 & A.
Catingan – P26,325.00);

(3.) Awarding to complainants their holiday pay, 13th month pay

(prop.) and salary differentials in the total amount of P8,080.74
(R. Corona – P4,040.37 & A. Catingan – P4,040.37);

(4.) 10% attorney's fees of the total award or in the amount of

P6,073.07; and

(5.) Dismissing all the other claims for lack of merit.

TOTAL AWARD: P66,803.81[6]

Universal appealed to the National Labor Relations Commission
(NLRC) claiming that it is petitioner which is the employer of the
private respondents because: it was petitioner which hired and
accepted the two as its drivers; it was petitioner which had direct
control and supervision over the two; petitioner may select,
replace, and dismiss the driver whose services are found to be
unsatisfactory; and petitioner directly paid the private
respondents their overtime pay. Universal also claimed that
private respondents were not illegally dismissed, thus they are
not entitled to backwages and reinstatement.[7]

On March 30, 1999, the NLRC issued a Resolution[8] modifying the

LA's Decision, thus:
WHEREFORE, the decision of the Labor Arbiter is Modified. The
award for backwages is ordered Deleted in view of the findings
that complainants were not illegally dismissed. However,
Universal Janitorial and Allied Services and 7KCorporation are
jointly and severally liable to pay complainants their salary
differentials, proportionate 13th month pay and holiday pay which
are maintained in this decision.

SO ORDERED.[9]
The NLRC found that Universal is a labor-only contractor since it
does not have substantial capital or investment in the form of
tools, equipments, machineries and the like, and the workers
recruited are performing activities which are directly related to
the principal business of the employer. The NLRC further held
that since Universal is a labor-only contractor, petitioner as the
principal employer, is solidarily liable with Universal for all the
rightful claims of private respondents. There was also no illegal
dismissal as the LA failed to identify who dismissed the
complainants.[10] 

Both petitioner and the private respondents filed their respective

motions for reconsideration.

On August 23, 1999, the NLRC issued its Resolution denying the

motions for reconsideration, thus:
Records show that Universal's appeal was regularly filed x x x

xxx
The Commission's findings in its challenged resolution that
Universal was a "labor-only" contractor stemmed from the latter's
failure to allege and prove that it has substantial capital or
investment in the form of tools, equipment and machineries to
qualify it as a labor contractor. It cannot be presumed. It must
alleged (sic) and prove this fact by substantial and competent
evidence, otherwise, the only inescapable conclusion is that it is a
"labor only" contractor.

In "labor only" contracting, the employer-employee relationship is

established by law between the principal employer, in this
case, 7K Corporation, and the employees of the labor-only
contractor, that is the complainants.

The Commission did not exceed its jurisdiction when it modified

the Labor Arbiter's decision. The Commission merely defined the
relationship between complainants and the respondent firms in
accordance with the provisions of Articles 107 and 109 in relation
to Article 106 of the Labor Code. The fact that complainants did
not appeal therefrom will not deprive the Commission from
entertaining the appeal of Universal.

The cases cited by 7K Corporation[11] to buttress its argument that

the NLRC cannot modify the award granted to the employee who
did not interpose an appeal from the Labor Arbiter's decision is to
say the least specious. Significantly, in this (sic) cases,
the NLRC erroneously modified the Labor Arbiter's decision for
giving additional awards to the employee who did not appeal,
more than what the Labor Arbiter awarded. Such is not the case
here. The Labor Arbiter's decision was modified because of the
Commission's conclusion that complainants were not illegally
dismissed. Hence, the deletion of the Labor Arbiter's award for
separation pay and backwages as only illegally separated
employees are entitled to such awards. The other awards granted
by the Labor Arbiter were maintained. However, in view of the
Commission's finding that Universal was a "labor only" contractor,
the provision of Article 206 of the Labor Code finds application in
the relationship between the principal and the employees. There
is, therefore, no cogent reason to disturb our resolution.

PREMISES considered, the motion for reconsideration is hereby

DENIED for want of merit.
SO ORDERED.[12]
Petitioner went to the CA on a petition for certiorari claiming that
the NLRC gravely abused its discretion when it implicated
petitioner which was not a party to the appealed case, and by
ignoring the fact that the LA decision has already become final
and executory.

The CA dismissed the petition and ruled that: Universal's appeal

to the NLRC was regularly filed; petitioner failed to substantiate
its claim that the LA decision had become final and executory;
petitioner's claim that the LA's decision was already final with
respect to them and the private respondents is without merit,
because when a party files a seasonable appeal, in this case
Universal, the whole case goes up to the appellate court for
review and all the parties below automatically become parties on
appeal; the cases cited by petitioner to support its argument that
the NLRC can not modify the award granted to an employee who
did not appeal the decision of the LA are not applicable to the
case at bar since in the said cases, the NLRC modified the LA's
decision and gave additional awards to employees who did not
appeal; in this case, there was no additional award given and
some of the awards granted by the LA were even deleted;
Universal is a labor-only contractor as defined under Art. 106,
par. 4 of the Labor Code; Universal admitted such fact in its
appeal memorandum when it stated that the power of control
over complainants was vested in and exercised by petitioner;
petitioner filed out of time its petition before the CA because the
petition for certiorari[13] assailing the same NLRC Resolution
earlier filed with the Supreme Court was dismissed in its
Resolution dated November 22, 1999, and did not toll the running
of the period to appeal.[14]

Petitioner now comes before this Court alleging that the CA

gravely erred:
I

x x x IN NOT HOLDING THAT THE NATIONAL LABOR RELATIONS

COMMISSION HAD NO JURISDICTION TO ENTERTAIN THE
BELATED APPEAL OF UNIVERSAL JANITORIAL & ALLIED
SERVICES AS THE DECISION OF THE LABOR ARBITER ALREADY
BECAME FINAL AND EXECUTORY.
 II

x x x IN NOT HOLDING THAT THE NATIONAL LABOR RELATIONS

COMMISSION DID NOT ACQUIRE JURISDICTION OVER THE
PERSON OF PETITIONER IN NLRC CA NO. M-004588
CONSIDERING THAT PETITIONER WAS NEITHER AN APPELLANT
NOR AN APPELLEE IN THE SAID CASE.

III

x x x IN NOT HOLDING THAT THE NATIONAL LABOR RELATIONS

COMMISSION EXCEEDED ITS AUTHORITY IN DECLARING THAT
UNIVERSAL JANITORIAL & ALLIED SERVICES IS A "LABOR-ONLY
CONTRACTOR."[15]
Petitioner argues that: private respondents and petitioner did not
appeal from the decision of the LA in RAB-11-10-01127-97 and
RAB-11-12-01138-97, thus such decision had long become final
and executory as to them; it is presumed that private
respondents agreed in toto with the said decision as they did not
appeal the decision of the LA and they even filed a motion for
execution of said judgment; even with respect to Universal, the
LA decision had already become final and executory as its appeal
to the NLRC was filed out of time in violation of Section 3, Rule VI
of the NLRC New Rules of Procedure relating to the requisites for
perfecting an appeal;[16] considering that the LA's decision has
become final and executory as far as petitioner and private
respondents are concerned and considering that Universal failed
to perfect its appeal with the NLRC, the latter had no jurisdiction
to decide said appeal; as Universal did not file a position paper
with the LA, its right to appeal with the NLRC should be deemed
foreclosed; NLRC did not acquire jurisdiction over petitioner
considering that petitioner was neither an appellant nor an
appellee in the appealed case; a judgment cannot bind persons
not parties to it; as the LA found that Universal admitted that
private respondents were their employees, such finding by the
LA, which had first-hand evidence of the controversy, should be
given great respect; by acquiescing with the decision of the LA,
private respondents are estopped from taking a position
inconsistent with the terms of the decision; Universal is not a
"labor-only contractor" because there is nothing on record which
shows that it does not have substantial capital or investment in
the form of tools, equipment, machineries, and the like.[17]
In their Comment, private respondents pointed out that petitioner
failed to file its petition before the CA on time. They also
expressed that they did not appeal from the decision of the LA
and are willing to abide by whatever decision the Court would
render on whether or not Universal is a labor-only contractor as
the issue of which entity will pay private respondents' claims are
matters which have become the concern of petitioner and
Universal.[18]

In its Reply to Comment, petitioner contends that while it filed its

petition before the CA beyond the reglementary period, courts
should give due course to appeals perfected out of time when
doing so would serve the demands of substantial justice; and that
the reason why private respondents declined to make any further
comment on the petition is the fact that they are amenable to the
decision rendered by the LA.[19]

We find the petition bereft of merit.

First of all, the admission of petitioner in its Reply to Comment

that it filed its petition with the CA beyond the reglementary
period, sustains the CA findings on the matter, and therefore, the
CA did not err in dismissing the petition. There is no showing that
substantial justice would have been served had the CA given due
course to the petition.

However, the Court opts to resolve the issues raised by petitioner

on the present petition to clarify once and for all the liability of
petitioner.

The contention of petitioner that the appeal of Universal before

the NLRC was filed out of time is not supported by the records.
Universal received the LA decision on December 15, 1998 and
filed its appeal with the NLRC also on the same
day. [20] The NLRC also categorically held that Universal's appeal
was regularly filed.[21] Absent any proof to the contrary, the Court
is constrained to uphold such finding.

Also without merit is the contention that since petitioner and

private respondents did not appeal the LA's decision, then the LA
decision has become final as far as they are concerned.
Records show that Universal filed a timely appeal before
the NLRC and therefore the decision of the LA has not yet become
final and executory, notwithstanding the choice of petitioner and
private respondents not to file any appeal.

Equally unavailing is the contention of petitioner that NLRC did

not acquire jurisdiction over its person since it was neither an
appellant nor an appellee in the case before it. As aptly stated by
the CA, when an appeal is seasonably filed by a party, the whole
case goes up to the appellate court/tribunal for review and all the
parties below automatically become parties on appeal either as
appellants or as appellees.

Further, Universal's failure to categorically implead petitioner as

an appellee in Universal's appeal before the NLRC, while
unfortunate, is not a fatal procedural flaw, as petitioner was not
deprived of opportunity to ventilate its arguments and challenge
Universal through counsel before the NLRC.[22] Administrative
tribunals exercising quasi-judicial powers are unfettered by the
rigidity of certain procedural requirements subject to the
observance of fundamental and essential requirements of due
process.[23] In this case, petitioner was properly furnished by
Universal of its appeal memorandum where Universal alleged that
it is petitioner which should be held liable for respondents' claims.
Petitioner was also able to submit its Motion for Reconsideration
to the March 30, 1999 Resolution of the NLRC where petitioner
was able to sufficiently argue its case. Finally, the NLRC, in its
Resolution dated August 23, 1999, adequately addressed the
issues raised by petitioner thus meeting the requirements of due
process.

Petitioner also claims that the NLRC and the CA erred in finding

Universal as a labor-only contractor.

We disagree.

Factual findings of quasi-judicial bodies, like the NLRC are

accorded great respect if supported by substantial evidence and
passed upon and upheld by the CA.[24] Unless the aggrieved party
establishes that grave abuse of discretion amounting to excess or
lack of jurisdiction was committed, such factual findings are
conclusive on this Court.[25]

No such grave abuse of discretion was shown by petitioner in this

case.

The fact that the service contract entered into by petitioner and
Universal stipulated that private respondents shall be the
employees of Universal, would not help petitioner, as the
language of a contract is not determinative of the relationship of
the parties. [26] Petitioner and Universal cannot dictate, by the
mere expedient of a declaration in a contract, the character of
Universal's business, i.e., whether as labor-only contractor, or job
contractor, it being crucial that Universal's character be measured
in terms of and determined by the criteria set by statute.[27]

Art. 106 of the Labor Code provides that there is "labor-only"

contracting where (1) 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 (2) the workers recruited and placed by such person
are performing activities which are directly related to the principal
business of such employer.

Sec. 4 (f), Rule VIII-A, Book III of the Omnibus Rules

Implementing the Labor Code further defines "labor-only
contracting" as follows:
(f) "Labor-only contracting" prohibited under this Rule is an
arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or
service for a principal, and the following elements are present:

i) The contractor or subcontractor does not have substantial

capital or investment to actually perform the job, work or service
under its own account and responsibility; and

ii) 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.
That private respondents are performing activities which are
directly related to the principal business of such employer are not
questioned by any of the parties.
Petitioner's main argument is that since there is no proof that
Universal does not have substantial capital, then Universal should
be considered as a legitimate job contractor and not a labor-only
contractor. Such contention is incorrect.

The presumption is that a contractor is a labor-only contractor

unless such contractor overcomes the burden of proving that it
has substantial capital, investment, tools and the like.[28] The
employees, in this case, private respondents, should not be
expected to prove the negative fact that the contractor does not
have substantial capital, investment and tools to engage in job-
contracting.[29]

Since neither petitioner nor Universal was able to adduce

evidence that Universal had any substantial capital, investment or
assets to perform the work contracted for, the presumption that
Universal is a labor-only contractor stands.

Thus, petitioner, the principal employer, is solidarily liable with

Universal, the labor-only contractor, for the rightful claims of the
employees.[30] Under this set-up, Universal, as the "labor-only"
contractor, is deemed an agent of the principal, herein petitioner,
and the law makes the principal responsible to the employees of
the "labor-only" contractor as if the principal itself directly hired
or employed the employees.[31]

Petitioner is therefore solidarily liable with Universal for the

payment of holiday pay, 13th month pay and salary differentials in
the amount of P4,040.37 per respondent, as awarded by
the NLRC and affirmed by the CA.

Even granting en arguendo that Universal is a legitimate job

contractor and not a labor-only contractor, still petitioner cannot
escape liability because even without a direct employer-employee
relationship between the principal employer and the employees,
the former is still jointly and severally liable with the job
contractor for the employees' monetary claims[32] following Arts.
106, 107 and 109 of the Labor Code, to wit:
Art. 106. Contractor or subcontractor. – Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the
contractor and the latter's 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.

xxx

Art. 107. Indirect employer. – The provisions of the

immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an
employer contracts with an independent contractor for the
performance of any work, task, job or project.

xxx

Art. 109. Solidary liability. - The provisions of existing laws to

the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under
this Chapter, they shall be considered as direct employers.
As explained by the Court in San Miguel Corporation v. MAERC
Integrated Services, Inc.[33]
In legitimate job contracting, the law creates an employer-
employee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages. The principal employer
becomes jointly and severally liable with the job contractor only
for the payment of the employees' wages whenever the
contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the
employees.

On the other hand, in labor-only contracting, the statute

creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent
of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such
employees had been directly employed by the principal
employer. The principal employer therefore becomes
solidarily liable with the labor-only contractor for all the
rightful claims of the employees.[34]
In legitimate job contracting, the law creates an employer-
employee relationship for a limited purpose, to ensure that the
employees are paid their wages. In such an arrangement, the
principal employer becomes jointly and severally liable with the
job contractor for the payment of the employees' wages
whenever the contractor fails to pay the same.[35] As the claim of
private respondents in this case involve only monetary claims
that fall within the purview of wages, petitioner, even if found as
the principal employer in a legitimate job contracting, is still liable
to them for the payment of such claims.

The Court finds no error in the assailed decision of the Court of

Appeals.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 192282, October 05, 2016 ]
A. NATE CASKET MAKER AND/OR ARMANDO AND ANELY
NATE, PETITIONERS, VS. ELIAS V. ARANGO, EDWIN M.
MAPUSAO, JORGE C. CARIÑO, JERMIE MAPUSAO, WILSON
A. NATE, EDGAR A. NATE, MICHAEL A. MONTALES, CELSO
A. NATE, BENJES A. LLONA AND ALLAN A. MONTALES,
RESPONDENTS.

DECISION

PERALTA, J.: 
Before us is a Petition for Review on Certiorari[1] under Rule 45 of
the Rules of Court which seeks the reversal of the
Decision[2] dated January 6, 2010, and Resolution[3] dated May 13,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106965. The
CA reversed and set aside the Decision[4] of the National Labor
Relations Commission (NLRC), Sixth Division, in NLRC NCR
Case No. 00-02-01233-07 which affirmed the Decision[5] of the
Labor Arbiter dismissing the complaint for illegal dismissal,
underpayment of wages, and non-fayment of overtime pay,
holiday pay, service incentive leave pay and 13th month pay filed
by respondents.

The factual antecedents are as follows:

Petitioners Armando and Anely Nate are the owners/proprietors

of A. Nate Casket Maker. They employed respondents on various
dates as carpenters, mascilladors and painters in their casket-
making business from 1998 until their alleged termination in
March 2007. Petitioners alleged in their Position Paper[6] that
respondents are pakyaw workers who are paid per job order.
[7]
 Respondents are "stay-in" workers with free board and lodging,
but they would "always" drink, quarrel with each other on petty
things such that they could not accomplish the job orders on
time. Hence, petitioners would then be compelled to "contract
out" to other workers for the job to be finished.  On February 3,
2007, they met with respondents in order to present a proposed
employment agreement which would change the
existing pakyaw system to "contractual basis" and would provide
for vacation leave and sick  leave pay and other benefits  given to
regular employees. Petitioners alleged that the proposed
employment agreement would be more beneficial to respondents.
[8]

On the other hand, respondents alleged in their Position Paper,

[9]
 that they worked from Monday to Saturday, from 7:00a.m. to
10:00 p.m., with no overtime pay and any monetary benefits
despite having claimed for such. On March 15, 2007, they were
called by petitioners and were made to sign a Contract of
Employment[10] with the following terms and conditions: (1) they
shall be working on contractual basis for a period of five months;
(2) renewal of employment contract after such period shall be on
a case-to-case basis or subject to respondents' efficiency and
performance; (3) petitioners shall reserve the right to terminate
their employment should their performance fall below
expectations or if the conditions under which they were
employed nolonger exist; (4) their wages shall be on a piece-rate
basis; (5) in the performance of their tasks, they shall be obliged
to strictly follow their work schedules; (6) they shall not be
eligible to avail of sick leave or vacation leave, nor receive
13th month pay and/or bonuses, or any other benefits given to a
regular employee. Respondents then alleged that when they were
adamant and eventually refused to sign the contract, petitioners
told them to go home because their employment has been
terminated.

On February 8, 2007, respondents filed a Complaint for illegal

dismissal and non-payment of separation pay against petitioners.
On March 15, 2007, they amended the complaint to include
claims for underpayment of wages, non-payment of overtime
pay, holiday pay, 5-day service incentive leave pay and
13th month pay.

On August 15, 2007, Labor Arbiter (LA) Eduardo J. Carpio, issued

a Decision dismissing the complaint for lack of merit. While the
LA acknowledged that respondents being pakyaw workers
are considered regular employees, he ruled that petitioners
did not terminate the services of respondents and believed in the
denial of petitioners that respondents were called to their office
on March 15, 2007 since respondents already initiated the
present case on February 8, 2007. On the issue of underpayment,
the LA held that respondents were earning more than the
minimum wage per day; and as pakyaw workers, though
they are deemed regular workers, they are not entitled to
overtime pay, holiday pay, service incentive leave pay and
13th month pay citing the case of field personnel and those
paid on purely commission basis.

Thereafter, respondents elevated the case before the NLRC, Sixth

Division. On July 29, 2008, the NLRC affirmed the Decision of the
LA and held that no substantial evidence was presented to show
that petitioners terminated the employment of respondents. It
stated that pakyaw workers are not entitled to money claims
because their work depends on the availability of job orders from
petitioners' clients. Also, there was no proof that overtime work
was rendered by respondents. A motion for reconsideration was
filed by respondents but the same was denied.

Aggrieved, respondents filed a petition for certiorari before the

CA. In a Decision dated January 6, 2010, the CA reversed and
set aside the decision ofthe NLRC. The fallo states:

WHEREFORE, the petition for certiorari is GRANTED. Public

Respondent's Decision dated July 29, 2008 and Resolution dated
November 7, 2008 in NLRC LAC No. 12-003252-07 (NCR
Case No. 00-02-01233-07) are REVERSED AND SET ASIDE, and
in lieu thereof, a new one is ENTERED, declaring petitioners to
have been illegally dismissed and ordering private respondents to
pay them backwages, separation pay and other monetary
benefits as required by law. Upon the finality of this decision and
for the enforcement of the same, the Labor Arbiter of origin is
directed to conduct further proceedings for the purpose of
determining the amount of backwages and separation pay due
petitioners.

SO ORDERED.[11]

A motion for reconsideration was filed by petitioners but the same

was denied by the Court of Appeals on May 13, 2010.

Hence, this petition, raising the following issues for resolution:

1. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN DECLARING THAT COMPLAINANTS
WERE ILLEGALLY DISMISSED; [and]

2. THERE ARE SERIOUS ERRORS IN THE FINDINGS OF FACTS

WHICH, IF NOT CORRECTED, WOULD CAUSE GRAVE AND
IRREPARABLE DAMAGE TO THE PRIVATE RESPONDENTS.[12]

Petitioners emphasized in their petition that they had always

agreed and admitted[13] from the beginning of the case the
regular employment status of respondents. According to
petitioners, what they are insisting, contrary to the findings of the
CA, is the alleged fact that they never dismissed the respondents
from their employment. They argued that since petitioners'
business depended on the availability of job orders, necessarily
the duration of respondents' employment is not permanent but
coterminous with the completion of such job orders. They further
argued that since respondents arc "pakyaw " workers or "paid by
result," they are not entitled to their money claims.

In their Comment to the Petition, respondents countered that

only questions of law may be raised in a petition for review
on certiorari and that the errors being raised by petitioners arc
questions of fact.

A petition for review on certiorari under Rule 45 is a mode of

appeal where the issue is limited to questions of law. In labor
cases, a Rule 45 petition is limited to reviewing whether the Court
of Appeals correctly determined the presence or absence of grave
abuse of discretion and deciding other jurisdictional errors of the
National Labor Relations Commission.[14]

The case of Career Philippines Shipmanagement, Inc., et al. v.

