Case Digest

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 156367

May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC.,  petitioner, vs. ANTONIO BAUTISTA,  respondent.

DECISION CHICO-NAZARIO, J .:

Before Us is a Petition for Review on Certiorari assailing Certiorari assailing the Decision1 and Resolution Resolution2 of the Court of Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the award of 13th  month pay and service incentive leave pay) by deleting the award of 13th month  pay to respondent. THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month  basis. On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any warning. Respondent averred that the accident happened because he was compelled by the management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had  just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent’s pleas for reconsideration, the same was ignored by management. After a month, management sent him a letter of termination. Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus. Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim,  petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest  pertaining to several incidents wherein respondent was involved. Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s employment was terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03 January 2000. On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision, Decision,4 the dispositive portion of which reads: WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the following: a. his 13th  month pay from the date of his hiring to the date of his dismissal,  presently computed at P78,117.87;  b. his service incentive leave pay pa y for all the years he had been in service with the respondent, presently computed at P13,788.05. All other claims of both complainant and respondent are hereby dismissed for lack of merit. merit.5  Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the  NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads: [T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides: "Section 3. Employers covered. –  covered. –  The   The Decree shall apply to all employers except to: xxx

xxx

xxx

e) employers of those who are paid on purely commission, boundary, or task  basis, performing a specific work, irrespective of the time consumed in the  performance thereof. xxx." Records show that complainant, in his position paper, admitted that he was paid on a commission basis. In view of the foregoing, we deem it just and equitable to modify the assailed Decision  by deleting the award of 13th month pay to the complainant. … WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay. The other findings are AFFIRMED. AFFIRMED.6 In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001. Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads: WHEREFORE, premises considered, the Petition the Petition is  is DISMISSED for lack of merit; and the assailed Decision assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. costs.7 toto. No costs. Hence, the instant petition. ISSUES

1. Whether or not respondent is entitled to service incentive leave; 2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is applicable to respondent’s claim of service incentive leave pay. RULING OF THE COURT

However, still based on the above-discussed premises, the respondent must pay to the complainant the following: a. his 13th  month pay from the date of his hiring to the date of his dismissal,  presently computed at P78,117.87;  b. his service incentive leave pay pa y for all the years he had been in service with the respondent, presently computed at P13,788.05. All other claims of both complainant and respondent are hereby dismissed for lack of merit. merit.5  Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the  NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads: [T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides: "Section 3. Employers covered. –  covered. –  The   The Decree shall apply to all employers except to: xxx

xxx

xxx

e) employers of those who are paid on purely commission, boundary, or task  basis, performing a specific work, irrespective of the time consumed in the  performance thereof. xxx." Records show that complainant, in his position paper, admitted that he was paid on a commission basis. In view of the foregoing, we deem it just and equitable to modify the assailed Decision  by deleting the award of 13th month pay to the complainant. … WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay. The other findings are AFFIRMED. AFFIRMED.6 In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001. Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads: WHEREFORE, premises considered, the Petition the Petition is  is DISMISSED for lack of merit; and the assailed Decision assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. costs.7 toto. No costs. Hence, the instant petition. ISSUES

1. Whether or not respondent is entitled to service incentive leave; 2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is applicable to respondent’s claim of service incentive leave pay. RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-visSection vis-à-visSection 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

 Art.  A rt. 95. RIGHT TO SERVICE INCENTIVE LEAVE (a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

Boo Book II I , Rul Rule V: SERVI CE I NCENTI VE L E AVE   SE CT CTII ON 1. Coverage. –   Coverage. –  This  This rule shall apply to all employees emplo yees except: … (d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; . . . A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other employees whose performance is unsupervised  by the employer" must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose actual hours of work in the field cannot be b e determined with reasonable certainty." certainty."8 The same is true with respect to the phrase "those "those who are engaged on task or contract basis,  purely commission basis. basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. follow.9 Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel. Therefor e, e, petitioner’s contention that respondent is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel. According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or  branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in the Bureau the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees  Association  Association10 which states that: As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the  principal office and whose who se hours and days d ays of work cannot canno t be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or  performing specific work. If work. If required to be at specific places at specific times, employees including drivers cannot be said to be field personnel despite the fact that they are  performing work away from the principal office of the employee. [Emphasis employee. [Emphasis ours] To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee would ever be considered a field personnel because every employer, in one way or another, exercises control over his employees. Petitioner further argues that the only criterion that should be considered is the nature of work of the employee in that, if the

employee’s job requires that he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel. We are not persuaded. At this point, it is necessary to stress that the definition of a "field  personnel" is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employee’s performance is unsu pervised by the employer. As discussed above, field personnel are those who regularly perform their duties away from the  principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s time and performance are constantly supervised by the employer. As observed by the Labor Arbiter and concurred in by the Court of Appeals: It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the  passengers, the punched tickets, and the conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the  premises at specific times and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be considered a field  personnel.11 We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of petitioner’s business. Accordingly, respondent is entitled to the grant of service incentive leave. The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled to. The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of service incentive leave pay. Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred. In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period. It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a  breach of the obligation of the defendant to the plaintiff .12 To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of action transpired. Stated differently, in the computation of the threeyear prescriptive period, a determination must be made as to the period when the act constituting a violation of the workers’ right to the benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period beyond the three-year  prescriptive period is therefore barred by prescription. The amount that can only be demand ed by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the complaint.14 It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year .15 Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC :16 The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay." Service incentive leave is a right which accrues to every employee who has served "within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that  provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year." It is also  "commutable to its money equivalent if not used or exhausted at the end of the year."  In other words, an employee who has served  for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.17 [Italics supplied] Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment. Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be. The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the  primordial and paramount consideration.18 The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor .19 In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that respondent demanded from his former employer commutation of his accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits. Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the employer failed to compensate his accumulated service incentive

leave pay at the time of his dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the  prescriptive period provided for by Article 291 of the Labor Code. WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs. SO ORDERED.

 Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 111744 September 8, 1995 LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND VILMA L. CRUZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO., LTD., respondents.

REGALADO, J .:

This petition for certiorari seeks the nullification of the decision1 of the National Labor Relations Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No. 00412092, and its resolution dated August 27, 1993 denying petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and  prorated performance bonus in the amount of P 144,579.00 and 10% attorney's fees in the amount of P14,457.90.2 First, the undisputed facts. Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but they were dismissed on November 1, 1990 when their positions were declared redundant. A special redundancy benefit was paid to them, which included payment of accrued vacation leave and fifty percent (50%) of unused current sick leave, special redundancy benefit, equivalent to three (3) months salary for every year of service; and additional cash benefits, in lieu of other  benefits provided by the company or required by law.3 Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than twenty (20) years, from August 26, ]970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965; petitioner Lopez, exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970.4 Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the redundancy package, She claimed that they should receive their respective service awards and other prorated bonuses which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have already been  budgeted in a fund distinct and apart from redundancy fund.5 Thereafter, private respondent required petitioners to execute a "Release and Quitclaim,"6 and  petitioners complied but with a written protest reiterating their previous demand that they were nonetheless entitled to receive their service awards. On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment7whether respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's Manual. About three months later the labor department issued its opinion, with pertinent authorities, responding to petitioners' query as follows: xxx xxx xxx

This Department believes that your query presents several issues. These shall be addressed point by point, thus: First, the Department deems the service award to be part of the  benefits of the employees of Insular Life. Company policies and  practices are fertile sources of employee's rights. These must be applied uniformly as interpretation cannot vary from one employee to another. . . . xxx xxx xxx While it may be argued that the above-cited case applies only to retirement  benefits, we find solace in the cases of Liberation Steamship Co., Inc. vs. CIR and  National Development Company vs. Unlicensed Crew members of Three Dons vessels (23 SCRA 1105) where the Supreme Court held that a gratuity or bonus,  by reason of its long and regular concession indicating company practice, may  become regarded as part of regular compensation and thus demandable. xxx xxx xxx Second, the award is earned at the pertinent anniversary date. At this time, entitlement to the award becomes vested. The anniversary date is the only crucial determining factor. Since the award accrues on that date, it is of no moment that the entitled employee is separated from service (for whatever cause) before the awards are physically handed out. xxx xxx xxx Third, even if the award has not accrued  —   as when an employee is separated from service because of redundancy before the applicable 5th year anniversary, the material benefits of the award must be given, prorated, by Insular Life. This is especially true (in) redundancy, wherein he/she had no control. xxx xxx xxx Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the material benefits of the service award. . . .8 Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the management approved the grant of an anniversary bonus equivalent to one (1) month salary only to permanent and probationary employees as of November 15, 1990.9 On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees and supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary, respectively, as of December 30, 1990. The performance  bonus, however, would be given only to permanent employees as of March 30, 1991. 10 Despite the aforequoted opinion of the Department of Labor and Employment, private respondent refused to pay petitioners service awards. This prompted the latter to file a consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez, for payment of their service awards, including performance and anniversary bonuses. In their complaint, petitioners contended that they are likewise entitled to the performance and anniversary bonuses because, at the time the performance bonus was announced to be given, they were only short of two (2) months service to be entitled to the full amount thereof as they had already served the company for ten (10) months prior to the declaration of the grant of said  benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the anniversary bonus when it was announced to be given to employees as of November 15, 1990. In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay  petitioners their service awards, anniversary bonuses and prorated performance bonuses, including ten percent (10%) thereof as attorne y's fees.

Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor arbiter in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that petitioners were estopped from claiming the same as said benefits had already been given to them. In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed by petitioners. For this conclusion, it rationalized that "(c)ertainly,  before complainants signed the quitclaim and release, they are aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the same. Hence, we can safely say that they were not placed under duress or were compelled by means of force to sign the document." 11 Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent upon separation, which entitled the former to other renumerations or benefits. On the contrary, they voluntarily accepted the redundancy benefit package, otherwise, they would not have been separated from employment." 12 Hence, this petition wherein it is postulated that the basic issue is whether or not respondent  NLRC committed reversible error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners are not entitled to payment of service awards and other bonuses. 13 The Solicitor General public respondent NLRC and private respondent company duly filed their respective comments. 14 In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length of service had rendered slim, if not eliminated, their chances of getting employed somewhere else." 15 On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of petitioners' claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in executing the release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof. 16 The petition being meritorious, we find for petitioners. Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. 17 We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur . 18 Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there maybe possible exceptions to this holding, we do not perceive any in the case at bar. Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards. 20The element of total voluntariness in executing

that instrument is negated by the fact that they expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof. As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive their separation  pay. We have pointed out in Veloso, et al . , vs. Department of Labor and Employment, et al . ,21 that: While rights may be waived, the same must not be contrary to law, public order,  public policy, morals or good customs or prejudicial to a third person with a right recognized by law. Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another. We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of respondent NLRC, called attention to the fact that "contrary to private respondent's contention, the "additional" redundancy package does not and could not have covered the  payment of the service awards, performance and anniversary bonuses since the  private respondent company has initially maintained the position that petitioners are not legally entitled to the same. . . . Surprisingly, in a sudden turnabout,  private respondent now claims . . . that the subject awards and bonuses are integrated in the redundancy package. It is evident, therefore, that private respondent has not truly consolidated the payment of the subject awards and  bonuses in the redundancy package paid to the petitioners. 22 We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards and other benefits, thus: Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation from employment, respondent should be paid their service awards for 1990. We are not impressed with the contention of the respondent that service award is a  bonus and therefore is an act of gratuity which the complainants have no right to demand. Service awards are governed by respondent's employee's manual and (are) therefore contractual in nature. On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary  bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days before :the respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its commendable  performance in 1990, respondent declared a performance bonus; that per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were employees of respondents for the first 10 months of 1990. We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to complainants who have rendered service to respondent for most of the five

year cycle. This is also true in the case of performance bonus which were given to  permanent employees of respondent as of 30 March 1991 and not to employees who have been connected with respondent for most of 1990 but were separated  prior to 30 March 1991. We believe that the prerogative of the employer to determine who among its employee shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily. 23 (Emphasis and corrections in  parentheses supplied.) The grant of service awards in favor of petitioners is more importantly underscored in the  precedent case of Insular Life Assurance Co., Ltd ., et al . vs.  NLRC, et al ., 24 where this Court ruled that "as to the service award differentials claimed by some respondent union members, the company policy shall likewise prevail, the same being based on the employment contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their policies on the matter, the service award differential is given at the end of the year to an employee who has completed years of service divisible by 5. A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given. 25 The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay. While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26 The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee. 27 However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the number of months that  petitioners actually served respondent company in the year 1990. This observation should be taken into account in the computation of the amounts to be awarded to petitioners. WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commission are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED. SO ORDERED.  Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 110068 February 15, 1995 PHILIPPINE DUPLICATORS, INC.,  petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS, respondents.

