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FIRST DIVISION

[G.R. No. 100388. December 14, 2000]

SOCIAL SECURITY SYSTEM, petitioner, vs. THE COURT OF APPEALS and


CONCHITA AYALDE, respondents.

DECISION
YNARES-SANTIAGO, J.:

In a petition before the Social Security Commission, Margarita Tana, widow of the
late Ignacio Tana, Sr., alleged that her husband was, before his demise, an employee of
Conchita Ayalde as a farmhand in the two (2) sugarcane plantations she owned (known
as Hda. No. Audit B-70 located in Pontevedra, La Carlota City) and leased from the
University of the Philippines (known as Hda. Audit B-15-M situated in La Granja, La
Carlota City). She further alleged that Tana worked continuously six (6) days a week, four
(4) weeks a month, and for twelve (12) months every year between January 1961 to April
1979. For his labor, Tana allegedly received a regular salary according to the minimum
wage prevailing at the time. She further alleged that throughout the given period, social
security contributions, as well as medicare and employees compensation premiums were
deducted from Tanas wages. It was only after his death that Margarita discovered that
Tana was never reported for coverage, nor were his contributions/premiums remitted to
the Social Security System (SSS). Consequently, she was deprived of the burial grant
and pension benefits accruing to the heirs of Tana had he been reported for coverage.
Hence, she prayed that the Commission issue an order directing:
1. respondents Conchita Ayalde and Antero Maghari as her administrator to pay
the premium contributions of the deceased Ignacio Tana, Sr. and report his
name for SSS coverage; and
2. the SSS to grant petitioner Margarita Tana the funeral and pension benefits
due her.[1]
The SSS, in a petition-in-intervention, revealed that neither Hda. B-70 nor
respondents Ayalde and Maghari were registered members-employers of the SSS, and
consequently, Ignacio Tana, Sr. was never registered as a member-employee. Likewise,
SSS records reflected that there was no way of verifying whether the alleged premium
contributions were remitted since the respondents were not registered members-
employers. Being the agency charged with the implementation and enforcement of the
provisions of the Social Security Law, as amended, the SSS asked the Commissions
leave to intervene in the case.[2]
In his answer, respondent Antero Maghari raised the defense that he was a mere
employee who was hired as an overseer of Hda. B-70 sometime during crop years 1964-
65 to 1971-72, and as such, his job was limited to those defined for him by the employer
which never involved matters relating to the SSS. Hence, he prayed that the case against
him be dismissed for lack of cause of action.[3]
For her part, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her
employee, admitting only that he was hired intermittently as an independent contractor to
plow, harrow, or burrow Hda. No. Audit B-15-M. Tana used his own carabao and other
implements, and he followed his own schedule of work hours. Ayalde further alleged that
she never exercised control over the manner by which Tana performed his work as an
independent contractor. Moreover, Ayalde averred that way back in 1971, the University
of the Philippines had already terminated the lease over Hda. B-15-M and she had since
surrendered possession thereof to the University of the Philippines. Consequently,
Ignacio Tana, Sr. was no longer hired to work thereon starting in crop year 1971-72, while
he was never contracted to work in Hda. No. Audit B-70. She also prayed for the dismissal
of the case considering that Ignacio Tana, Sr. was never her employee. [4]
After hearing both parties, the Social Security Commission issued a Resolution on
January 28, 1988, the dispositive portion of which reads:

After a careful evaluation of the testimonies of the petitioner and her witnesses, as well
as the testimony of the respondent together with her documentary evidences, this
Commission finds that the late Ignacio Tana was employed by respondent Conchita
Ayalde from January 1961 to March 1979. The testimony of the petitioner which was
corroborated by Agaton Libawas and Aurelio Tana, co-workers of the deceased Ignacio
Tana, sufficienty established the latters employment with the respondent.

As regards respondent Antero Maghari, he is absolved from liability because he is a


mere employee of Conchita Ayalde.

PREMISES CONSIDERED, this Commission finds and so holds that the late Ignacio
Tana had been employed continuously from January 1961 to March 1979 in Hda. B-70
and Hda. B-15-M which are owned and leased, respectively, by respondent Conchita
(Concepcion) Ayalde with a salary based on the Minimum Wage prevailing during his
employment.

Not having reported the petitioners husband for coverage with the SSS, respondent
Conchita (Concepcion) Ayalde is, therefore, liable for the payment of damages
equivalent to the death benefits in the amount of P7,067.40 plus the amount of P750.00
representing funeral benefit or a total of P7,817.40.

Further, the SSS is ordered to pay to the petitioner her accrued pension covering the
period after the 5-year guaranteed period corresponding to the employers liability.

SO ORDERED.[5]

Respondent Ayalde filed a motion for reconsideration[6]which the Commission denied


for lack of merit in an Order dated November 3, 1988.[7]
Not satisfied with the Commissions ruling, Ayalde appealed to the Court of Appeals,
docketed as CA-G.R. SP No. 16427, raising the following assignment of errors:

The Social Security Commission erred in not finding that there is sufficient evidence to
show that:

(a) The deceased Ignacio Tana, Sr. never worked in the farmland of respondent-
appellant situated in Pontevedra, La Carlota City, otherwise known as Hacienda No.
Audit B-70, (Pontevedra B-70 Farm for short), in any capacity, whether as a daily or
monthly laborer or as independent contractor;

(b) During the time that respondent-appellant was leasing a portion of the land of the
University of the Philippines, otherwise known as Hacienda Audit No. B-15-M, (La
Granja B-15 Farm for short), the deceased Ignacio Tana, Sr. was hired thereat on a
pakyaw basis, or as an independent contractor, performing the services of an arador
(Plower), for which he was proficient, using his own carabao and farming implements on
his own time and discretion within the period demanded by the nature of the job
contracted.