Serna, [15] citing Montoya v. Transmed Manila Corp./Mr. Ellena, et
al.,[16] is instructive on the parameters of judicial review under
Rule 45:

As a rule, only questions of law may be raised in a Rule 45

petition. In one case, we discussed the particular parameters of a
Rule 45 appeal from the CA's Rule 65 decision on a labor case, as
follows:
In a Rule 45 review, we consider the correctness of the assailed
CA decision, in contrast with the review for jurisdictional error
that we undertake under Rule 65. Furthermore, Rule 45 limits us
to the review of questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct. In
other words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.[17]
Therefore, in this kind of petition, the proper question to be
raised is, "Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?" In
other words, did the CA correctly determine whether the NLRC
ruling had basis in. fact and in law? In Our Rule 45 review, this
Court must deny the petition if it finds that the CA correctly
acted. These parameters shall be used in resolving the
substantive issues in this petition.[18]

To resolve the issue of whether petitioners are guilty of illegal

dismissal, We necessarily have to determine the veracity of the
parties' allegations, a function we are ordinarily barred from
performing when deciding a Rule 45 petition. However, due to the
conflicting factual findings of the NLRC and the CA, we find the
review of the evidence on record compelling and proper.[19]

The crux of the dispute boils down to two issues, namely, (a)
whether respondents' employment was terminated, and (b)
whether respondents who are pakyaw workers and considered
regular workers are entitled to overtime pay, holiday pay, service
incentive leave pay and 13th month pay. Both issues are clearly
factual in nature as they involved appreciation of evidence
presented before the NLRC.

There is no doubt that respondents have been under the employ

of petitioners for some years. The conflict arose when petitioners
presented to respondents an employment contract hereunder
reproduced:

A. NATE CASKET MAKER

30 Espirito St. Pangulo
Malabon, Metro Manila

CONTRACT OF EMPLOYMENT

DATE: February 3, 2007

You arc hereby assigned as worker/laborer at A. NATE CASKET

MAKER. The following constitute the terms and conditions under
which the management of NATE CASKET MAKER governs.
You will be working a 5-month contract basis. Your contract will
be renewed on a case-to-case basis or based upon the efficiency
of your performance. The company also reserves the right to
discontinue or terminate your employment anytime if your
performance does not come to expectations or if the conditions
under which you have been employed nolonger exist.

You will be receiving remuneration on a per item/piece basis [i.e.,

per casket made]. You are obliged to follow strictly your
schedules to work or perform your duty. During the period of
your employment, you will not [be] eligible to earn or receive any
sick leave pay, [vacation] leave pay, or any other benefits given
to regular employees such as 13th month pay and bonuses.

This contract and other conditions of your employment arc

governed further by existing company policies and regulations, of
which you have already been oriented into, and by future
company policies which may be issued from time to time.

Mr. and Mrs. Armando and Anely NATE

Proprietor Proprietress

I hereby accept this employment contract knowing and

understanding fully well the terms and conditions under which it
shall be governed. I hereby acknowledge that I have been
thoroughly oriented and I fully understand the whole company
policies, rules and regulations and thereby agree to abide by
them when employed.

DATE: February 3, 2007                                                 

EMPLOYEE/WORKER[20]

The said contract with a short term of five (5) months, renewable
upon the terms set by petitioners, was presented to respondents
on February 3, 2007[21] (not February 8, 2007). Naturally,
respondents who had been continuously reporting to the
petitioners sine 1998 without any interruption would have second
thoughts on signing the said contract.  Feeling disgruntled, they
filed a Complaint with the NLRC on February 8, 2016 for money
claims. To their minds, it was a way to protect their status of
employment. It was explained in the Rejoinder they presented to
the LA that it was purely money claims but, not being
learned norassisted by a lawyer, they also checked the box for
"illegal dismissal."[22]

When the petitioners received the summons on March 15, 2007 in

connection with the complaint, respondents were ordered by
petitioners to go to the latter's office.[23] Because there
was no dismissal yet, and thinking perhaps that it was for an
amicable settlement of their claims, respondents went to the
office of petitioners. However, respondents were presented with
the same contract. According to respondents, their refusal to sign
the contract irated petitioners who then told them to go home
and not to report for work anymore.[24] This prompted
respondents to file an amended complaint for illegal dismissal and
money claims.

The meeting on March 15, 2007 was denied by petitioners as well

as the dismissal of respondents. It is worth noting, however, that
in the Position Paper of petitioners, they alleged that their offer of
the said employment contract to respondents was caused by the
alleged refusal/failure of the latter to report for work as a result
of the alleged drinking and petty quarrels:

8. Considering that the complainants refuse to do their work, a

meeting was held on February 8, 2007, to have a proposal for a
change of [pakyaw] system to that of contractual basis, giving
them the sample employment agreement for them to study. The
herein respondents explained to them that the change of work
system to that of a contract basis which is beneficial to the
complainants, the employees will receive a vacation and sick
leave, or any other benefits given to a regular [employee] x x x.
[25]

Clearly, the aforequoted allegation in the Position Paper of

petitioners is contrary to the terms and conditions stated in the
employment contract. It is specifically stated in the employment
agreement that during the period of employment, respondents
would not be eligible to earn or receive any sick leave pay,
vacation leave pay, or any other benefits given to regular
employees such as 13th month pay and bonuses. Hence, the key
to understanding petitioners' motive in severing respondents'
employment lies in the tenor of the contract itself which is the
opposite to what is alleged by petitioners in their position paper.
Moreover, as correctly observed by the CA, there was the
absence of proof to show that petitioners conducted an
investigation on the alleged drinking and petty quarrelling of
respondents nor did the petitioners provide respondents with an
opportunity to explain their side with respect to charges against
them. The validity of the charge must be established in a manner
consistent with due process. These circumstances, taken
together, lead Us to conclude that petitioners indeed terminated
respondents' employment. The positive assertion of respondents
that they were dismissed by petitioners is more convincing than
the mere denial of petitioners.

In termination cases, the burden of proving just and valid cause

for dismissing an employee from his employment rests upon the
employer, and the latter's failure to do so would result in a
finding that the dismissal IS unjustified. Petitioners failed to
discharge this burden.[26]

It must be emphasized that employers cannot seek refuge under

whatever terms of the agreement they had entered into with their
employees. The law, in defining their contractual relationship,
does so, not necessarily or exclusively upon the terms of their
written or oral contract, but also on the basis of the nature of the
work of employees who had been called upon to perform. The law
affords protection to an employee, and it will not countenance
any attempt to subvert its spirit and intent. A stipulation in an
agreement can be ignored as and when it is utilized to deprive
the employee of his security of tenure. The sheer inequality that
characterizes employer employee relations, where the scales
generally tip against the employee, often scarcely provides him
real and better options.[27]

Furthermore, petitioners agreed that respondents arc regular

employees. Article 280 of the Labor Code provides:

Art. 280. Regular and Casual Employment. The provisions of

written agreement to the contrary notwithstanding and regardless
of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at
the time of the engagement of the employee or where the work
or services to be performed is seasonal in nature and the
employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered

by the preceding paragraph; Provided, That, any employee who
has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his
employment shall continue while such activity exist.

This provision classifies employees into regular, project, seasonal,

and casual. It further classifies regular employees into two kinds:
(I) those "engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer"; and (2) casual employees who have "rendered at
least one year of service, whether such service is continuous or
broken."

A regular employment, whether it is one or not, is aptly gauged

from the concurrence, or the non-concurrence, of the following
factors  (a) the manner of selection and engagement of the
putative employee; (b) the mode of payment of wages; (c) the
presence or absence of the power of dismissal; and (d) the
presence or absence of the power to control the conduct of the
putative employee or the power to control the employee with
respect to the means or methods by which his work is to be
accomplished. The "control test" assumes primacy in the
overall consideration. Under this test, an employment
relation obtains where work is performed or services are
rendered under the control and supervision of the party
contracting for the service, not only as to the result of the
work but also as to the manner and details of the
performance desired.[28]

There is no dispute that the tasks performed by respondents as

carpenters, painters, and mascilladors were necessary and
desirable in the usual business of petitioners who are engaged in
the manufacture and selling of caskets. We have to also consider
the length of time that respondents worked for petitioners,
commencing on various dates from 1998 to 2007. In addition, the
power of control of petitioners over respondents is clearly present
in this case. Respondents follow the steps in making a casket, as
instructed by the petitioners, like carpentry, mascilla, rubbing and
painting. They had their own notebooks where they listed the
work completed with their signature and the date finished. The
same would be checked by petitioners as basis for the
compensation for the day. Thus, petitioners wielded control
over the respondents in the discharge of their work.

It should be remembered that the control test merely calls

for the existence of the right to control, and not
necessarily the exercise thereof. It is not essential that the
employer actually supervises the performance of duties by the
employee. It is enough that the former has a right to wield
the power.[29] Hence, pakyaw workers are considered regular
employees for as long as their employers exercise control over
them. Thus, while respondents' mode of compensation was on a
per-piece basis, the status and nature of their employment was
that of regular employees.[30]

As regular employees, respondents were entitled to security of

tenure and could be dismissed only for just or authorized causes
and after the observance of due process. The right to security of
tenure is guaranteed under Article XIII, Section 3 of the 1987
Constitution:

Article XIII. Social Justice and Human Rights

Labor

It shall guarantee the rights of all workers to self-organization,

collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and
benefits as may be provided by law.[31]

Likewise, Article 279 of the Labor Code also provides for the right
to security of tenure, thus:

Art. 279. Security of tenure. In cases of regular employment, the

employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time
of his actual reinstatement.[32]

Therefore, on the right to security of tenure, no employee shall

be dismissed, unless there are just or authorized causes and only
after compliance with procedural and substantive due process.
Section 2, Rule XIV, Book V of the Omnibus Rules Implementing
the Labor Code provides:

SEC. 2. Notice of Dismissal. - Any employer who seeks to dismiss

a worker shall furnish him a written notice stating the particular
acts or omission constituting the grounds for his dismissal. In
cases of abandonment of work, the notice shall be served at the
workers' last known address.

Petitioners violated respondents' rights to security of tenure and

constitutional right to due process in not even serving them with
a written notice of termination which would recite any valid or
just cause for their dismissal. Respondents were merely told that
their services are terminated. Thus, the Court of Appeals correctly
ruled that private respondents were illegally dismissed.

Under Article 279 of the Labor Code as aforestated, an employee

unjustly dismissed from work is entitled to reinstatement and
backwages, among others. REINSTATEMENT restores the
employee who was unjustly dismissed to the position from which
he was removed, that is, to his status quo ante dismissal, while
the grant of backwages allows the same employee to recover
from the employer that which he had lost by way of wages as a
result of his dismissal. These TWIN REMEDIES - reinstatement
and payment of ackwages - make the dismissed employee whole
who can then look forward to continued employment. Thus, do
these two remedies give meaning and substance to the
constitutional right of labor to security of tenure.[33]  Respondents
are, therefore, entitled to reinstatement with full backwages
pursuant to Article 279 of the Labor Code, as amended by
R.A. No. 6715.
On reinstatement, the CA ordered payment of separation pay in
lieu of reinstatement. The accepted doctrine is that separation
pay may avail in lieu of reinstatement if reinstatement
is no longer practical or in the best interest of the parties.
Separation pay in lieu of reinstatement may likewise be awarded
if the employee decides not to be reinstated. We defer to the
findings of the Court of Appeals and authorized under
jurisprudence, that separation pay in lieu of reinstatement is
warranted in this case.[34] Respondents filed their complaint in
2007. Nine (9) years are a substantial period[35] to bar
reinstatement. The dispositive portion of the CA Decision is
consistent with the premise that the respondents were entitled to
reinstatement by reason of their illegal dismissal, but they could
receive instead separation pay in lieu of reinstatement if
reinstatement is no longer practicable.

That being said, the amount of backwages to which each

respondent is entitled, however, cannot be fully settled at this
time. As respondents are piece-rate workers being paid by the
piece, there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue is
best left to the NLRC. In Labor Congress of the Philippines v.
NLRC,[36] the Court was confronted with a situation wherein
several workers paid on a piece-rate basis were entitled to
backwages by reason of illegal dismissal. The Court noted that as
the piece-rate workers had been paid by the piece, "there [was] a
need to determine the varying degrees of production and days
worked by each worker," and that "this issue is best left to the
[NLRC]." We believe the same result should obtain in this case,
and the NLRC be tasked to conduct the proper determination of
the appropriate amount of backwages due to each of the
respondents.[37]

Nonetheless, even as the case should be remanded to the NLRC

for the proper determination of backwages, nothing in this
decision should be construed in a manner that would impede the
award of separation pay to the respondents as previously
rendered by the CA. In lieu of reinstatement then, separation pay
at the rate of one month for every year of service, with a fraction
of at least six (6) months of service considered as one (1) year, is
in order.[38]
As to the other benefits, namely, holiday pay, 13th month pay,
service incentive leave pay and overtime pay which respondents
prayed for in their complaint, We affirm the ruling of the CA that
respondents are so entitled to these benefits.

In the case of David v. Macasio,[39] We held that workers engaged

on pakyaw or "task basis" are entitled to holiday and service
incentive leave pay (SIL) provided they are not field personnel:

In short, in determining whether workers engaged on

"pakyaw" or task basis" is entitled to holiday and SIL pay,
the presence (or absence) of employer supervision as regards the
worker's time and performance is the key: if the worker is simply
engaged on "pakyaw" or task basis, then the general rule is that
he is entitled to a holiday pay and SIL pay unless exempted from
the exceptions specifically provided under Article 94 (holiday
pay)40 and Article 95 (SIL pay)[41] of the Labor Code. However, if
the worker engaged on pakyaw or task basis also falls within the
meaning of "field personnel" under the law, then he is not entitled
to these monetary benefits.[42]

Based on the definition of field personnel under Article 82,

[43]
respondents do not fall under the definition of "field
personnel." First, respondents regularly performed their duties at
petitioners' place of business; second, their actual hours of work
could be determined with reasonable certainty; and, third,
petitioners supervised their time and performance of their duties.
Since respondents cannot be considered as "field personnel," then
they are not exempted from the grant of holiday and SIL pay
even as they were engaged on pakyaw or task basis.

With respect to the payment of 13th month pay, however, We find

that respondents are not entitled to such benefit. Again, as We
ruled in the case of David v. Macasio:[44]

The governing law on 13th month pay is Presidential Decree No.

851.[45] As with holiday and SIL pay, 13th month pay benefits
generally cover all employees; an employee must be one of those
expressly enumerated to be exempted. Section 3 of the Rules and
Regulations Implementing P.D. No. 851 enumerates the
exemptions from the coverage of 13th month pay benefits. Under
Section 3(e), "employers of those who are paid on xxx task basis,
and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance
thereof' are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL
pay, Section 3(e) of the Rules and Regulations Implementing
PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar
as payment of the 13th month pay is concerned, the law did not
intend to qualify the exemption from its coverage with the
requirement that the task worker be a "field personnel" at the
same time.[46]

All told, We need to stress that the Constitution affords full

protection to labor, and that in light of this Constitutional
mandate, We must be vigilant in striking down any attempt of the
management to exploit or oppress the working class. The law, in
protecting the rights of the employees, authorizes neither
oppression nor self-destruction of the employer. It should be
made clear that when the law tilts the scales of justice in favor of
labor, it is in recognition of the inherent economic inequality
between labor and management. The intent is to balance the
scales of justice; to put the two parties on relatively equal
positions.[47]

WHEREFORE, the Petition is PARTIALLY GRANTED in so far as

the payment of 13th month pay to respondents is concerned. In
all other aspects, the Court AFFIRMS the Decision dated January
6, 2010 and the Resolution dated May 13, 2010 of the Court of
Appeals in CA-G.R. SP No. 106965.

SO ORDERED.

Velasco, Jr., (Chairperson), Perez, Reyes, and Jardeleza, JJ.,

concur.

THIRD DIVISION
[ G.R. No. 186114, October 07, 2015 ]
 CHEVRON (PHILS.), INC., PETITIONER, VS. VITALIANO C
GALIT, SJS AND SONS CONSTRUCTION CORPORATION AND
MR. REYNALDO SALOMON, RESPONDENTS.

DECISION

PERALTA J.:* 

Before the Court is a petition for review on certiorari under Rule

45 of the Rules of Court seeking the reversal and setting aside of
the Decision[1] and Resolution[2] of the Court of Appeals (CA),
dated December 8, 2008 and January 20, 2009, respectively, in
CA-G.R. SP No. 104713. The assailed CA Decision reversed and
set aside the Decision dated January 31, 2008 and the Resolution
dated May 27, 2008 of the National Labor Relations Commission
(NLRC), Second Division in NLRC NCR (Case No.) 00-03-02399-
06 (CA No. 051468-07), while the questioned CA Resolution
denied petitioner's Motion for Reconsideration.

The factual and procedural antecedents of the case are as

follows:

On March 20, 2006, herein respondent (Galit) filed against Caltex

Philippines, Inc., now Chevron (Phils.), Inc., SJS and Sons
Construction Corporation (SJS), and its president, Reynaldo
Salomon (Salomon),[3] a Complaint[4] for illegal dismissal,
underpayment/non-payment of 13thmonth pay, separation pay
and emergency cost of living allowance. The Complaint was filed
with the NLRC National Capital Region, North Sector Branch in
Quezon City.

In his Position Paper,[5] Galit alleged that: he is a regular and

permanent employee of Chevron since 1982, having been
assigned at the company's Pandacan depot; he is an "all-around
employee" whose job consists of cleaning the premises of the
depot, changing malfunctioning oil gaskets, transferring oil from
containers and other tasks that management would assign to
him; in the performance of his duties, he was directly under the
control and supervision of Chevron supervisors; on January 15,
2005, he was verbally informed that his employment is
terminated but was promised that he will be reinstated soon; for
several months, he followed up his reinstatement but was not
given back his job.

In its Position Paper,[6] SJS claimed that: it is a company which

was established in 1993 and was engaged in the business of
providing manpower to its clients on a "per project/contract"
basis; Galit was hired by SJS in 1993 as a project employee and
was assigned to Chevron, as a janitor, based on a contract
between the two companies; contrary to Galit's allegation, he
started working for SJS only in 1993; the manpower contract
between SJS and Chevron eventually ended on November 30,
2004 which resulted in the severance of Galit's employment; SJS
finally closed its business operations in December 2004; it retired
from doing business in Manila on January 21, 2005; Galit was
paid separation pay of P11,000.00.

On the other hand, petitioner contended in its Position Paper with

Motion to Dismiss[7] that: it entered into two (2) contracts for-
janitorial services with SJS from May 1, 2001 to April 30, 2003
and from June 1, 2003 to June 1, 2004; under these contracts,
SJS undertook to "assign such number of its employees, upon
prior .agreement with [petitioner], as would be sufficient to fully
and effectively render the work and services undertaken" and to
"supply the equipment, tools and materials, which shall, by all
means, be effective and efficient, at its own expense, necessary
for the performance" of janitorial services; Galit, who was
employed by SJS, was assigned to petitioner's Pandacan depot as
a janitor; his wages and all employment benefits were paid by
SJS; he was subject to the supervision, discipline and control of
SJS; on November 30, 2004, the extended contract between
petitioner and SJS expired; subsequently, a new contract for
janitorial services was awarded by petitioner to another
independent contractor; petitioner was surprised that Galit filed
an action impleading it; despite several conferences, the parties
were not able to arrive at an amicable settlement.

On October 31, 2006, the Labor Arbiter (LA) assigned to the case
rendered a Decision,[8] the dispositive portion of which reads as
follows:

WHEREFORE, judgment is hereby rendered DISMISSING the

Complaint against respondent Chevron for lack of jurisdiction,
and against respondents SJS and Reynaldo Salomon for lack of
merit. For equity and compassionate consideration, however,
respondent SJS is hereby ordered to pay the complainant a
separation pay at the rate of a half-month salary for every year
of service that the complainant had with respondent SJS.

SO ORDERED.[9]

The LA found that SJS is a legitimate contractor and that it was

Galit's employer, not petitioner. The LA dismissed Galit's
complaint for illegal dismissal against petitioner for lack of
jurisdiction on the ground that there was no employer-employee
relationship between petitioner and Galit. The LA likewise
dismissed the complaint against SJS and Salomon for lack of
merit on the basis of his finding that Galit's employment with SJS
simply expired as a result of the completion of the project for
which he was engaged.

Aggrieved, herein respondent filed an appeal[10] with the NLRC.

On January 31, 2008, the NLRC rendered its Decision[11] and

disposed as follows:

WHEREFORE, premises considered, the decision under review is

hereby, MODIFIED.

Respondent SJS and Sons Construction Corporation is ordered to

pay the complainant, severance compensation, at the rate of one
(1) month salary for every year of service. In all other respects,
the appealed decision so stands as AFFIRMED.

SO ORDERED.[12]

The NLRC affirmed the findings of the LA that SJS was a

legitimate job contractor and that it was Galit's employer.
However,"the NLRC found that Gal it was a regular, and not a
project employee, of SJS, whose employment was effectively
terminated when SJS ceased to operate.

Herein respondent tiled a Motion for Reconsideration,[13] but the

NLRC denied it in its Resolution[14] dated May 27, 2008.
Respondent then filed a petition for certiorari with the CA
assailing the above NLRC Decision and Resolution.

On December 8, 2008, the CA promulgated its assailed Decision,

the dispositive portion of which reads, thus:

WHEREFORE, premises considered, the petition isGRANTED.

The Decision dated January 31, 2008 and the Resolution dated
May 27, 2008 of the NLRC, Second Division in NLRC NCR
[Cast No.] 00-03-02399-06 (CA No. 051468-07) are REVERSED
and SET ASIDE.  Judgment is rendered declaring private
respondent Chevron Phils, guilty of illegal dismissal and ordering
petitioner Galit's reinstatement without loss of seniority rights
and other privileges and payment of his full backwages, inclusive
of allowances and to other benefits or their monetary equivalents
computed from the time compensation was withheld up to the
time of actual reinstatement. Private respondent Chevron Phils, is
also hereby ordered to pay 10% of the amount due petitioner
Galit as attorney's fees.

SO ORDERED.[15]

Contrary to the- findings of the LA and the NLRC, the CA held

that SJS was a labor-only contractor, that petitioner is Galit's
actual employer and that the latter was unjustly dismissed from
his employment.

Herein petitioner filed a motion for reconsideration, but the CA

denied it in its Resolution dated January 20, 2009.

Hence, the present petition for review on certiorari based on the

following grounds:

I.

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS

SERIOUSLY ERRED IN DECLARING THAT THE DISMISSAL OF
RESPONDENT WAS ILLEGAL CONSIDERING THAT:

A. THE FINDINGS OF FACT OF TFIE LABOR ARBITER A QUO AND

THE NATIONAL LABOR RELATIONS  COMMISSION ARE ALREADY
BINDING UPON THE HONORABLE COURT OF APPEALS.
B. THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
THE COMPANY AND RESPONDENT HEREIN.

C. PETITIONER SJS IS A. LEGITIMATE INDEPENDENT

CONTRACTOR.

II.

CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE

RELATIONSHIP BETWEEN THE COMPANY AND RESPONDENT
HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF
REINSTATEMENT, BACKWAGES, AND ATTORNEY'S FEES AGAINST
THE COMPANY HAS NO LEGAL BASIS.[16]

On September 19, 2012, this Court issued a

Resolution[17] directing petitioner to implead SJS as party-
respondent on the ground that it is an indispensable party
without whom no final determination can be had of this case.

In a Motion[18] dated November 21, 2012, petitioner manifested

its compliance with this Court's September 19, 2012 Resolution.
In addition, it prayed that Salomon be also impleaded as party-
respondent

Acting on petitioner's above Motion, this Court issued another

Resolution[19] on June 19, 2013, stating that SJS and Salomon are
impleaded as parties-respondents and are required to comment
on the petition for review on certiorari.

However, despite due notice sent to SJS and Salomon at their last
known addresses, copies of the above Resolution were returned
unserved. Hence, on October 20, 2014, the Court, acting on
Galit's plea for early resolution of the case, promulgated a
Resolution[20] resolving to dispense with the filing by SJS and
Salomon of their respective comments.

The Court will, thus, proceed to resolve the instant petition.

At the outset, the Court notes that the first ground raised by
petitioner consists of factual issues. It is settled that this Court is
not a trier of facts, and this applies with greater force in labor
cases.[21] Corollary thereto, this Court has held in a number of
cases that factual findings of administrative or quasi-judicial
bodies, which are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not
only respect but even finality, and bind the Court when supported
by substantial evidence.[22] However, it is equally settled that
the.foregoing principles admit of certain exceptions, to wit: (1)
the findings are grounded entirely on speculation, surmises or
conjectures; (2) the inference made is manifestly mistaken,
absurd or impossible; (3) there is grave abuse of discretion; (4)
the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) in making its findings, the
Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both appellant and
appellee; (7) the findings are contrary to those of the trial court;
(8) the findings are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the
petition, as well as in petitioners main and reply briefs, are not
disputed by respondent; (10) the findings of fact are premised on
the supposed absence of evidence and contradicted by the
evidence on record; and (11) the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.
[23]
 In the instant case, the Court gives due course to the instant
petition considering that the findings of fact and conclusions of
law of the LA and the NLRC differ from those of the CA.

Thus, the primordial question that confronts the Court is whether

there existed an employer-employee relationship between
petitioner and Galit, and whether the former is liable to the latter
for the termination of his employment. Corollary to this, is the
issue of whether or not SJS is an independent contractor or a
labor only contractor.

To ascertain the existence of an employer-employee relationship,

jurisprudence has invariably adhered to the four-fold test, to wit:
(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power
to control the employee's conduct, or the so-called "control
test."[24] Of these four, the last one is the most important.[25] The
so-called "control test" is commonly regarded as the most crucial
and determinative indicator of the presence or absence of an
employer-employee relationship.[26]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 achieved, but also the manner and means to be
used in reaching that end.[27]

In the instant case, the true nature of Galit's employment is

evident from the Job Contract between petitioner and SJS,
pertinent portions of which are reproduced hereunder:

xxxx

1.1 The CONTRACTOR [SJS] shall provide the following specific

services to the COMPANY [petitioner]:
xxxx

1. Scooping of slop of oil water separator

2. Cleaning of truck parking area/drum storage area and pier

xxxx
4.1 In the fulfillment of its obligations to the COMPANY, the
CONTRACTOR shall select and hire its workers. The CONTRACTOR
alone shall be responsible for the payment of their wages and
other employment benefits and likewise for the safeguarding of
their health and safety in accordance with existing laws- and
regulations. Likewise, the CONTRACTOR shall be responsible for
the discipline and/or dismissal of these workers.

4.2 The CONTRACTOR shall retain the right to control the manner
and the means of performing the work, with the COMPANY having
the control or direction only as to the results to be accomplished.

xxxx

4.4 It is understood that, for the above reasons, these workers

shall be considered as the employees of the CONTRACTOR.
Under no circumstances, shall these workers be deemed directly
or indirectly as the employees of the COMPANY. 

xxxx

5.1 The CONTRACTOR shall maintain efficient and effective

discipline over any and all employees it may utilize in performing
its obligations under this CONTRACT, x x x

5.2 The COMPANY shall in no manner be answerable or

accountable for any incident or injury which may occur to any
worker or personnel of .the CONTRACTOR during the time and
consequent upon the performance of the work and services under
this Agreement, nor for any injury, loss or damage arising from
fault, negligence or carelessness of the CONTRACTOR or anyone
of its workers to any person or persons or to his or their
property; and the CONTRACTOR covenants and agrees to
assume, as it does hereby assume, all liabilities for any such
injury, loss or damage and to make the COMPANY free and
blameless therefrom, x x x

5.3. The CONTRACTOR shall be responsible for any loss or

damage that may be incurred upon the products, properties and
installations of the COMPANY during the effectivity of this
Contract which are due to the unreasonable or negligent act of
the CONTRACTOR, its agents or its workers.

xxxx

6.1 The CONTRACTOR shall at its own expense maintain with a

reputable insurance company, acceptable to the CQMPANY, a
comprehensive liability insurance in the amount required by the
COMPANY to cover claims for bodily injury, death or property
damage caused to any person or persons by an act or omission of
the CONTRACTOR or any of its employees, agents or
representatives.

xxxx

x x x [T]he CONTRACTOR agrees and undertakes:

xxxx

b. To submit satisfactory proof to the COMPANY that it has

registered its personnel/workers assigned to perform the work
and services herein required with the Social Security System,
Medicare and other appropriate agencies for purposes of the
Labor Code as well as other laws, decrees, rules and regulations.
c. To pay the wages or salaries of its personnel/workers as well
as benefits, premia and protection in accordance with the
provisions of the Labor Code and other applicable laws, decrees,
rules and regulations promulgated by competent authority, xxx

d. To assign such number of its employees, upon prior agreement

with the COMPANY, as would be sufficient to fully and effectively
render the work and services herein undertaken, xxx

e. To supply the equipment, tools and materials, which shall, by

all means, be effective and efficient, at its own expense,
necessary for the performance of the services under this
Contract.[28]

The foregoing provisions of the Job Contract between petitioner

and SJS demonstrate that the latter possessed the following
earmarks of an employer, to wit: (1) the power of selection and
engagement of employees, under.Sections 4.1 and 6.1(d); (2)
the payment of wages, under Sections 4.1 and 6.1(c); (3) the
power to discipline and dismiss, under Section 4.1; and, (4) the
power to control the employee's conduct, under Sections 4.1, 4.2,
and 5.1.

As to SJS' power of selection and engagement, Galit himself

admitted in his own affidavit that it was SJS which assigned him
to work at Chevron's Pandacan depot.[29] As such, there
is no question that it was SJS which selected and engaged Galit
as its employee.

With respect to the payment of wages, the Court finds no error in

the findings of the LA that Galit admitted that it was SJS which
paid his wages. While Galit claims that petitioner was the one
which actually paid his wages and that SJS was merely used as a
conduit, Galit failed to present evidence to this effect. Galit,
likewise, failed to present sufficient proof to back up his claim
that it was petitioner, and not SJS, which actually paid his SSS,
Philhealth and Pag-IBIG premiums. On the contrary, it is .unlikely
that SJS would report Galit as its worker, pay his SSS, Philhealth
and Pag-IBIG premiums, as well as his wages, if it were not true
that he was indeed its employee.[30] In the same manner, the
Quitclaim and Release,[31] which was undisputedly signed by Galit,
acknowledging receipt of his separation pay from SJS, is an
indirect admission or recognition of the fact that the latter was
indeed his employer. Again, it would be unlikely for SJS to pay
Galit his separation pay if it is not the latter's employer.

Galit also did not dispute the fact that he was dismissed from
employment by reason of the termination of the service contract
between SJS and petitioner. In other words, it was not petitioner
which ended his employment. He was dismissed therefrom
because petitioner no longer renewed its contract with SJS and
that the latter subsequently ceased to operate.

Anent the power of control, the Court again finds no cogent

reason to depart from the findings of the NLRC that in case of
matters that needed to be addressed with respect to employee
performance, petitioner dealt directly with SJS and not with the
employee concerned. In any event, it is settled that such power
merely calls for the existence of the right to control and not
necessarily the exercise thereof. In the' present case, the Job
Contract between petitioner and SJS clearly provided that SJS
"shall retain the right to control the manner and the means of
performing the work, with [petitioner] having the control or
direction only as to the results to be accomplished."[32]

In addition, it would bear to point out that contrary to the ruling

of the CA, the work performed by Galit, which is the "scooping of
slop of oil water separator,"[33] has no direct relation to
petitioner's business, which is the importation, refining and
manufacture of petroleum products. The Court defers to the
findings of both the LA and the NLRC that the job performed by
Galit, which essentially consists of janitorial services, may be
incidental or desirable to petitioner's main activity but it is not
necessary and directly related to it.

As to whether or not SJS is an independent contractor,

jurisprudence has invariably ruled that an independent contractor
carries on an independent business and undertakes the contract
work on his own account, under his own responsibility, according
to his own manner and method, and 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.
[34]
 This embodies what has long been jurisprudentially recognized
as the control test, as discussed above. In the instant case, SJS
presented evidence to show that it had an independent business
by paying business taxes and fees and that it was registered as
an employer with the Social Security System. Moreover, there
was no evidence to show that SJS and its employees were ever
subject to the control of petitioner. On the contrary, as shown
above, SJS possessed the right to control its employees' manner
and means of performing their work , including herein respondent
Galit.

As to its capital, there is no dispute that SJS generated an income

of P1,523,575.81 for the year 2004.[35] In Neri v. National Labor
Relations Commission,[36] this Court held that a business venture
which had a capitalization of P1,000,000.00 was considered as
highly capitalized and cannot be deemed engaged in labor-only
contracting. In the present case, while SJS' income of more than
P1,500,000.00 was not shown to be equivalent to its authorized
capital stock, such income is an indication of how much capital
was put into its business to generate such amount of revenue.
Thus, the Court finds no sufficient reason to disturb the findings
of the LA and the NLRC that SJS had substantial capital.

WHEREFORE, the instant petition is GRANTED. The assailed

Decision and Resolution of the Court of Appeals, dated December
8, 2008 and January 20, 2009, respectively,
are REVERSED and SET ASIDE. The Decision of the National
Labor Relations Commission, dated January 31, 2008 in NLRC
NCR' [Case No.] 00-03-02399-06 (CA No. 051468-07)
is REINSTATED.

SO ORDERED.

[ G.R. No. 198782, October 19, 2016 ]

ALLAN BAZAR, PETITIONER, VS. CARLOS A. RUIZOL,
RESPONDENT.

DECISION
PEREZ, J.: 

This is a petition for review of the Decision[1] and Resolution[2] of

the Court of Appeals in CA-G.R. SP No. 00937-MIN dated 11
November 2010 and 8 September 2011, respectively.

The antecedent facts follow.

Respondent Carlos A. Ruizol (also identified as Carlos Ruisol in

the Complaint, Labor Arbiter's Decision and in other pleadings)
was a mechanic at Norkis Distributors and assigned at the
Surigao City branch. He was terminated effective 27 March 2002.
At the time of his termination, respondent was receiving a
monthly salary of P2,050.00 and was working from 8:00 a.m. to
5:00 p.m. with a one-hour meal break for six (6) days in a week.
Respondent claimed that petitioner Allan Bazar came from
Tandag branch before he was assigned as a new manager in the
Surigao City branch. Respondent added that he was
dismissed by petitioner because the latter wanted to
appoint his protege as a mechanic. Because of his
predicament, respondent filed a complaint before Regional
Arbitration Branch No. XIII of the National Labor Relations
Commission (NLRC) in Butuan City for illegal dismissal and other
monetary claims. An Amended Complaint was filed on 12 August
2002 changing the name of the petitioner therein from Norkis
Display Center to Norkis Distributors, Inc. (NDI).

Petitioner, on the other hand, alleged that NDI is a corporation

engaged in the sale, wholesale and retail of Yamaha motorcycle
units. Petitioner countered that respondent is not an
employee but a franchised mechanic of NDI pursuant to a
retainership agreement. Petitioner averred that respondent,
being the owner of a motor repair shop, performed repair
warranty service, back repair of Yamaha units, and ordinary
repair at his own shop. Petitioner maintained that NDI
terminated the retainership contract with respondent
because they were no longer satisfied with the latter's
services.

On 8 October 2003,[3] Executive Labor Arbiter Noel Augusto S.

Magbanua ruled in favor of respondent declaring him a regular
employee of NDI and that he was illegally dismissed, to wit:

WHEREFORE, judgment is hereby rendered:

1. Declaring [respondent] a regular employee of [NDI and

petitioner];
2. Declaring [respondent's] dismissal illegal;
3. Ordering [NDI] to pay [respondent] Carlos A. Ruisol the
total amount of TWO HUNDRED THREE THOUSAND FIVE
HUNDRED FIFTY ONE PESOS & 33/100 (P203,551.33)
representing his monetary award computed above.
4. Other claims of [respondent] are dismissed for lack of merit.
[4]

The Labor Arbiter stressed that an employer-employee

relationship existed in this case. He did not give any weight to the
unsworn contract of retainership based on the reason that it is a
clear circumvention of respondent's security of tenure.

On appeal, petitioner reiterated that there is no employer-

employee relationship between NDI and respondent because the
latter is only a retainer mechanic of NDI. Finding merit in the
appeal, the NLRC reversed the ruling of the Labor Arbiter and
dismissed the case for lack of cause of action. The NLRC held that
respondent failed to refute petitioner's allegation that he
personally owns a motor shop offering repair and check-up
services to other customers and that he worked on the units
referred by NDI either at his own motor shop or at NDI's service
shop. The NLRC also ruled that NDI had no power of control and
supervision over the means and method by which respondent
performed job as mechanic. The NLRC concluded that respondent
is bound to adhere to and respect the retainership contract
wherein he declared and acknowledged that he is not an
employee of NDI.

Respondent filed a petition for certiorari before the Court of

Appeals, submitting that the Labor Arbiter's ruling had become
final with respect to NDI because the latter failed to appeal the
same. · Respondent asserted that the NLRC erred in ruling that
there is no employer-employee relationship between the parties.
Respondent also prayed for re'i?statement.
On 11 November 2010, the Court of Appeals:granted the petition.
The Court of Appeals ruled that petitioner had no legal personality
to make the appeal for NDI. The Court of Appeals held that te
labor arbiter's decision with respect to NDI is final. The Court of
Appeals found that there was employer-employee relationship
between respondent and NDI and that respondent was unlawfully
dismissed. Finally, the Court of Appeals awarded respondent
separation pay in lieu of reinstatement.

Petitioner sought reconsideration of the decision but its motion

for reconsideration was denied. Hence, this petition.

Before this Court, petitioner assigns the following alleged errors

committed by the Court of Appeals:

1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

GRANTING THE PETITION FOR CERTIORARI, AND
REVERSING THE "DECISION" AND "RESOLUTION"
(ANNEXES "A" AND "B") OF THE NATIONAL LABOR
RELATIONS COMMISSION - FIFTH DIVISION, CAGAYAN DE
ORO CITY, AS THE SAME ARE NOT IN ACCORDANCE WITH
EXISTING LAWS ANDIOR DECISIONS [PROMULGATED] BY
THE HONORABLE SUPREME COURT.

a. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FAILING TO APPLY THE. DECISION OF THE
HONORABLE SUPREME COURT THAT "JURISDICTION
CANNOT BE ACQUIRED OVER THE DEFENDANT
WITHOUT SERVICE OF SUMMONS, EVEN IF HE KNOWS
OF THE CASE AGAINST HIM, UNLESS HE VOLUNTARILY
SUBMITS TO THE JURISDICTION OF THE COURT BY
APPEARING THEREIN AS THROUGH HIS COUNSEL
FILING THE CORRESPONDING PLEADING IN THE
CASE", PURSUANT TO THE RULING OF THIS
HONORABLE SUPREME COURT IN THE CASE OF
"HABANA VS. VAMENTA, ET AL., L-27091, JUNE 30,
1970."

b. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FAILING TO APPLY THE LEGAL PRINCIPLE THAT "IT
IS BASIC THAT A CORPORATION IS INVESTED BY LAW
WITH A [PERSONALITY] SEPARATE AND DISTINCT
 FROM THOSE OF THE PERSONS COMPOSING IT AS
WELL AS FROM THAT OF ANY OTHER LEGAL ENTITY TO
WHICH IT MAY BE RELATED.", PURSUANT TO THE
RULING OF THE HONORABLE SUPREME COURT IN THE
CASE OF "ELCEE FARMS, INC. VS. NATIONAL LABOR
RELATIONS COMMISSION, 512 SCRA 602."

c. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FAILING TO APPLY THE RULE REGARDING
"DECLARATION AGAINST INTEREST", PURSUANT TO
SECTION 38, RULE 130 ON THE REVISED RULES ON
EVIDENCE.

d. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FAILING TO APPLY THE DECISION OF THE
HONORABLE SUPREME COURT THAT "LD. CARDS
WHERE THE WORDS "EMPLOYEE'S NAME" APPEAR
PRINTED  THEREIN DO NOT PROVE EMPLOYER
EMPLOYEE RELATIONSHIP WHERE SAID I.D. CARDS
ARE ISSUED FOR THE PURPOSE OF ENABLING
CERTAIN "CONTRACTORS" SUCH AS SINGERS AND
BAND PERFORMERS, TO ENTER THE PREMISES OF AN
ESTABLISHMENT", PURSUANT TO THE RULING OF
THIS HONORABLE SUPREME COURT IN THE CASE OF
"TSPIC CORPORATION VS. TSPIC EMPLOYEES UNION
(FFE), 545 SCRA 215."

2. THE HONORABLE COURT OF APPEALS MANIFESTLY

OVERLOOKED CERTAIN RELEVANT AND UNDISPUTED FACTS
THAT, IF PROPERLY CONSIDERED, WOULD JUSTIFY A
DIFFERENT CONCLUSION.

a. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FAILING TO DECLARE THAT "NORKIS
DISTRIBUTORS, INC. IS NOT A PARTY IN THE INSTANT
CASE."

b. THE HONORABLE COURT OF APPEALS GRAVELY

ERRED  IN FAILING TO DECLARE THAT "THE DECISION
OF THE LABOR ARBITER IS NOT BINDING UPON
NORKIS DISTRIBUTORS, INC."
c. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN DECLARING THAT, "WITH RESPECT TO NORKIS
DISTRIBUTORS, INC., THE DECISION OF THE LABOR
ARBITER HAD ALREADY BECOME FINAL", FOR THE
REASON THAT NOJURISDICTION HAD BEEN ACQUIRED
OVER NORKIS DISTRIBUTORS, INC. SINCE THERE
WAS NO PROPER SERVICE OF SUMMONS UPON THE
CORPORATION.

d. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN SETTING ASIDE THE "DECISION" OF THE NATIONAL
LABOR RELATIONS COMMISSION FIFTH DIVISION,
CAGAYAN DE ORO CITY, AND REINSTATING THE
"DECISION" OF THE LABOR ARBITER, AS RESPONDENT
IS NOT AN EMPLOYEE OF NORKIS  DISTRIBUTORS,
INC., BUT ONLY A "RETAINER MECHANIC", JUST LIKE
A RETAINER LAWYER WHO IS NOT AN EMPLOYEE OF
THE LAWYER'S CLIENT.

e. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN DECLARING THE : EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP, SINCE THERE IS AN
ABSENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN NORKIS DISTRIBUTORS, INC. AND
RESPONDENT RUIZOL.

f. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN DISREGARDING THE "MASTERLIST OF ALL
EMPLOYEES" OF NORKIS DISTRIBUTORS, INC. AS
PROOF THAT RESPONDENT RUIZOL IS NOT ITS
EMPLOYEE.

g. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN AFFIRMING THE "DECISION" OF THE LABOR
ARBITER REGARDING THE AWARD OF 10%
ATTORNEY'S  FEES, FOR THE REASON THAT
RESPONDENT WAS, AT THAT TIME, REPRESENTED BY
A PUBLIC LAWYER FROM THE PUBLIC ATTORNEY'S
OFFICE OF BUTUAN CITY.

h. THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN REINSTATING THE "DECISION" OF THE LABOR
ARBITER, WHICH AWARDS BACKWAGES, SALARY
 DIFFERENTIAL, 13TH MONTH PAY, SEPARATION PAY,
SERVICE INCENTIVE LEAVE AND ATTORNEY'S FEES,
AS THERE IS NOEMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN NDI AND RESPONDENT RUIZOL.[5]

Petitioner first raises a question of procedure. Petitioner asserts

that nosummons was served on NDI. Thus, NDI had no reason to
appeal the adverse decision of the Labor Arbiter because
jurisdiction over its person was not acquired by the labor tribunal.
Considering the foregoing, petitioner maintains that he cannot be
made personally liable for the monetary awards because he has a
personality separate and distinct from NDI.

We partly grant the petition.

The NLRC, despite ruling against an employer-employee

relationship had nevertheless upheld the jurisdiction of the Labor
Arbiter over NDI. The NLRC ruled and we agree, thus:

Indeed, NDI was impleaded as respondent in this case as clearly

indicated in the amended complaint filed by [respondent] on
August 12, 2002, contrary to the belief of [NDI and petitioner].
And considering that the summons and other legal processes
issued by the Regional Arbitration Branch a quo were duly served
to [petitioner] in his capacity as branch manager of NDI, the
Labor Arbiter had validly acquired jurisdiction over the juridical
person of NDI.[6]

The Court of Appeals correctly added that the Labor Arbiter's

ruling with respect to NDI has become final and executory for the
latter's failure to appeal within the reglementary period; and that
petitioner had no legal personality to appeal for and/or behalf of
the corporation.

Interestingly, despite vehemently arguing that NDI was not

bound by the ruling because it was not impleaded as respondent
to the complaint, petitioner in the same breath admits even if
impliedly NDI is covered by the ruling, arguing that there cannot
be any illegal dismissal because there is no employer-employee
relationship between NDI and respondent. We are not convinced.
We emphasize at the outset that the existence of an employer
employee relationship is ultimately a question of fact. Only errors
of law are generally reviewed by this Court. Factual findings of
administrative and quasi-judicial agencies specializing in their
respective fields, especially when affirmed by the Court of
Appeals, must be accorded high respect, if not finality.[7] We here
see an exception to the rule on the binding effect on us of the
factual conclusiveness of the quasi-judicial agency. The findings
of the Labor Arbiter are in conflict with that of the NLRC and
Court of Appeals. We can thus look into the factual issues
involved in this case.