RESOLUTION FELICIANO, J .:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing  petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner. On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5 (a)1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union. In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case. Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions must fail. The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied,with finality, on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994. Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987,  by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and

asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed. More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases  present quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ. The Third Division in Durplicators found that: In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by  petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or salary of  petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries  being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the  benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation. In other words, the sales commissions received for every duplicating machine sold constituted  part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record: Salesmen's Total For the Year 19862

Earnings

and

13th

 Name of Total Amount Paid Salesman Earnings as 13th Month Pay Wages x 123 Baylon, Benedicto Bautista Salvador Brito, Tomas

90,780.85

1,182.00

14,184.00

1,238.00

54,625.16

Centeno, Melecio, Jr. De Ricardo

P16,200.00

74,678.17

Dasig, Jeordan

los

Fixed

P1,350.00

89,287.75

Canilan, Rogelio

Montly

Pay

P76,610.30

64,382.75

Bunagan, Jorge

Month

51,854.15

Santos

1,266.00

15,192.00

1,350.00

16,200.00

1,378,00

16,536.00

1,266.04

73,551.39

14,856.00

1,322.00

15,192.00

15,864.00

del Wilfredo Garcia, Delfin

Mundo,

108,230.35

93,753.75

1,406.00

16,872.00

1,294.00

15,528.00

 Navarro, Ma. Teresa

98,618.71

1,266.00

15,192.00

Ochosa, Rolano

66,275.65

1,406.00

16,872.00

Quisumbing, Teofilo

101,065.75

1,406.00

16,872.00

Rubina, Emma

42,209.73

1,266.00

15,192.00

Salazar, Celso

64,643.65

1,238.00

14,856.00

Sopelario, Ludivico Tan, Leynard Talampas, Pedro Villarin, Constancio

52,622.27

30,127.50

Poblador, Alberto Cruz, Danilo Baltazar, Carlito

1,238.00

146,510.25

1,434.00

41,888.10

Carrasco, Cicero Punzalan, Reynaldo

1,350.00

1,434.00

50,201.20

24,351.89

32,950.45

15,681.35

14,856.00

17,208.00

17,208.00

403.75*

1,266.00

25,516.75

16,200.00

15,192.00

323.00*

323.00*

323.00*

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime payments, nor profit-sharing  payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a predetermined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay. In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses."4 The Second Division characterized these  payments as additional monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the  productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble

 profit-sharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and  paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and selfinterest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations,5 the Court explained the nature of a bonus in the following general terms:  As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which contributed to the success of the employer's business and made  possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view a  bonus is not and mandable and enforceable obligation. It is so when It is made  part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . .6 (Emphasis supplied) In Atok-Big Wedge Mining Co. , Inc. v. Atok-Big Wedge Mutual Benefit Association,7 the Court amplified: . . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its payment . If it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of  production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied) More recently, the non-demandable character of a bonus was stressed by the Court in Traders  Royal Bank v. National Labor Relations Commission:9  A bonus is a " gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right ." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). " It is something given in addition to what is ordinarily received by or  strictly due the recipient ." The granting of a bonus is basically a management  prerogative which cannot be forced upon the employer  "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10 (Emphasis supplied) If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay. It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not   have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial  practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified  physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profitsharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional  payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay. The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz .: Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay. We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral  portion of the basic salary structure of an employee, shall be included in determining his 13th month pay. We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity  bonuses are not directly dependent on the extent an individual employee exerts himself. A  productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to  pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a  percentage of the sales closed by a salesman and operates as an integral part of such salesman's  basic pay. Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second  paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that that second paragraph  provides no legal basis for including within the term "commission" there used additional  payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or  bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those  paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid. ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained.  Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

FIRST DIVISION G.R. No. 149013 August 31, 2006 HOUSE OF SARA LEE,  Petitioner, vs. CYNTHIA F. REY, Respondent.

DECISION AUSTRIA-MARTINEZ, J .:

Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse and set aside the Decision1 dated August 25, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 51653 which affirmed the Decision dated October 29, 1998 of the National Labor Relations Commission (NLRC); and the CA Resolution2 dated July 4, 2001 which denied the petitioner's3 Motion for Reconsideration. The case originated from a Complaint for illegal dismissal instituted on September 24, 1996 by the respondent against the petitioner before the NLRC Arbitration Branch No. 10 in Cagayan de Oro City. The Complaint prayed for reinstatement with full backwages without loss of seniority rights, payment of 13th, 14th and 15th month pay, and the award of moral damages and attorney’s fees. The essential facts: The House of Sara Lee (petitioner) is engaged in the direct selling of a variety of product lines for men and women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and other novelty items, through its various outlets nationwide. In the pursuit of its business, the  petitioner engages and contracts with dealers to sell the aforementioned merchandise. These dealers, known either as "Independent Business Managers" (IBMs) or "Independent Group Supervisors" (IGSs), depending on whether they sell individually or through their own group, would obtain at discounted rates the merchandise from the petitioner on credit and then sell the same products to their own customers at fixed prices also determined by the petitioner. In turn, the dealers are paid "Services Fees," or sales commissions, the amount of which depends on the volume and value of their sales. Under existing company policy, the dealers must remit to the  petitioner the proceeds of their sales within a designated credit period, which would either be 38 days for IGSs or 52 days for IBMs, counted from the day the said dealers acquired the merchandise from the petitioner. To discourage late remittances, the petitioner imposes a "Credit Administration Charge," or simply, a penalty charge, on the value of the unremitted payment. Additionally, if the dealer concerned has overdue payments or is said to be in "default," he or she cannot purchase additional products from the petitioner. The dealers under this system earn income through a profit margin between the discounted purchase price they pay on credit to the  petitioner and the fixed selling price their customers will have to pay. On top of this margin, the dealer is given the Service Fee, a sales commission, based on the volume of sales generated by him or her. Due to the sheer volume of sales generated by all of its outlets, the petitioner has found the need to strictly monitor the 38- or 52-day "rolling due date" of each of its IBMs and IGSs through the employment of "Credit Administration Supervisors" (CAS) for each branch. The primary duty of the CAS is to strictly monitor each of these deadlines, to supervise the credit and collection of payments and outstanding accounts due to the petitioner from its independent dealers and various customers, and to screen prospective IBMs. To discharge these responsibilities, the CAS is provided with a computer equipped with control systems through which data is readily generated. Under this organizational setup, the CAS is under the direct and immediate supervision of the Branch Operations Manager (BOM). Cynthia Rey (respondent), at the time of her dismissal from employment, or on June 25, 1996, held the position of Credit Administration Supervisor or CAS at the Cagayan de Oro City branch of the petitioner. Respondent was first employed by the petitioner in July 16, 1993 as an Accounts Receivable Clerk at its Caloocan City branch. In November 1993, respondent was transferred to the Cagayan de Oro City branch retaining the same position. In January 1994, respondent was elevated to the position of CAS. At that time, the Branch Operations Manager or

BOM of the Cagayan de Oro City branch was a certain Mr. Jeremiah Villagracia. In March 1995, respondent was temporarily assigned to the Butuan Cit y branch. Sometime in June 1995, while respondent was still working in Butuan City, she allegedly instructed the Accounts Receivable Clerk of the Cagayan de Oro outlet, a certain Ms. Magi Caroline Mendoza, to change the credit term of one of the IBMs of the petitioner, a certain Ms. Mariam Rey-Petilla, who hap pens to be respondent’s sister -in-law, from the 52-day limit to an "unauthorized" term of 60 days. The respondent made the instruction, the petitioner avers, just  before the computer data for the computation of the Service Fee accruing to Ms. Rey-Petilla was about to be generated. Ms. Mendoza then reported this allegedly unauthorized act of respondent to her Branch Operations Manager, Mr. Villagracia. Acting on the report, as the petitioner alleges, BOM Villagracia discreetly verified the records and discovered that it was not only the 52-day credit term of IBM Rey-Petilla that had been extended by the respondent, but there were several other IBMs whose credit terms had been similarly extended beyond the periods allowed  by company policy. BOM Villagracia then summoned the respondent and required her to explain the unauthorized credit extensions. The petitioner alleges that during that confrontation, respondent admitted her infractions and begged the BOM not to elevate or disclose the matter further to higher authorities. In a letter dated June 22, 1995, Villagracia formally reported the matter to higher management, stating that respondent, "in tears and remorse" and confiding "her sincerest apology," personally admitted that the credit terms of certain IBMs were adjusted in the computer for purposes of computing the Service Fees.4 On June 24, 1995, Villagracia formally served a "show-cause" letter to respondent and placed her on "indefinite suspension" effective on the same day.5On June 27, 1995, respondent submitted her explanation denying the accusations made against her and stated that the "discrepancies" in the service fees may have been the result of deadlines falling on holidays, after "reconsiderations" had been requested by the IBM concerned and with the full knowledge of and approval by BOM Villagracia as part of his campaign to increase collections.6 Additionally, in the same letter-response, respondent vehemently denied that she waived her right to explain as well as any admission she allegedly made before Villagracia, and she pointed to the latter as the author of the "discrepancies."7 As a consequence of the discovery of the foregoing alleged "anomalous practice" of extending the credit terms of certain IBMs, management undertook an audit of the Cagayan de Oro City and Butuan City branches. During the process, the petitioner alleges, respondent was interviewed  by the auditors before whom she again openly admitted her infractions. Upon being furnished a copy of the Auditor’s Report, portions of which read: xxxx OBJECTIVE OF THE AUDIT UNDERTAKEN This activity has been conducted to establish facts that would determine whether Ms. Cynthia Rey did change the credit terms or not for whatever reason resulting in the company’s payments of undue service fees. AUDIT FINDINGS We conducted examination of Service Fee Report for 15 selected IBMs with the largest service fee pay-outs from November 1993 up to April 1995 for Cagayan de Oro Branch and from February 1995 to March 1995 for Butuan Service Center. Set forth are the results of this activity: CAGAYAN DE ORO BRANCH FINDING In all 15 samples, credit terms were changed by then CAS Cynthia Rey beyond 52 days to as high as 90 days as evidenced by the IBM Credit Terms Exception Report . . . . The exception report revealed that the CAS with User ID "credit1" often changes/increases the credit terms of several IBMs, since February 1994, usually a day before or during SF cut-off dates (20th, 21st, 22nd, or 23rd of the month) and would return it to original credit terms after completion of SF  print-outs. Total SF discrepancy for the 15 samples as a result of credit term adjustment amounts to P 211K x x x x

It is apparent that credit term adjustments resulted in payment of significant amount of undue service fees. Such fraudulent practice clearly favors the interest of the IBMs to the detriment of the company. This constitutes conflict of interest and should be dealt with accordingly. xxx FINDING Ms. Cynthia Rey was on maternity leave from March 07, 1994 up to May 30, 1994 during which time no changing of credit term was recorded by the parameter 23.8.2. This simply means that no credit term adjustment was made during the period Ms. Rey was on leave. Again, this confirms that without Ms. Rey around, nobody ever changed/adjusted the credit terms beyond 52 days. xxxx BUTUAN SERVICE CENTER FINDING

On a concurrent capacity as OIC and CAS of Butuan Service Center starting sometime February 1995, Ms. Cynthia Rey changed the credit terms of IBMs as shown in the IBM Credit Terms Exception Report . . . . Total discrepancies for February and March 1995 Service Fees as a result of the credit term adjustments amounts to P3,716.44 . . . . Analysis showed that credit terms used  by Cynthia for each of the IBMs/IBMC/IGSs ranged from 55 to 90 days x x x x Surprised with the Exception Reports, Ms. Rey admitted having done the credit term adjustments at Butuan. Her statements therefore showed inconsistencies as she previously denied this allegation. However, she cited no clear reasons for such malpractice. Recommendation

Materiality of the amount involved is not the issue at hand. Her admission to the auditor of the violation committed does not absolve her from being meted disciplinary actions as determined  by management. We would like to emphasize that any leniency on this case might have far reaching implications to the branch operations and the company as a whole. x x x.8 Petitioner, on July 29, 1995, directed respondent again to explain, but in more detail, the alleged "anomalies" uncovered by the audit. After requesting more time to review the report and submit her comment, on July 31, 1995, respondent requested instead that a formal investigation be conducted in the presence of her lawyer .9 In the meantime, respondent’s suspension was lifted,  but without prejudice to the outcome of the administrative investigation.10 On September 7, 1995, the petitioner conducted a formal hearing which was attended by respondent and her counsel of record.11 Subsequently, respondent and her counsel affixed their respective signatures on the transcripts of the hearing.12 Meanwhile, on April 15, 1996, BOM Villagracia resigned. Upon his resignation, respondent managed the Cagayan de Oro branch for three months pending the appointment of a new BOM. On the basis of the hearing, the alleged voluntary admissions of respondent, and the findings of the auditor’s report, the petitioner, on June 25, 1996, formally dismissed the r espondent for  breach of trust and confidence.13 On September 24, 1996, as stated above, respondent filed her Complaint for illegal dismissal,  backwages and damages, with the Labor Arbiter. On April 30, 1998, the Labor Arbiter rendered a decision in favor of the respondent, the dispositive portion of which states: WHEREFORE, in view of all the foregoing, judgment is hereby entered ordering [petitioner] House of Sara Lee to immediately pay [respondent] Cynthia F. Rey the sum of P177,052.05 as full backwages from July 1, 1996 up to the date of this decision; 13th month pay in the sum of

P18,666.67 and separation pay in the sum of P40,000.00 and likewise to pay the sum of P23,571.72 equivalent to 10% of the aggregate monetary award as attorney’s fees. The rest of the claims are dismissed for lack of me rit. SO ORDERED.14 To the Labor Arbiter, the question to be resolved is whether the petitioner validly terminated respondent’s employment on the ground of loss of trust and confidence. In declaring the termination illegal, the Labor Arbiter held that the petitioner, as employer, failed to discharge its  burden of proof in showing that the dismissal was for a just or authorized cause; that, in  particular, the petitioner failed to establish that respondent was the very person who allegedly manipulated the credit terms of certain IBMs through the computer terminals, since other employees had access to the same; that respondent’s alleged admissions before Villagracia, her BOM, and M.D. Sabayle, the company auditor, are based on self-serving evidence; that the  petitioner failed to substantiate the loss of P211,000.00 which it imputed to the respondent; that the petitioner failed to show that it apprised its employees of the terms of the company policy which respondent allegedly violated, or, in other words, that respondent was not fully informed of the possible sanctions for such acts; that reinstatement would be impractical under the circumstances since the relations of the parties were already strained, hence, the award of full  backwages and separation pay is justified; that petitioner failed to refute the claim for 13th month pay, hence, as a statutory relief, respondent should be awarded the same; and that the claims for 14th and 15th month pay as well as moral and exemplary damages should be denied for having no legal basis. Aggrieved, the petitioner appealed to the NLRC. On October 29, 1998, the NLRC rendered its Decision dismissing the appeal. In affirming the Decision of the Labor Arbiter, the NLRC additionally held that if indeed benefits accrued to the IBMs by virtue of the credit term extensions, it was BOM Villagracia who benefited from this scheme which he himself adopted; that the auditor’s report showed that the scheme had been a "long standing practice" of the  branch office of the petitioner; that after Villagracia resigned, respondent was left to manage the Cagayan de Oro branch which, at that time, registered the highest growth rate and for which reason respondent earned a commendation from the petitioner; and that the loss of trust and confidence advanced by the petitioner is negated by the fact that respondent, after Villagracia’s resignation, was allowed to manage the Cagayan de Oro City branch and by the fact that she was commended for her good performance. The petitioner appealed to the CA under Rule 65. On August 25, 2000, the CA dismissed the Petition on the sole ground that factual issues are not proper subjects for a special civil action of certiorari. The petitioner is now before this Court under Rule 45, assigning the following errors: I. IN DISMISSING THE PETITION FOR CERTIORARI ASSAILING THE RESOLUTIONS OF THE NATIONAL LABOR RELATIONS COMMISSION IN THE LABOR CASE BELOW ON THE GROUND THAT FACTUAL ISSUES ARE NOT THE PROPER SUBJECT OF CERTIORARI, THE COURT OF APPEALS HAS IN EFFECT DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE. II. IN DOING SO, THE COURT OF APPEALS DEVIATED FROM ESTABLISHED DOCTRINES LONG SETTLED BY CONSISTENT JURISPRUDENCE ENUNCIATED BY THIS HONORABLE COURT.15 We grant the petition. As a preliminary matter, we shall resolve the procedural concern raised by the respondent. She maintains that no grave abuse of discretion was committed by the NLRC. This is incorrect.