II

The Social Security Commission erred in holding that there is no evidence whatsoever
to show that respondent-appellant was no longer leasing La Granja B-15 Farm.

III

The Social Security Commission erred in not holding that the deceased Ignacio Tana,
having been hired as an independent contractor on pakyaw basis, did not fall within the
coverage of the Social Security Law.[8]

The Court of Appeals rendered judgment in favor of respondent-appellant Conchita


Ayalde and dismissed the claim of petitioner Margarita Tan.
The SSS, as intervenor-appellee, filed a Motion for Reconsideration, which was
denied on the ground that the arguments advanced are mere reiterations of issues and
arguments already considered and passed upon in the decision in question which are
utterly insufficient to justify a modification or reversal of said decision.[9]
Hence, this petition for review on certiorari on the following assigned errors:
1) The Court of Appeals was in error in ruling that an employee working under
the pakyaw system is considered under the law to be an independent
contractor.
2) The Court of Appeals was in error in not giving due consideration to the
fundamental tenet that doubts in the interpretation and implementation of labor
and social welfare laws should be resolved in favor of labor.
3) The Court of Appeals was in error in disregarding the settled rule that the
factual findings of administrative bodies on matters within their competence
shall not be disturbed by the courts.
4) The Court of Appeals was in error in ruling that even granting arguendo that
Ignacio Tana was employed by Conchita Ayalde, such employment did not
entitle him to compulsory coverage since he was not paid any regular daily
wage or basic pay and he did not work for an uninterrupted period of at least
six months in a year in accordance with Section 8(j) (1) of the SS Law.
The pivotal issue to be resolved in this petition is whether or not an agricultural laborer
who was hired on pakyaw basis can be considered an employee entitled to compulsory
coverage and corresponding benefits under the Social Security Law.
Petitioner, Social Security System (or SSS), argues that the deceased Ignacio Tana,
Sr., who was hired by Conchita Ayalde on pakyaw basis to perform specific tasks in her
sugarcane plantations, should be considered an employee; and as such, his heirs are
entitled to pension and burial benefits.
The Court of Appeals, however, ruled otherwise, reversing the ruling of the Social
Security Commission and declaring that the late Ignacio Tana, Sr. was an independent
contractor, and in the absence of an employer-employee relationship between Tana and
Ayalde, the latter cannot be compelled to pay to his heirs the burial and pension benefits
under the SS Law.
At the outset, we reiterate the well-settled doctrine that the existence of an employer-
employee relationship is ultimately a question of fact.[10] And while it is the general rule
that factual issues are not within the province of the Supreme Court, said rule is not
without exception. In cases, such as this one, where there are conflicting and
contradictory findings of fact, this Court has not hesitated to scrutinize the records to
determine the facts for itself.[11] Our disquisition of the facts shall be our guide as to whose
findings are supported by substantial evidence.
The mandatory coverage under the SSS Law (Republic Act No. 1161, as amended
by PD 1202 and PD 1636) is premised on the existence of an employer-employee
relationship, and Section 8(d) defines an employee as any person who performs services
for an employer in which either or both mental and physical efforts are used and who
receives compensation for such services where there is an employer-employee
relationship. The essential elements of an employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the power of control with regard to the means and methods by which
the work is to be accomplished, with the power of control being the most determinative
factor.[12]
There is no question that Tana was selected and his services engaged by either
Ayalde herself, or by Antero Maghari, her overseer. Corollarily, they also held the
prerogative of dismissing or terminating Tanas employment. The dispute is in the
question of payment of wages. Claimant Margarita Tana and her corroborating witnesses
testified that her husband was paid daily wages per quincena as well as
onpakyaw basis. Ayalde, on the other hand, insists that Tana was paid solely
on pakyaw basis. To support her claim, she presented payrolls covering the period
January of 1974 to January of 1976;[13] and November of 1978 to May of 1979.[14]
A careful perusal of the records readily show that the exhibits offered are not complete,
and are but a mere sampling of payrolls. While the names of the supposed laborers
appear therein, their signatures are nowhere to be found. And while they cover the years
1975, 1976 and portions of 1978 and 1979, they do not cover the 18-year period during
which Tana was supposed to have worked in Ayaldes plantations. Also an admitted fact