The four-fold test used in determining the, existence of employer

employee relationship are: (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. method by which the work is to
be accomplished.[8]

In finding that respondent was an employee of NDI, the Court of

Appeals applied the four-fold test in this wise:

x x x First, the services of [respondent] was indisputably engaged

by the [NDI] without the aid of a third party. Secondly, the fact
that the [respondent] was paid a retainer fee and on a per
diem basis does not altogether negate the existence of an
[employer]-employee relationship. The retainer agreement only
provided the breakdown, of the [respondent's] monthly income.
On a more important note, the [NDI] did not present its payroll,
which it could conveniently do, to disprove the [respondent's]
claim that he was their employee. x x x

Third, the [NDI's] power of dismissal can be [gleaned] from the

termination of the [respondent] although couched under the
guise of the non-renewal of his contract with the company. Also,
the contract alone showed that the [respondent] provided service
to Yamaha motorbikes brought to the NDI service shop in
accordance with the manual of the unit and subject to the
minimum standards set by the company. Also, tool kits were
furnished to the mechanics which they use in repairs and
checking of the units conducted inside or in front of the Norkis
Display Center.[9]
Petitioner argues that respondent was not engaged as an
employee but the parties voluntarily executed a retainership
contract where respondent became NDI's retainer mechanic; that
respondent was paid a retainer's fee similar to that of the
services of lawyers; that the termination of the retainership
contract does not constitute illegal dismissal of the retained
mechanic; and that NDI is only interested in the outcome of
respondent's work. Petitioner further explained that respondent is
free to use his own means and methods by which his work is to
be accomplished and the manual of the Yamaha motorbike unit is
necessary in order to guide respondent in the repairs of the
motorbikes.

At the outset, respondent denied the existence of a retainership

contract. Indeed, the contract presented by NDI was executed by
the latter and a certain Eusequio Adorable. The name "Carlos
Ruizol" was merely added as a retainer/franchised mechanic and
the same was unsigned. Assuming, however, that such a contract
did exist, its provisions should not bind respondent. We agree
with the Labor Arbiter on the following points:

Paragraph 5 and 6 of the unsworned contract of Retainership

between [respondent] and [NDI and petitioner] dated March 1,
1989 states as follows:
"5. That the franchised mechanic, though not an employee of the
NDI agrees to observe and abide by the rules and regulations by
the NDI aims to maintain a good quality and efficient service to
customer.

6.) Franchised mechanic hereby acknowledge that he is not an

employee of NDI, hence, not entitled to Labor Standard benefits.
It bears stressing that the contents of the unsworn Contract of
Retainership is a clear circumvention of the security of tenure
pursuant to Articles 279 and 280 of the Labor Code. The
agreement embodied in the said contract is contrary to law. thus
[respondent] is not bound to comply with the same.[10]

NDI admitted to have engaged the services of respondent,

although under the guise of a retainership agreement. The fact of
engagement does not exclude the power ofNDI to hire respondent
as its employee.
Assuming that respondent signed the retainership agreement, it
is not indicative of his employment status. It is the law that
defines and governs an employment relationship, whose terms
are not restricted by 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 relations generally tips the
scales in favor of the employer, such that the employee is often
scarcely provided real and better options.[11]

Petitioner claims that respondent was receiving 1!2,050.00 as his

monthly retainer's fee as of his termination in March 2002.  This
fee is covered by the term "wages" and defined as remuneration
or earnings, however designated, capable of being expressed in
terms of money, whether· fixed or ascertained on a time, task,
piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract 'of employment for work done or to
be done, or for service rendered or to be rendered.[12] For services
rendered to NDI, respondent received compensation. NDI could
have easily disproved that respondent was its employee by
presenting the manner by which such compensation was paid to
respondent. NDI did not do so.

That NDI had the power to dismiss respondent was clearly

evidenced by the fact that respondent's services were terminated.

The control test is the most crucial and determinative indicator of

the presence or absence of an employer-employee relationship.
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 achieved, but also the
manner and means to be used in reaching that end.[13]

Petitioner asserts that NDI did not exercise the power of control
over respondent because he is free to use his own means and
methods by which his work is to be accomplished. The records
show the contrary. It was shown that respondent had to abide by
the standards sets by NDI in conducting repair work on Yamaha
motorbikes done in NDI's service shop. As a matter of fact, on
allegations that respondent failed to live up to the demands of the
work, he was sent several memoranda[14] by NDI. We agree with
the Labor Arbiter that the presence of control is evident thus:

This Branch agree with the complainants' contention that there

is no contract and that he is a regular employee as shown in
Annexes "2" & "3" respectively of the respondents position paper,
as follows:
"Furthermore, you are directed and advice to religiously follow
orders from your immediate superior x x x
Failure on your part to submit a written explanation will be
construed as a waiver of your right and your case will be decided
based on available information"

The above memo is so worded in a way that it unmistakably show

that it is addressed to the [respondent] who is an employee of
[NDI]. It shows clearly the presence of the element of "control"
by [NDI and petitioner] over [respondent's] manner of work.[15]

Petitioner points out that respondent actually owns a motor repair

shop where he performs repair warranty service and back job
repairs of Yamaha motorcycles for NDI and other clients. This
allegation was unsubstantiated. We cannot give credit to such
claim.

Petitioner argues that the appellate court erred in holding that

respondent is an employee of NDI based on the identification card
issued to him. While it is true that identification cards do not
prove employer employee relationship, the application of the
four-fold test in this case proves that an employer-employee
relationship did exist between respondent and NDI.

Since it was sufficiently established that petitioner is an employee

of NDI, he is entitled to security of tenure. He can only be
dismissed for a just or authorized cause. Petitioner was dismissed
through a letter informing him of termination of contract of
retainership which we construe as a termination notice. For lack
of a just or authorized cause coupled with failure to observe the
twin-notice rule in termination cases, respondent's dismissal is
clearly illegal.

An illegally dismissed employee is entitled to two reliefs:

backwages and reinstatement. The two reliefs provided are
separate and distinct. In instances where reinstatement
is no longer feasible because of strained relations between the
employee and the employer, separation pay is granted. In effect,
an illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement
is nolonger viable, and backwages.[16]

Based on the foregoing, we affirm that NDI is not only liable for
respondent's illegal dismissal, but that the Labor Arbiter's
decision against it had already become final and executory.

We now go to the liability of petitioner for payment of the

monetary award.  There is solidary liability when the obligation
expressly so states, when the law so provides, or when the
nature of the obligation so requires.[17]  Settled is the rule that a
director or officer shall only be personally liable for the obligations
of the corporation, if the following conditions concur: (1) the
complainant alleged in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the
officer was guilty of gross negligence or bad faith; and (2) the
complainant clearly and convincingly proved such unlawful acts,
negligence or bad faith.[18]

In the instant case, there is an allegation that petitioner

dismissed respondent because he wanted to hire his own
mechanic. However, this remained to be an allegation absent
sufficient proof of motive behind respondent's termination.
Petitioner may have directly issued the order to dismiss
respondent but respondent must prove with certainty bad faith on
the part of petitioner. No bad faith can be presumed from the
lone fact that immediately after respondent's termination, a new
mechanic was hired. That the new mechanic was actually
petitioner's protege is a mere allegation with no proof. Therefore,
petitioner, as branch manager, cannot be held solidarily liable
with NDI.

WHEREFORE, the instant Petition is PARTLY GRANTED. The

Decision dated 11 November 2010 and Resolution dated 8
September 2011 of the Court of Appeals in CA-G.R. SP No.
00937-MIN reinstating the Decision of the Labor Arbiter declaring
respondent Carlos Ruizol's dismissal as illegal are AFFIRMED.
Petitioner Allan Bazar is however ABSOLVED from the liability
adjudged against Norkis Distributors, Inc.

SO ORDERED.

FIRST DIVISION
[ G.R. NO. 170087, August 31, 2006 ]
ANGELINA FRANCISCO, PETITIONER, VS. NATIONAL
LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA,
IRENE BALLESTEROS, TRINIDAD LIZA AND RAMON
ESCUETA, RESPONDENTS.

DECISION

YNARES-SANTIAGO, J.: 

This petition for review on certiorari under Rule 45 of the Rules of

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

In 1995, petitioner was hired by Kasei Corporation during its

incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of
the company.[5]

Although she was designated as Corporate Secretary, she was

not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so. She never
prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the company.[6]

In 1996, petitioner was designated Acting Manager. The

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

For five years, petitioner performed the duties of Acting Manager.

As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of
Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes as

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

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a

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

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

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

Private respondents averred that petitioner is not an employee of

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

Petitioner's designation as technical consultant depended solely

upon the will of management. As such, her consultancy may be
terminated any time considering that her services were only
temporary in nature and dependent on the needs of the
corporation.

To prove that petitioner was not an employee of the corporation,

private respondents submitted a list of employees for the years
1999 and 2000 duly received by the BIR showing that petitioner
was not among the employees reported to the BIR, as well as a
list of payees subject to expanded withholding tax which included
petitioner. SSS records were also submitted showing that
petitioner's latest employer was Seiji Corporation.[13]
The Labor Arbiter found that petitioner was illegally dismissed,
thus:
WHEREFORE, premises considered, judgment is hereby rendered
as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant's dismissal as illegal;
3. ordering respondents to reinstate complainant to her former
position without loss of seniority rights and jointly and
severally pay complainant her money claims in accordance
with the following computation:

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

(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei 361,175.00
Corp. from 1996-2001
g. Moral and exemplary damages 100,000.00
h. 10% Attorney's fees 7,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to

pay complainant separation pay with additional backwages that
would accrue up to actual payment of separation pay.

SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with modification the
Decision of the Labor Arbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby
MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay

computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and

10% share in profit in the respective accounts of P100,000.00
and P361,175.00 are deleted;
3) The award of 10% attorney's fees shall be based on salary
differential award only;

4) The awards representing salary differentials, housing

allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision,
thus:
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the National Labor Relations Commissions dated April
15, 2003 is hereby REVERSED and SET ASIDE and a new one is
hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive
dismissal.

SO ORDERED.[16]
The appellate court denied petitioner's motion for reconsideration,
hence, the present recourse.

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

Considering the conflicting findings by the Labor Arbiter and the

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

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction,

there has been no uniform test to determine the existence of an
employer-employee relation. Generally, courts have relied on the
so-called right of control test where the person for whom the
services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching
such end. In addition to the standard of right-of-control, the
existing economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give
a complete picture of the relationship between the parties, owing
to the complexity of such a relationship where several positions
have been held by the worker. There are instances when, aside
from the employer's power to control the employee with respect
to the means and methods by which the work is to be
accomplished, economic realities of the employment relations
help provide a comprehensive analysis of the true classification of
the individual, whether as employee, independent contractor,
corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test

involving: (1) the putative employer's power to control the
employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of

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

The control test initially found application in the case of Viaña v.

Al-Lagadan and Piga,[19] and lately in Leonardo v. Court of
Appeals,[20]where we held that there is an employer-employee
relationship when the person for whom the services are
performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to

consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture
in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic
circumstances of the worker.

Thus, the determination of the relationship between employer

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

The proper standard of economic dependence is whether the

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

By applying the control test, there is no doubt that petitioner is

an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the corporation's
Technical Consultant. She reported for work regularly and served
in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting
and tax services to the company and performing functions
necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses
over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can

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

It is therefore apparent that petitioner is economically dependent

on respondent corporation for her continued employment in the
latter's line of business.

In Domasig v. National Labor Relations Commission,[28] we held

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

We likewise ruled in Flores v. Nuestro[29] that a corporation who

registers its workers with the SSS is proof that the latter were the
former's employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee
relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5,

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

The second affidavit of Kamura dated March 7, 2002 which

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

Granting arguendo, that the second affidavit validly repudiated

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

Based on the foregoing, there can be no other conclusion that

petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation, and
is economically dependent upon respondent for her continued
employment in that line of business. Her main job function
involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged
petitioner for compensation, with the power to dismiss her for
cause. More importantly, respondent corporation had the power
to control petitioner with the means and methods by which the
work is to be accomplished.

The corporation constructively dismissed petitioner when it

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

A diminution of pay is prejudicial to the employee and amounts to

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

In affording full protection to labor, this Court must ensure equal

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

WHEREFORE, the petition is GRANTED. The Decision and

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

SO ORDERED.

Panganiban, C.J., (Chairperson), Austria-Martinez, Callejo,

Sr. and Chico-Nazario, JJ., concur.
 [ G.R. No. 189255, June 17, 2015 ]
JESUS G. REYES,
PETITIONER, VS. GLAUCOMARESEARCH FOUNDATION,
INC., EYE REFERRAL CENTER AND MANUEL B. AGULTO,
RESPONDENTS.

DECISION

PERALTA, J.: 

Before the Court is a petition for review on certiorari seeking to

reverse and set aside the Decision[1] and Resolution[2] of the Court
of Appeals (CA), dated April 20, 2009 and August 25, 2009,
respectively, in CA-G.R. SP No. 104261. The assailed CA Decision
annulled the Decision of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 05-0441-05 and reinstated the
Decision of the Labor Arbiter (LA) in the same case, while the CA
Resolution denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal

filed by petitioner against respondents with the NLRC, National
Capital Region, Quezon City. Petitioner alleged that: on August 1,
2003, he was hired by respondent corporation as administrator of
the latter's Eye Referral Center (ERC); he performed his duties as
administrator and continuously received his monthly salary of
P20,000.00 until the end of January 2005; beginning February
2005, respondent withheld petitioner's salary without notice but
he still continued to report for work; on April 11, 2005, petitioner
wrote a letter to respondent Manuel Agulto (Agulto), who is the
Executive Director of respondent corporation, informing the latter
that he has not been receiving his salaries since February 2005 as
well as his 14th month pay for 2004; petitioner did not receive
any response from Agulto; on April 21, 2005, petitioner was
informed by the Assistant to the Executive Director as well as the
Assistant Administrative Officer, that he is no longer the
Administrator of the ERC; subsequently, petitioner's office was
padlocked and closed without notice; he still continued to report
for work but on April 29, 2005 he was no longer allowed by the
security guard on duty to enter the premises of the ERC.
On their part, respondents contended that: upon petitioner's
representation that he is an expert in corporate organizational
structure and management affairs, they engaged his services as a
consultant or adviser in the formulation of an updated
organizational set-up and employees' manual which is compatible
with their present condition; based on his claim that there is a
need for an administrator for the ERC, he later designated himself
as such on a trial basis; there is no employer-employee
relationship between them because respondents had no control
over petitioner in terms of working hours as he reports for work
at anytime of the day and leaves as he pleases; respondents also
had no control as to the manner in which he performs his alleged
duties as consultant; he became overbearing and his relationship
with the employees and officers of the company soured leading to
the filing of three complaints against him; petitioner was not
dismissed as he was the one who voluntarily severed his relations
with respondents.

On January 20, 2006, the LA assigned to the case rendered a

Decision[3] dismissing petitioner's complaint. The LA held, among
others, that petitioner failed to establish that the elements of an
employer-employee relationship existed between him and
respondents because he was unable to show that he was, in fact,
appointed as administrator of the ERC and received salaries as
such; he also failed to deny that during his stint with
respondents, he was, at the same time, a consultant of various
government agencies such as the Manila International Airport
Authority, Manila Intercontinental Port Authority, Anti-Terrorist
Task Force for Aviation and Air Transportation Sector; his actions
were neither supervised nor controlled by the management of the
ERC; petitioner, likewise, did not observe working hours by
reporting for work and leaving therefrom as he pleased; and, he
was receiving allowances, not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the
LA. The NLRC declared petitioner as respondents' employee, that
he was illegally dismissed and ordered respondents to reinstate
him to his former position without loss of seniority rights and
privileges with full backwages. The NLRC held that the basis upon
which the conclusion of the LA was drawn lacked support; that it
was incumbent for respondents to discharge the burden of
proving that petitioner's dismissal was for cause and effected
after due process was observed; and, that respondents failed to
discharge this burden.[4]

Respondents filed a motion for reconsideration, but it was denied

by the NLRC in its Resolution[5] dated May 30, 2008.

Respondents then filed a Petition for Certiorari[6] with the CA.

In its assailed Decision, the CA annulled and set aside the

judgment of the NLRC and reinstated the Decision of the LA. The
CA held that the LA was correct in ruling that, under the control
test and the economic reality test, no employer-employee
relationship existed between respondents and petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it

in its Resolution dated August 25, 2009.

Hence, the present petition for review on certiorari based on the

following grounds:
I

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS

DISCRETION IN NOT DISMISSING RESPONDENTS' PETITION FOR
CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED
A VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES
ON NOTARIAL PRACTICE.

II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS

DISCRETION IN RULING THAT NO EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND
PETITIONER.[7]
As to the first ground, petitioner contends that respondents'
petition for certiorari filed with the CA should have been
dismissed on the ground that it was improperly verified because
the jurat portion of the verification states only the community tax
certificate number of the affiant as evidence of her identity.
Petitioner argues that under the 2004 Rules on Notarial Practice,
as amended by a Resolution[8] of this Court, dated February 19,
2008, a community tax certificate is not among those considered
as competent evidence of identity.
The Court does not agree.

This Court has already ruled that competent evidence of identity

is not required in cases where the affiant is personally known to
the notary public.[9]

Thus, in Jandoquile v. Revilla, Jr.,[10] this Court held that:

If the notary public knows the affiants personally, he need
not require them to show their valid identification
cards. This rule is supported by the definition of a "jurat" under
Section 6, Rule II of the 2004 Rules on Notarial Practice. A "jurat"
refers to an act in which an individual on a single occasion: (a)
appears in person before the notary public and presents an
instrument or document; (b) is personally known to the notary
public or identified by the notary public through competent
evidence of identity; (c) signs the instrument or document in the
presence of the notary; and (d) takes an oath or affirmation
before the notary public as to such instrument or document.[11]
Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice
provides as follows:
SEC. 2. Prohibitions -

(a) x x x

(b) A person shall not perform a notarial act if the person

involved as signatory to the instrument or document -
(1) is not in the notary's presence personally at the time of the
notarization; and

(2) is not personally known to the notary public or otherwise

identified by the notary public through competent evidence of
identity as defined by these Rules.
Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a

single occasion:
(a) appears in person before the notary public and presents an
instrument or document;

(b) is personally known to the notary public oridentified by the

notary public through competent evidence of identity as defined
by these Rules;

(c) signs the instrument or document in the presence of the

notary; and

(d) takes an oath or affirmation before the notary public as to

such instrument or document.
In legal hermeneutics, "or" is a disjunctive that expresses an
alternative or gives a choice of one among two or more things.
[12]
 The word signifies disassociation and independence of one
thing from another thing in an enumeration.[13]

Thus, as earlier stated, if the affiant is personally known to the

notary public, the latter need not require the former to show
evidence of identity as required under the 2004 Rules on Notarial
Practice, as amended.

Applying the above rule to the instant case, it is undisputed that

the attorney-in-fact of respondents who executed the verification
and certificate against forum shopping, which was attached to
respondents' petition filed with the CA, is personally known to the
notary public before whom the documents were acknowledged.
Both attorney-in-fact and the notary public hold office at
respondents' place of business and the latter is also the legal
counsel of respondents.

In any event, this Court's disquisition in the fairly recent case

of Heirs of Amada Zaulda v. Isaac Zaulda[14] regarding the import
of procedural rules vis-a-vis the substantive rights of the parties,
is instructive, to wit:
[G]ranting, arguendo, that there was non-compliance with the
verification requirement, the rule is that courts should not be so
strict about procedural lapses which do not really impair the
proper administration of justice. After all, the higher objective of
procedural rule is to ensure that the substantive rights of the
parties are protected. Litigations should, as much as possible, be
decided on the merits and not on technicalities. Every party-
litigant must be afforded ample opportunity for the proper and
just determination of his case, free from the unacceptable plea of
technicalities.

In Coca-Cola Bottlers v. De la Cruz, where the verification was

marred only by a glitch in the evidence of the identity of the
affiant, the Court was of the considered view that, in the interest
of justice, the minor defect can be overlooked and should not
defeat the petition.

The reduction in the number of pending cases is laudable, but if it

would be attained by precipitate, if not preposterous, application
of technicalities, justice would not be served. The law abhors
technicalities that impede the cause of justice. The court's
primary duty is to render or dispense justice. "It is a more
prudent course of action for the court to excuse a technical lapse
and afford the parties a review of the case on appeal rather than
dispose of the case on technicality and cause a grave injustice to
the parties, giving a false impression of speedy disposal of cases
while actually resulting in more delay, if not miscarriage of
justice."

What should guide judicial action is the principle that a party-

litigant should be given the fullest opportunity to establish the
merits of his complaint or defense rather than for him to lose life,
liberty, honor, or property on technicalities. The rules of
procedure should be viewed as mere tools designed to facilitate
the attainment of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate rather than
promote substantial justice, must always be eschewed. At this
juncture, the Court reminds all members of the bench and bar of
the admonition in the often-cited case of Alonso v. Villamor:
Lawsuits, unlike duels, are not to be won by a rapier's thrust.
Technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in
technicalities.[15]
Anent the second ground, petitioner insists that, based on
evidence on record, an employer-employee relationship exists
between him and respondents.

The Court is not persuaded.

It is a basic rule of evidence that each party must prove his

affirmative allegation.[16] 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 that
of his opponent.[17] The test for determining on whom the burden
of proof lies is found in the result of an inquiry as to which party
would be successful if no evidence of such matters were given.
[18]
 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.[19] However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.[20] Thus, in filing a complaint before the LA for illegal
dismissal, based on the premise that he was an employee of
respondents, it is incumbent upon petitioner to prove the
employer-employee relationship by substantial evidence.[21]

In regard to the above discussion, the issue of whether or not an

employer-employee relationship existed between petitioner and
respondents is essentially a question of fact.[22] The factors that
determine the issue include who has the power to select the
employee, who pays the employee's wages, who has the power to
dismiss the employee, and who exercises control of the methods
and results by which the work of the employee is accomplished.
[23]
 Although no particular form of evidence is required to prove
the existence of the relationship, and any competent and relevant
evidence to prove the relationship may be admitted, a finding
that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a
reasonable mind might accept as adequate to justify a conclusion.
[24]

Generally, the Court does not review factual questions, primarily

because the Court is not a trier of facts.[25] However, where, like
here, there is a conflict between the factual findings of the LA and
the CA, on one hand, and those of the NLRC, on the other, it
becomes proper for the Court, in the exercise of its 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]

Etched in an unending stream of cases are four standards in

determining the existence of an employer-employee relationship,
namely: (a) the manner of selection and engagement of the
putative employee; (b) the mode of payment of wages; (c) the
presence or absence of power of dismissal; and, (d) the presence
or absence of control of the putative employee's conduct. Most
determinative among these factors is the so-called "control
test."[27]

Indeed, 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.[28] This test 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.[29]

In the present case, petitioner contends that, as evidence of

respondents' supposed control over him, the organizational plans
he has drawn were subject to the approval of respondent
corporation's Board of Trustees. However, the Court agrees with
the disquisition of the CA on this matter, to wit:
[Respondents'] power to approve or reject the organizational
plans drawn by [petitioner] cannot be the control contemplated in
the "control test." It is but logical that one who commissions
another to do a piece of work should have the right to accept or
reject the product. The important factor to consider in the
"control test" is still the element of control over how the work
itself is done, not just the end result thereof.