In the recent case of Manila Memorial Park Cemetery, Inc. v. Panado,16 we held that where the  NLRC or the labor arbiter acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy, the extraordinary writ of certiorari will lie.17 While as a general rule, the factual findings of administrative agencies are not subject to review by this Court, it is equally established that we will not uphold erroneous conclusions which are contrary to the evidence, because the agency a quo, for that reason, would be guilty of a grave abuse of discretion. Nor is this Court bound by conclusions which are not supported by substantial evidence.18 The substantial evidence rule does not authorize any finding just as long as there is any evidence to support it. It does not excuse administrative agencies from considering contrary evidence which fairly detracts from the evidenc e supporting a finding.19 In this case, the NLRC and the CA consistently ignored the following facts established in the record: a) respondent, during the formal hearing on September 7, 1995, in the presence of her counsel, clearly admitted in several instances that, beginning June 1994, she herself actually extended, on a monthly basis, the credit terms of certain IBMs from the company-fixed 52 days to as high as 90 days;20  b) as Credit Administration Supervisor, she knew the appropriate credit terms (38 days for IGSs and 52 days for IBMs) under the company guidelines and which would serve as the bases for the computation of the correct Service Fees or sales commissions;21 c) she was fully aware of the financial implications whenever she would extend the credit terms, in that all late remittances by the IBMs concerned would be considered in the computation of their Service Fees which would not otherwise be due to them under company guidelines;22 d) the computation of the Service Fees, on many occasions, had been finalized, processed, and  printed out;23 e) she changed the credit terms in the Cagayan de Oro branch under the alleged "blanket approval" of BOM Villagracia;24 f) she changed the credit terms in the Cagayan de Oro branch since it was a "standard practice" in Caloocan City where she had been previously assigned;25 g) during her stint in the Butuan City branch, she admitted that there had been no such "blanket approval," but she nonetheless kept changing the credit terms because, according to her, this had  become "standard practice" in the Cagayan de Oro branch as well;26 h) in several instances, she acted on her own accord and without the requisite authority in extending the credit terms, since there were no specific nor direct instructions from Villagracia to change those terms;27 i) she even assisted Mr. Villagracia and Ms. Mendoza in the process of changing the credit terms since they were ignorant of the procedure;28  j) she would change the credit terms whenever the IBMs concerned would ask for "reconsideration;"29 and finally, k) her statements suffered notable inconsistencies, oscillating between denying or not remembering the alleged act and categorically admitting having done them.30 The consideration of the foregoing facts, as disclosed in the record, justifies a different conclusion. Although numerous exceptions to the general rule have been fairly established in case law, it must be stressed that the meticulous constitution of the factual findings are functions that principally lie with the NLRC and the CA as well as the other tribunals that may come under the review power of the Supreme Court. It is a strict judicial policy to hand down an incisive ruling in the first instance in order to relieve this Court from exercising its extraordinary powers of excavating the facts, so that the Court may thoroughly devote its energies to the disposition of questions of law, and only questions of law, under the extent of Rule 45.

Contrary to the findings of the NLRC and the CA, the Court holds that respondent was dismissed for a just cause. Law31 and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. confidence.32 More so, in the case of supervisors or personnel occupying positions of responsibility, loss of trust justifies termination. termination .33 Loss of confidence as a  just cause for dismissal is premised on o n the fact that an employee concerned holds a position of trust and confidence. This situation applies where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. But, in order to constitute a just cause for dismissal, the act complained of must be "workrelated," such that the employee concerned is unfit to continue working for the employer .34 The degree of proof required in labor cases is not as stringent as in other types of cases. cases.35 It must  be noted, however, that recent decisions of this Court have distinguished the treatment of managerial employees from that of rank-and-file personnel in the application of the doctrine of loss of trust and confidence. confidence.36 With respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient. But as to a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required; it is sufficient that there is some basis for the loss of confidence, as when the employer has reasonable ground to  believe that the employee emplo yee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded by his  position.  position.37 In the present case, the respondent is not an ordinary rank-and-file employee. The nature of her work requires a substantial amount of trust and confidence on the part of the employer. Being the Credit Administration Supervisor of the Cagayan de Oro and Butuan City branches of the  petitioner, respondent occupied a highly sensitive and critical position and may thus be dismissed on the ground of loss of trust and confidence. The duties of the respondent included the strict monitoring of the 38- or 52-day "rolling due date" of each of its IBMs and IGSs, as well as the supervision of the credit and collection of payments and outstanding accounts due to the  petitioner from its dealers. More importantly, respondent has a direct hand in the preparation and computation of the Service Fees or sales commissions accruing to each dealer. The computation of these commissions depends on whether the dealer concerned was able to remit the sales  proceeds within the 38-day or 52-day rolling deadline. Clearly, respondent’s position involves a high degree of responsibility requiring trust and confidence. The position carried with it the duty to observe proper company procedures in the fulfillment of her job, as it relates closely to the financial interests of the company. Respondent’s unauthorized extensions of the credit periods of the dealers are prejudicial to the interest of the  petitioner and bear serious financial implications: First, the dealer concerned is allowed to withhold remittances to the company for his or her credit purchases beyond the expiration of the 38- or 52-day rolling deadline; second, the Credit Administration Charges or interest penalties are not imposed on the erring dealer; third, the dealer concerned is allowed to purchase goods on credit despite the fact that he or she has not remitted payment, which is against company policy; and fourth, undue Service Fees were unknowingly paid by the company to certain IBMs. Moreover, respondent was not guilty of one-time unauthorized extension of the credit terms, but of repeated acts over the course of several months. Her bare, unsubstantiated and uncorroborated denial of her participation in the anomalies does not prove her innocence nor disprove her alleged guilt, guilt,38 especially considering that she would vacillate between admitting and denying the charges. On the contrary, such denial or failure to rebut the serious accusations hurled against her militate against her innocence and strengthen the adverse averments of the petitioner .39 The requirement that there must be some basis or reasonable ground to believe that the employee is responsible for the misconduct was sufficiently met in this case. The NLRC and the CA held that there were other co-employees who had access to the same computer terminals, hence, it cannot be pinpointed who was responsible. Even if this is true, as respondent argues, this point is not material. It must be stressed that the respondent was the Credit Administration Supervisor, one tasked to directly supervise each and every collectible due to the petitioner. Recently, this Court has held that even if the employee had no actual and direct

 participation in the alleged anomalies, his h is failure to detect any anomaly that would normally fall within the scope of his work reflects his ineffectiveness and amounts to gross negligence and incompetence, which are, likewise, justifiable grounds for his dismissal; and that it is not necessary to prove the employee’s direct participation in the irregularity, irregularity, for what is material is that his actuations were more than sufficient to sow in his employer the seed of mistrust and loss of confidence. confidence.40 The records show that respondent, by her very own admission, actually  participated in the foregoing irregularities. Although the petitioner could not directly and wholly attribute the monetary loss of P211,000.00 P211,000.00 linked to the 15 samples as reflected in the Auditor’s Report, to the actuations of the respondent, it is conceded in all quarters that the repeated and unauthorized extensions of the credit terms no doubt have serious financial implications that affect the company as a whole. Whether the petitioner was financially prejudiced is immaterial. immaterial.41 What matters is not the amount involved, rather, it is the fraudulent scheme in which the respondent was involved, and which constitutes a clear betrayal of trust and confidence. In fact, there are indications that these acts had been done before, and probably would have continued had it not been discovered. discovered.42 The Court is not impressed with respondent’s claim that Villagracia, her BOM at that time, "cleverly pinned her down" as the culprit; that he deleted from the computer files all the credit extensions that took place; and that he "created a scenario" for a graceful exit. There is nothing in the record that would substantiate these bare allegations. Nor can the Court accept respondent’s assertion that she was never apprised of the company policies with respect to the allowable credit terms. As Credit Administration Supervisor, the respondent cannot feign ignorance of the irregularity as she was sufficiently aware that the credit extensions she made were beyond acceptable limits. By her very own admission, and in the presence of her counsel, she was fully aware of the company-fixed rolling due dates for the dealers and that their commissions were to  be determined by their timely remittances of the sales proceeds. In other words, respondent was aware of the financial implications of her extension of the credit terms, especially the outcome where the consideration of late remittances, after the extension, would unduly inflate the sales commissions. It is also an established fact that the petitioner, to ensure the correct computation of the commissions, installed internal control systems in the computer terminals and that respondent, through "practice" and "experience," acquired the proficiency and computer literacy as to be able to override these control systems in order to make the changes changes43 in clear deviation from company policy. But the respondent, quoting the agencies a quo, insists that her extensions of the credit terms of certain dealers were predicated on a "long standing policy" in the Cagayan de Oro branch, and that this "arrangement" had the "blessings of the manager." She did not prove these allegations. While case law provides that where a violation of company policy or breach of company rules and regulations was found to have been tolerated by management, then the same could not serve as a basis for termination, termination ,44 in this case respondent failed to show that her extensions of the credit terms were condoned by management. Her BOM, Mr. Villagracia, categorically denied that he had given her the requisite and direct authority to change the credit terms. When the respondent, while in Butuan City, instructed Ms. Mendoza, the Accounts Receivable Clerk of the Cagayan de Oro outlet, to change the credit terms of IBM Mariam Rey-Petilla, Rey-Petilla, respondent’s 45 sister-in-law, sister-in-law, to an unauthorized term of 60 days, she reported this instruction to Villagracia who, in turn, verified the records and reported his findings to higher management. Villagracia even reprimanded Ms. Mendoza for carrying out respondent’s instructions. instructions.46 As a consequence, higher management immediately undertook an audit of the Cagayan de Oro and Butuan City  branches where the respondent had been assigned. And, as a consequence, an Auditor’s Report was issued, expressly finding the respondent guilty of violating comp any policy. Respondent was again directed by the higher authorities to explain, in more detail, the anomalies uncovered by the audit. The foregoing activities activities negate the suggestion that management tolerated respondent’s unauthorized extension of credit terms. Despite the marked inconsistencies of her statements during the formal investigation, respondent only offered the following explanation: because of the alleged "standard practice" in the Caloocan City branch where she worked as an Accounts Receivable Clerk, she assumed that the extensions can be done in the Cagayan de Oro City  branch and where she allegedly procured the "blanket approval" of BOM Villagracia; and that, since this "standard practice" had allegedly taken root in Cagayan de Oro City (mainly owing to her activities), she assumed that the same can be carried over to the Butuan City branch, even without any "blanket approval" of her BOM. These declarations, self-serving as they are, taken together, are also not demonstrative of any acquiescence on the part of management. Even if the Court were to accept her allegation that Villagracia deleted the pertinent files and destroyed

evidence otherwise favorable to her, she must at least show how such evidence, if hypothetically  produced, would constitute con stitute an adequate defense against the charge of carrying out unauthorized acts. At any rate, even if the Court finds credible her accusation that Villagracia "cleverly pinned her down" as the culprit, she will not be exonerated for that reason alone, since it is established that she directly and actively participated in the acts which amounted to violations of company  policy. Certainly the prerogative lies with the com pany to hold Villagracia accountable, if inde ed he was: the option to discipline lies with the employer. But since Villagracia was not made a  party in this proceeding, further discussion on the point is useless. Respondent argues that the loss of trust and confidence as Credit Administration Supervisor had  been effectively negated by the fact that she was made to occupy the position of Branch Operations Manager for three months immediately after Villagracia resigned. This act of the  petitioner, respondent reasons, is an express recognition of her capability and integrity or trustworthiness as an employee. employee.47 To support this contention, she adduces several cash advance slips which she signed as BOM as evidence of her appointment. appointment.48 Even in light of this "promotion," it must be noted that at the time she occupied this position, which the petitioner asserts was done in an acting capacity only, the investigation over the anomalies committed by respondent had been pending. The Memorandum dated August 21, 1995 reinstating respondent and granting her request to conduct a formal investigation with the presence of counsel expressly stated that the reinstatement is "without prejudice" to "a reinvestigation" of her case. case.49 Pending the final outcome of the investigation, respondent, as with all persons, has in her favor the  presumption of innocence, and for this reason she may even be entitled to a promotion in due course. But after due investigation and marshalling of facts, after the employer forms a moral conviction that indeed the employee breached its trust and confidence, and despite such  promotion, the employer may then proceed to dismiss the erring employee. As stated, the rules on termination of employment and the penalties for infractions, insofar as fiduciary employees are concerned, are not necessarily the same as those applicable to the termination of employment of ordinary employees. Employers, generally, are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those of similar rank performing functions which by their nature require the employer’s trust and confidence, than in the case of ordinary rank-and-file employees. employees.50 There can be no doubt that the respondent’s continuance in the sensitive fiduciary position of Credit Administration Supervisor would be patently inimical to the interests of the petitioner. It would be oppressive and unjust to order the petitioner to take her back, for the law, in protecting the rights of the employee, authorizes neither oppression nor self-destruction of the employer .51 The award of 13th month pay must be deleted. Respondent is not a rank-and-file employee and is, therefore, not entitled to thirteenth-month pay. pay.52 However, the NLRC and the CA are correct in refusing to award 14th and 15th month pay as well as the "monthly salary increase of 10 percent per year for two years based on her latest salary rate." The respondent must show that these benefits are due to her as a matter of right. right.53 The rule in these cases is, she who alleges, not she who denies, must prove. Mere allegations by the respondent do not suffice in the absence of proof supporting the same. same.54 With respect to salary increases in particular, the respondent must likewise show that she has a vested right to the same, such that her salary increases can be made a component in the computation of  backwages. What is evident is that salary increases are a mere expectancy. They are by nature volatile and dependent on numerous variables, including the company’s fiscal fiscal situation, the employee’s future performance on the job, or the employee’s continued stay in a position. position. 55 In short, absent any proof, there is no vested right to salary increases. increases.56 The claims for moral and exemplary damages, as correctly held by the NLRC and the CA , should  , should be denied for having no basis in fact and law. law.57 The award of attorney’s fees should likewise be deleted for the same reason. reason.58 And last, the Court is constrained to delete the award of separation pay. Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on her moral character .59 Inasmuch as the reason for which the respondent was validly separated involves her integrity, which is required for the position of Credit Administration Supervisor, she is not worthy of compassion as to deserve separation pa y for her length of service. service.60

WHEREFORE, the petition is GRANTED. The challenged Decision and Resolution of the Court of Appeals are hereby SET ASIDE and a new one entered DECLARING respondent’s dismissal valid. The complaint of respondent is DISMISSED.  No pronouncement as to costs. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice

Chairperson CONSUELO YNARES-SANTIAGO, ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice MINITA V. CHICO-NAZARIO Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. ARTEMIO V. PANGANIBAN Chief Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 79004-08 October 4, 1991 FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT AND 6 OTHERS, ROY MAGALLANES AND 4 OTHERS, CLAUDIO BONGO, EDUARDO ANDALES and 4 OTHERS,  petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (3rd DIVISION), GENERAL MILLING CORPORATION and/or FELICIANO LUPO,  respondents.