is that these exhibits only cover Hda. B70, Ayalde having averred that all her records and
payrolls for the other plantation (Hda. B-15-M) were either destroyed or lost.[15]
To our mind, these documents are not only sadly lacking, they are also unworthy of
credence. The fact that Tanas name does not appear in the payrolls for the years 1975,
1976 and part of 1978 and 1979, is no proof that he did not work in Hda. B70 in the years
1961 to 1974, and the rest of 1978 and 1979. The veracity of the alleged documents as
payrolls are doubtful considering that the laborers named therein never affixed their
signatures to show that they actually received the amounts indicated corresponding to
their names. Moreover, no record was shown pertaining to Hda. B-15-M, where Tana was
supposed to have worked. Even Ayalde admitted that she hired Tana as arador and
sometimes as laborer during milling in Hda. B-15-M.[16] In light of her incomplete
documentary evidence, Ayaldes denial that Tana was her employee in Hda. B-70 or Hda.
B-15-M must fail.
In contrast to Ayaldes evidence, or lack thereof, is Margarita Tanas positive testimony,
corroborated by two (2) other witnesses. On the matter of wages, they testified as follows:
Margarita Tana:
Q. During the employment of your late husband, was he paid any wages?
A. Yes, he was paid.
Q. What was the manner of payment of his salary, was it on pakyaw or daily basis?
A. Daily basis.
Q. How many times did he receive his salary in a months time?
A. 2 times.
Q. You mean, payday in Hda. B-70 is every 15 days?
A. Yes, sir.
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ATTY. GALVAN:
To prove that it is material to the main question because if ever the hacienda
maintains complete payrolls of their employees, then the burden of proof lies in
the petitioner..
HEARING OFFICER:
Let the witness answer, if she knows.
WITNESS:
There was no payroll, only pad paper.
ATTY. GALVAN: (continuing)
Q. Were the names of workers of the hacienda all listed in that pad paper every
payday?
A. Yes, we just sign on pad paper because we have no payroll to be signed.
xxxxxxxxx
Q. What do you understand by payroll?
A. Payroll is the list where the whole laborers are listed and receive their salaries.
Q. And how did that differ from the pad paper which you said you signed?
A. There is a difference.
Q. What is the difference?
A. In the payroll, at the end there is a column for signature but in the pad paper, we
only sign directly.
Q. Did it contain the amount that you receive?
A. Yes, sir.
Q. And the date corresponding to the payroll pad?
A. I am not sure but it only enumerates our names and then we were given our
salaries.
Q. Now, did you have a copy of that?
ATTY. GALVAN:
Objection, Your Honor, it is not the petitioner who had a copy, it is usually the owner
because the preparation of the payrolls is done by the employer who..
ATTY. UNGCO:
That is why Im asking ..
HEARING OFFICER:
Let the witness answer. Objection overruled.
WITNESS:
I dont have.
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Q. When you are receiving daily wage of P4.00 how much was your quincenal
together with your husband?
A. The highest salary I received for my own was P30.00 in one quincena.
Q. What about the salary of your husband, how much?
A. The same.
Q. Was this P30.00 per quincena later on increased?
A. There was an increase because formerly it was P4.00 now it is P8.00.
Q. In 1979 how much was your husbands salary per quincena?
A. In one quincena my husband receives P60.00 while I only receive P30.00.[17]
AGATON LIBAWAS:
Q. During your employment, do you sign payrolls everytime you draw your salary?
A. We sign on intermediate pad.
Q. You mean, the practice of the hacienda is to have the names of the laborers
receiving that salaries listed on that intermediate pad?
A. Yes, sir.[18]
AURELIO TANA:
Q. By the way, how many times did you receive your salaries in a month?
A. We receive our wages twice a month that is, every 15 days.
Q. Did you sign payrolls everytime you received your salaries?
A. In the pad paper as substitute payroll.
Q. Do you know if all the workers of the hacienda were listed in that payrolls?
A. Yes, sir.
Q. Who was in charge in giving your salaries?
A. Antero Maghari.[19]
These witnesses did not waver in their assertion that while Tana was hired by Ayalde
as an arador on pakyaw basis, he was also paid a daily wage which Ayaldes overseer
disbursed every fifteen (15) days.It is also undisputed that they were made to
acknowledge receipt of their wages by signing on sheets of ruled paper, which are
different from those presented by Ayalde as documentary evidence. In fine, we find that
the testimonies of Margarita Tana, Agaton Libawas and Aurelio Tana prevail over the
incomplete and inconsistent documentary evidence of Ayalde.
In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the petitioners
argued that since Manuel P. Esitas name does not appear in the payrolls of the company
it necessarily means that he was not an employee. This Court held:

Petitioners further argue that complainant miserably failed to present any documentary
evidence to prove his employment. There was no timesheet, pay slip and/or
payroll/cash voucher to speak of. Absence of these material documents are necessarily
fatal to complainants cause.

We do not agree. No particular form of evidence is required to prove the existence of an


employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. For, if only documentary evidence would be required to
show that relationship, no scheming employer would ever be brought before the bar of
justice, as no employer would wish to come out with any trace of the illegality he has
authored considering that it should take much weightier proof to invalidate a written
instrument. Thus, as in this case where the employer-employee relationship between
petitioners and Esita was sufficiently proved by testimonial evidence, the absence of
time sheet, time record or payroll has become inconsequential.[20] (Underscoring ours)

Clearly, then, the testimonial evidence of the claimant and her witnesses constitute
positive and credible evidence of the existence of an employer-employee relationship
between Tana and Ayalde. As the employer, the latter is duty-bound to keep faithful and
complete records of her business affairs, not the least of which would be the salaries of
the workers. And yet, the documents presented have been selective, few and incomplete
in substance and content. Consequently, Ayalde has failed to convince us that, indeed,
Tana was not her employee.
The argument is raised that Tana is an independenent contractor because he was
hired and paid wages on pakyaw basis. We find this assertion to be specious for several
reasons.
First, while Tana was sometimes hired as an arador or plower for intermittent periods,
he was hired to do other tasks in Ayaldes plantations. Ayalde herself admitted as much,
although she minimized the extent of Tanas labors. On the other hand, the claimant and
her witnesses were direct and firm in their testimonies, to wit:
MARGARITA TANA:
Q. Was your late husbands work continuous or not?
A. His work was continuous except on Sundays.
Q. Mrs. Witness, in January 1961, how many days in a week did your late husband
work?
A. 4 weeks in January 1961.
Q. And how many months for that year did he work?
A. 12 months.
Q. Is this working pattern of your husband, considering that you testified that he
worked continuously, the same all throughout his employment from 1961 to
1978?
A. Yes, he worked continuously from 1961 to 1978 for 6 days a week, 4 weeks a
month and 12 months each year.
Q. Mrs. Witness, how many months did your husband work in 1979 considering that
he died in 1979?
A. 3 months.
Q. What was the nature of the work of your late husband from 1961 until his death in
1979?
A. Cutting canes, hauling canes with the use of canecarts, plowing, hauling fertilizers,
weeding and stubble cleaning.
xxxxxxxxx
Q. Now, the other co-workers of yours, you said they were Agaton Libawas, Narciso
Dueas, Juan Dueas, and Aurelio Tana, what were their jobs?
A. Hauling canes by the use of bull carts and cutting canes. Their works are the same
with that of my husbands.
Q. But you mentioned among the duties of your husband as arador meaning plowing
the fields?
A. Yes, he was also plowing because that is one of his duties.[21]
AGATON LIBAWAS:
Q. How about petitioner Margarita Tana and the late Ignacio Tana, were they regular
workers, or extra workers?
A. They were regular workers.
Q. In your case, Mr. Witness, considering that according to you, you are only a relief
worker, please inform the Commission how many months each year from 1961 to
1984 did you work in Hda. B-70 and Hda. B-15M with Conchita Ayalde?
A. During milling season, I worked 2 months, during cultivation if they are short of
plowers then they would call me to work for at least 3 months as a plower.
Q. So, all in all, each year, from 1961 to 1984 your average working months in Hda.
B-70 and B-15M are 5 months each year?
A. Yes, sir.
Q. Mr. Witness, to prove that you have worked there, will you please inform at least 5
laborers of Hda. B-70 and B-15M of Conchita Ayalde?
A. Juan Dueas, Narciso Dueas, Aurelio Tana, Ignacio and Margarita Tana.
xxxxxxxxx
Q. Will you please inform the Commission if the deceased Ignacio Tana which is
according to you, was a regular worker of the 2 haciendas, if how many months
did he work during lifetime from 1961 until he died in 1979?
A. His work was continuous.
Q. And by continuous you mean he worked straight 12 months each year except in
1979?
A. He worked only for 10 months because the 2 months are already preparation for
cultivation.
xxxxxxxxx
Q. And according to you, in a years time, you worked only for at least 5 months in
Hda. B-70 and B-15M, is that correct?
A. Yes.
Q. And during this time that you are working in your riceland you will agree with me
that you do not know whether the laborers of this Hda. B-70 and Had B-15M are
really working because you are devoting your time in your riceland, is that
correct?
A. I knew because the place of their work is just near my house, it is along the way.
Q. How about when the canes are already tall, can you actually see the workers in
Hda. B-70 and B-15M when you are busy at your riceland?
A. Yes, because they have to pass in my house.
Q. Is there no other passage in that hacienda except that road in front of your house?
A. Yes.
Q. Are you sure about that?
A. Yes, I am sure.[22]
AURELIO TANA:
Q. Do you know what is the work of the petitioner during the time when you were
together working in the field?
A. We were working together, like cutting and loading canes, hoeing, weeding,
applying fertilizers, digging canals and plowing.
Q. During your employment in the said hacienda where were you residing?
A. There inside the hacienda.
Q. What about the petitioner?
A. The same.
Q. How far is your house from the house of the petitioner?
A. About 20 arms-length.
Q. How far is Hda. B-70 from Hda. B-15.
A. It is very near it is divided by the road.
Q. What road are you referring to?
A. Highway road from Barangay Buenavista to La Granja.
Q. During your employment will you please inform the Commission the frequency of
work of the late Ignacio Tana?
A. 4 weeks a month, 6 days a week, 12 months a year.
Q. Why is it that you are in a position to inform the Commission about the period of
employment of Ignacio Tana?
A. Because we were together working.[23]
It is indubitable, therefore, that Tana worked continuously for Ayalde, not only
as arador on pakyaw basis, but as a regular farmhand, doing backbreaking jobs for
Ayaldes business. There is no shred of evidence to show that Tana was only a seasonal
worker, much less a migrant worker. All witnesses, including Ayalde herself, testified that
Tana and his family resided in the plantation. If he was a mere pakyawworker or
independent contractor, then there would be no reason for Ayalde to allow them to live
inside her property for free. The only logical explanation is that he was working for most
part of the year exclusively for Ayalde, in return for which the latter gratuitously allowed
Tana and his family to reside in her property.
The Court of Appeals, in finding for Ayalde, relied on the claimants and her witnesses
admission that her husband was hired as an arador on pakyaw basis, but it failed to
appreciate the rest of their testimonies. Just because he was, for short periods of time,
hired on pakyaw basis does not necessarily mean that he was not employed to do other
tasks for the remainder of the year. Even Ayalde admitted that Tana did other jobs when
he was not hired to plow. Consequently, the conclusion culled from their testimonies to
the effect that Tana was mainly and solely an arador was at best a selective appreciation
of portions of the entire evidence. It was the Social Security Commission that took into
consideration all the documentary and testimonial evidence on record.
Secondly, Ayalde made much ado of her claim that Tana could not be her employee
because she exercised no control over his work hours and method of performing his task
as arador. It is also an admitted fact that Tana, Jr. used his own carabao and tools. Thus,
she contends that, applying the control test, Tana was not an employee but an
independent contractor.
A closer scrutiny of the records, however, reveals that while Ayalde herself may not
have directly imposed on Tana the manner and methods to follow in performing his tasks,
she did exercise control through her overseer.
Be that as it may, the power of control refers merely to the existence of the power. It
is not essential for the employer to actually supervise the performance of duties of the
employee; it is sufficient that the former has a right to wield the power.[24] Certainly, Ayalde,
on her own or through her overseer, wielded the power to hire or dismiss, to check on the
work, be it in progress or quality, of the laborers. As the owner/lessee of the plantations,
she possessed the power to control everyone working therein and everything taking place
therein.
Jurisprudence provides other equally important considerations which support the
conclusion that Tana was not an independent contractor. First, Tana cannot be said to be
engaged in a distinct occupation or business. His carabao and plow may be useful in his
livelihood, but he is not independently engaged in the business of farming or
plowing. Second, he had been working exclusively for Ayalde for eighteen (18) years prior
to his demise. Third, there is no dispute that Ayalde was in the business of growing
sugarcane in the two plantations for commercial purposes. There is also no question that
plowing or preparing the soil for planting is a major part of the regular business of Ayalde.
Under the circumstances, the relationship between Ayalde and Tana has more of the
attributes of employer-employee than that of an independent contractor hired to perform
a specific project. In the case ofDy Keh Beng v. International Labor,[25] we cited our long-
standing ruling in Sunripe Coconut Products Co. v. Court of Industrial Relations, to wit:

When a worker possesses some attributes of an employee and others of an


independent contractor, which make him fall within an intermediate area, he may be
classified under the category of an employee when the economic facts of the relations
make it more nearly one of employment than one of independent business enterprise
with respect to the ends sought to be accomplished. (Underscoring Ours)[26]

We find the above-quoted ruling to be applicable in the case of Tana. There is


preponderance of evidence to support the conclusion that he was an employee rather
than an independent contractor.
The Court of Appeals also erred when it ruled, on the alternative, that if ever Tana
was an employee, he was still ineligible for compulsory coverage because he was not
paid any regular daily wage and he did not work for an uninterrupted period of at least six
months in a year in accordance with Section 8(j) (I) of the Social Security Law. There is
substantial testimonial evidence to prove that Tana was paid a daily wage, and he worked
continuously for most part of the year, even while he was also occasionally called on to
plow the soil on a pakyaw basis. As a farm laborer who has worked exclusively for Ayalde
for eighteen (18) years, Tana should be entitled to compulsory coverage under the Social
Security Law, whether his service was continuous or broken.
Margarita Tana alleged that SSS premiums were deducted from Tanas salary,
testifying, thus:
Q. Were there deductions from the salaries of your husband while he was employed
with the respondent from 1961 to 1979?
A. Yes, there were deductions but I do not know because they were the ones
deducting it.
Q. Why do you know that his salaries were deducted for SSS premiums?
A. Because Antero Maghari asked me and my husband to sign SSS papers and he
told us that they will take care of everything.
Q. How much were the deductions every payday?
A. I do not know how much because our daily wage was only P4.00. [27]
Agaton Libawas, also testified:
Q. Mr. Witness, in your 15-day wages do you notice any deductions from it?
A. There were deductions and we were informed that it was for SSS.
Q. Mr. Witness, since when were there deductions from your salaries?
A. Since 1961.
Q. Up to when?
A. Up to 1979.
Q. Mr. Witness, are you a member of the SSS?
A. No.
Q. How about petitioner, if you know?
A. No, also.
Q. What happened to the deductions did you not ask your employer?
A. We asked but we were answered that we were being remitted for our SSS.
Q. Did you not verify?
A. No, because I just relied on their statement.[28]
Ayalde failed to counter these positive assertions. Even on the assumption that there
were no deductions, the fact remains that Tana was and should have been covered under
the Social Security Law. The circumstances of his employment place him outside the
ambit of the exception provided in Section 8(j) of Republic Act No. 1611, as amended by
Section 4 of R.A. 2658.
WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in
C.A.-G.R. SP No. 16427 and the Resolution dated June 14, 1991 are hereby REVERSED
and SET ASIDE. The Resolution of the Social Security Commission in SSC Case No.
8851 is REINSTATED.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.
[1] Petition before SSC Case No. 8851; Original Record, p. 1.
[2] Petition-in-Intervention, Case No. 8851; Original Record, pp. 9-12.
[3] Answer of Antero Maghari, Case No. 8851; Original Record, p. 25.
[4] Answer of Conchita Ayalde, Case No. 8851; Original Record, pp. 26-29.
[5] Resolution of SSC; Original Record, pp. 134-135.
[6] Motion for Reconsideration; Original Record, pp. 153-167.
[7] Order of SSC; Original Record, pp. 175-178.
[8] CA Decision promulgated March 14, 1991; Rollo, pp. 34-35.
[9] CA Resolution promulgated June 14, 1991; Rollo, p. 39.
[10] Great
Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694 (1990); Santos v. NLRC,
293 SCRA 113 (1998).
[11] Arambulo v. CA, 293 SCRA 567 (1998); Jison v. CA, 286 SCRA 495 (1998).
[12] Filipinas
Broadcasting Network, Inc. v. NLRC, 287 SCRA 348 (1998); Cabalan
Pastulan Negrito Labor Association v. NLRC, 241 SCRA 643 (1995).
[13] Exhibits 4, 4-A to 4-L, 5; 5-A to 5-J; 7, 7-A to 7-C (Exhibits for Ayalde).
[14] Exhibits 8; 9; 9-A; 9-B; 10; 10-A to 10-F (Exhibits for Ayalde).
[15] Deposition of Ayalde, January 28, 1986, p. 44 (Exhibits for Ayalde).
[16] Deposition of Ayalde, January 28, 1986, p. 45.
[17] T.S.N., Margarita Tana, June 13, 1985, pp. 9,11-12, 17.
[18] T.S.N., Agaton Libawas, June 13, 1985, p. 25.
[19] T.S.N., Aurelio Tana, September 30, 1985, pp. 37-38.
[20] Opulencia Ice Plant and Storage v. NLRC, 228 SCRA 473 (1993).
[21] T.S.N., Margarita Tana, June 13, 1985, pp. 8-9; 13.
[22] T.S.N., Agaton Libawas, June 13, 1985, pp. 24; 26; 30-31.
[23] T.S.N., Aurelio Tana, September 30, 1985, pp. 37-38.
[24] MAM Realty Devt. Corp. v. NLRC, 244 SCRA 797 (1995).
[25] 90 SCRA 161 (1979).
[26] 83 Phil. 518, 523, L-2009, April 30, 1949.
[27] T.S.N., Margarita Tana, June 13, 1985, p. 17.
[28] T.S.N., Agaton Libawas, September 30, 1985. p. 39.