Well settled is the rule that where a person who works for
another performs his job more or less at his own pleasure, in the
manner he sees fit, not subject to definite hours or conditions of
work, and is compensated according to the result of his efforts
and not the amount thereof, no employer-employee relationship
exists.[30]
What was glaring in the present case is the undisputed fact that
petitioner was never subject to definite working hours. He never
denied that he goes to work and leaves therefrom as he pleases.
[31]
 In fact, on December 1-31, 2004, he went on leave without
seeking approval from the officers of respondent company. On
the contrary, his letter[32]simply informed respondents that he will
be away for a month and even advised them that they have the
option of appointing his replacement during his absence. This
Court has held that there is no employer-employee relationship
where the supposed employee is not subject to a set of rules and
regulations governing the performance of his duties under the
agreement with the company and is not required to report for
work at any time, nor to devote his time exclusively to working
for the company.[33]

In this regard, this Court also agrees with the ruling of the CA
that:
Aside from the control test, the Supreme Court has also used the
economic reality test in determining whether an employer-
employee relationship exists between the parties. Under this test,
the economic realities prevailing within the activity or between
the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate when, as in
this case, there is no written agreement or contract on which to
base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships
for purposes of applying the Labor Code ought to be the economic
dependence of the worker on his employer.

In the instant case, as shown by the resume of [petitioner], he

concurrently held consultancy positions with the Manila
International Airport Authority (from 04 March 2001 to
September 2003 and from 01 November 2004 up to the present)
and the Anti-Terrorist Task Force for Aviation and Air
Transportation Sector (from 16 April 2004 to 30 June 2004)
during his stint with the Eye Referral Center (from 01 August
2003 to 29 April 2005). Accordingly, it cannot be said that the
[petitioner] was wholly dependent on [respondent] company.[34]
In bolstering his contention that there was an employer-employee
relationship, petitioner draws attention to the pay slips he
supposedly received from respondent corporation. However, he
does not dispute the findings of the CA that there are no
deductions for SSS and withholding tax from his compensation,
which are the usual deductions from employees' salaries. Thus,
the alleged pay slips may not be treated as competent evidence
of petitioner's claim that he is respondents' employee.

In addition, the designation of the payments to petitioner as

salaries, is not determinative of the existence of an employer-
employee relationship.[35] Salary is a general term defined as a
remuneration for services given.[36] Evidence of this fact, in the
instant case, was the cash voucher issued in favor of petitioner
where it was stated therein that the amount of P20,000.00 was
given as petitioner's allowance for the month of December 2004,
although it appears from the pay slip that the said amount was
his salary for the same period.

Additional evidence of the fact that petitioner was hired as a

consultant and not as an employee of respondent corporation are
affidavits to this effect which were executed by Roy
Oliveres[37] and Aurea Luz Esteva,[38] who are Medical Records
Custodian and Administrative Officer, respectively, of respondent
corporation. Petitioner insists in its objection of the use of these
affidavits on the ground that they are, essentially, hearsay.
However, this Court has ruled that although the affiants had not
been presented to affirm the contents of their affidavits and be
cross-examined, their affidavits may be given evidentiary value;
the argument that such affidavits were hearsay was not
persuasive.[39]Likewise, this Court ruled that it was not necessary
for the affiants to appear and testify and be cross-examined by
counsel for the adverse party.[40] To require otherwise would be to
negate the rationale and purpose of the summary nature of the
proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence.[41]

These affidavits are corroborated by evidence, as discussed

above, showing that petitioner has no definite working hours and
is not subject to the control of respondents.

Lastly, the Court does not agree with petitioner's insistence that
his being hired as respondent corporation's administrator and his
designation as such in intra-company correspondence proves that
he is an employee of the corporation. The fact alone that
petitioner was designated as an administrator does not
necessarily mean that he is an employee of respondents. Mere
title or designation in a corporation will not, by itself, determine
the existence of an employer-employee relationship.[42] In this
regard, even the identification card which was issued to petitioner
is not an adequate proof of petitioner's claim that he is
respondents' employee. In addition, petitioner's designation as an
administrator neither disproves respondents' contention that he
was engaged only as a consultant.

As a final point, it bears to reiterate that 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.[43] Management
also has its rights which are entitled to respect and enforcement
in the interest of simple fair play.[44] 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.[45] 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.[46]

WHEREFORE, the instant petition is DENIED. The Decision and

Resolution of the Court of Appeals, dated April 20, 2009 and
August 25, 2009, respectively, in CA-G.R. SPNo. 104261,
are AFFIRMED.

SO ORDERED.

Del Castillo,** Villarama, Jr., Reyes, and Jardeleza, JJ., concur.

[ G.R. No. 197899, March 06, 2017 ]

JOAQUIN LU, PETITIONER, V. TIRSO ENOPIA, ROBERTO
ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL
CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR.,
REYNALDO CERNA, PETER CERVANTES, LEONARDO
CONDESTABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ,
EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO
GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO
LANUTAN, JOVENTINO MATOBATO, ALFREDO MONIVA,
VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO
PRUCIA, PONCIANO REANDO, HERMENIO REMEGIO,
DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI,
VICENTE SASTRELLAS, ROMEO SUMAYANG, and
DESIDERIO TABAY, RESPONDENTS. 

DECISION

PERALTA, J.: 
Before us is a petition for review on certiorari filed by
Joaquin Lu which seeks to reverse and set aside the
Decision[1] dated October 22, 2010 and the Resolution[2] dated
May 12, 2011, respectively, of the Court of Appeals issued in CA-
G.R. SP No. 55486-MIN.

The facts of the case, as stated by the Court of Appeals, are as

follows:

Petitioners (now herein respondents) were hired from January 20,

1994 to March 20, 1996 as crew members of the fishing mother
boat F/B MG-28 owned by respondent Joaquin "Jake" Lu (herein
petitioner Lu) who is the sole proprietor of Mommy Gina Tuna
Resources [MGTR] based in General Santos City. Petitioners
and Lu had an income-sharing arrangement wherein 55% goes
to Lu, 45% to the crew members, with an additional 4% as
"backing incentive." They also equally share the expenses for the
maintenance and repair of the mother boat, and for the purchase
of nets, ropes and payaos.

Sometime in August 1997, Lu proposed the signing of a Joint

Venture Fishing Agreement between them, but petitioners refused
to sign the same as they opposed the one-year term provided in
the agreement. According to petitioners, during their dialogue on
August 18, 1997, Lu terminated their services right there and
then because of their refusal to sign the agreement. On the other
hand, Lu alleged that the master fisherman (piado) Ruben Salili
informed him that petitioners still refused to sign the agreement
and have decided to return the vessel F/B MG-28.

On August 25, 1997, petitioners filed their complaint for illegal

dismissal, monetary claims and damages. Despite serious efforts
made by Labor Arbiter (LA) Arturo P. Aponesto, the case was not
amicably settled, except for the following matters: (1) Balansi 8
and 9; (2) 10% piado share; (3) sud-anon refund; and (4) refund
of payment of motorcycle in the amount of P15,000.00. LA
Aponesto further inhibited himself from the case out of
"delicadeza," and the case was raffled to LA Amado M. Solamo.

In their Position Paper, petitioners alleged that their refusal to

sign the Joint Venture Fishing Agreement is not a just cause for
their termination. Petitioners also asked for a refund of the
amount of P8,700,407.70 that was taken out of their 50% income
share for the repair and maintenance of boat as well as the
purchase of fishing materials, as Lushould not benefit from such
deduction.

On the other hand, Lu denied having dismissed petitioners,

claiming that their relationship was one of joint venture where he
provided the vessel and other fishing paraphernalia, while
petitioners, as industrial partners, provided labor by fishing in the
high seas. Lu alleged that there was no employer-employee
relationship as its elements were not present, viz.: it was
the piado who hired petitioners; they were not paid wages but
shares in the catch, which they themselves determine; they were
not subject to his discipline; and respondent had no control over
the day-to-day fishing operations, although they stayed in
contact through respondent's radio operator or checker. Lualso
claimed that petitioners should not be reimbursed for their share
in the expenses since it was their joint venture that shouldered
these expenses.[3]

On June 30, 1998, the LA rendered a Decision[4] dismissing the

case for lack of merit finding that there was no employer-
employee relationship existing between petitioner and the
respondents but a joint venture.

In so ruling, the LA found that: (1) respondents were not hired by

petitioner as the hiring was done by the piado or master
fisherman; (2) the earnings of the fishermen from the labor were
in the form of wages they earned based on their respective
shares; (3) they were never disciplined nor sanctioned by the
petitioner; and, (4) the income-sharing and expense splitting
was no doubt a working set up in the nature of an industrial
partnership. While petitioner issued memos, orders and
directions, however, those who were related more on the aspect
of management and supervision of activities after the actual work
was already done for purposes of order in hauling and sorting of
fishes, and thus, not in the nature of control as to the means and
method by which the actual fishing operations were conducted as
the same was left to the hands of the master fisherman.

The LA also ruled that the checker and the use of radio were for
the purpose of monitoring and supplying the logistics
requirements of the fishermen while in the sea; and that the
checkers were also tasked to monitor the recording of catches
and ensure that the proper sharing system was implemented;
thus, all these did not mean supervision on how, when and where
to fish.

Respondents appealed to the National Labor Relations

Commission (NLRC), which affirmed the LA Decision in its
Resolution[5] dated March 12, 1999. Respondents' motion for
reconsideration was denied in a Resolution[6] dated July 9, 1999.

Respondents filed a petition for certiorari with the CA which

dismissed[7] the same for having been filed beyond the 60-day
reglementary period as provided under Rule 65 of the Rules of
Court, and that the sworn certification of non-forum shopping was
signed only by two (2) of the respondents who had not shown
any authority to sign in behalf of the other respondents. As their
motion for reconsideration was denied, they went to Us via a
petition for certiorari assailing the dismissal which We granted in
a Resolution[8] dated July 31, 2006 and remanded the case to the
CA for further proceedings.

Petitioner filed its Comment to the petition. The parties submitted

their respective memoranda as required by the CA.

On October 22, 2010, the CA rendered its assailed Decision

reversing the NLRC, the decretal portion of which reads as
follows:

WHEREFORE, premises considered, the assailed March 12, 1999

Resolution of public respondent National Labor Relations
Commission (NLRC), Fifth Division, Cagayan de Oro City, is
hereby REVERSED and SET ASIDE, and a new one is entered.

Thus, private respondent Mommy Gina Tuna Resources (MGTR)

thru its sole proprietor/general manager, Joaquin T. Lu (Lu), is
hereby ORDERED to pay each of the petitioners, namely,
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS,
SALVADOR BERNAL, SAMUEL CAHAYAG, ALEJANDRO
CAMPUNGAN, RUPERTO CERNA, JR., REYNALDO CERNA, PETER
CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR,
ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO
FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO,
MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO
MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO
PIALAN, ALFREDO PRUCIA, POCIANO REANDO, HERMENIO
REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR
SALILI, RICHARD SALILI, SAMUEL SALILI, VICENTE SASTRELLAS,
ROMEO SUMAYANG and DESIDERIO TABAY the following:

(1) SEPARATION PAY (in lieu of the supposed reinstatement)

equivalent to one (1) month pay for every year of service
reckoned from the very moment each petitioner was hired as
fishermen-crew member of F/B MG-28 by MGTR until the finality
of this judgment. A fraction of at least six (6) months shall be
considered one (1) whole year. Any fraction below six months
shall be paid pro rata;

(2) FULL BACKWAGES (inclusive of all allowances and other

benefits required by law or their monetary equivalent) computed
from the time they were dismissed from employment on August
18, 1997 until finality of this Judgment;

(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos

(P50,000.00);

(4) ATTORNEY'S FEES equivalent to 10% of the total monetary

award.

Considering that a person's income or earning is his "lifeblood,"

so to speak, i.e., equivalent to life itself, this Decision is
deemed immediately executory pending appeal should MGTR
decide to elevate this case to the Supreme Court.

Let this case be referred back to the Office of the Labor Arbiter
for proper computation of the awards.[9]

The CA found that petitioner exercised control over respondents

based on the following: (1) respondents were the fishermen crew
members of petitioner's fishing vessel, thus, their services to the
latter were so indispensable and necessary that without them,
petitioner's deep-sea fishing industry would not have come to
existence much less fruition; (2) he had control over the entire
fishing operations undertaken by the respondents through the
master fisherman (piado) and the assistant master fisherman
(assistant piado) employed by him; (3) respondents were paid
based on a percentage share of the fish catch did not in any way
affect their regular employment status; and (4) petitioner had
already invested millions of pesos in its deep-sea fishing industry,
hence, it is highly improbable that he had no control over
respondents' fishing operations.

Petitioner's motion for reconsideration was denied by the CA in its

Resolution dated May 12, 2011.

Aggrieved, petitioner filed the instant petition for review

on certiorariciting the following as reasons for granting the same,
to wit:

THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED

DECISION CONTRARY TO LAW AND LOGIC BY CITING THE
ABSENCE OF PROOF OF REQUISITES OF A VALID DISMISSAL AS
BASIS FOR CONCLUDING THAT THE NLRC GRAVELY ABUSED ITS
DISCRETION.

II

THE HONORABLE COURT OF APPEALS EXCEEDED ITS

JURISDICTION BY TREATING RESPONDENTS' PETITION FOR
CERTIORARI UNDER RULE 65 AS AN ORDINARY APPEAL, AND BY
INSISTING ON ITS OWN EVALUATION OF THE EVIDENCE.

III

THE HONORABLE COURT OF APPEALS RENDERED THE DECISION

DATED 22 OCTOBER 2010 CONTRARY TO LAW AND THE
EVIDENCE ON RECORD.

IV

THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE

ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS BY
MAKING ITS ASSAILED DECISION IMMEDIATELY EXECUTORY
PENDING APPEAL IN SPITE OF THE FACT THAT RESPONDENTS
DID NOT ASK FOR IMMEDIATE PAYMENT OF SEPARATION PAY
AND OTHER CLAIMS, AND DESPITE THE CLAIM OF
RESPONDENTS THAT MOST OF THEM ARE CURRENTLY EMPLOYED
IN OTHER DEEP-SEA FISHING COMPANIES.[10]
Petitioner contends that no grave abuse of discretion can be
attributed to the NLRC's finding affirming that of the LA that the
arrangement between petitioner and respondents was a joint
venture partnership; and that the CA, in assuming the role of an
appellate body, had re-examined the facts and re-evaluated the
evidence thereby treating the case as an appeal instead of an
original action for certiorari under Rule 65.

We are not persuaded.

In Prince Transport, Inc. v. Garcia,[11] We held:

The power of the CA to review NLRC decisions via a petition

for certiorari under Rule 65 of the Rules of Court has been settled
as early as this Court's decision in St. Martin Funeral Homes v.
NLRC. In said case, the Court held that the proper vehicle for
such review is a special civil action for certiorariunder Rule 65 of
the said Rules, and that the case should be filed with the CA in
strict observance of the doctrine of hierarchy of courts. Moreover,
it is already settled that under Section 9 of Batas Pambansa Blg.
129, as amended by Republic Act No. 7902, the CA, pursuant to
the exercise of its original jurisdiction over petitions for certiorari,
is specifically given the power to pass upon the evidence, if and
when necessary, to resolve factual issues. Section 9 clearly
states:

xxxx

The Court of Appeals shall have the power to try cases and
conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within
its original and appellate jurisdiction, including the power to grant
and conduct new trials or further proceedings. x x x.

However, equally settled is the rule that factual findings of labor

officials, who are deemed to have acquired expertise in matters
within their jurisdiction, are generally accorded not only respect
but even finality by the courts when supported by substantial
evidence, i.e., the amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.
But these findings are not infallible. When there is a showing that
they were arrived at arbitrarily or in disregard of the evidence on
record, they may be examined by the courts. The CA can grant
the petition for certiorari if it finds that the NLRC, in its assailed
decision or resolution, made a factual finding not supported by
substantial evidence. It is within the jurisdiction of the CA, whose
jurisdiction over labor cases has been expanded to review the
findings of the NLRC.[12]

Here, the LA's factual findings was affirmed by the NLRC,

however, the CA found that the latter's resolution did not critically
examine the facts and rationally assess the evidence on hand,
and thus found that the NLRC gravely abused its discretion when
it sustained the LA's decision dismissing respondents' complaint
for illegal dismissal on the ground of lack of merit. The judicial
function of the CA in the exercise of its certiorari jurisdiction over
the NLRC extends to the careful review of the NLRC's evaluation
of the evidence because the factual findings of the NLRC are
accorded great respect and finality only when they rest on
substantial evidence.[13] Accordingly, the CA is not to be
restrained from revising or correcting such factual findings
whenever warranted by the circumstances simply because the
NLRC is not infallible. Indeed, to deny to the CA this power is to
diminish its corrective jurisdiction through the writ of certiorari.[14]

The main issue for resolution is whether or not an employer-

employee relationship existed between petitioner and
respondents.

At the outset, We reiterate the doctrine that the existence of an

employer-employee relationship is ultimately a question of fact.
Generally, We do not review errors that raise factual questions.
However, when there is a 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. In dealing with
factual issues in labor cases, substantial evidence or that amount
of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion is sufficient. [15]

In determining the existence of an employer-employee

relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the power to
control the worker's conduct; (3) the payment of wages by
whatever means; and (4) the power of dismissal.[16] We find all
these elements present in this case.

It is settled that no particular form of evidence is required to

prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted.[17]

In this case, petitioner contends that it was the piado who hired

respondents, however, it was shown by the latter's evidence that
the employer stated in their Social Security System (SSS) online
inquiry system printouts was MGTR, which is owned by petitioner.
We have gone over these printouts and found that the date of the
SSS remitted contributions coincided with the date of
respondents' employment with petitioner. Petitioner failed to
rebut such evidence. Thus, the fact that petitioner had registered
the respondents with SSS is proof that they were indeed his
employees. The coverage of the Social Security Law is predicated
on the existence of an employer-employee relationship.[18]

Moreover, the records show that the 4% backing incentive fee

which was divided among the fishermen engaged in the fishing
operations approved by petitioner was paid to respondents after
deducting the latter's respective vale or cash advance.[19] Notably,
even the piado'sname was written in the backing incentive fee
sheet with the corresponding vale which was deducted from his
incentive fee. If indeed a joint venture was agreed upon between
petitioner and respondents, why would these fishermen obtain
vale or cash advance from petitioner and not from the piado who
allegedly hired and had control over them.

It was established that petitioner exercised control over

respondents. It should be remembered that the control test
merely calls for the existence of the right to control, and not
necessarily the exercise thereof. It is not essential that the
employer actually supervises the performance of duties by the
employee. It is enough that the former has a right to wield the
power.[20]

Petitioner admitted in his pleadings that he had contact with

respondents at sea via the former's radio operator and their
checker. He claimed that the use of the radio was only for the
purpose of receiving requisitions for the needs of the fishermen in
the high seas and to receive reports of fish catch so that they can
then send service boats to haul the same. However, such
communication would establish that he was constantly monitoring
or checking the progress of respondents' fishing operations
throughout the duration thereof, which showed their control and
supervision over respondents' activities. Consequently, We give
more credence to respondents' allegations in their petition filed
with the CA on how such control was exercised, to wit:

The private respondent (petitioner) controls the entire fishing

operations. For each mother fishing boat, private respondent
assigned a master fisherman (piado) and assistant master
fisherman (assistant piado), who every now and then supervise
the fishing operations. Private respondent also assigned a checker
and assistant checker based on the office to monitor and contact
every now and then the crew at sea through radio. The checker
and assistant checker advised then the private respondent of the
condition. Based on the report of the checker, the private
respondent, through radio, will then instruct the "piado" how to
conduct the fishing operations.[21]

Such allegations are more in consonance with the fact that, as

the CA found, MGTR had already invested millions of pesos in its
deep-sea fishing industry.

The payment of respondents' wages based on the percentage

share of the fish catch would not be sufficient to negate the
employer-employee relationship existing between them. As held
in Ruga v. NLRC:[22]

x x x [I]t must be noted that petitioners received compensation

on a percentage commission based on the gross sale of the fish-
catch, i.e., 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing
trip, otherwise, only 10% of the proceeds of the sale. Such
compensation falls within the scope and meaning of the term
"wage" as defined under Article 97(f) of the Labor Code, thus:

(f) "Wage" paid to any employee shall mean the remuneration or

earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered, and included
the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee. x x x[23]

Petitioner wielded the power of dismissal over respondents when

he dismissed them after they refused to sign the joint fishing
venture agreement.

The primary standard for determining regular employment is the

reasonable connection between the particular activity performed
by the employee in relation to the usual trade or business of the
employer.[24]Respondents' jobs as fishermen-crew members of
F/B MG 28 were directly related and necessary to petitioner's
deep-sea fishing business and they had been performing their job
for more than one year. We quote with approval what the CA
said, to wit:

Indeed, it is not difficult to see the direct linkage or causal

connection between the nature of petitioners' (now respondents)
work visa-vis MGTR's line of business. In fact, MGTR's line of
business could not possibly exist, let alone flourish without people
like the fishermen crew members of its fishing vessels who
actually undertook the fishing activities in the high seas.
Petitioners' services to MGTR are so indispensable and necessary
that without them MGTR's deep-sea fishing industry would not
have come to existence, much less fruition. Thus, We do not see
any reason why the ruling of the Supreme Court in Ruga v.
National Labor Relations Commission should not apply squarely to
the instant case, viz.:

x x x The hiring of petitioners to perform work which is necessary

or desirable in the usual business or trade of private respondent x
x x [qualifies] them as regular employees within the meaning of
Article 280[25] of the Labor Code as they were indeed engaged to
perform activities usually necessary or desirable in the usual
fishing business or occupation of private respondent.[26]

As respondents were petitioner's regular employees, they are

entitled to security of tenure under Section 3,[27] Article XIII of the
1987 Constitution. It is also provided under Article 279 of the
Labor Code, that the right to security of tenure guarantees the
right of employees to continue in their employment absent a just
or authorized cause for termination. Considering that respondents
were petitioner's regular employees, the latter's act of asking
them to sign the joint fishing venture agreement which provides
that the venture shall be for a period of one year from the date of
the agreement, subject to renewal upon mutual agreement of the
parties, and may be pre-terminated by any of the parties before
the expiration of the one-year period, is violative of the former's
security of tenure. And respondents' termination based on their
refusal to sign the same, not being shown to be one of those just
causes for termination under Article 282,[28] is, therefore, illegal.