 Public Attorney's Office for petitioners.  Joseph M. Baduel & Steve R. Siclot for private respondents.

MELENCIO-HERRERA, J .:

The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole issue brought to the fore in this labor dispute. This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public respondent National Labor Relations Commission (NLRC), Third Division, which reversed the Resolution of its First Division, dated 27 December 1985, and absolved private respondent General Milling Corporation (GMC) from any and all liability to petitioners. Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a contract with GMC, a domestic corporation engaged in flour and feeds manufacturing, for the construction of an annex building inside the latter's plant in Cebu City. In connection with the aforesaid contract, LUPO hired herein petitioners either as carpenters, masons or laborers. Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners filed Complaints against LUPO and GMC before the NLRC Regional Arbitration Branch No. VII, Cebu City, for unpaid wages, COLA differentials, bonus and overtime pay. In a Decision, dated 21 November 1984, the Executive Labor Arbiter, Branch VII, found LUPO and GMC jointly and severally liable to petitioners, premised on Article 109 of the Labor Code, infra, and ordered them to pay the aggregate amount of P95,382.92. Elevated on appeal on 14 December 1984, the NLRC (First Division) denied the same for lack of merit in a Resolution, dated 27 December 1985. Upon Motion for Reconsideration, filed on 27 February 1986, the case was reassigned to the Third Division. In a Resolution of 27 February 1987, that Division absolved GMC from any liability. It opined that petitioners were only hired by LUPO as workers in his construction contract with GMC and were never meant to be employed by the latter. Petitioners now assail that judgment in this Petition for Certiorari. Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's obligations to them. They seek recovery from GMC based on Article 106 of the Labor Code, infra, which holds the employer jointly and severally liable with his contractor for unpaid wages of employees of the latter. In his "Manifestation in lieu of Comment," the Solicitor General recognizes the solidary liability of GMC and LUPO but bases recovery on Article 108 of the Labor Code, infra, contending that inasmuch as GMC failed to require them LUPO a bond to answer for the latter's obligations to

his employees, as required by said provision, GMC should, correspondingly, be deemed solidarily liable. In their respective Comments, both GMC and the NLRC maintain that Article 106 finds no application in the instant case because it is limited to situations where the work being performed  by the contractor's employees are directly related to the principal business of the employer. The  NLRC further opines that Article 109 on "Solidary Liability" finds no application either because GMC was neither petitioners' employer nor indirect employer. Upon the facts and circumstances, we uphold the solidary liability of GMC and LUPO for the latter's liabilities in favor of employees whom he had earlier emplo yed and dismissed. Recovery, however, should not be based on Article 106 of the Labor Code. This provision treats specifically of "labor-only" contracting, which is not the set-up between GMC and LUPO. Article 106 provides: 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. xxx

xxx

xxx

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  persons 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). In other words, a person is deemed to be engaged in "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 (See Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code; emphasis supplied). Since the construction of an annex building inside the company plant has no relation whatsoever with the employer's business of flour and feeds manufacturing, "labor-only" contracting does not exist. Article 106 is thus inapplicable. Instead, it is "job contracting," covered by Article 107, which is involved, reading: 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. (Emphasis supplied). Specifically, there is "job contracting" where (1) the 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, free from the control and direction of his employer or  principal in all matters connected with the performance of the work except as to the results thereof; and (2) the contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct

of his business. It may be that LUPO subsequently ran out of capital and was unable to satisfy the award to petitioners. That was an after-the-fact development, however, and does not detract from his status as an independent contractor. Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with an independent contractor, LUPO, for the construction of an annex building, a work, task, job or  project not directly related to GMC's business of flour and feeds manufacturing. Being an "indirect employer," GMC is solidarily liable with LUPO for any violation of the Labor Code  pursuant to Article 109 thereof, reading: Art. 109. Solidary Liability.  —  The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with a 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. The provision of existing law referred to is Article 1728 of the Civil Code, which states, among others, that "the contractor is liable for all the claims of labo rers and others employed by him ..." The foregoing interpretation finds a precedent in the case o Deferia v. NLRC   (G.R. No. 78713, 27 February 1991) per Sarmiento, J., where Articles 107 and 109 were applied as the statutory  basis for the joint and several liability of the employer with his contractor, in addition to Article 106, since the situation in that case was clearly one of "labor-only" contracting. The NLRC submission that Article 107 is not applicable in the instant case for the reason that the coverage thereof is limited to one "not an employer" whereas GMC is such an employer as defined in Article 97 (b) of the Labor Code,1 is not well-taken. Under the peculiar set-up herein, GMC is, in fact, "not an employer" (in the sense of not being a direct employer) as understood in Article 106 of the Labor Code, but qualifies as an "indirect employer" under Article 107 of said Code. The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "laboronly" contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer, who is deemed "responsible to the workers to the same extent as if the latter were directly employed by him." On the other hand, Article 107 deals with "job contracting."   In the latter situation, while the contractor himself is the direct employer of the employees, the employer is deemed, by operation of law, as an indirect employer. In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with Article 106. A contrary interpretation would render the provisions of Article 107 meaningless considering that everytime an employer engages a contractor, the latter is always acting in the interest of the former, whether directly or indirectly, in r elation to his employees. It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No. 50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor is considered as a mere agent of an employer. In contrast, in "job contracting," no employer-employee relationship exists between the owner and the employees of his contractor. The owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's employees. As an indirect employer, and for purposes of determining the extent of its civil liability, GMC is deemed a "direct employee" of his contractor's employees pursuant to the last sentence of Article 109 of the Labor Code. As a consequence, GMC can not escape its joint and solidary liability to  petitioners. Further, Article 108 of the Labor Code requires the posting of a bond to answer for wages that a contractor fails to pay, thus:

Article 108.  Posting of Bond .  —   An employer or indirect employer may require the contractor or subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees showed the contractor or subcontractor, as the case may be, fails to pay the same. Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities LUPO may have incurred to his employees. This is without prejudice to its seeking reimbursement from LUPO for whatever amount it will have to pay petitioners. WHEREFORE, the Petition for certiorari is GRANTED. The Resolution of respondent NLRC, Third Division, dated 27 February 1987, is hereby SET ASIDE, and the Decision of the Labor Arbiter, dated 21 November 1984, is hereby REINSTATED. SO ORDERED.  Paras, Sarmiento and Regalado, JJ., concur.

Separate Opinions

PADILLA, J .,:

The present petition seeks to have General Milling Corporation (the Company) held liable for the unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the  petitioners' services. This majority finds for the petitioners in the total adjudged sum of P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable, and therefore disagree, with the legal basis on which the company's liability is determined. As determined by the majority, such liability of the company is called for by Article 107, Chapter III, Title II, Book III of the Labor Code, which is as follows: 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. (emphasis supplied) It is strongly urged by the majority that the phrase "not being an employer" found in said Article 107 be given a circumspect appraisal. To my mind, there is no other interpretation of this  provision of the Code than that an indirect employer, to be categorized as such, must not be an  EMPLOYER as this term is defined under the Code. Article 97 of the same Title of the Labor Code defines an EMPLOYER as —  ART. 97. Definition. —  As used  in this Title a) ...  b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its  branches, subdivision and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions, or organizations. ... (emphasis supplied) From the foregoing basic premises, it is my submission that the company (General Milling Corporation) is an employer   in every sense of the word. It engages in the primary enterprise of manufacturing flour and feeds, it definitely employs employees and workers in its plant and outlets to work in various capacities. Therefore, the company cannot, in any way, be considered

an indirect employer, as the term is defined, for purposes of the petitioner's cause of action against it. To hold as the majority does, that Article 107 does apply in this case, would, in my view, render useless the phrase "not being an employer" contained therein. Evidently, the framers of the Labor Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it, gives protection to those workers hired or recruited by a contractor to work on some job for a  person who is not himself engaged in any enterprise. An example easily comes to mind: a person who wishes to have a residential house built. He engages an architect or engineer to undertake the project who, in turn, hires laborers, masons and carpenters. Should the architect or engineer renege on his obligations to the workers he shall have recruited, to whom will the latter seek relief? By mandate of Article 107, above-quoted, the owner of the house, who is not himself  an employer as defined by law,  shall be held accountable. This is where, in my view, Article 107 properly applies. In the present case, however, the company's liability to the petitioners properly comes under Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, provides: 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 the 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 the 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 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  persons are performing activities which are directly related to the principal business of such employer. In such case, 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. It appears abundantly clear that the juridical relationship envisioned in Article 106  involves an employer, as defined by the Code. It thus applies to the juridical situation involved in this case, where the actors are General Milling Corporation (as the employer), Lupo (as the contractor) and the petitioners (as the employees or workers). Article 106, upon careful examination, deals with three (3) situations in the juridical relationship between employer-contractor-employee. It does not deal solely with "labor-only" contracting. The first situation  in Article 106 is where the employer (project owner) enters into a contract with a contractor for the performance of some job or work; the employees recruited by such contractor shall be paid, according to Article 106, first paragraph, in accordance with the requirements of the Labor Code. Stated in another way, the first paragraph of Article 106,  provides the manner by which such employees shall be paid their wages and that is, in compliance with the provisions of the Labor Code. This, therefore, would include the rules on manner of payment, minimum wage, place of payment, etc. In an employer-contractor-employee relationship, it is clear that the contractor is the real employer and, therefore, responsible to his workers for their wages. However, should such

contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse? The second paragraph of Article 106  resolves the seeming dilemma of the workers by providing that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for the payment of wages corresponding to the amount of work undertaken by the contractor's employees in the project. This is the second situation contemplated by Article 106. The third  and final situation treated in Article 106 is contained in the fourth paragraph thereof. It pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article 106that of a "labor-only" contracting and the extent of the rights and liabilities of the part ies involved in such a relationship. As explained in the ponencia,for this scheme or situation to exist, two (2) circumstances must concur: one, the contractor who recruits the workers must have 'no substantial capital or investment in the form of tools, equipment, machineries and work premises,' and two, 'such workers are so engaged to perform activities directly related to the employer's principal business.' Should there be a finding of 'labor-only' contracting, the law expressly provides that the EMPLOYER (or project owner) shall be considered the direct employer of such workers. Such juridical relationship would then spawn a whole gamut of employer's obligations, including obligations under the workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. 1

From the facts of this case as presented, the second paragraph of article 106 finds clear application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to his insolvency, the employer (company) must compl y with its joint and several obligation to answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the company be inclined to do so, it may seek reimbursement from Lupo. In sum, it is my submission that the company's solidary liability to the petitioners ought to be  predicated on the basis, not of Article 107 of the Labor Code (which applies only to nonemployers while the company in this case is an employer) but rather, upon the express declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not nonemployers) as the company in the case at bar.

# Separate Opinions PADILLA, J., The present petition seeks to have General Milling Corporation (the Company) held liable for the unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the  petitioners' services. This majority finds for the petitioners in the total adjudged sum of P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable, and therefore disagree, with the legal basis on which the company's liability is determined. As determined by the majority, such liability of the compan y is called for by Article 107, Chapter III, Title II, Book III of the Labor Code, which is as follows: 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. (emphasis supplied) It is strongly urged by the majority that the phrase "not being an employer" found in said Article 107 be given a circumspect appraisal. To my mind, there is no other interpretation of this  provision of the Code than that an indirect employer, to be categorized as such, must not be an EMPLOYER as this term is defined under the Cod e. Article 97 of the same Title of the Labor Code defines an EMPLOYER as —  ART. 97. Definition. —  As used in this Title

a) ...  b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivision and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions, or organizations. ... (emphasis supplied) From the foregoing basic premises, it is my submission that the compan y (General Milling Corporation) is an employer in every sense of the word. It engages in the primary enterprise of manufacturing flour and feeds, it definitely employs employees and workers in its plant and outlets to work in various capacities. Therefore, the company cannot, in any way, be considered an indirect employer, as the term is defined, for purposes of the petitioner's cause of action against it. To hold as the majority does, that Article 107 does apply in this case, would, in my view, render useless the phrase "not being an emplo yer" contained therein. Evidently, the framers of the Labor Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it, gives protection to those workers hired or recruited by a contractor to work on some job for a  person who is not himself engaged in any enterprise. An example easily comes to mind: a person who wishes to have a residential house built. He engages an architect or engineer to undertake the project who, in turn, hires laborers, masons an d carpenters. Should the architect or engineer renege on his obligations to the workers he shall have recruited, to whom w ill the latter seek relief? By mandate of Article 107, above-quoted, the owner of the house, who is not himself an employer as defined by law, shall be held accountable. This is where, in my view, Article 107 properly applies. In the present case, however, the company's liability to the petitioners properly comes under Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, provides: 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 the 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 the con tractor 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 may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Cod e. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job con tracting as well as differentiations within these types of contracting and determine who am ong the parties involved shall be considered the emplo yer for purposes of this Code, to prevent an y 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 persons are performing activities which are directly related to the principal business of such employer. In such case, 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. It appears abundantly clear that the juridical relationship env isioned in Article 106 involves an employer, as defined by the Code. It thus applies to the juridical situation involved in this case, where the actors are General Milling Corporation (as the emplo yer), Lupo (as the contractor) and

the petitioners (as the employees or workers). Article 106, u pon careful examination, deals with three (3) situations in the juridical relationship between employer-contractor-employee. It does not deal solely with "labor-only" contracting. The first situation in Article 106 is where the employer (project owner) enters into a contract with a contractor for the performance of some job or work; the employees recruited by such contractor shall be paid, according to Article 106, first paragraph, in accordance with the requirements of the Labor Code. Stated in another way, the first paragraph of Article 106,  provides the manner by which such employees shall be paid their wages and that is, in compliance with the provisions of the Labor Cod e. This, therefore, would include the rules on manner of payment, minimum wage, place of payment, etc. In an employer-contractor-employee relationship, it is clear that the contractor is the real employer and, therefore, responsible to his workers for their wages. Howev er, should such contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse? The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for the payment of wages corresponding to the amount of work undertaken by the contractor's employees in the project. This is the second situation contemplated by Article 106.