Republic of the Philippines


Supreme Court
Manila

THIRD DIVISION

BITOY JAVIER G.R. No. 192558


(DANILO P. JAVIER),
Petitioner, Present:

CARPIO, J.,
PERALTA, Acting Chairperson,
ABAD,
- versus - PEREZ,*** and
MENDOZA, JJ.

FLY ACE CORPORATION/ Promulgated:


FLORDELYN CASTILLO,
Respondents. February 15, 2012

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

DECISION

MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18,
2010 Decision[1] of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in CA-G.R. SP
No. 109975, which reversed the May 28, 2009 Decision[3] of the National Labor Relations
Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that
petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace
Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries
and other labor standard benefits. He alleged that he was an employee of Fly Ace since September
2007, performing various tasks at the respondents warehouse such as cleaning and arranging the
canned items before their delivery to certain locations, except in instances when he would be
ordered to accompany the companys delivery vehicles, as pahinante; that he reported for work
from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that
during his employment, he was not issued an identification card and payslips by the company; that
on May 6, 2008, he reported for work but he was no longer allowed to enter the company premises
by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;[5] that after
several minutes of begging to the guard to allow him to enter, he saw Ong whom he approached
and asked why he was being barred from entering the premises; that Ong replied by
saying, Tanungin mo anak mo; [6] that he then went home and discussed the matter with his family;
that he discovered that Ong had been courting his daughter Annalyn after the two met at a fiesta
celebration in Malabon City; that Annalyn tried to talk to Ong and convince him to spare her father
from trouble but he refused to accede; that thereafter, Javier was terminated from his employment
without notice; and that he was neither given the opportunity to refute the cause/s of his dismissal
from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who
alleged that Javier was a stevedore or pahinante of Fly Ace from September 2007 to January
2008. The said affidavit was subscribed before the Labor Arbiter (LA).[7]

For its part, Fly Ace averred that it was engaged in the business of importation and sales
of groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as
extra helper on a pakyaw basis at an agreed rate of ₱300.00 per trip, which was later increased to
₱325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever
the vehicle of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008,
Fly Ace no longer needed the services of Javier. Denying that he was their employee, Fly Ace
insisted that there was no illegal dismissal.[8] Fly Ace submitted a copy of its agreement with
Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier
for his contracted services bearing the words, daily manpower (pakyaw/piece rate pay) and the
latters signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground
that Javier failed to present proof that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the


Respondent nor any document showing that he received the benefits
accorded to regular employees of the Respondents. His contention that
Respondent failed to give him said ID and payslips implies that indeed he
was not a regular employee of Fly Ace considering that complainant was a
helper and that Respondent company has contracted a regular trucking for
the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the
importation and sales of groceries. Since there is a regular hauler to deliver
its products, we give credence to Respondents claim that complainant was
contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented
by the Respondents showing salaries of workers on pakiao basis has
evidentiary weight because although the signature of the complainant
appearing thereon are not uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the
above described payrolls, Respondents are not liable for salary
differentials. [9]

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of
Javier and immediately concluded that he was not a regular employee simply because he failed to
present proof. It was of the view that a pakyaw-basis arrangement did not preclude the existence
of employer-employee relationship. Payment by result x x x is a method of compensation and does
not define the essence of the relation. It is a mere method of computing compensation, not a basis
for determining the existence or absence of an employer-employee relationship.[10] The NLRC
further averred that it did not follow that a worker was a job contractor and not an employee, just
because the work he was doing was not directly related to the employers trade or business or the
work may be considered as extra helper as in this case; and that the relationship of an employer
and an employee was determined by law and the same would prevail whatever the parties may call
it. In this case, the NLRC held that substantial evidence was sufficient basis for judgment on the
existence of the employer-employee relationship. Javier was a regular employee of Fly Ace
because there was reasonable connection between the particular activity performed by the
employee (as a pahinante) in relation to the usual business or trade of the employer (importation,
sales and delivery of groceries). He may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of company products. He was only engaged as
a helper.