An employee who is unjustly dismissed from work shall be

entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time
of his actual reinstatement.[29]

Respondents who were unjustly dismissed from work are entitled

to reinstatement and backwages, among others. However, We
agree with the CA that since most (if not all) of the respondents
are already employed in different deep-sea fishing companies,
and considering the strained relations between MGTR and the
respondents, reinstatement is no longer viable. Thus, the CA
correctly ordered the payment to each respondent his separation
pay equivalent to one month for every year of service reckoned
from the time he was hired as fishermen-crew member of F/B
MG-28 by MGTR until the finality of this judgment.

The CA correctly found that respondents are entitled to the

payment of backwages from the time they were dismissed until
the finality of this decision.

The CA's award of exemplary damages to each respondent is

likewise affirmed. Exemplary damages are granted by way of
example or correction for the public good if the employer acted in
a wanton, fraudulent, reckless, oppressive or malevolent
manners.[30]

We also agree with the CA that respondents are entitled to

attorney's fees in the amount of 10% of the total monetary
award. It is settled that where an employee was forced to litigate
and, thus, incur expenses to protect his rights and interest, the
award of attorney's fees is legally and morally justifiable.[31]

The legal interest shall be imposed on the monetary awards

herein granted at the rate of six percent (6%) per annum from
the finality of this judgment until fully paid.[32]

Petitioner's contention that there is no justification to incorporate

in the CA decision the immediate execution pending appeal of its
decision is not persuasive. The petition for certiorari filed with the
CA contained a general prayer for such other relief and remedies
just and equitable under the premises. And this general prayer is
broad enough to justify extension of a remedy different from or
together with the specific remedy sought.[33] Indeed, a court may
grant relief to a party, even if the party awarded did not pray for
it in his pleadings.[34]

WHEREFORE, the petition for review on certiorari is DENIED.

The Decision dated October 22, 2010 and the Resolution dated
May 12, 2011 of the Court of Appeals in CA-G.R. SP No. 55486-
MIN are hereby AFFIRMED. The monetary awards which are
herein granted shall earn legal interest at the rate of six percent
(6%) per annum from the date of the finality of this Decision until
fully paid.

SO ORDERED.

[ G.R. No. 221241, September 14, 2016 ]

MARIO N. FELICILDA, PETITIONER, VS. MANCHESTEVE H.
UY, RESPONDENT.

DECISION

PERLAS-BERNABE, J.: 

Assailed in this petition for review on certiorari[1] are the

Decision[2]dated July 10, 2015 and the Resolution[3] dated October
21, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 129784,
which set aside the Decision[4] dated November 16, 2012 and the
Resolution[5] dated February 28, 2013 of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 08-002277-12 /
NLRC NCR Case No. 12-18409-11 and, instead, dismissed Mario
N. Felicilda's (petitioner) complaint for illegal dismissal with
money claims for lack of merit.

The Facts

Petitioner alleged that on October 29, 2010, respondent

Manchesteve H. Uy (respondent) hired him as a truck driver for
the latter's trucking service under the business name "Gold Pillars
Trucking"[6] (GPT). In connection, therewith, petitioner was issued
a company identification card (ID), assigned in one of GPT's
branches in Manila, and paid on a percentage basis.[7] On
December 9, 2011, petitioner took a nap at the work station
while waiting for his truck to be loaded with cargoes, all of which
were delivered to respondent's clients on schedule. The next day,
or on December 10, 2011, respondent's helper told petitioner that
his employment was already terminated due to his act of sleeping
while on the job.[8] Claiming that he was dismissed without just
cause and due process, and that his act of taking a nap did not
prejudice respondent's business, petitioner filed a complaint[9] for
illegal dismissal with money claims against respondent, before
the NLRC, docketed as NLRC NCR Case No. 12-18409-11.[10]

In his defense,[11] respondent denied the existence of an

employer-employee relationship between him and petitioner,
considering that petitioner was: (a) paid merely on a per trip
"percentage" basis and was not required to regularly report for
work; (b) free to offer his services to other companies; and (c)
not under respondent's control with respect to the means and
methods by which he performed his job as a truck driver.
Respondent added that petitioner's company ID did not indicate
that the latter was his employee, but only served the purpose of
informing the GPT's clients that petitioner was one of
respondent's authorized drivers. Finally, respondent averred that
it nolonger engaged petitioner's services due to the latter's
"serious transgressions and misconduct."[12]

The Labor Arbiter's Ruling

In a Decision[13] dated June 29, 2012, the Labor Arbiter (LA) ruled

in petitioner's favor and, accordingly, ordered respondent to pay
the aggregate sum of P80,145.52 representing his backwages
and separation pay.[14]

Finding that petitioner's service as truck driver was indispensable

to respondent's business operations, the LA concluded that
petitioner was respondent's regular employee and, thus, may
only be dismissed for just or authorized cause and with due
process. Absent any showing of a clear and valid cause to
terminate petitioner's employment, respondent was, therefore,
guilty of illegal dismissal.[15]

Aggrieved, respondent appealed[16] to the NLRC, docketed as

NLRC LAC No. 08-002277-12.

The NLRC Ruling

In a Decision[17] dated November 16, 2012, the NLRC affirmed the

LA ruling. It ruled that an employer-employee relationship existed
between the parties, considering that: (a) respondent engaged
petitioner's services without the aid of a third party or a
manpower agency; (b) the payment of wages on a percentage
basis did not negate such existence; (c) respondent's power to
dismiss petitioner was inherent in his selection and engagement
of the latter as truck driver; and (d) respondent exercised control
and supervision over petitioner's work as shown in the former's
determination of the latter's delivery areas and schedules.
[18]
 Considering that respondent failed to show a lawful cause for
petitioner's dismissal, the NLRC sustained the order of payment
of monetary awards in petitioner's favor.[19]

Respondent moved for reconsideration,[20] but was denied in a

Resolution[21] dated February 28, 2013. Undaunted, respondent
filed a petition for certiorari[22] before the CA.

The CA Ruling

In a Decision[23] dated July 10, 2015, the CA set aside the NLRC

ruling and, instead, dismissed petitioner's complaint for illegal
dismissal with money claims for lack of merit.[24] Contrary to the
findings of the LA and the NLRC, the CA held that the elements of
payment of wages and control in determining an employer-
employee relationship were absent, considering that petitioner
was not paid wages, but commissions only, which amounts varied
depending on the kind of cargo, length of trip, and fuel
consumption. The CA observed that there was no evidence to
show that respondent exercised control over the means and
methods by which petitioner was to perform his duties. Further,
petitioner failed to refute the claims that: (a) the payment of his
commission was dependent on his efficiency, discipline, and
industry, which factors were beyond respondent's control; (b) he
was not required to regularly report for work and may make
himself available to other companies; and (c) the company ID
was merely issued to him for the purpose of apprising
respondent's clients that he was the authorized driver.[25]

Petitioner moved for reconsideration,[26] but was denied in a

Resolution[27] dated October 21, 2015; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA
correctly ascribed grave abuse of discretion on the part of the
NLRC in ruling that no employer-employee relationship existed
between petitioner and respondent and, thus, the latter could not
have illegally dismissed the former.

The Court's Ruling

The petition is impressed with merit.

At the outset, it should be mentioned that the jurisdiction of the

Supreme Court in cases brought before it from the CA via Rule 45
of the Rules of Court is generally limited to reviewing errors of
law and does not extend to a re-evaluation of the sufficiency of
evidence upon which the courts a quo had based its
determination. This rule, however, is not ironclad and a departure
therefrom may be warranted where the findings of fact of the LA
and the NLRC, on the one hand, and the CA, on the other, are
contradictory, as in this case. There is therefore a need to review
the records to determine whether the CA, in the exercise of
its certiorari jurisdiction, erred in finding grave abuse of discretion
on the part of the NLRC in ruling that respondent was not illegally
dismissed.[28]

To justify the grant of the extraordinary remedy of certiorari,

petitioner must satisfactorily show that the court or quasi-judicial
authority gravely abused the discretion conferred upon it. Grave
abuse of discretion connotes a capricious and whimsical exercise
of judgment, done in a despotic manner by reason of passion or
personal hostility, the character of which being so patent and
gross as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined by or to act at all in
contemplation of law.[29]

In labor disputes, grave abuse of discretion may be ascribed to

the NLRC when, inter alia, its findings and conclusions are not
supported by substantial evidence, or that amount of relevant
evidence which a reasonable mind might accept as adequate to
justify a conclusion.[30]

Guided by the foregoing considerations, the Court finds that the

CA committed reversible error in granting
respondent's certiorari petition since the NLRC did not gravely
abuse its discretion in ruling that petitioner was respondent's
regular employee and, hence, was illegally dismissed by the
latter. In this case, respondent disclaims any liability for illegal
dismissal, considering that, in the first place, no employer-
employee relationship existed between him and petitioner.

To ascertain the existence of an employer-employee relationship,

jurisprudence has invariably adhered to the four-fold test, to wit:
(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power
to control the employee's conduct, or the so-called "control
test."[31] Verily, 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.[32] It must, however, be stressed that the
"control test" merely calls for the existence of the right to control,
and not necessarily the exercise thereof. To be clear, the test
does not require that the employer actually supervises the
performance of duties by the employee.[33]

Contrary to respondent's submission, which was upheld by the

CA, the Court agrees with the labor tribunals that all the four (4)
elements are present in this case:
First. It is undisputed that respondent hired petitioner to work as
a truck driver for his private enterprise, GPT.

Second. Petitioner received compensation from respondent for

the services he rendered. Contrary to the findings of the CA,
while the wages paid was determined on a "per trip" or
commission basis, it has been constantly ruled that such does not
negate employment relationship.[34] Article 97 (f) of the Labor
Code broadly defines the term "wage" as "the remuneration or
earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered x x
x."[35] That petitioner was paid on a "per trip" or commission basis
is insignificant as this is merely a method of computing
compensation and not a basis for determining the existence or
absence of an employer-employee relationship.[36]

Third. Respondent's power to dismiss was inherent in the

selection and engagement of petitioner as truck driver.

Fourth. The presence of the element of control, which is the most

important element to determine the existence or absence of
employment relationship, can be safely deduced from the fact
that: (a) respondent owned the trucks that were assigned to
petitioner; (b) the cargoes loaded in the said trucks were
exclusively for respondent's clients; and (c) the schedule and
route to be followed by petitioner were exclusively determined by
respondent. The latter's claim that petitioner was permitted to
render service to other companies was not substantiated and
there was no showing that he indeed worked as truck driver for
other companies. Given all these considerations, while petitioner
was free to carry out his duties as truck driver, it cannot be
pretended that respondent, nonetheless, exercised control over
the means and methods by which the former was to accomplish
his work. To reiterate, the power of control refers merely to the
existence of the power. 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,[37] as
in this case.

Having established that an employer-employee relationship exists

between the parties, it is now incumbent for the Court to
determine whether or not respondent validly terminated
petitioner's employment.

For a dismissal to be valid, the rule is that the employer must

comply with both the substantive and procedural due process
requirements. Substantive due process requires that the
dismissal must be pursuant to either a just or an authorized
cause under Articles 297, 298, and 299 (formerly Articles 282,
283 or 284)[38] of the Labor Code, as amended.[39]

Procedural due process, on the other hand, mandates that the

employer must observe the twin requirements of notice and
hearing before a dismissal can be effected.[40]

In this case, suffice it to say that aside from respondent's

averment that petitioner committed "serious transgressions and
misconduct" resulting in the former's loss of trust and
confidence, no other evidence was shown to substantiate the
same. Such averment should be properly deemed as a self
serving assertion that deserves no weight in law.[41]Neither was
petitioner accorded procedural due process as he was merely
informed by respondent's helper that he was already terminated
from his job. Clearly, respondent illegally dismissed petitioner,
and as such, the latter is entitled to backwages and separation
pay in lieu of reinstatement, as correctly ruled by the labor
tribunals.

WHEREFORE, the petition is GRANTED. The Decision dated July

10, 2015 and the Resolution dated October 21, 2015 of the Court
of Appeals in CA-G.R. SP No. 129784 are
hereby REVERSED and SET ASIDE. The Decision dated
November 16, 2012 and the Resolution dated February 28, 2013
of the National Labor Relations Commission in NLRC LAC No. 08-
002277-12 / NLRC NCR Case No. 12-18409-11
are REINSTATED.

SO ORDERED.
Sereno, C. J., Leonardo-De Castro, and Caguioa, JJ., concur.
Bersamin, J., on official leave.

[ G.R. No. 194137, June 21, 2017 ]

AMBASSADOR HOTEL, INC., PETITIONER, VS. SOCIAL
SECURITY SYSTEM, RESPONDENT.

DECISION

MENDOZA, J.: 

This is a petition for review on certiorari seeking to reverse and

set aside the July 29, 2010 Decision[1] and October 18, 2010
Resolution[2]of the Court Appeals (CA) in CA-G.R. CV No. 87948,
which affirmed in toto the December 20, 2005 Decision[3] of the
Regional Trial Court, Branch 218, Quezon City (RTC) in Criminal
Case No. Q-04-125458, a case for nonpayment of Social Security
System (SSS) contributions.

Sometime in September 2001, the SSS filed a complaint with the

City Prosecutor's Office of Quezon City against Ambassador Hotel,
Inc. (Ambassador Hotel) and its officers for non-remittance of
SSS contributions and penalty liabilities for the period from June
1999 to March 2001 in the aggregate amount of P769,575.48.

After preliminary investigation, the City Prosecutor's Office filed

an Information,[4] dated January 28, 2004, before the RTC
charging Ambassador Hotel, Inc.'s Yolanda Chan (Yolanda), as
President and Chairman of the Board; and Alvin Louie Rivera, as
Treasurer and Head of the Finance Department, with violation of
Section 22(a), in relation to Section 22(d) and Section 28(e) of
Republic Act (R.A.) No. 1161, as amended by R.A. No. 8282. Only
Yolanda was arrested. Upon arraignment, she pleaded not guilty.
Thereafter, trial ensued.

Evidence of the Prosecution

The prosecution presented Maria Rezell C. De Ocampo (De

Ocampo), Accounts Officer of SSS and Simeon Nicolas Chan
(Simeon), former President of Ambassador Hotel. Their combined
testimonies tended to establish the following:

De Ocampo was assigned to investigate the account of

Ambassador Hotel. In the course of her investigation, she
discovered that the hotel was delinquent in its payment of
contributions for the period from June 1999 to March 2001, as an
examination of the hotel's records revealed that its last payment
was made in May 1999. Thereafter, De Ocampo prepared a
delinquency assessment and a billing letter for Ambassador Hotel.
On April 17, 2001, she visited Ambassador Hotel, where a certain
Guillermo Ciriaco (Ciriaco) assisted her. De Ocampo then
informed Ciriaco of the hotel's delinquency. She showed him the
assessment, billing letter, and letter of authority. De Ocampo also
requested for the records of previous SSS payments, but the
same could not be produced. Thus, she told Ciriaco that
Ambassador Hotel had to comply with the said request within
fifteen (15) days.

De Ocampo referred the matter to their Cluster Legal Unit. On

May 23, 2001, she prepared an investigation report stating that
Ambassador Hotel failed to present the required reports and to
fully pay their outstanding delinquency. In turn, the Cluster Legal
Unit issued a final demand letter to Ambassador Hotel. De
Ocampo sent the final demand letter to Ambassador Hotel via
registered mail. She also returned to the hotel to personally serve
the said letter, which was received by Norman Cordon, Chief
Operating Officer of Ambassador Hotel.

On July 4, 2001, Pilar Barzanilla of Ambassador Hotel went to the

SSS office and submitted a list of unpaid contributions from June
1999 to March 2001. On September 14, 2001, De Ocampo went
back to the hotel to seek compliance with the demand letter. The
representatives of the hotel requested that the delinquency be
settled by installment. They also submitted a collection list, the
audited financial settlement and the request of installment to the
SSS. Ambassador Hotel, however, did not tender any postdated
checks for the installment payments.

De Ocampo concluded that based on the actual assessment and

documents submitted, the unpaid contributions of Ambassador
Hotel from June 1999 to March 2001 amounted to P303,459.00.
Further, as of January 2, 2005, the hotel is liable for penalties in
the amount of P531,341.44.

On the other hand, Simeon testified that he was the President of

Ambassador Hotel from 1971 until he was replaced in 1998; and
that on April 25, 1998, her daughter, Yolanda, became the
President of the hotel pursuant to Board Resolution No. 7, series
of 1998.[5]

Evidence of the Defense

The defense presented the following witnesses: Yolanda,

President and Chairman of the Board of Ambassador Hotel; Atty.
Laurenao Galon (Atty. Galon), lawyer of Ambassador Hotel;
Michael Paragas, Sheriff of RTC Branch 46; and Norman D.
Cordon (Cordon), Chief Operating Officer of Ambassador Hotel.
Their testimonies are summarized, to wit:

Yolanda was elected as President of Ambassador Hotel on April

25, 1998. Simeon, however, prevented her from assuming her
office and performing her functions as President. Consequently,
she filed a case for grave coercion and grave threats against
Simeon and his allies. On the other hand, Simeon filed a case for
injunction, damages and declaration of nullity of the corporate
meeting, which elected Yolanda as President. The case was
raffled to RTC Branch 46, which ruled in her favor. Pursuant to
the Order, dated April 10, 2001 of RTC Branch 46, she assumed
the position of President of the hotel without any impediment.

Accordingly, Yolanda argued that because she was not performing

the functions as the President of Ambassador Hotel from April 25,
1998 until April 10, 2001, she could not be held criminally liable
for the non-payment of SSS contributions from June 1999 to
March 2001.

Further, Cordon testified that the SSS indeed conducted an

investigation as to their non-remittance of contributions. He
attempted to locate the records regarding their SSS
contributions, but could not find any. Cordon also communicated
with the SSS, but it failed to respond and instead filed the
present case against them.
The RTC Ruling

In its December 20, 2005 Decision, the RTC held that Yolanda
could not be held criminally liable for the non-payment of SSS
contributions because she was not performing the duties of the
hotel's president from June 1999 to March 2001. It opined that
Yolanda could not be considered as the managing head of the
hotel within the purview of Section 28(f) of R.A. No. 8282; thus,
she was not criminally accountable. The RTC, however, ruled that
the acquittal of Yolanda did not absolve Ambassador Hotel from
its civil liabilities. Thus, it concluded that Ambassador Hotel must
pay SSS in the amount of P584,804.00 as contributions for SSS
Medicare and Employee Compensation, including 3% penalties
thereon.

Aggrieved, Ambassador Hotel filed an appeal insofar as the civil

liability is concerned. It alleged that the RTC did not acquire
jurisdiction over its person because it was not a party in the said
case.

The CA Ruling

In its assailed decision, dated July 29, 2010, the CA affirmed in

toto the RTC ruling. It held that the payment of SSS contributions
is mandatory and its non-payment results in criminal prosecution.
The appellate court stated that every criminal liability carries with
it civil liability. As Ambassador Hotel neither waived nor reserved
its right to institute a separate civil case, it was deemed instituted
in the criminal case. The CA opined that the acquittal of Yolanda
did not extinguish the civil action against Ambassador Hotel as
the RTC did not declare that the fact from which the civil liability
might arise did not exist. Moreover, it underscored that
Ambassador Hotel was not deprived of due process as its
directors and officers were informed numerous times regarding its
delinquency and the pending case filed against it. The CA
concluded that Ambassador Hotel was given every opportunity to
contest its obligation with the SSS yet it did nothing.

Ambassador Hotel moved for reconsideration, but its motion was

denied by the CA in its assailed resolution, dated October 18,
2010.
Hence, this petition.
ISSUES

WHETHER OR NOT THE LOWER COURT ACQUIRED

JURISDICTION OVER THE PERSON OF THE PETITIONER.

II

WHETHER OR NOT PETITIONER WAS DEPRIVED OF DUE

PROCESS WHEN THE LOWER COURT DECLARED IT LIABLE
TO RESPONDENT SSS EVEN THOUGH IT IS NOT A PARTY TO
THE CASE.

III

WHETHER OR NOT THE DECISION RENDERED BY THE

LOWER COURT DECLARING PETITIONER LIABLE TO
RESPONDENT SOCIAL SECURITY SYSTEM FOR ALLEGED
UNREMITTED SSS CONTRIBUTION IS VALID.[6]
In its Memorandum,[7] Ambassador Hotel argued that it has a
separate and distinct personality from its officers such as
Yolanda; that it was neither a party to the criminal case nor was
summons issued against it, hence, the RTC did not acquire
jurisdiction over it; that it was deprived due process when the
RTC ruled that it was civilly liable for the unpaid SSS
contributions even though the trial court had no jurisdiction over
its person; and that the RTC had no right to render an adverse
decision against it because it was not a party in the criminal
action.

In its Memorandum,[8] the SSS countered that under R.A. No.

8282, employers, including juridical entities, that violate their
obligation to remit the SSS contributions shall be criminally liable
and that in cases of corporations, it is the managing head that
shall be the one criminally responsible. It argued that since
Yolanda, as President of Ambassador Hotel, was properly
arrested, the RTC acquired jurisdiction over it. The SSS added
that the acquittal of Yolanda did not extinguish the civil liability of
the hotel because it was deemed instituted in the criminal action.
Further, it highlighted that Ambassador Hotel was given sufficient
notice of its delinquency and the pending case against it.

The Court's Ruling

The petition is bereft of merit.