The third and final situation treated in Article 106 is contained in the fourth paragraph thereof. It  pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article 106-that of a "labor-only" contracting and the extent of the rights and liabilities of the parties involved in such a relationship. As explained in the ponencia, for this scheme or situation to exist, two (2) circumstances must concur: one, the contractor who recruits the workers must have 'no substantial capital or investment in the form of tools, eq uipment, machineries and work  premises,' and two, 'such workers are so engaged to perform activities directly related to the employer's principal business.' Should there be a finding of 'labor-only' contracting, the law expressly provides that the EMPLOYER (or project owner) shall be consi dered the direct employer of such workers. Such juridical relationship would then spawn a whole gamut of employer's obligations, including obligations under the workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. 1

From the facts of this case as presented, the second paragraph of article 106 finds clear application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to his insolvency, the employer (company) must compl y with its joint and several obligation to answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the company be inclined to do so, it may seek reimbursement from Lupo. In sum, it is my submission that the company's solidary liability to the petitioners ought to be  predicated on the basis, not of Article 107 of the Labor Code (which applies only to nonemployers while the company in this case is an employer) but rather, upon the express declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not nonemployers) as the company in the case at bar.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 79351 November 28, 1989 DEVELOPMENT BANK OF THE PHILIPPINES,  petitioner, vs. THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET AL., respondents.

The Chief Legal Counsel for petitioner.  Dante P. Sindac for private respondents.

CORTES, J .:

Petitioner Development Bank of the Philippines seeks the nullification of an order dated July 29, 1987 and issued by the Undersecretary of Labor and Employment, affirming that of National Capital Region Officer-in-Charge Romeo A. Young, directing the petitioner to deliver the  properties of Riverside Mills Corporation (RMC) which it had in its possession to the Ministry (now Department) of Labor and Employment (MOLE) for proper disposition in Case No. NCRLSED-7-334-84 pursuant to Article 110 of the Labo r Code. Labor Case No. NCR-LSED-7-334-84 involves a complaint for illegal dismissal, unfair labor  practice, illegal deductions from salaries and violation of the minimum wage law filed by private respondents herein against RMC. On July 3, 1985, a decision was rendered by Director Severo M. Pucan of the National Capital Region, MOLE, ordering RMC to pay private respondents  backwages and separation benefits. A corresponding writ of execution was issued on October 22, 1985 directing the sheriff to collect the amount of ONE MILLION TWO HUNDRED FIFTYSIX THOUSAND SIX HUNDRED SEVENTY-EIGHT PESOS AND SEVENTY SIX CENTAVOS (P1,256,678.76) from RMC and, in case of failure to collect, to execute the writ by selling the goods and chattel of RMC not exempt from execution or, in case of insufficiency thereof, the real or immovable properties of RMC. However, on May 23, 1986, the writ of execution was returned unserved and unsatisfied, with the information that the company premises of RMC had been padlocked and foreclosed by  petitioner. It appears that petitioner had instituted extra-judicial foreclosure proceedings as early as 1983 on the properties and other assets of RMC as a result of the latter's failure to meet its obligations on the loans it secured from petitioner. Consequently, private respondents filed with the MOLE a "Motion for Delivery of Properties of the [RMC] in the Possession of the [DBP] to the [MOLE] for Proper Disposition," stating that  pursuant to Article 110 of the Labor Code, they enjoy first preference over the mortgaged  properties of RMC for the satisfaction of the judgment rendered in their favor notwithstanding the foreclosure of the same by petitioner as mortgage creditor [Rollo, pp. 16-17]. Petitioner filed its opposition. In an order signed by Officer-in-Charge Romeo A. Young and dated December 11, 1986, private respondents' motion was granted based on the finding that Article 110 of the Labor Code and the ruling laid down in  Philippine Commercial and Industrial Bank v. Natural Mines and Allied Workers' ( NAMAWU-MIF ) [G.R. No. 50402, August 19, 1982, 115 SCRA 873] support the conclusion that private respondents still enjoyed a preferential lien for the payment of their  backwages and separation benefits over the properties of RMC which were foreclosed by  petitioner [Rollo, pp. 21-22]. Petitioner then filed its motion for reconsideration on December 24,1986 contending that Article 110 of the Labor Code finds no application in the case at bar for the following reasons: (1) The

 properties sought to be delivered have ceased to belong to RMC in view of the fact that  petitioner had foreclosed on the mortgage, and the properties have been sold and delivered to third parties; (2) The requisite condition for the application of Article 110 of the Labor Code is not present since no bankruptcy or insolvency proceedings over RMC properties and assets have  been undertaken [Rollo, pp. 24-28]. In an order dated July 29, 1987, petitioner's motion for reconsideration was denied for lack of merit b y Undersecretary Dionisio C. dela Serna. Hence, petitioner filed this special civil action for  certiorari with prayer for the issuance of a writ of preliminary injunction. On August 27, 1987, this Court issued a temporary restraining order enjoining public respondent from enforcing or carrying out its order dated July 29, 1987. After considering the allegations made and issues raised in the petition, comments thereto and reply, the Court, on March 14, 1988, resolved to give due course to the petition and to require the  parties to submit their respective memoranda. Petitioner and private respondent submitted their memoranda, while public respondent adopted as its memorandum the comment it had previously submitted. After a careful study of the various arguments adduced, as well as the legal provisions and  jurisprudence on the matter, the Court finds the petition impressed with merit. Indeed, the assailed Order suffers from infirmities which must be rectified by the grant of a writ of certiorari in favor of petitioner. Firstly, public respondent acted with grave abuse of discretion amounting to lack or excess of  jurisdiction in enforcing private respondents' right of first preference under Article 110 of the Labor Code notwithstanding the absence of bankruptcy, liquidation or insolvency proceedings against RMC. Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provide the following: Article 110. WORKER PREFERENCE IN CASE OF BANKRUPTCY. —   In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards wages due them for services rendered during the  period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a share in the assets of the employer [Emphasis supplied]. Section 10. PAYMENT OF WAGES IN CASE OF BANKRUPTCY. —   Unpaid wages earned by the employees before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be  paid in full before other creditors may establish any claim to a share in the assets of the employer. It is clear from the wording of the law that the preferential right accorded to employees and workers under Article 110 may be invoked only during bankruptcy or judicial liquidation  proceedings against the employer. The law is unequivocal and admits of no other construction. Respondents contend that the terms "bankruptcy" or "liquidation" are broad enough to cover a situation where there is a cessation of the operation of the employer's business as in the case at  bar. However, this very same contention was struck down as unmeritorious in the case of Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel C. Santos [G.R. Nos. 78261-62, March 8, 1989] involving a group of RMC employees which sought to enforce its  preference of credit Article 110 against DBP over certain RMC real properties. In that case, the Court laid down the ruling that Article 110 of the Labor Code, which cannot be viewed in isolation of, and must always be reckoned with the provisions of the Civil Code on concurrence and preference of credits, may not be invoked by employees or workers of RMC like private respondents herein, in the absence of a formal declaration of bankruptcy or a judicial liquidation order of RMC. The rationale for making the application of Article 110 of the Labor Code contingent upon the institution of bankruptcy or judicial liquidation proceedings against the employer is premised upon the very nature of a preferential right of credit. A preference of credit bestows upon the  preferred creditor an advantage of having his credit satisfied first ahead of other claims which

may be established against the debtor. Logically, it becomes material only when the properties and assets of the debtor are insufficient to pay his debts in full; for if the debtor is amply able to  pay his various creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale of the debtor's specific property? Indubitably, the preferential right of credit attains significance only after the  properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established [Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil. 611 (1916); Barrette v. Villanueva, G.R. No. L-14938, December 29, 1962, 6 SCRA 928; Philippine Savings Bank v. Lantin, G.R. No. L-33929, September 2, 1983, 124 SCRA 476]. In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide the only proper venue for the enforcement of a creditor's preferential right such as that established in Article 110 of the Labor Code, for these are in rem proceedings binding against the whole world where all persons having any interest in the assets of the debtor are given the opportunity to establish their respective credits [Philippine Savings Bank v. Lantin, supra; Development Bank of the Philippines v. Santos supra]. Secondly, public respondent's Order directing petitioner to deliver to the MOLE the properties it had foreclosed from RMC for the purpose of executing the judgment rendered against RMC in Case No. NCR-LSED 7-334-84 violates the basic rule that the power of a court or tribunal in the execution of its judgment extends only over properties unquestionably belonging to the judgment debtor [Special Services Corporation v. Centro La Paz, G.R. No. L- 44100, April 28, 1983, 121 SCRA 748; National Mines and Allied Workers' Union v. Vera, G.R. No. L-44230, November 19, 1984, 133 SCRA 295]. It appears on record, and remains undisputed by respondents, that petitioner had extra-judicially foreclosed the subject properties from RMC as early as 1983 and purchased the same at public auction, and that RMC had failed to exercise its right to redeem. Thus, when Officer-in-Charge Young issued on December 11, 1986 the order which directed the delivery of these properties to the MOLE, RMC had ceased to be the absolute owner thereof [See Dizon v. Gaborra, G.R. No. L-36821, June 22, 1978, 83 SCRA 688]. Consequently, the order was directed against properties which no longer belonged to the judgment debtor RMC. However, respondents, in citing the case of PCIB v. NAMAWU-MIF  [ supra], argue that by virtue of Article 110 of the Labor Code, an "automatic first lien" was created in favor of private respondents on RMC properties — a "lien" which predated the foreclosure of the subject  properties by petitioner, and remained vested on these properties even after its sale to petitioner and other parties. There is no merit to this contention. It proceeds from a misconception which must be corrected. What Article 110 of the Labor Code establishes is not a lien, but a preference of credit in favor of employees [See Republic v. Peralta, G.R. No. 56568, May 20, 1987, 150 SCRA 37]. This simply means that during bankruptcy, insolvency or liquidation proceedings involving the existing  properties of the employer, the employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be proved therein. It bears repeating that a preference of credit points out solely the order in which creditors would  be paid from the properties of a debtor inventoried and appraised during bankruptcy, insolvency or liquidation proceedings. Moreover, a preference does not exist in any effective way prior to, and apart from, the institution of these proceedings, for it is only then that the legal provisions on concurrence and preference of credits begin to apply. Unlike a lien, a preference of credit does not create in favor of the preferred creditor a charge or proprietary interest upon any particular  property of the debtor. Neither does it vest as a matter of course upon the mere accrual of a money claim against the debtor. Certainly, the debtor could very well sell, mortgage or pledge his property, and convey good title thereon, to third parties free from such preference [Kuenzle & Streiff v. Villanueva, supra]. Incidentally, the Court is not unmindful of the 1989 amendments to the article introduced by Section 1, R.A. No. 6715 [March 21, 1989]. Article 110 of the Labor Code as amended reads:

WORKER PREFERENCE IN CASE OF BANKRUPTCY. —   In the event of  bankruptcy or liquidation of an employer's business, his workers shall enjoy first  preference as regards their unpaid wages and other monetary claims, any  provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of the Government  and other creditors may be paid. [Amendments indicated.] However, these amendments only relate to the scheme of concurrence and preference of credits; they do not affect the issues heretofore discussed regarding the applicability of Article 110 to the attendant facts. WHEREFORE, considering the foregoing, the present petition is hereby GRANTED. The assailed order dated July 29, 1987 is SET ASIDE and the temporary restraining order issued by the Court on August 27, 1987 is made PERMANENT. SO ORDERED.  Fernan (C.J.), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 117378 March 26, 1997 GIL CAPILI and RICARDO CAPILI,  petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, National Capital Region (First Division), BENIGNO SANTOS, DELFIN YUSON, LUISITO SANTOS, URSINO BASISTER, RICARDO REYES, JOSELITO SANTOS, JORGE BINUYA and NICOLAS MULINGBAYAN, respondents.

BELLOSILLO, J .:

Respondents Benigno Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes, Joselito Santos, Jorge Binuya and Nicolas Mulingbayan are licensed drivers of public utility  jeepneys plying the Libertad-Sta. Cruz route in Manila. The jeepneys were formerly owned by  petitioner Gil Capili. For the use of the jeepney for twelve hours a driver would pay rent or socalled "boundary" of P280.00 and earn a net profit of P200.00 per day. On 7 May 1991, at a time when petitioner Ricardo Capili jointly with his wife had assumed ownership and operation of the jeepneys driven by private respondents, the latter and the other drivers similarly situated were required by the jeepney operators to sign individually contracts of lease of the jeepneys to formalize their lessor-lessee relationship. However, having gathered the impression that the signing of the contracts of lease was a condition precedent before they could continue driving for petitioners, all the drivers stopped plying their assigned routes beginning 7 May 1991. A week later or on 14 May 1991 the drivers, numbering twenty-two (22), filed a complaint for illegal dismissal before the Labor Arbiter praying not for reinstatement  but for separation pay.1 In the interim, fourteen (14) of the complainants desisted and resumed plying their routes. The remaining eight (8) complainants with their reckoning dates of employment follow: (a) Benigno Santos, 1972; (b) Jorge Binuya, 1965; (c) Luisito Santos, 1982; (d) Delfin Yuson, 1983; (e) Ursino Basister, 1980; (f) Ricardo Reyes, 1985; (g) Joselito Santos, 1989; and, (h) Nicolas Mulingbayan, 1978. Petitioners opposed the claim of private respondents before the Labor Arbiter alleging that the latter voluntarily abandoned their respective jobs without any valid cause and thereafter refused and still continue to refuse to return to work despite repeated demands and/or notices given to them to return to work. In resolving the dispute, the Labor Arbiter ruled —  On the issue of dismissal versus abandonment, we are inclined to believe that the latter scenario happened. It is not sound business practice to dismiss many employees at the same time since it would cripple the operations. What was more likely was that the drivers, all 22 of them . . . boycotted respondents on May 7, 1991 by not reporting for work on that day. xxx xxx xxx From the viewpoint of complainants, their signing of the lease contract was a condition sine qua non to the continuous driving of their respective drivers

(jeepneys?). But from the point of view of respondent Capili and as shown in the aforequoted paragraph 5 of his affidavit, and as further shown in the notices (Exhibits "3-B" and "3-B-1") which merely asked complainants to return to work without mentioning any condition like the signing of the contract, the signing of the lease contract by the drivers was merely intended as a confirmation of the original concept of a no employer-employee relationship, and to streamline the operation by indicating the amount of the boundary per driver, depending on the number of hours they drive and their obligation to check on the motor/engine, oil, tires, brakes and other routinary requirements in order to insure the vehicles' roadworthiness. It was never meant to be that if a driver refuses to sign the contract, he would not be allowed to continue driving. To our mind, both parties misappreciated the situation. Respondents' erroneous insistence of a no employer-employee relationship even in the face of a wellestablished contrary doctrine as postulated in the Dinglasan case2 (98 Phil. 649) and complainants' erroneous apprehension of the loss of such employer-employee relationship if they sign the lease contract propelled the complainants to file the instant complaint. In short, this is merely a simple case of misunderstanding. To remedy the situation, we feel that the most prudent approach would be to let the parties return to the relationship that existed between them prior to May 7, 1991.3 The Labor Arbiter thus concluded —  WHEREFORE, decision is hereby rendered declaring the breakage ( sic), of relationship between respondent Ricardo Capili and complainants Benigno T. Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes, Joselito Santos, Jorge Binuya and Nicholas Mulingbayan, as a product of misunderstanding and misappreciation of the situation by both parties and, therefore, respondents are hereby directed to reinstate them to their former  position without loss of seniority rights and other benefits, but without back wages (p. 7, Annex "F", emphasis supplied).4 Private respondents appealed to the National Labor Relations Commission. They reiterated their  prayer for separation pay equivalent to one (1) month salary for every year of service and, in addition, three (3) years back wages. Respondent NLRC upheld the finding of the Labor Arbiter that the case arose due to simple misunderstanding between the complaining drivers on one hand and their employers on the other. However, it took exception to the relief granted to private respondents and modified the appealed decision accordingly by holding that —  Since there was misunderstanding between the parties and this misunderstanding resulted in animosity and strained relationship between them, we deem it proper and most prudent approach to maintain industrial peace for respondents to pay the complainants their separation pay of one half (1/2) month for every year of service, based on their daily earnings of P200.00.5 The petitioners moved to have the above disquisition of respondent NLRC reconsidered but the latter denied the motion. They now come to us arguing that since there was a clear finding of abandonment by the Labor Arbiter consisting in the failure of private respondents to report for work without justifiable reason, the award of separation pay could not be warranted. The NLRC brushed aside the arguments of petitioners. It emphasized that if it were the finding of the Labor Arbiter that private respondents were guilty of abandonment he would not have ordered reinstatement but dismissal of the case. Thus on 9 August 1994 NLRC denied reconsideration.