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security
of tenure. For failing to present proof of a valid cause for his termination, Fly Ace was found to be
liable for illegal dismissal of Javier who was likewise entitled to backwages and separation pay in
lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is
partially GRANTED. The assailed Decision of the labor arbiter is VACATED
and a new one is hereby entered holding respondent FLY ACE
CORPORATION guilty of illegal dismissal and non-payment of 13th month
pay. Consequently, it is hereby ordered to pay complainant DANILO Bitoy
JAVIER the following:

1. Backwages -₱45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former
employee of Fly Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The
CA exercised its authority to make its own factual determination anent the issue of the existence
of an employer-employee relationship between the parties. According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer


to prove that its dismissal was for a valid cause. However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first
be established. x x x it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.

xxx

It is incumbent upon private respondent to prove, by substantial


evidence, that he is an employee of petitioners, but he failed to discharge
his burden. The non-issuance of a company-issued identification card to
private respondent supports petitioners contention that private respondent
was not its employee.[12]
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the inescapable conclusion that he was not an
employee of Fly Ace. Further, it found that Javiers work was not necessary and desirable to the
business or trade of the company, as it was only when there were scheduled deliveries, which a
regular hauling service could not deliver, that Fly Ace would contract the services of Javier as an
extra helper. Lastly, the CA declared that the facts alleged by Javier did not pass the control test.

He contracted work outside the company premises; he was not required to observe definite hours
of work; he was not required to report daily; and he was free to accept other work elsewhere as
there was no exclusivity of his contracted service to the company, the same being co-terminous
with the trip only.[13] Since no substantial evidence was presented to establish an employer-
employee relationship, the case for illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER WAS NOT A REGULAR
EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.[14]

The petitioner contends that other than its bare allegations and self-serving affidavits of the
other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on
a pakyawbasis. Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude his
regular employment with the company. Even the acknowledgment receipts bearing his signature
and the confirming receipt of his salaries will not show the true nature of his employment as they
do not reflect the necessary details of the commissioned task. Besides, Javiers tasks
as pahinante are related, necessary and desirable to the line of business by Fly Ace which is
engaged in the importation and sale of grocery items. On days when there were no scheduled
deliveries, he worked in petitioners warehouse, arranging and cleaning the stored cans for delivery
to clients.[15] More importantly, Javier was subject to the control and supervision of the company,
as he was made to report to the office from Monday to Saturday, from 7:00 oclock in the morning
until 5:00 oclock in the afternoon. The list of deliverable goods, together with the corresponding
clients and their respective purchases and addresses, would necessarily have been prepared by Fly
Ace. Clearly, he was subjected to compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other duties in the warehouse.[16]

The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to
a worker on a per trip basis is not significant because this is merely a method of computing
compensation and not a basis for determining the existence of employer-employee relationship.
Javier likewise invokes the rule that, in controversies between a laborer and his master, x x x
doubts reasonably arising from the evidence should be resolved in the formers favour. The policy
is reflected is no less than the Constitution, Labor Code and Civil Code.[18]

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed
by the latters failure to observe substantive and procedural due process. Since his dismissal was
not based on any of the causes recognized by law, and was implemented without notice, Javier is
entitled to separation pay and backwages.

In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove
employer-employee relationship. Having a service contract with Milmar Hauling Services for the
purpose of transporting and delivering company products to customers, Fly Ace contracted Javier
as an extra helper or pahinante on a mere per trip basis. Javier, who was actually a loiterer in the
area, only accompanied and assisted the company driver when Milmar could not deliver or when
the exigency of extra deliveries arises for roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded
company products. With the vehicle and products in their custody, the driver and Javier would
leave the company premises using their own means, method, best judgment and discretion on how
to deliver, time to deliver, where and [when] to start, and manner of delivering the products.[20]

Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his
bare allegations, he presented nothing to substantiate his status as an employee. It is a basic rule
of evidence that each party must prove his affirmative allegation. If he claims a right granted by
law, he must prove his claim by competent evidence, relying on the strength of his own evidence
and not upon the weakness of his opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly
Ace insists that in an illegal dismissal case, the burden of proof is upon the complainant who claims
to be an employee. It is essential that an employer-employee relationship be proved by substantial
evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer
to prove that its dismissal of an employee was for a valid cause. However,
before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of
Fly Ace, which are unfortunately not supported by proof, documentary or otherwise.[23] Javier
simply assumed that he was an employee of Fly Ace, absent any competent or relevant evidence
to support it. He performed his contracted work outside the premises of the respondent; he was not
even required to report to work at regular hours; he was not made to register his time in and time
out every time he was contracted to work; he was not subjected to any disciplinary sanction
imposed to other employees for company violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he was not registered with the Social Security
System(SSS) as petitioners employee; and, he was free to leave, accept and engage in other means
of livelihood as there is no exclusivity of his contracted services with the petitioner, his services
being co-terminus with the trip only. All these lead to the conclusion that petitioner is not an
employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be accomplished.[25] In
other words, Javier and the company driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to definite hours or condition of work.