The Social Security System is a government agency imbued with

a salutary purpose to carry out the policy of the State to
establish, develop, promote and perfect a sound and viable tax-
exempt social security system suitable to the needs of the people
throughout the Philippines which shall promote social justice and
provide meaningful protection to members and their beneficiaries
against the hazards of disability, sickness, maternity, old-age,
death and other contingencies resulting in loss of income or
financial burden.[9]

The soundness and viability of the funds of the SSS in turn

depend on the contributions of its covered employee and
employer members, which it invests in order to deliver the basic
social benefits and privileges to its members. The entitlement to
and amount of benefits and privileges of the covered members
are contribution-based. Both the soundness and viability of the
funds of the SSS as well as the entitlement and amount of
benefits and privileges of its members are adversely affected to a
great extent by the non-remittance of the much-needed
contributions.[10]

Ambassador Hotel is obligated to remit SSS contributions

Under Section 8(c) of R.A. No. 8282, an employer is defined as

"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." Ambassador Hotel, as a
juridical entity, is still bound by the provisions of R.A. No. 8282.
Section 22 (a) thereof states:
Remittance of Contributions, (a) The contributions imposed in the
preceding section shall be remitted to the SSS within the first ten
(10) days of each calendar month following the month for which
they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such
contributions shall be liable for their payment and if any
contribution is not paid to the SSS as herein prescribed, he shall
pay besides the contribution a penalty thereon of three percent
(3%) per month from the date the contribution falls due until
paid. If deemed expedient and advisable by the Commission, the
collection and remittance of contributions shall be made quarterly
or semi-annually in advance, the contributions payable by the
employees to be advanced by their respective
employers: Provided, That upon separation of an employee, any
contribution so paid in advance but not due shall be credited or
refunded to his employer.
Verily, prompt remittance of SSS contributions under the
aforesaid provision is mandatory. Any divergence from this rule
subjects the employer not only to monetary sanctions, that is, the
payment of penalty of three percent (3%) per month, but also to
criminal prosecution if the employer fails to: (a) register its
employees with the SSS; (b) deduct monthly contributions from
the salaries/wages of its employees; or (c) remit to the SSS its
employees' SSS contributions and/or loan payments after
deducting the same from their respective salaries/wages.[11]

To acquire jurisdiction over Ambassador Hotel, its managing

head, director or partner must be arrested

As discussed above, even when the employer is a corporation, it

shall still be held liable for the non-remittance of SSS
contributions. It is, however, the head, directors or officers that
shall suffer the personal criminal liability. Although a corporation
is invested by law with a personality separate and distinct from
that of the persons composing it,[12] the corporate veil is pierced
when a director, trustee or officer is made personally liable by
specific provision of law.[13] In this regard, Section 28 (f) of
R.A. No. 8282 explicitly provides that "[i]f the act or omission
penalized by this Act be committed by an association,
partnership, corporation or any other institution, its managing
head, directors or partners shall be liable to the penalties
provided in this Act for the offense." Thus, a corporation cannot
invoke its separate judicial entity to escape its liability for non-
payment of SSS contributions.
To acquire jurisdiction over the corporation in a criminal case, its
head, directors or partners must be served with a warrant of
arrest. Naturally, a juridical entity cannot be the subject of an
arrest because it is a mere fiction of law; thus, an arrest on its
representative is sufficient to acquire jurisdiction over it. To
reiterate, the law specifically disregards the separate personality
between the corporation and its officers with respect to violations
of R.A. No. 8282; thus, an arrest on its officers binds the
corporation.

In this case, Yolanda, as President of Ambassador Hotel, was

arrested and brought before the RTC. Consequently, the trial
court acquired jurisdiction over the person of Yolanda and of
Ambassador Hotel as the former was its
representative. No separate service of summons is required for
the hotel because the law simply requires the arrest of its agent
for the court to acquire jurisdiction over it in the criminal action.
Likewise, there is no requirement to implead Ambassador Hotel
as a party to the criminal case because it is deemed included
therein through its managing head, directors or partners, as
provided by Section 28 (f) of R.A. No. 8282.

The acquittal of Yolanda does not extinguish the civil liability of

Ambassador Hotel

It is a basic rule that when a criminal action is instituted, the civil

action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action unless
the offended party waives the civil action, reserves the right to
institute it separately, or institutes the civil action prior to the
criminal action.[14] Necessarily, when the Information was filed
with the RTC, the civil action against Ambassador Hotel for the
recovery of civil liability arising from the non-remittance of SSS
contributions was deemed instituted therein.

Further, extinction of the penal action does not carry with it the
extinction of the civil action, unless the extinction proceeds from
a declaration in a final judgment that the fact from which the civil
liability might arise did not exist.[15] When Yolanda was acquitted
in the criminal case because it was proven that she did not
perform the functions of the president from June 1999 to March
2001, it did not result in the dismissal of the civil case against
Ambassador Hotel. The RTC did not declare in its judgment that
the fact from which the civil liability might arise did not exist.
Thus, the civil action, deemed impliedly instituted in the criminal
case, remains.

The argument of Ambassador Hotel - that the RTC lost its

jurisdiction over it when Yolanda was acquitted - fails to convince.
It is a well-settled rule that the jurisdiction of a court depends
upon the state of facts existing at the time it is invoked, and if
the jurisdiction once attaches to the person and subject matter of
the litigation, the subsequent happening of events, although they
are of such a character as would have prevented jurisdiction from
attaching in the first instance, will not operate to oust jurisdiction
already attached.[16] Also, it is fundamental that the jurisdiction of
a court in criminal cases is determined by the allegations of the
information or criminal complaint and not by the result of the
evidence presented at the trial, much less by the trial judge's
personal appraisal of the affidavits and exhibits attached by the
fiscal to the record of the case without hearing the parties and
their witnesses nor receiving their evidence at a proper trial.[17]

In this case, the Information alleged that Yolanda was the

President of Ambassador Hotel. Moreover, such fact was
supported by the affidavits and exhibits attached to the
Information. Hence, the RTC properly issued a warrant of arrest
over Yolanda pursuant to Section 28(f) of R.A. No. 8282 to
acquire jurisdiction over her person and that of Ambassador
Hotel. From that moment, the jurisdiction over their persons was
acquired.

Even though it was established during the trial that Yolanda was
not performing the functions of the hotel's president from June
1999 to March 2001, which negated her criminal responsibility, it
is non sequiturthat the jurisdiction over Ambassador Hotel will be
detached. Any subsequent event during trial will not strip the RTC
of its jurisdiction because once it attaches, the same shall remain
with the said court until it renders judgment.

To subscribe to the theory of Ambassador Hotel - that evidence

will dictate the jurisdiction of the court - will create a chaotic
situation. It will be absurd for the courts to first conduct trial on
the merits before it can determine whether it has jurisdiction over
the person or subject matter. The more logical and orderly
approach is for the court to determine jurisdiction by the
allegations in the information or criminal complaint, as supported
by the affidavits and exhibits attached therein, and not by the
evidence at trial. Once jurisdiction attaches, it shall not be
removed from the court until the termination of the case.

As the jurisdiction over Ambassador Hotel was obtained, it

became a party in the case and, as will be discussed later, it was
given fair opportunity to present its evidence and controvert the
prosecution's evidence. In fine, the RTC's jurisdiction over
Ambassador Hotel continued in spite of Yolanda's acquittal.

Ambassador Hotel failed to controvert the evidence of its non-

remittance of SSS contributions

The CA found that Ambassador Hotel was well informed of its

delinquency by the SSS even before the case was filed. When the
case was eventually filed, its directors and officers were also
notified. Notably, even its own lawyer, Atty. Galon, testified
during trial on its behalf. Ambassador Hotel was given the
opportunity to present its defense before the court for its non-
payment of SSS contributions. Thus, it was given the right to be
heard and controvert the evidence presented against it.

During trial, the prosecution established that the SSS, through De

Ocampo, discovered that the last remittance of SSS contributions
by Ambassador Hotel was made in May 1999. She then informed
the hotel of its delinquency when she visited the establishment on
April 17, 2001. She gave the hotel's representative the
delinquency assessment and the billing letter. De Ocampo also
requested that the records of previous SSS payments be
presented, but these could not be produced. After referring the
case to the Cluster Legal Unit, De Ocampo sent a final demand
letter to Ambassador Hotel by registered mail and personal
service. Notwithstanding the several notices of its delinquency,
Ambassador Hotel failed to settle its obligations. Moreover,
though it offered to pay its delinquency through
installment, no postdated checks were ever submitted.

On the other hand, Ambassador Hotel's evidence simply focused

on establishing that Yolanda was not acting as its President from
June 1999 to March 2001 because of an internal dispute.
Although this may be sufficient to eliminate the criminal liability
of Yolanda, it does not justify the nonpayment of SSS
contributions. Ambassador Hotel did not squarely address the
issue on its obligations because there was dearth of evidence that
it remitted the said contributions. Cordon, a witness for the hotel,
even admitted that they were informed of their delinquency and
that they attempted to unearth its SSS records to defend its
obligations, but failed to do so. The hotel never proved that it had
already paid its contributions or, if not, who should have been
accountable for its non-payment. Glaringly, even though
Ambassador Hotel was given sufficient leeway to explain its
obligations, it did not take advantage of the said opportunity.
Consequently, it had nothing else to blame for its predicament
but itself.

In fine, the Court is of the view that there is preponderance of

evidence that Ambassador Hotel failed to remit its SSS
contributions from June 1999 to March 2001 in the amount of
P584,804.00. It must pay the said amount to the SSS plus
interest at the legal rate of six percent (6%) per annum.

WHEREFORE, the petition is DENIED. The July 29, 2010

Decision and October 18, 2010 Resolution of the Court Appeals in
CA-G.R. CV No. 87948 are AFFIRMED with MODIFICATION in
that the judgment award shall earn interest at the rate of six
percent (6%) per annumfrom the date of finality until fully paid.

SO ORDERED.

Peralta,** (Acting Chairperson), and Martires, JJ., concur.

Carpio, J., on official leave.
Leonen, J., on leave.

[ G.R. No. 211015, June 20, 2016 ]

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC.
(CEPALCO) AND CEPALCO ENERGY SERVICES
CORPORATION (CESCO), FORMERLY CEPALCO ENERGY
 SERVICES & TRADING CORPORATION (CESTCO),
PETITIONERS, VS. CEPALCO EMPLOYEE'S LABOR UNION-
ASSOCIATED LABOR UNIONS-TRADE UNION CONGRESS OF
THE PHILIPPINES (TUCP), RESPONDENT.

[G.R. No. 213835]

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC.

(CEPALCO) AND CEPALCO ENERGY SERVICES
CORPORATION (CESCO), FORMERLY CEPALCO ENERGY
SERVICES & TRADING CORPORATION (CESTCO),
PETITIONERS, VS. CEPALCO EMPLOYEE'S LABOR UNION-
ASSOCIATED LABOR UNIONS-TRADE UNION CONGRESS OF
THE PHILIPPINES (TUCP), RESPONDENT.

DECISION

PERLAS-BERNABE, J.: 

Before the Court are petitions for review on certiorari[1] which

assail: (a) in G.R. No. 211015, the Decision[2] dated September
14, 2012 and the Resolution[3] dated January 15, 2014 of the
Court of Appeals (CA) in CA-G.R. SP No. 03169-MIN; and (b) in
G.R. No. 213835, the Decision[4] dated November 11, 2013 and
the Resolution[5] dated July 17, 2014 of the CA in CA-G.R. SP No.
04296-MIN. In both cases, the CA absolved herein petitioners
Cagayan Electric Power & Light Company, Inc. (CEPALCO) and
CEPALCO Energy Services Corporation (CESCO), formerly
CEPALCO Energy Services & Trading Corporation,[6] from the
charges of Unfair Labor Practice (ULP) filed by herein respondent
CEPALCO Employee's Labor Union-Associated Labor Unions-Trade
Union Congress of the Philippines (respondent), but nonetheless,
pronounced that CESCO was engaged in labor-only contracting
and that, in consequence, the latter's employees are actually the
regular employees of CEPALCO in the same manner and extent as
if they were directly employed by CEPALCO.

The Facts

Respondent is the duly certified bargaining representative of

CEPALCO's regular rank-and-file employees. On the other hand,
CEPALCO is a domestic corporation engaged in electric
distribution in Cagayan de Oro and other municipalities in
Misamis Oriental; while CESCO is a business entity engaged in
trading and services.[7]

On February 19, 2007, CEPALCO and CESCO (petitioners) entered

into a Contract for Meter Reading Work[8] where CESCO undertook
to perform CEPALCO's meter-reading activities. As a result,
several employees and union members of CEPALCO were
relieved, assigned in floating positions, and replaced with CESCO
workers,[9] prompting respondent to file a complaint[10] for ULP
against petitioners, docketed as NLRC Case No. RAB-10-07-
00408-2007. Respondent alleged that when CEPALCO engaged
CESCO to perform its meter-reading activities, its intention was
to evade its responsibilities under the Collective Bargaining
Agreement (CBA) and labor laws, and that it would ultimately
result in the dissipation of respondent's membership in CEPALCO.
[11]
 Thus, respondent claimed that CEPALCO's act of contracting
out services, which used to be part of the functions of the regular
union members, is violative of Article 259 (c)[12] of the Labor
Code, as amended,[13] governing ULP of employers. It further
averred that for engaging in labor-only contracting, the workers
placed by CESCO must be deemed regular rank-and-file
employees of CEPALCO, and that the Contract for Meter Reading
Work be declared null and void.[14]

In defense,[15] petitioners averred that CESCO is an independent

job contractor and that the contracting out of the meter-reading
services did not interfere with CEPALCO's regular workers' right to
self-organize, denying that none of respondent's members was
put on floating status.[16] Moreover, they argued that the case is
only a labor standards issue, and that respondent is not the
proper party to raise the issue regarding the status of CESCO's
employees and, hence, cannot seek that the latter be declared as
CEPALCO's regular employees.[17]

In a Decision[18] dated August 20, 2008, the Labor Arbiter (LA)

dismissed the complaint for lack of merit. The LA found that
petitioners have shown by substantial evidence that CESCO
carries on an independent business of contracting services, in this
case for CEPALCO's meter-reading work, and that CESCO has an
authorized capital stock of P100,000,000.00, as well as
equipment and materials necessary to carry out its business.
[19]
 As an independent contractor, CESCO is the statutory
employer of the workers it supplied to CEPALCO pursuant to their
contract.[20] Thus, there is no factual basis to say that CEPALCO
committed ULP as there can be no splitting or erosion of the
existing rank-and-file bargaining unit that negates interference
with the exercise of CEPALCO workers' right to self-organize.[21]

On appeal[22] by respondent, the National Labor Relations

Commission (NLRC), in a Decision[23] dated April 30, 2009,
affirmed the LA's ruling in toto, finding that the evidence
proffered by respondent proved inadequate in establishing that
the service contract amounted to the interference of the right of
the union members to self-organization and collective bargaining.
[24]

Respondent's motion for reconsideration[25] was denied in a

Resolution[26] dated June 30, 2009; hence, it filed a petition
for certiorari[27] before the CA, docketed as CA-G.R. SP No.
03169-MIN.

Pending resolution of CA-G.R. SP No. 03169-MIN, or on

January 5, 2010, CEPALCO and CESCO entered into another
Contract of Service,[28] this time for the warehousing works of
CEPALCO. Alleging that three (3) union members who were
assigned at the warehouse of the logistics department were
transferred to other positions and departments without their
conformity and, eventually, were replaced by workers recruited
by CESCO, respondent filed another complaint[29] for ULP against
petitioners, docketed as NLRC Case No. RAB-10-12-00602-
2009, similarly decrying that CEPALCO was engaged in labor-
only contracting and, thus, committed ULP.[30]

As in the first case against them, petitioners posited[31] that

CEPALCO did not engage in ULP when it contracted out its
warehousing works[32]and that CESCO is an independent
contractor.[33] They further reiterated their argument that
respondent is not the proper party to seek any form of relief for
the CESCO employees.[34]

In a Decision[35] dated July 29, 2010, the LA dismissed the case

for lack of merit, citing its earlier decision in NLRC Case No.
RAB-10-07-00408-2007. It explained that the only difference
between the previous case and the present case was that in the
former, CEPALCO contracted out its meter-reading activities,
while in the latter, it contracted out its warehousing works.
However, both cases essentially raised the same issue between
the same parties, i.e., whether or not the contracting out of
services being performed by the union members constitute ULP.
[36]
 As such, the NLRC applied the principle of res judicata under
the rule on eonclusiveness of judgment and dismissed the
complaint for ULP.[37] At any rate, it found that respondent failed
to present substantial evidence that CEPALCO's contracting out of
the warehousing works constituted ULP.[38]

On appeal[39] by respondent, the NLRC, in a Resolution[40] dated

February 21, 2011, dismissed the appeal and affirmed the LA's
ruling in toto. Respondent's motion for reconsideration[41] was
denied in a Resolution[42] dated April 15, 2011; hence, it elevated
the matter to the CA via petition for certiorari,[43] docketed as CA-
G.R. SP No. 04296-MIN.

The Ruling in CA-G.R. SP No. 03169-MIN

In a Decision[44] dated September 14, 2012, the CA partially

granted respondent's certiorari petition and reversed and set
aside the assailed NLRC issuances.

Preliminarily, the CA found that CESCO was engaged in labor-only

contracting in view of the following circumstances: (a) there was
absolutely no evidence to show that CESCO exercised control
over its workers, as it was CEPALCO that established the working
procedure and methods, supervised CESCO's workers, and
evaluated them;[45] (b) there is no substantial evidence to show
that CESCO had substantial capitalization as it only had a paid-up
capital of P51,000.00 as of May 30, 1984, and there was nothing
on CESCO's list of machineries and equipment that could have
been used for the performance of the meter-reading activities
contracted out to it;[46] and (c) the workers of CESCO performed
activities that are directly related to CEPALCO's main line of
business.[47] Moreover, while CESCO presented a Certificate of
Registration[48] with the Department of Labor and Employment,
the CA held that it was not a conclusive evidence of CESCO's
status as an independent contractor.[49] Consequently, the
workers hired by CESCO pursuant to the service contract for the
meter-reading activities were declared regular employees of
CEPALCO.[50]

However, the CA found no substantial evidence that CEPALCO

was engaged in ULP, there being no showing that when it
contracted out the meter-reading activities to CESCO, CEPALCO
was motivated by ill will, bad faith or malice, or that it was aimed
at interfering with its employees' right to self-organize.[51]

Petitioners' motion for reconsideration[52] was denied in a

Resolution[53] dated January 15, 2014; hence, the present petition
docketed as G.R. No. 211015.

The Ruling in CA-G.R. SP No. 04296-MIN

In a Decision[54] dated November 11, 2013, the CA partially

granted respondent's petition, finding that CESCO was a labor-
only contractor as it had no substantial capitalization, as well as
tools, equipment, and machineries used in the work contracted
out by CEPALCO.[55] As such, it stated that CESCO is merely an
agent of CEPALCO, and that the latter is still responsible to the
workers recruited by CESCO in the same manner and extent as if
those workers were directly employed by CEPALCO.[56]

Nonetheless, same as the ruling in CA-G.R. SP No. 03169-MIN,

the CA found that CEPALCO committed no ULP for lack of
substantial evidence to establish the same.[57]

Petitioners' motion for reconsideration[58] was denied in a

Resolution[59] dated July 17, 2014; hence, the present petition
docketed as G.R. No. 213835.

The Issues Before the Court

In both G.R. Nos. 211015 and 213835,[60] petitioners lament
that the CA erred in declaring CESCO as a labor-only contractor
notwithstanding the fact that CEPALCO has already been absolved
of the charges of ULP. To this, petitioners argue that the issue of
whether or not CESCO is an independent contractor was mooted
by the finality of the finding that there was no ULP on the part of
CEPALCO.[61] Also, they aver that respondent is not a party-in-
interest in this issue because the declaration of the CA t&at the
employees of CESCO are considered regular employees will not
even benefit the respondent.[62]If there is anyone who stands to
benefit from such rulings, they are the employees of the CESCO
who are not impleaded in these cases. In any event, petitioners
insist that CESCO is a legitimate contractor. Overall, they prayed
that the assailed CA rulings be reversed and set aside insofar as
the CA found CESCO as engaged in labor-only contracting and
that its employees are actually the regular employees of
CEPALCO.[63]

The Court's Ruling

The petitions are partly meritorious.

At the outset, it is well to note that the status of CESCO as a

labor-only contractor was raised in respondent's complaints
before the labor tribunals only in relation to the charges of ULP.
In particular, respondent, in its complaint in NLRC Case No.
RAB-10-07-00408-2007, mainly argued that the "[labor-only]
contracting agreement between CEPALCO and [CESCO]
discriminates regular union member employees and will
ultimately result in the dissipation of its ranks in the line
maintenance and construction department."[64] This is similar to
the thrust of its complaint in NLRC Case No. RAB-10-12-
00602-2009, wherein they averred that "the [labor-only]
contracting arrangement between CEPALCO and [CESCO]
discriminates union members and restrains or coerces employees
in the exercise of their rights to [self-organization] and collective
bargaining[,] and amounts to union busting."[65] As the LA in the
latter case aptly observed, "the essential issue between the same
parties remain[s] identical: whether the contracting out of
activities or services being performed by [u]nion members
constitute [ULP]."[66]

Under Article 106[67] of the Labor Code, as amended, labor-only

contracting is an arrangement where the contractor, who does
not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, supplies
workers to an employer and the workers recruited are performing
activities which are directly related to the principal business of
such employer. Section 5 of Department Order No. 18-02,
Series of 2002, otherwise known as the "Rules
Implementing Articles 106 to 109 of the Labor Code, As
Amended" (DO 18-02), provides the following criteria to
gauge whether or not an arrangement constitutes labor-
only contracting:
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.
(Emphases supplied)
Labor-only contracting is considered as a form of ULP when the
same is devised by the employer to "interfere with, restrain or
coerce employees in the exercise of their rights to self-
organization."[68] Article 259 of the Labor Code, as amended,
which enumerates certain prohibited activities constitutive of ULP,
provides:
Article 259. Unfair Labor Practices of Employers. - It shall be
unlawful for an employer to commit any of the following unfair
labor practice:
xxxx

(c) To contract out services or functions being performed by

union members when such will interfere with, restrain or
coerce employees in the exercise of their rights to self-
organization.

x x x x (Emphasis and underscoring supplied)

The need to determine whether or not the contracting out of
services (or any particular activity or scheme devised by the
employer for that matter) was intended to defeat the workers'
right to self-organization is impelled by the underlying concept of
ULP. This is stated in Article 258 of the Labor Code, as amended,
to wit:
Article 258. Concept of Unfair Labor Practice and Procedure for
Prosecution Thereof. - Unfair labor practices violate the
constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of both
labor and management, including their right to bargain
collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial
peace and hinder the promotion of healthy and stable labor-
management relations.

x x x x (Emphases and underscoring supplied)

Thus, in Great Pacific Employees Union v. Great Pacific Life
Assurance Corporation,[69] the Court observed:
There should be no dispute that all the prohibited acts
constituting unfair labor practice in essence relate to the
workers' right to self-organization. Thus, an employer may
be held liable under this provision if his conduct affects in
whatever manner the right of an employee to self-organize.[70]
Similarly, in Bankard, Inc. v. NLRC:[71]
The Court has ruled that the prohibited acts considered as ULP
relate to the workers' right to self-organization and to the
observance of a CBA. It refers to "acts that violate the
workers' right to organize." Without that element, the
acts, even if unfair, are not ULP. Thus, an employer may only
be held liable for unfair labor practice if it can be shown that his
acts affect in whatever manner the right of his employees to self-
organize.[72] (Emphasis and underscoring supplied)
In these cases, the Court agrees with the CA that CEPALCO was
engaged in labor-only contracting as its Contract for Meter-
Reading Work dated February 19, 2007 and Contract of Service
To Perform Warehousing Works dated January 5, 2010 (subject
contracts) with CESCO fit the criteria provided for in Section 5 of
DO 18-02, as above-highlighted.