Petitioners impute grave abuse of discretion on the part of respondent NLRC in awarding separation pay to private respondents. We agree with petitioners. The legal basis for the award of separation pay is clearly provided by Art. 279 of the Labor Code which states that the remedy for illegal dismissal is reinstatement without loss of seniority rights plus back wages computed from the time compensation was withheld up to reinstatement. However there may be instances where reinstatement is not a viable remedy as where the relations between employer and employee have been so severely strained that it is no longer advisable to order reinstatement or where the employee decides not to  be reinstated. In such events, the employer will instead be ordered to pay separation pay. 6 A reading of Art. 279 in relation to Art. 282 of the Labor Code reveals that an employee who is dismissed for cause after appropriate proceedings in compliance with the due process requirements is not entitled to an award of separation pay. Under Arts. 283 and 284 of the same Code, separation pay is authorized only in cases of dismissals due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer's business, and, (e) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of his coemployees.7 However, separation pay shall be allowed as a measure of social justice in those cases where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character, but only when he was illegally dismissed. The common denominator of those instances where payment of separation pay is warranted is that the employee was dismissed   by the employer. In the instant case there was no dismissal at all. Respondent NLRC affirmed the factual findings of the Labor Arbiter that there was only a misunderstanding   between petitioners and private respondents which caused the latter to stop reporting for work. If the Labor Arbiter ordered reinstatement it should not be construed as relief  proceeding from illegal dismissal; instead, it should be considered as a declaration or affirmation that private respondents may return to work because they were not dismissed in the first place, and they should be happy that their employers are accepting them back. This could be the reason why complainants asked only for separation pay —   not for reinstatement —   in their complaint  before the Labor Arbiter. The award of separation pay cannot be justified solely because of the existence of "strained relations" between the employer and the employee. It must be given to the employee only as an alternative to reinstatement emanating from illegal dismissal. When there is no illegal dismissal, even if the relations are strained, separation pay has no legal basis. Besides, the doctrine on "strained relations" cannot be applied indiscriminately since every labor dispute almost invariably results in "strained relations;" otherwise, reinstatement can never be possible simply  because some hostility is engendered between the parties as a result of their disagreement. That is human nature.8 The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case.9 When respondents filed their complaint, and taking account of the allegations therein, they foreclosed reinstatement as a relief, since they prayed only for an award of separation pay. This is confirmed in their appeal to the NLRC where they prayed for a modification of the decision of the Labor Arbiter, from reinstatement without back wages to payment of three (3) years back wages and separation pay equivalent to one (1) month salary for every year of service. 10 It is therefore clear that respondents never desired to be reinstated. This being so, the Court cannot order them to return to work. 11 If private respondents voluntarily chose not to return to work anymore they must be considered as having resigned from their employment. This is without  prejudice however to the willingness of both parties to continue with their former contract of employment or enter into a new one whenever they so desire. WHEREFORE, the petition is GRANTED and the employer-employee relationship between  petitioners on one hand and each private respondent on the other is deemed voluntarily terminated. Consequently, the decision of respondent National Labor Relations Commission dated 28 February 1994 is REVERSED and SET ASIDE.

SO ORDERED.  Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 163891

May 21, 2009

CHARTER CHEMICAL AND COATING CORPORATION,  Petitioner, vs. HERBERT TAN and AMALIA SONSING,  Respondents.

DECISION CARPIO, J .: The Case

This is a petition for review1 of the 9 March 2004 Decision2 and 4 June 2004 Resolution3 of the Court of Appeals in CA-G.R. SP No. 72086. In the 9 March 2004 Decision, the Court of Appeals ruled that the National Labor Relations Commission (NLRC) acted with grave abuse of discretion when it reversed its earlier dismissal of and, subsequently, gave due course to the appeal of petitioner Charter Chemical and Coating Corporation (petitioner). The 4 June 2004 Resolution denied petitioner’s motion for reconsideration. The Facts

Respondents Herbert Tan and Amalia Sonsing (respondents) were employed as officer-in-charge and office secretary, respectively, at petitioner’s Davao branch. On 4 March 2000, respondents were placed under preventive suspension for their failure to satisfactorily explain the discrepancies in the stock inventory at the Davao depot warehouse. Respondents were also asked to explain the alleged dishonesty in the punching of their time cards. On 24 March 2000,  petitioner advised respondents that they were being terminated from the service. On 7 J une 2000, respondents filed a complaint for illegal dismissal and money claims against petitioner. On 18 January 2001, Labor Arbiter Nicolas S. Sayson ruled in favor of respondents. The dispositive portion of the 18 January 2001 Decision4 provides: WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the dismissal of complainants Herbert Tan and Amalia Sonsing as ILLEGAL. Respondent Charter Chemical and Coating Corporation is hereby directed to pay herein complainants their separation pay, backwages, 13th month pay and damages, to wit: 1. Herbert Tan - ₱372,800.00; and 2. Amalia Sonsing 136,800.00 or in the total amount of Five Hundred Nine Thousand Six Hundred Pesos (₱509,600)  plus ten (10%) per cent thereof as attorney’s fees. Total award: ₱560,560.00 SO ORDERED.5 Petitioner received a copy of the Labor Arbiter’s Decision on 7 February 2001. On 16 February 2001, petitioner sent its notice of appeal to the NLRC through Luzon Brokerage Corporation (LBC). The NLRC received the notice of appeal on 26 February 2001. In its 11 October 2001 Resolution,6 the NLRC dismissed petitioner’s appeal for having been filed beyond the 10-day reglementary period.

Petitioner filed a motion for reconsideration. In its 6 February 2002 Resolution, 7 the NLRC granted the motion and gave due course to petitioner’s appeal. Subsequently, the NLRC dismissed respondents’ complaint for illegal dismissal. Respondents filed a motion for reconsideration. In its 22 April 2002 Resolution, the NLRC denied respondents’ motion. Respondents then filed a petition for certiorari before the Court of Appeals. In its 9 March 2004 Decision, the Court of Appeals granted respondents’ petition and ruled that the NLRC acted with grave abuse of discretion in admitting petitioner’s belated appeal. Petitioner filed a motion for reconsideration. In its 4 June 2004 Resolution, the Court of Appeals denied the motion. Hence, this petition. The 6 February 2002 Resolution of the NLRC

In its 6 February 2002 Resolution, the NLRC reversed its earlier dismissal of petitioner’s appeal. According to the NLRC, in the ordinary course of events, the NLRC would have received  petitioner’s notice of appeal on time because of LBC’s assurance that delivery shall be made within 24 hours. However, the NLRC transferred its office to another location and the DOLE refused to accept petitioner’s notice of appeal when it was delivered by LBC. The NLRC said these unforeseen circumstances led to the failure of the NLRC to receive the notice of appeal on time. The NLRC added that strict observance of the period to appeal need not be exacted on  petitioner since it exerted diligent efforts to file its notice of appeal on time but failed to do so through no fault of its own. The NLRC said the supervening events constitute excusable negligence which would vest the NLRC with discretion to admit the appeal which was filed out of time. The Ruling of the Court of Appeals

According to the Court of Appeals, the NLRC acted with grave abuse of discretion in admitting  petitioner’s belated appeal. The Court of Appeals said that the NLRC should have adhered to the rule that the appeal should be filed within 10 calendar days from the receipt of the decision as mandated by Article 2238 of the Labor Code. The Court of Appeals added that the delay in the delivery of the notice of appeal committed by LBC did not fall under any of the circumstances that would justify the relaxation of the rigid technicality of the rule on appeal. The Issue

Petitioner raises the issue of whether the 9 March 2004 Decision and the 4 June 2004 Resolution of the Court of Appeals are contrary to existing law and jurisprudence. The Court’s Ruling

The petition has no merit. Petitioner argues that the NLRC acted within its jurisdiction when it relaxed the application of the rules on appeal in labor cases because the failure to comply with the reglementary period to appeal was brought about by LBC’s difficulty in finding the new address of the NLRC. Petitioner adds that there was substantial compliance with the rules on appeal as the notice of appeal was consigned for delivery to LBC on 16 February 2001 or three days before the expiration of the period to appeal. Petitioner also insists that the date of delivery to LBC was the date of filing of its notice of appeal. Article 223 of the Labor Code, the governing law on the timeliness of an appeal from the decisions, awards or orders of the Labor Arbiter, is explicit that the aggrieved party has 10 calendar days from receipt thereof to appeal to the NLRC. Accordingly, this 10-day reglementary period to perfect an appeal is mandatory and jurisdictional in nature. The failure to file an appeal within the reglementary period renders the assailed decision final and executory

and deprives the appellate court of jurisdiction to alter the judgment, much less to entertain the appeal.91awphi1 There is no dispute that petitioner received a copy of the Labor Arbiter’s decision on 7 February 2001. Thus, pursuant to Article 223 of the Labor Code, petitioner had only until 17 February 2001, the 10th calendar day from 7 February 2001, within which to file an appeal. However, as 17 February 2001 fell on a Saturday, petitioner had until the next working day, or until 19 February 2001, to file its appeal. On 16 February 2001, petitioner consigned its notice of appeal to LBC for delivery to the NLRC. The NLRC received petitioner’s notice of appeal only on 26 February 2001.1avvphi1 In Benguet Electric Cooperative, Inc. v. NLRC ,10 we ruled: The established rule is that the date of delivery of pleadings to a private letter-forwarding agency is not to be considered as the date of filing thereof in court, and that in such cases, the date of actual receipt by the court, and not the date of delivery to the private carrier, is deemed the date of filing of that pleading.11 In this case, petitioner availed of the services of LBC, a private carrier, to deliver its notice of appeal to the NLRC. Had petitioner sent its notice of appeal by registered mail, the date of mailing would have been deemed the date of filing with the NLRC.12 But petitioner, for reasons of its own, chose to send its notice of appeal through a private letter-forwarding agency. Therefore, the date of actual receipt by the NLRC of the notice of appeal, and not the date of delivery to LBC, is deemed to be the date of the filing of the notice of appeal. Since the NLRC received petitioner’s notice of appeal on 26 February 2001, the appeal was clearly filed out of time. Petitioner had thus lost its right to appeal from the decision of the Labor Arbiter and the  NLRC should have dismissed its notice of appeal. WHEREFORE, we DENY the petition and AFFIRM  the 9 March 2004 Decision and 4 June 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 72086. SO ORDERED. ANTONIO T. CARPIO Associate Justice

WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson RENATO C. CORONA Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

LUCAS P. BERSAMIN Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. REYNATO S. PUNO Chief Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 84433 June 2, 1992 ALEXANDER REYES, ALBERTO M. NERA, EDGARDO M. GECA, and 138 others,  petitioners, vs. CRESENCIANO B. TRAJANO, as Officer-in-Charge, Bureau of Labor Relations, Med. Arbiter PATERNO ADAP, and TRI-UNION EMPLOYEES UNION, et al., respondent.

NARVASA, C.J.:

The officer-in-charge of the Bureau of Labor Relations (Hon. Cresenciano Trajano) sustained the denial by the Med Arbiter of the right to vote of one hundred forty-one (141) members of the "Iglesia ni Kristo" (INK), all employed in the same company, at a certification election at which two (2) labor organizations were contesting the right to be the exclusive representative of the employees in the bargaining unit. That denial is assailed as having been done with grave abuse of discretion in the special civil action of certiorari at bar, commenced by the INK members adversely affected thereby. The certification election was authorized to be conducted by the Bureau of Labor Relations among the employees of Tri-Union Industries Corporation on October 20, 1987. The competing unions were Tri-Union Employees Union-Organized Labor Association in Line Industries and Agriculture (TUEU-OLALIA), and Trade Union of the Philippines and Allied Services (TUPAS). Of the 348 workers initially deemed to be qualified voters, only 240 actually took part in the election, conducted under the provision of the Bureau of Labor Relations. Among the 240 employees who cast their votes were 141 members of the INK. The ballots provided for three (3) choices. They provided for votes to be cast, of course, for either of the two (2) contending labor organizations, (a) TUPAS and (b) TUEU-OLALIA; and, conformably with established rule and practice, 1 for (c) a third choice: "NO UNION."  The final tally of the votes showed the following results: TUPAS 1 TUEU-OLALIA 95  NO UNION 1 SPOILED 1 CHALLENGED 141 The challenged votes were those cast by the 141 INK members. They were segregated and excluded from the final count in virtue of an agreement between the competing unions, reached at the pre-election conference, that the INK members should not be allowed to vote "because they are not members of any union and refused to participate in the previous certification elections." The INK employees promptly made known their protest to the exclusion of their votes. They filed f a petition to cancel the election alleging that it "was not fair" and the result thereof did "not reflect the true sentiments of the majority of the employees." TUEU-OLALIA opposed the  petition. It contended that the petitioners "do not have legal personality to protest the results of

the election," because "they are not members of either contending unit, but . . .  of the INK" which prohibits its followers, on religious grounds, from joining or forming any labor organization . . . ." The Med-Arbiter saw no merit in the INK employees 1 petition. By Order dated December 21, 1987, he certified the TUEU-OLALIA as the sole and exclusive bargaining agent of the rankand-file employees. In that Order he decided the fact that "religious belief was (being) utilized to render meaningless the rights of the non-members of the Iglesia ni Kristo to exercise the rights to  be represented by a labor organization as the bargaining agent," and declared the petitioners as "not possessed of any legal personality to institute this present cause of action" since they were not parties to the petition for certification election. The petitioners brought the matter up on appeal to the Bureau of Labor Relations. There they argued that the Med-Arbiter had "practically disenfranchised petitioners who had an overwhelming majority," and "the TUEU-OLALIA certified union cannot be legally said to have  been the result of a valid election where at least fifty-one percent of all eligible voters in the appropriate bargaining unit shall have cast their votes." Assistant Labor Secretary Cresenciano B. Trajano, then Officer-in-Charge of the Bureau of Labor Relations, denied the appeal in his Decision of July 22, 1988. He opined that the petitioners are "bereft of legal personality to  protest their alleged disenfrachisement" since they "are not constituted into a duly organized labor union, hence, not one of the unions which vied for certification as sole and exclusive  bargaining representative." He also pointed out that the petitioners "did not participate in  previous certification elections in the company for the reason that their religious beliefs do not allow them to form, join or assist labor organizations." It is this Decision of July 22, 1988 that the petitioners would have this Court annul and set aside in the present special civil action of certiorari. The Solicitor General having expressed concurrence with the position taken by the petitioners,  public respondent NLRC was consequently required to file, and did thereafter file, its own comment on the petition. In that comment it insists that "if the workers who are members of the Iglesia ni Kristo in the exercise of their religious belief opted not to join any labor organization as a consequence of which they themselves can not have a bargaining representative, then the right to be representative by a bargaining agent should not be denied to other members of the  bargaining unit." Guaranteed to all employees or workers is the "right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining." This is made plain by no less than three provisions of the Labor Code of the Philippines. 2 Article 243 of the Code provides as follows: 3 ART. 243. Coverage and employees right to self-organization.  —   All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without any definite employers may form labor organizations for their mutual aid and protection. Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to "interfere with, restrain or coerce employees in the exercise of their right to self-organization." Similarly, Article 249 (a) makes it an unfair labor practice for a labor organization to "restrain or coerce employees in the exercise of their rights to self-organization . . . " The same legal proposition is set out in the Omnibus Rules Implementing the Labor Code, as amended, as might be expected Section 1, Rule II (Registration of Unions), Book V (Labor Relations) of the Omnibus Rules provides as follows; 4 Sec. 1. Who may join unions; exception. —   All persons employed in commercial, industrial and agricultural enterprises, including employees of government corporations established under the Corporation Code as well as employees of

religious, medical or educational institutions, whether operating for profit or not, except managerial employees, shall have the right to self-organization and to  form, join or assist labor organizations for purposes of collective bargaining.  Ambulant, intermittent and without any definite employers people, rural workers and those without any definite employers may form labor organizations for their mutual aid and protection. xxx

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The right of self-organization includes the right to organize or affiliate with a labor union or determine which of two or more unions in an establishment to join, and to engage in concerted activities with co-workers for purposes of collective bargaining through representatives of their own choosing, or for their mutual aid and protection, i.e., the protection, promotion, or enhancement of their rights and interests. 5 Logically, the right NOT to join, affiliate with, or assist any union, and to disaffiliate or resign  from a labor organization, is subsumed in the right to join, affiliate with, or assist any union, and to maintain membership therein. The right to form or join a labor organization necessarily includes the right to refuse or refrain from exercising said right. It is self-evident that  just as no one should be denied the exercise of a right granted by law, so also, no one should be compelled to exercise such a conferred right. The fact that a person has opted to acquire membership in a labor union does not preclude his subsequently opting to renounce such membership. 6 As early as 1974 this Court had occasion to expatiate on these self-evident propositions in Victoriano v. Elizalde Rope Workers' Union, et al., 7 viz.: . . .What the Constitution and Industrial Peace Act recognize and guarantee is the "right" to form or join associations. Notwithstanding the different theories  propounded by the different schools of jurisprudence regarding the nature and contents of a "right," it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself being prevented by law; second, power, whereby an employee may, as he  pleases, join or refrain from joining an association. It is therefore the employee who should decide for himself whether he should join or not an association; and should he choose to join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time (Pagkakaisa Samahang Manggagawa ng San Miguel Brewery vs. Enriquez, et al., 108 Phil. 1010, 1019). It is clear, therefore, that the right to join a union includes the right to abstain from joining any union (Abo, et al. vs. PHILAME [KG] Employees Union, et al., L-19912, January 20, 1965, 13 SCRA 120, 123, quoting Rothenberg, Labor Relations). Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, the guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association. The right to refuse to join or be represented by any labor organization is recognized not only by law but also in the rules drawn up for implementation thereof. The original Rules on Certification promulgated by the defunct Court of Industrial Relations required that the ballots to  be used at a certification election to determine which of two or more competing labor unions would represent the employees in the appropriate bargaining unit should contain, aside from the names of each union, an alternative choice of the employee voting, to the effect that he desires not to which of two or more competing labor unions would represent the employees in the appropriate bargaining unit should contain, aside from the names of each union, an alternative choice of the employee voting, to the effect that he desires not to be represented by any union. 8 And where only one union was involved, the ballots were required to state the question  —   "Do you desire to be represented by said union?" —   as regards which the employees voting would mark an appropriate square, one indicating the answer, "Yes" the other, "No."

To be sure, the present implementing rules no longer explicitly impose the requirement that the  ballots at a certification election include a choice for "NO UNION" Section 8 (rule VI, Book V of the Omnibus Rules) entitled "Marketing and canvassing of votes," pertinently provides that: . . . (a) The voter must write a cross (X) or a check (/) in the square opposite the union of his choice. If only one union is involved, the voter shall make his cross or check in the square indicating "YES" or "NO." xxx

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Withal, neither the quoted provision nor any other in the Omnibus Implementing Rules expressly  bars the inclusion of the choice of "NO UNION" in the ballots. Indeed it is doubtful if the employee's alternative right NOT to form, join or assist any labor organization or withdraw or resign from one may be validly eliminated and he be consequently coerced to vote for one or another of the competing unions and be represented by one of them. Besides, the statement in the quoted provision that "(i)f only one union is involved, the voter shall make his cross or check in the square indicating "YES" or "NO," is quite clear acknowledgment of the alternative  possibility that the "NO" votes may outnumber the "YES" votes —   indicating that the majority of the employees in the company do not wish to be represented by any union —   in which case, no union can represent the employees in collective bargaining. And whether the prevailing "NO" votes are inspired by considerations of religious belief or discipline or not is beside the point, and may not be inquired into at all. The purpose of a certification election is precisely the ascertainment of the wishes of the majority of the employees in the appropriate bargaining unit: to be or not to be represented by a labor organization, and in the affirmative case, by which particular labor organization. If the results of the election should disclose that the majority of the workers do not wish to be represented by any union, then their wishes must be respected, and no union may properly be certified as the exclusive representative of the workers in the bargaining unit in dealing with the employer regarding wages, hours and other terms and conditions of employment. The minority employees  —   who wish to have a union represent them in collective bargaining  —   can do nothing but wait for another suitable occasion to petition for a certification election and hope that the results will be different. They may not and should not be permitted, however, to impose their will on the majority  —   who do not desire to have a union certified as the exclusive workers'  benefit in the bargaining unit —   upon the plea that they, the minority workers, are being denied the right of self-organization and collective bargaining. As repeatedly stated, the right of selforganization embraces not only the right to form, join or assist labor organizations, but the concomitant, converse right NOT to form, join or assist any labor union. That the INK employees, as employees in the same bargaining unit in the true sense of the term, do have the right of self-organization, is also in truth beyond question, as well as the fact that when they voted that the employees in their bargaining unit should be represented by "NO UNION," they were simply exercising that right of self-organization, albeit in its negative aspect. The respondents' argument that the petitioners are disqualified to vote because they "are not constituted into a duly organized labor union" —   "but members of the INK which prohibits its followers, on religious grounds, from joining or forming any labor organization" —   and "hence, not one of the unions which vied for certification as sole and exclusive bargaining representative," is specious. Neither law, administrative rule nor jurisprudence requires that only employees affiliated with any labor organization may take part in a certification election. On the contrary, the plainly discernible intendment of the law is to grant the right to vote to all bona  fide employees in the bargaining unit, whether they are members of a labor organization or not. As held in Airtime Specialists, Inc. v. Ferrer-Calleja: 9 In a certification election all rank-and-file employees in the appropriate  bargaining unit are entitled to vote. This principle is clearly stated in Art. 255 of the Labor Code which states that the "labor organization designated or selected by the majority of the employees in an appropriate bargaining unit shall be the exclusive representative of the employees in such unit for the purpose of collective bargaining." Collective bargaining covers all aspects of the employment relation and the resultant CBA negotiated by the certified union  binds all employees in the bargaining unit. Hence, all rank-and-file employees,

 probationary or permanent, have a substantial interest in the selection of the  bargaining representative. The Code makes no distinction as to their employment for certification election. The law refers to "all" the employees in the bargaining unit. All they need to be eligible to support the petition is to belong to the "bargaining unit".  Neither does the contention that petitioners should be denied the right to vote because they "did not participate in previous certification elections in the company for the reason that their religious beliefs do not allow them to form, join or assist labor organizations," persuade acceptance. No law, administrative rule or precedent prescribes forfeiture of the right to vote by reason of neglect to exercise the right in past certification elections. In denying the petitioners' right to vote upon these egregiously fallacious grounds, the public respondents exercised their discretion whimsically, capriciously and oppressively and gravely abused the same. WHEREFORE, the petition for certiorari  is GRANTED; the Decision of the then Officer-inCharge of the Bureau of Labor Relations dated December 21, 1987 (affirming the Order of the Med-Arbiter dated July 22, 1988) is ANNULLED and SET ASIDE; and the petitioners are DECLARED to have legally exercised their right to vote, and their ballots should be canvassed and, if validly and properly made out, counted and tallied for the choices written therein. Costs against private respondents. SO ORDERED.  Paras, Padilla and Regalado, JJ., concur.  Nocon, J., is on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 179652

May 8, 2009

PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.),  Petitioner, vs. THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, Respondents.

DECISION TINGA, J .:

The present controversy concerns a matter of first impression, requiring as it does the determination of the demarcation line between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his duly authorized representatives, on the one hand, and the  jurisdiction of the National Labor Relations Commission, on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed between the parties. I. The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP  No. 00855.1 The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against People’s Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAGIBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office  No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report Form,3 the Labor Inspector wrote under the heading "Findings/Recommendations" "non-diminution of benefits" and "Note: Respondent deny employer-employee relationship with the complainant- see Notice of Inspection results." In the  Notice of Inspection Results4 also bearing the date 23 September 2003, the Labor Inspector made the following notations: Management representative informed that complainant is a drama talent hired on a per drama "  participation basis" hence no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies of cash vouchers, billing statement, employments of specific undertaking (a contract between the talent director & the complainant), summary of  billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures into another contract w/ other broadcasting industries. On the other hand, complainant Juezan’s alleged violation of non-diminution of benefits is computed as follows: @ P 2,000/15 days + 1.5 mos = ₱ 6,000 (August 1/03 to Sept 15/03)  Note: Recommend for summary investigation or whatever action deem proper .5

Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected by petitioner; thus, summary investigations were conducted, with the  parties eventually ordered to submit their respective position papers.6 In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money claims amounting to ₱203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to the documents offered by respondent without examining the originals, but at the same time he missed or failed to consider  petitioner’s evidence. Petitioner’s motion for reconsideration was denied.8 On appeal to the DOLE Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank Deposit.9 Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that there is no employeremployee relationship had ever existed between it and respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor arbiter because respondent’s claim exceeded ₱5,000.00. The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of the amount of individual claims  because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was denied.11 Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE Secretary, has jurisdiction over respondent’s claim, in view of Articles 217 and 128 of the Labor Code.12 It adds that the Court of Appeals committed grave abuse of discretion when it dismissed petitioner’s appeal without delving on the issues raised therein, p articularly the claim that no employer-employee relationship had ever existed between petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law available to it. On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act No. 7730, which "removes the jurisdiction of the Secretary of Labor and Employment or his duly authorized representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor Code, regarding the confinement of jurisdiction based on the amount of claims."13 Respondent also claims that petitioner was not denied due process since even when the case was with the Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by the propriety of the Court of Appeals’ ruling that there exists an employer-employee relationship between him and petitioner. Finally, respondent argues that the instant petition for certiorari is a wrong mod e of appeal considering that petitioner had earlier filed a Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals;  petitioner, instead, should have filed a Petition for Review.14 II. The significance of this case may be reduced to one simple question — does the Secretary of Labor have the power to determine the existence of an employer-employee relationship? To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement  power of the DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads: Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue

compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection. (emphasis supplied) xxx The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into  play only "in cases when the relationship of employer-employee still exists." It also underscores the avowed objective underlying the grant of power to the DOLE which is "to give effect to the labor standard provision of this Code and other labor legislation." Of course, a person’s entitlement to labor standard benefits under the labor laws presupposes the existence of employer-employee relationship in the first place. The clause "in cases where the relationship of employer-employee still exists" signifies that the employer-employee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLE’s power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed. The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases15 issued by the DOLE Secretary. It reads: Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION Sec. 3. Complaints where no employer-employee relationship actually exists. Where employeremployee relationship no longer exists by reason of the fact that it has already been severed, claims for payment of monetary benefits fall within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be ascertained that employeremployee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC). In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and accordingly ruled that a complainant’s allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor Code.17 In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has  jurisdiction in view of the termination of the employer-employee relationship. The same  procedure has to be followed in the second situation since it is the NLRC that has jurisdiction in view of the absence of employer-employee relationship between the evidentiary parties from the start. Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and implications of an employer-employee relationship demand that the level of scrutiny should  be far above the cursory and the mechanical. While documents, particularly documents found in the employer’s office are the primary source materials, what may prove decisive are factors related to the history of the employer’s business operations, its current state as well as accepted contemporary  practices in the industry. More often than not, the question of employer-employee relationship  becomes a battle of evidence, the determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body that is the NLRC.