To be specific, petitioners failed to show that CESCO has

substantial capital or investment which relates to the job, work or
service to be performed. While it is true that: (a) CESCO's
Amended Articles of Incorporation[73] as of November 26, 2008
shows that CESCO's authorized capital stock is P200,000,000.00
as of September 26, 2008,[74] which was increased from
P100,000,000.00[75] on May 30, 2007; and (b) its financial
statement[76] as of 2010 and 2011 shows that its paid-up capital
stock is in the sum of P81,063,000.00,[77] there is noavailable
document to show CESCO's authorized capital stock at the time of
the contracting out of CEPALCO's meter-reading activitiesto
CESCO on February 19, 2007. As it is, the increases in its
authorized capital stock and paid-up capital were only made after
November 26, 2008, hence, are only relevant with regard to the
time CEPALCO contracted out its warehousing works to CESCO on
January 5, 2010. Since the amount of CESCO's authorized capital
stock at the time CEPALCO contracted out its meter-reading
activities was not shown, the Court has no means of determining
whether it had substantial capital at the time the contract
therefor was entered into. Furthermore, the list[78] of CESCO's
office equipment, furniture and fixtures, and vehicles offered in
evidence by petitioners does not satisfy the requirement that they
could have been used in the performance of the specific work
contracted out, i.e., meter-reading service. As the CA aptly
pointed out,[79] the tools and equipment utilized by CESCO in the
meter-reading activities are owned by CEPALCO, emphasizing the
fact that CESCO has no basic equipment to carry out the service
contracted out by CEPALCO.

It is also evident that meter-reading is a job that is directly

related to the main business of CEPALCO, considering that the
latter is an electric distribution utility,[80] which is necessarily
tasked with the evaluation and appraisal of meters in order to bill
its clients.
More significantly, records are devoid of evidence to prove that
the work undertaken in furtherance of the meter-reading contract
was made under the sole control and supervision of CESCO.
Instead, as noted[81]by the CA, it was CEPALCO that established
the working procedure and methods and supervised CESCO's
workers in their tasks.

On the other hand, although it may be said that CESCO had

substantial capital when CEPALCO contracted out
its warehousing works on January 5, 2010, there is, however,
lack of credible evidence to show that CESCO had the aforesaid
substantial investment in the form of equipment, tools,
implements, machineries, and work premises to perform the
warehousing activities on its own account. Similarly, the job
contracted out is directly related to CEPALCO's electric
distribution business, which involves logistics, inventories,
accounting, billing services, and other related operations. Lastly,
same as above, noevidence has been offered to establish that
CESCO exercised control with respect to the manner and methods
of achieving the warehousing works, or that it supervised the
workers assigned to perform the same.

The foregoing findings notwithstanding, the Court, similar to the

CA and the labor tribunals, finds that CEPALCO's contracting
arrangements with CESCO did not amount to ULP. This is because
respondent was not able to present any evidence to show that
such arrangements violated CEPALCO's workers' right to self-
organization, which, as above-mentioned, constitutes the core of
ULP. Records do not show that this finding was further appealed
by respondent. Thus, the complaints filed by respondent
should be dismissed with finality.

At this juncture, it should be made clear that the disposition of

these cases should be limited only to the foregoing declaration.
Again, the complaints filed by respondent were only for ULP.
While there is nothing infirm in passing upon the matter of labor-
only contracting since it was vigorously litigated in these
proceedings, the resolution of the same must only be read in
relation to the charges of ULP. As earlier stated, labor-only
contracting was invoked by respondent as a prohibited act under
Article 259 (c) of the Labor Code, as amended. As it turned out,
however, respondent failed to relate the arrangement to the
defining element of ULP, i.e., that it violated the workers' right to
self-organization. Hence, being a preliminary matter actively
argued by respondent to prove the charges of ULP, the same was
not rendered moot and academic by the eventual dismissal of the
complaints as an issue only becomes moot and academic if it
becomes a "dead" issue, devoid of any practical value or use to
be passed upon. In Pormento v. Estrada:[82]
An action is considered "moot" when it no longer presents a
justiciable controversy because the issues involved have become
academic or dead or when the matter in dispute has already been
resolved and hence, one is not entitled to judicial intervention
unless the issue is likely to be raised again between the parties.
There is nothing for the court to resolve as the determination
thereof has been overtaken by subsequent events.[83]
For another, the Court also observes that while respondent did
ask for the nullification of the subject contracts between
petitioners, and even sought that the employees provided by
CESCO to CEPALCO be declared as the latter's own employees,
petitioners correctly argue that respondent is not a real party-in-
interest and hence, had no legal standing insofar as these
matters are concerned. This is because respondent failed to
demonstrate how it stands to be benefited or injured by a
judgment on the same, or that any personal or direct injury
would be sustained by it if these reliefs were not granted. In Joya
v. Presidential Commission on Good Government,[84] the Court
explained:
"Legal standing" means a personal and substantial interest in the
case such that the party has sustained or will sustain direct injury
as a result of the x x x act being challenged. The term "interest"
is material interest, an interest in issue and to be affected by the
decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. Moreover, the interest of
the party plaintiff must be personal and not one based on a
desire to vindicate the constitutional right of some third and
unrelated party.[85]
If at all, it would be the employees of CESCO who are entitled to
seek the foregoing reliefs since in cases of labor-only contracting,
"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."[86] However, they have not been impleaded in
these cases. Thus, as prayed for by petitioners, the Court must
set aside the portions of the assailed CA Decisions declaring: (a)
the workers hired by CESCO, pursuant to the contracts subject of
these cases, as regular employees of CEPALCO; and (b) the latter
responsible to said workers in the same manner and extent as if
they were directly employed by it. This pronouncement not only
squares with the rules on real party-in-interest and legal
standing, but also with the precept that no one shall be affected
by any proceeding to which he is a stranger, and that strangers
to a case are not bound by any judgment rendered by the court.
[87]

With the principal issues already resolved, the Court sees no need

to delve into other ancillary issues that would have no effect to
the conclusion of these cases.

WHEREFORE, the petitions are PARTLY GRANTED. The

portions of the Decisions and Resolutions of the Court of Appeals
(CA) in CA-G.R. SP No. 03169-MIN and CA-G.R. SP No. 04296-
MIN declaring that the workers hired by CESCO, pursuant to the
contracts subject of these cases, are regular employees of
CEPALCO, and that the latter is responsible to said workers in the
same manner and extent as if those workers were directly
employed by CEPALCO are hereby DELETED. The rest of the CA
Decisions stand.

SO ORDERED.

Sereno, C. J., Leonardo-De Castro, Bersamin, and Caguioa, JJ.,

concur.

[ G.R. No. 208451, February 03, 2016 ]

MANILA MEMORIAL PARK CEMETERY, INC., PETITIONER,
VS. EZARD D. LLUZ, NORMAN CORRAL, ERWIN FUGABAN,
VALDIMAR BALISI, EMILIO FABON, JOHN MARK
APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES,
GAVINO FARINAS, AND WARD TRADING AND SERVICES,
RESPONDENTS.

DECISION
CARPIO, J.: 

The Case

This is a petition for review on certiorari[1] assailing the

Decision[2]dated 21 January 2013 and the Resolution[3] dated 17
July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.

The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery,

Inc. (Manila Memorial) entered into a Contract of Services with
respondent Ward Trading and Services (Ward Trading). The
Contract of Services provided that Ward Trading, as an
independent contractor, will render interment and exhumation
services and other related work to Manila Memorial in order to
supplement operations at Manila Memorial Park, Parañaque City.

Among those assigned by Ward Trading to perform services at

the Manila Memorial Park were respondents Ezard Lluz, Norman
Corral, Erwin Fugaban, Valdimar Balisi, Emilio Fabon, John Mark
Aplicador, Michael Curioso, Junlin Espares, and Gavino Farinas
(respondents). They worked six days a week for eight hours daily
and were paid P250 per day.

On 26 June 2007, respondents filed a Complaint[4] for

regularization and Collective Bargaining Agreement benefits
against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's
Executive Vice-President and Director in Charge for Overall
Operations, and Ward Trading. On 6 August 2007, respondents
filed an amended complaint to include illegal dismissal,
underpayment of 13th month pay, and payment of attorney's fees.

Respondents alleged that they asked Manila Memorial to consider

them as regular workers within the appropriate bargaining unit
established in the collective bargaining agreement by Manila
Memorial and its union, the Manila Memorial Park Free Workers
Union (MMP Union). Manila Memorial refused the request since
respondents were employed by Ward Trading, an independent
labor contractor. Thereafter, respondents joined the MMP Union.
The MMP Union, on behalf of respondents, sought their
regularization which Manila Memorial again declined. Respondents
then filed the complaint. Subsequently, respondents were
dismissed by Manila Memorial. Thus, respondents amended the
complaint to include the prayer for their reinstatement and
payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint

for lack of jurisdiction since there was no employer-employee
relationship. Manila Memorial argued that respondents were the
employees of Ward Trading.

In a Decision[5] dated 29 March 2010, the Labor Arbiter dismissed

the complaint for failing to prove the existence of an employer-
employee relationship. The dispositive portion of the Decision
states:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the above-entitled case for complainants' lack of
employer-employee relationship with respondent Manila Memorial
Park Cemetery, Inc.

SO ORDERED.[6]
Respondents appealed[7] to the NLRC. In a Decision[8] dated 30
September 2010, the NLRC reversed the Labor Arbiter's findings.
The NLRC ruled that Ward Trading was a labor-only contractor
and an agent of Manila Memorial. The dispositive portion of the
Decision states:
WHEREFORE, premises considered, complainants' appeal is
GRANTED. The assailed Decision of Labor Arbiter Geobel A.
Bartolabac dated March 29, 2010 is MODIFIED. It is hereby
declared that complainants were regular employees of respondent
Manila Memorial Park Cemetery, Inc. and entitled to the benefits
provided for under the CBA between the latter and the Manila
Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to

pay wage differentials to complainants as follows:
1. Ezard D. Lluz - P43,982.79 
2. Norman Corral - P29,765.67 
3. Erwin Fugaban - P28,634.67 
4. Valdimar Balisi - P20,310.33 
5. Emilio Fabon - P43,982.79 
6. John Mark
P43,982.79 
Aplicador -
7. Michael Curioso
P43,982.79 
-
8. Ju[n]lin Espares - P43,982.79 
9. Gavino Farinas - P43,982.79 
SO ORDERED.[9]
Manila Memorial filed a Motion for Reconsideration which was
denied in a Resolution[10] dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a

Decision dated 21 January 2013, the CA affirmed the ruling of the
NLRC. The CA found the existence of an employer-employee
relationship between Manila Memorial and respondents. The
dispositive portion of the Decision states:
WHEREFORE, in view of the foregoing, the instant Petition for
Certiorari is DENIED. The Decision, dated September 30, 2010
and the Resolution, dated January 31, 2011, rendered by the
National Labor Relations Commission (NLRC) in NLRC LAC No. 06-
001267-10 are AFFIRMED.

SO ORDERED.[11]
Manila Memorial then filed a Motion for Reconsideration which
was denied by the CA in a Resolution dated 17 July 2013.

Hence, the instant petition.

The Issue

The main issue for our resolution is whether or not an employer-

employee relationship exists between Manila Memorial and
respondents for the latter to be entitled to their claim for wages
and other benefits.

The Court's Ruling

The petition lacks merit.

Manila Memorial contends that Ward Trading has total assets in

excess of P1.4 million, according to Ward Trading's financial
statements for the year 2006, proving that it has sufficient
capitalization to qualify as a legitimate independent contractor.
Manila Memorial insists that nowhere is it provided in the
Contract of Services that Manila Memorial controls the manner
and means by which respondents accomplish the results of their
work. Manila Memorial states that the company only wants its
contractors and the latter's employees to abide by company rules
and regulations.

Respondents, on the other hand, assert that they are regular

employees of Manila Memorial since Ward Trading cannot qualify
as an independent contractor but should be treated as a mere
labor-only contractor. Respondents state that (1) there is enough
proof that Ward Trading does not have substantial capital,
investment, tools and the like; (2) the workers recruited and
placed by the alleged contractors performed activities that were
related to Manila Memorial's business; and (3) Ward Trading does
not exercise the right to control the performance of the work of
the contractual employees.

As a general rule, factual findings of the CA are binding upon this

Court. One exception to this rule is when the factual findings of
the former are contrary to those of the trial court, or the lower
administrative body, as the case may be. This Court is obliged to
resolve an issue of fact due to the conflicting findings of the Labor
Arbiter on one hand, and the NLRC and the CA on the other.

In order to determine whether there exists an employer-

employee relationship between Manila Memorial and respondents,
relevant provisions of the labor law and rules must first be
reviewed. Article 106 of the Labor Code states:
Art. 106. Contractor or subcontractor. Whenever an employer
enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the
latter's 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)
Sections 3, 5 and 7 of Department Order No. 18-02[12] distinguish
between legitimate and labor-only contracting and assume the
existence of an employer-employee relationship if found to be
engaged in labor-only contracting. The provisions state:
xxxx

Section 3. Trilateral Relationship in Contracting Arrangements.

In legitimate contracting, there exists a trilateral relationship
under which there is a contract for a specific job, work or service
between the principal and the contractor or subcontractor, and a
contract of employment between the contractor or subcontractor
and its workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual
workers engaged by the contractor or subcontractor to
accomplish the job, work or service.

xxxx

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.

xxxx

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 solidarity 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)
It is clear from these provisions that contracting arrangements for
the performance of specific jobs or services under the law and its
implementing rules are allowed. However, contracting must be
made to a legitimate and independent job contractor since labor
rules expressly prohibit labor-only contracting.

Labor-only contracting exists when 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:

1) 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
2) The contractor does not exercise the right to control the performance of the work of the
contractual employee.[13]

In the present case, Manila Memorial entered into a Contract of

Services with Ward Trading, a single proprietorship owned by
Emmanuel Mayor Ward with business address in Las Piñas City on
23 February 2006. In the Contract of Services, it was provided
that Ward Trading, as the contractor, had adequate workers and
substantial capital or investment in the form of tools, equipment,
machinery, work premises and other materials which were
necessary in the conduct of its business.

However, a closer look at the Contract of Services reveals that

Ward Trading does not have substantial capital or investment in
the form of tools, equipment, machinery, work premises and
other materials since it is Manila Memorial which owns the
equipment used in the performance of work needed for interment
and exhumation services. The pertinent provision in the Contract
of Services which shows that Manila Memorial owns the
equipment states:
The COMPANY shall [sell] to the contractor the COMPANY owned
equipment in the amount of ONE MILLION FOUR HUNDRED
THOUSAND PESOS ONLY (Php1,400,000.00) payable in two (2)
years or a monthly payment of FIFTY EIGHT THOUSAND THREE
HUNDRED THIRTY FIVE PESOS ONLY (Php58,335.00) to be
deducted from the CONTRACTOR'S billing.[14]
Just by looking at the provision, it seems that the sale was a
regular business transaction between two parties. However,
Manila Memorial did not present any evidence to show that the
sale actually pushed through or that payments were made by
Ward Trading to prove an ordinary arms length transaction. We
agree with the NLRC in its findings:
While the above-cited provision of the Contract of Service implies
that respondent MMPCI would sell subject equipment to Ward at
some future time, the former failed to present any contract of
sale as proof that, indeed, it actually sold said equipment to
Ward. Likewise, respondent MMPCI failed to present any
"CONTRACTOR'S billing" wherein the purported monthly
installment of P58,335.00 had been deducted, to prove that Ward
truly paid the same as they fell due. In a contract to sell, title is
retained by the vendor until full payment of the price.

Moreover, the Contract of Service provides that:

"5. The COMPANY reserves the right to rent all or any of the
CONTRACTOR'S equipment in the event the COMPANY requires
the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute
right to use or enjoy subject equipment, considering that its right
to do so is subject to respondent MMPCI's use thereof at any time
the latter requires it. Such provision is contrary to Article 428 of
the Civil Code, which provides that "The owner has the right to
enjoy and dispose of a thing, without other limitation than those
established by law." It is plain to see that Ward is not the owner
of the equipment worth P1,400,000.00 that is being actually and
directly used in the performance of the services contracted out.

Further, the Service Contract states that:

"For its part, the COMPANY agrees to provide the following:

a)  Area to store CONTRACTOR'S equipment and materials

b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually
and directly used by Ward in the performance of the services
contracted out is owned by respondent MMPCI.[15]
Also, the difference in the value of the equipment in the total
amount of P1,400,000.00 can be glaringly seen in Ward Trading's
financial statements for the year 2006 when compared to its
2005 financial statements. It is significant to note that these
financial statements were submitted by Manila Memorial without
any certification that these financial statements were actually
audited by an independent certified public accountant. Ward
Trading's Balance Sheet[16] as of 31 December 2005 showed that
it had assets in the amount of P441,178.50 and property and
equipment with a net book value of P86,026.50 totaling
P534,705. A year later, Ward Trading's Balance Sheet[17] ending
in 31 December 2006 showed that it had assets in the amount of
P57,084.70 and property and equipment with a net book value of
P1,426,468 totaling P1,491,052.70. Ward Trading, in its Income
Statements[18] for the years 2005 and 2006, only earned a net
income of P53,800 in the year ending 2005 and P68,141.50 in
2006. Obviously, Ward Trading could not have raised a
substantial capital of P1,400,000.00 from its income alone
without the inclusion of the equipment owned and allegedly sold
by Manila Memorial to Ward Trading after they signed the
Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B.

Lagdameo admitted that respondents performed various
interment services at its Sucat, Parañaque branch which were
directly related to Manila Memorial's business of developing,
selling and maintaining memorial parks and interment functions.
Manila Memorial even retained the right to control the
performance of the work of the employees concerned. As
correctly observed by the CA:
A perusal of the Service Contract would reveal that respondent
Ward is still subject to petitioner's control as it specifically
provides that although Ward shall be in charge of the supervision
over individual respondents, the exercise of its supervisory
function is heavily dependent upon the needs of petitioner
Memorial Park, particularly:
"It is also agreed that:

a) The CONTRACTOR'S supervisor will conduct a regular

inspection of grave sites/areas being dug to ensure compliance
with the COMPANY'S interment schedules and other related
ceremonies.
b) The CONTRACTOR will provide enough manpower during peak
interment days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in
coordination with the COMPANY'S schedule of interment
operation.
d) The CONTRACTOR shall be responsible for any damage done to
lawn/s and/or structure/s resulting from its operation, which must
be restored to its/their original condition without delay and at the
expense of CONTRACTOR."
The contract further provides that petitioner has the option to
take over the functions of Ward's personnel if it finds any part or
aspect of the work or service provided to be unsatisfactory, thus:
"6.1 It is hereby expressly agreed and understood that, at any
time during the effectivity of this CONTRACT and its sole
determination, the COMPANY may take over the performance of
any of the functions mentioned in Paragraph I above, in any of
the following cases:

xxx

c. If the COMPANY finds the performance of the CONTRACTOR in

any part or aspect of the grave digging works or other services
provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent
Ward at the mercy of petitioner Memorial Park as the contract
states that the latter may take over if it finds any part of the
services to be below its expectations, including the manner of its
performance. x x x.[19]

The NLRC also found that Ward Trading's business documents fell
short of sound business practices. The relevant portion in the
NLRC's Decision states:
It is also worth noting that while Ward has a Certificate of
Business Name Registration issued by the Department of Trade
and Industry on October 24, 2003 and valid up to October 24,
2008, the same expressly states that it is not a license to engage
in any kind of business, and that it is valid only at the place
indicated therein, which is Las Piñas City. Hence, the same is not
valid in Parañaque City, where Ward assigned complainants to
perform interment services it contracted with respondent MMPCI.
It is also noted that the Permit, which was issued to Ward by the
Office of the Mayor of Las Piñas City on October 28, 2003, was
valid only up to December 31, 2003. Likewise, the Sanitary
Permit to Operate, which was issued to Ward by the Office of the
City Health Officer of the Las Piñas City Health Office on October
28, 2003, expired on December 31, 2003. While respondents
MMPCI and Lagdameo were able to present copies of the above-
mentioned documents, they failed to present any proof that Ward
is duly registered as [a] contractor with the Department of Labor
and Employment.[20]
Section 11 of Department Order No. 18-02, which mandates
registration of contractors or subcontractors with the DOLE,
states:
Section 11. Registration of Contractors or Subcontractors. -
Consistent with authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor
through appropriate regulations, a registration system to govern
contracting arrangements and to be implemented by the Regional
Office is hereby established.

The Registration of contractors and subcontractors shall be

necessary for purposes of establishing an effective labor market
information and monitoring.

Failure to register shall give rise to the presumption that the

contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that
one is engaged in labor-only contracting unless the contractor
overcomes the burden of proving that it has substantial capital,
investment, tools and the like.[21]

In this case, however, Manila Memorial failed to adduce evidence

to prove that Ward Trading had any substantial capital,
investment or assets to perform the work contracted for. Thus,
the presumption that Ward Trading is a labor-only contractor
stands. Consequently, Manila Memorial is deemed the employer
of respondents. As regular employees of Manila Memorial,
respondents are entitled to their claims for wages and other
benefits as awarded by the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision

dated 21 January 2013 and the Resolution dated 17 July 2013 of
the Court of Appeals in CA-G.R. SP No. 119237.

SO ORDERED.
Velasco, Jr.,* Del Castillo, and Mendoza, JJ., concur. 
Leonen, J., on leave.