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely preliminary, incidental and collateral to the DOLE’s primary function of enforcing labor standards provisions. The determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause "in cases where the relationship of employeremployee still exists" in Art. 128 (b). Thus, before the DOLE may exercise its powers under Article 128, two important questions must  be resolved: (1) Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law? The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire. The approach suggested by the dissent is frowned upon by common law. To wit: [I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior court.18 A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls within or outside that function, rather than making the provision itself the determining centerpiece of the analysis.19Yet even under this more expansive approach, the dissent fails. A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was granted visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual existence of an employer-employee relationship affects the complexion of the putative findings that the Secretary of Labor may determine, since employees are entitled to a different set of rights under the Labor Code from the employer as opposed to non-employees. Among these differentiated rights are those accorded by the "labor standards" provisions of the Labor Code, which the Secretary of Labor is mandated to enforce. If there is no employer-employee relationship in the first place, the duty of the employer to adhere to those labor standards with respect to the non-employees is questionable. This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of visitorial and enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition of the statutory limitations thereon. A mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The Secretary of Labor would not have been precluded from exercising the powers under Article 128 (b) over petitioner if another person with better-grounded claim of employment than that which respondent had. Respondent, especially if he were an employee, could have very well enjoined other employees to complain with the DOLE, and, at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its aegis.

Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor Inspector during the inspection as well as submitted during the proceedings before the Regional Director puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on the part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims. Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot be relied upon as  proof of employer-employee relationship. III. Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Director’s 27 February 2004 Order. A careful study of the case reveals that the said Order, which found respondent as an employee of petitioner and directed the payment of respondent’s money claims, is not supported by substantial evidence, and was even made in disregard of the evidence on record. It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-judicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be "considered in the course of inspection" does not apply. It applies only to issues other than the fundamental issue of existence of employeremployee relationship. A contrary rule would lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent of denial of substantive due process. As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings should be supported by substantial evidence from which the said tribunals can make its own independent evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the tribunals’ conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunal’s findings of fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error of law.21 At the onset, it is the Court’s considered view that the existence of employer - employee relationship could have been easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at the records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had noted petitioner’s manifestation and documents in the Notice of Inspection Results, it is clear that he did not give much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings evidencing payment to the alleged real employer of respondent, letter-contracts denominated as "Employment for a Specific Undertaking," prima facie negate the existence of employer-employee relationship, the labor inspector could have exerted a bit more effort and looked into petitioner’s payroll, for example, or its roll of employees, or interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given "access to employer’s records and premises at any time of day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations  pursuant thereto."22 Despite these far-reaching powers of labor regulation officers, records reveal that no additional efforts were exerted in the course of the inspection. The Court further examined the records and discovered to its dismay that even the Regional Director turned a blind eye to the evidence presented by petitioner and relied instead on the selfserving claims of respondent. In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate of ₱60.00 per script, earning an average of ₱15,0000.00 per month, payable on a semi-monthly  basis. He added that the payment of wages was delayed; that he was not given any service

incentive leave or its monetary commutation, or his 13th month pay; and that he was not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the number of radio programs of which respondent was a talent/spinner was reduced, resulting in the reduction of his monthly income from ₱15,000.00 to only ₱4,000.00, an amount he could barely live on. Anent the claim of petitioner that no employer-employee relationship ever existed, respondent argued that that he was hired by petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and its agents, and it was petitioner who had the  power to dismiss him from his employment.23 In support of his position paper, respondent attached a photocopy of an identification card purportedly issued by petitioner, bearing respondent’s picture and name with the designation "Spinner"; at the back of the I.D., the following is written: " This certifies that the card holder is a duly Authorized MEDIA R epresentative of BOMBO RADYO PHILIPPINES … THE NO.1 Radio Network in the Country ***BASTA RADYO BOMBO***"24 Respondent likewise included a Certification which reads: This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLE’S BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the  present. Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (₱15,000.00) PESOS. This certification is issued upon the request of the above stated name to substantiate loan requirement. Given this 18th day of April 2000, Cebu City , Philippines. (signed) GREMAN B. SOLANTE Station Manager On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached as annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as letters of employment captioned "Employment for a Specific Undertaking", wherein respondent was appointed by different drama directors as spinner/narrator for specific radio programs.25 In his Order, the Regional Director merely made a passing remark on petitioner’s claim of lack of employer-employee relationship — a token paragraph — and proceeded to a detailed recitation of respondent’s allegations. The documents introduced by petitioner in its position paper and even those presented during the inspection were not given an iota of credibility. Instead, full recognition and acceptance was accorded to the claims of respondent — from the hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged "evidence." In fact, the findings are anchored almost verbatim on the self-serving allegations of respondent. Furthermore, respondent’s pieces of evidence— the identification card and the certification issued by petitioner’s Greman Solante—   are not even determinative of an employer-employee relationship. The certification, issued upon the request of respondent, specifically stated that "MR. JANDELEON JUEZAN is a program employee of PEOPLE’S BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu)," it is not therefore "crystal clear that complainant is a station employee rather than a program employee hence entitled to all the  benefits appurtenant thereto,"26 as found by the DOLE Regional Director. Respondent should be  bound by his own evidence. Moreover, the classification as to whether one is a "station employee" and "program employee," as lifted from Policy Instruction No. 40, 27 dividing the workers in the broadcast industry into only two groups is not binding on this Court, especially when the classification has no basis either in law o r in fact.28 Even the identification card purportedly issued by petitioner is not proof of employer-employee relationship since it only identified respondent as an "Authorized Representative of Bombo Radyo…," and not as an employee. The phrase gains significance when compared vis a vis the following notation in the sample identification cards presented by petitioner in its motion for reconsideration:

1. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo Radio Philippines. 2. This ID must be worn at all times within Bombo Radyo Philippines premises for  proper identification and security. Furthermore, this is the property of Bombo Radyo Philippines and must be surrendered upon separation from the company. HUMAN RESOURCE DEPARMENT (Signed) JENALIN D. PALER HRD HEAD Respondent tried to address the discrepancy between his identification card and the standard identification cards issued by petitioner to its employees by arguing that what he annexed to his  position paper was the old identification card issued to him by petitioner. He then presented a  photocopy of another "old" identification card, this time purportedly issued to one of the employees who was issued the new identification card presented by petitioner .29Respondent’s argument does not convince. If it were true that he is an employee of petitioner, he would have  been issued a new identification card similar to the ones presented by petitioner, and he should have presented a copy of such new identification card. His failure to show a new identification card merely demonstrates that what he has is only his "Media" ID, which does not constitute  proof of his employment with petitioner. It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of employer-employee relationship. Substantial evidence, which is the quantum of proof required in labor cases, is "that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion."30 No particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted.31 Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects.32 In the instant case, save for respondent’s self -serving allegations and self-defeating evidence, there is no substantial basis to warrant the Regional Director’s finding that respondent is an employee of petitioner. Interestingly, the Order of the Secretary of Labor denying petitioner’s appeal dated 27 January 2005, as well as the decision of the Court of Appeals dismissing the  petition for certiorari, are silent on the issue of the existence of an employer-employee relationship, which further suggests that no real and proper determination the existence of such relationship was ever made by these tribunals. Even the dissent skirted away from the issue of the existence of employer-employee relationship and conveniently ignored the dearth of evidence presented by respondent. Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand that something more should have been  proffered.33 Had there been other proofs of employment, such as respondent’s inclusion in  petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore, committed grievous error in ordering petitioner to answer for respondent’s claims. Moreover, with the conclusion that no employer-employee relationship has ever existed between petitioner and respondent, it is crystalclear that the DOLE Regional Director had no jurisdiction over respondent’s complaint. Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate all the subsequent orders they issued. IV. The records show that petitioner’s appeal was denied because it had allegedly failed to post a cash or surety bond. What it attached instead to its appeal was the Letter Agreement34 executed  by petitioner and its bank, the cash voucher ,35 and the Deed of Assignment of Bank

Deposits.36 According to the DOLE, these documents do not constitute the cash or surety bond contemplated by law; thus, it is as if no cash or surety bond was posted when it filed its appeal. The Court does not agree. The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last  paragraph of Art. 128 (b) of the Labor Code, which reads: An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued  by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. (emphasis supplied) While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.37 Thus, in some cases, the bond requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.38 A review of the documents submitted by petitioner is called for to determine whether they should have been admitted as or in lieu of the surety or cash bond to sustain the appeal and serve the ends of substantial justice. The Deed of Assignment reads: DEED OF ASSIGNMENT OF BANK DEPOSIT WITH SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLE’S BROADCASTING SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending appeal. That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLE’S BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30)  payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City. It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the PlaintiffAppellee/ Department of Labor and Employment Regional Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office. FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit will be for the account holder.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in the City of Cebu, Philippines. PEOPLE’S BROADCASTING SERVICES, INC. By: (Signed) GREMAN B. SOLANTE Station Manager As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,39 and a Cash Voucher issued by petitioner showing the amount of ₱203,726.30 deposited at the said bank. Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the documents petitioner did assign, as cash bond for the monetary award in favor of respondent in LSED Case NO. RO700-2003-CI-09, the amount of ₱203,726.30 covered by petitioner’s PSD Account No. 010-8-00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement. The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently affirmed.40 The Deed of Assignment in the instant case, like a cash or surety bond, serves the same purpose. First, the Deed of Assignment constitutes not just a partial amount, but rather the entire award in the appealed Order. Second, it is clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not of petitioner, and is in fact  payable to the DOLE Regional Office, to be withdrawn by the same office after it had issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioner’s willingness to pay the judgment amount. The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova v. Keysa’s Boutique,41 wherein this Court found that such bank certification did not come close to the cash or surety bond required by law. The bank certification in Cordova merely stated that the employer maintains a depository account with a  balance of ₱23,008.19, and that the certification was issued upon the depositor’s request for whatever legal purposes it may serve. There was no indication that the said deposit was made specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the bank certification had not in any way ensured that the award would be paid should the appeal fail.  Neither was the appellee in the case prevented from making withdrawals from the savings account. Finally, the amount deposited was measly compared to the total monetary award in the  judgment.42 V. Another question of technicality was posed against the instant petition in the hope that it would not be given due course. Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant petition must be dismissed.1avvphi1.zw+ Once more, the Court is not convinced. A petition for certiorari is the proper remedy when any tribunal, board or officer exercising  judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any  plain speedy, and adequate remedy at law. There is "grave abuse of discretion" when respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.43

Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as indeed the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a general proposition, that the availability of an appeal does not foreclose recourse to the extraordinary remedies, such as certiorari and prohibition, where appeal is not adequate or equally beneficial, speedy and sufficient, as where the orders of the trial court were issued in excess of or without jurisdiction, or there is need to promptly relieve the aggrieved party from the injurious effects of the acts of an inferior court or tribunal, e.g ., the court has authorized execution of the judgment.44 This Court has even recognized that a recourse to certiorari is proper not only where there is a clear deprivation of petitioner’s fundamental right to due process,  but so also where other special circumstances warrant immediate and more direct action.45 In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy,46and if it is shown that the refusal to allow a Rule 65 petition would result in the infliction of an injustice on a party by a judgment that evidently was rendered whimsically and capriciously, ignoring and disregarding uncontroverted facts and familiar legal principles without any valid cause whatsoever .47 It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari  proceedings.48 The Court has not too infrequently given due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations would warrant such a recourse.49 Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or adequate remedy, in view of the importance of the issues raised therein.50 The rules were also relaxed by the Court after considering the public interest involved in the case;51 when public welfare and the advancement of public policy dictates; when the  broader interest of justice so requires; when the writs issued are null and void; or when the questioned order amounts to an oppressive exercise of judicial authority.52 "The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107 SCRA 504, 524, the ‘exercise once more of our exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as in x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: ‘ x x The Rules have been drafted with the primary objective of enhancing fair trials and expediting justice. As a corollary, if their applications and operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified."53 The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as evidence by respondent. To make matters worse, DOLE denied petitioner’s appeal based solely on petitioner’s alleged failure to file a cash or surety bond, without any discussion on the merits of the case. Since the petition for certiorari  before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE were supported by the evidence presented. It appears, however, that the Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due  process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is satisfactorily1avvphi1 established that the tribunal had acted capriciously and whimsically in total disregard of evidenc e material to or even decisive of the controversy.54 The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the NLRC’s jurisdiction and the DOLE’s  prerogative but also the procedure when the case involves the fundamental challenge on the DOLE’s prerogative based on lack of employer -employee relationship. As exhaustively discussed here, the DOLE’s prerogative hinges on the existence of employer -employee

relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates  private respondent has never been petitioner’s employee. But the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition on a technicality would deprive the Court of the opportunity to resolve the novel controversy.1avvphi1 WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioner’s appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner is DISMISSED. SO ORDERED. DANTE O. TINGA Associate Justice

WE CONCUR: CONCHITA CARPIO MORALES * Associate Justice Acting Chairperson PRESBITERO J. VELASCO, JR. Associate Justice

TERESITA J. LEONARDO-DE CASTRO** Associate Justice

ARTURO D. BRION Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. CONCHITA CARPIO MORALES Associate Justice Acting Chairperson, Second Division

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. REYNATO S. PUNO Chief Justice

STEP 3.B: FACTS Facts

are

the

brief

story

of

the

case.

You

should

write

what happened in the case, who are the petitioner and the respondents, what is the decision of the Court of Appeals and

Lower

Courts.

Facts

should

be

brief

as

possible.

A

digest is a summary of the full text and not another copy of the full text.

STEP 3.C: ISSUE Issue for me, always starts with  WHETHER OR NOT followed by the issue that is related to your topic. For example, the topic is warrant of arrest and the issue in the case is the validity of the warrant, then your issue should be,  WHETHER

OR NOT the warrant is valid.

STEP 3.D: RULING/HELD This is the decision of the SUPREME COURT. I repeat, this is the DECISION OF THE SUPREME COURT not the ruling of any lower

court

portion.

regarding

the

The ISSUE is

So,

issue the

you

raised

question,

in

your

issue

the RULING is

the

answer. You can use Ruling or Held, whatever is comfortable for you. The point is, you or other people should see the decision of

the

court

rationale

whether

for

such

it

is

granted

decision.

or

Decision

dismissed should

and

the

answer

the

issue as i said earlier, if you put a decision that not

answer

your

issue

then

you

have

a

problem

the case.

STEP 3.E: HOW IT SHOULD LOOK LIKE TRINIDAD v. GABRIEL G.R. No. XXXXXXX, August 30, 1950 DE GUZMAN, J.: FACTS: ISSUE:

does

discussing