Fly Ace likewise claims that Javiers function as a pahinante was not directly related or
necessary to its principal business of importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the business of inland transportation.
Lastly, the acknowledgment receipts bearing Javiers signature and words pakiao rate, referring to
his earned salaries on a per trip basis, have evidentiary weight that the LA correctly considered in
arriving at the conclusion that Javier was not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the
existence of an employer-employee relationship between him and Fly Ace. This is essentially a
question of fact. Generally, the Court does not review errors that raise factual questions. However,
when there is conflict among the factual findings of the antecedent deciding bodies like the LA,
the NLRC and the CA, it is proper, in the exercise of Our equity jurisdiction, to review and re-
evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings.[26] In dealing with factual issues in labor cases, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient.[27]

As the records bear out, the LA and the CA found Javiers claim of employment with Fly
Ace as wanting and deficient. The Court is constrained to agree. Although Section 10, Rule VII of
the New Rules of Procedure of the NLRC[28] allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean a complete dispensation of
proof. Labor officials are enjoined to use reasonable means to ascertain the facts speedily and
objectively with little regard to technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack of it. The quantum of proof required,
however, must still be satisfied. Hence, when confronted with conflicting versions on factual
matters, it is for them in the exercise of discretion to determine which party deserves credence on
the basis of evidence received, subject only to the requirement that their decision must be supported
by substantial evidence.[29] Accordingly, the petitioner needs to show by substantial evidence that
he was indeed an employee of the company against which he claims illegal dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations as different
as chalk and cheese. It is, therefore, incumbent upon the Court to determine whether the party on
whom the burden to prove lies was able to hurdle the same. No particular form of evidence is
required to prove the existence of such employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be admitted. Hence, while no particular form of
evidence is required, a finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as
its qualitative aspects.[30] Although substantial evidence is not a function of quantity but rather of
quality, the x x x circumstances of the instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as x x x inclusion in petitioners payroll,
or a clear exercise of control, the Court would have affirmed the finding of employer-employee
relationship.[31]

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence.[32] Whoever claims entitlement to
the benefits provided by law should establish his or her right thereto x x x.[33] Sadly, Javier failed
to adduce substantial evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his
employment with Fly Ace. By way of evidence on this point, all that Javier presented were his
self-serving statements purportedly showing his activities as an employee of Fly Ace. Clearly,
Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no
reason to depart from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was
made to work in the company premises during weekdays arranging and cleaning grocery items for
delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit executed
by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said document, all
Valenzuela attested to was that he would frequently see Javier at the workplace where the latter
was also hired as stevedore.[34] Certainly, in gauging the evidence presented by Javier, the Court
cannot ignore the inescapable conclusion that his mere presence at the workplace falls short in
proving employment therein. The supporting affidavit could have, to an extent, bolstered Javiers
claim of being tasked to clean grocery items when there were no scheduled delivery trips, but no
information was offered in this subject simply because the witness had no personal knowledge of
Javiers employment status in the company. Verily, the Court cannot accept Javiers statements,
hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled
tests to determine the existence of an employer-employee relationship, viz: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employees conduct. Of these elements, the most important criterion is
whether the employer controls or has reserved the right to control the employee not only as to the
result of the work but also as to the means and methods by which the result is to be
accomplished.[35]

In this case, Javier was not able to persuade the Court that the above elements exist in his
case. He could not submit competent proof that Fly Ace engaged his services as a regular
employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate what his
conduct should be while at work. In other words, Javiers allegations did not establish that his
relationship with Fly Ace had the attributes of an employer-employee relationship on the basis of
the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Aces assertion that it
had an agreement with a hauling company to undertake the delivery of its goods. It was also
baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to the
company. In short, all that Javier laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a
stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment receipts
admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the
signatures affixed therein cannot automatically sway us to ignore the documents because forgery
cannot be presumed and must be proved by clear, positive and convincing evidence and the burden
of proof lies on the party alleging forgery.[36]

Considering the above findings, the Court does not see the necessity to resolve the second
issue presented.

One final note. The Courts decision does not contradict the settled rule that payment by the
piece is just a method of compensation and does not define the essence of the relation.[37] Payment
on a piece-rate basis does not negate regular employment. The term wage is broadly defined in
Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations. Nor does
the fact that the petitioner is not covered by the SSS affect the employer-employee
relationship. However, in determining whether the relationship is that of employer and employee
or one of an independent contractor, each case must be determined on its own facts and all the
features of the relationship are to be considered.[38] Unfortunately for Javier, the attendant facts
and circumstances of the instant case do not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its rights which are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for the less privileged in life, the Court has inclined,
more often than not, toward the worker and upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine.[39]

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of
Appeals and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

Acting Chairperson

JOSE PORTUGAL PEREZ

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 Courts Division.

DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting
Chairpersons Attestation, 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 Courts Division.

RENATO C. CORONA
Chief Justice

 Designated as additional member in lieu of Associate Justice Presbitero J. Velasco, Jr., per
Special Order No. 1185 dated February 10, 2012.
 Designated as Acting Chairperson, per Special Order No. 1184 dated February 10, 2012.

 Designated as additional member in lieu of Associate Justice Estela M. Perlas-Bernabe, per
Special Order No. 1192 dated February 10, 2012.
[1]
Rollo, pp. 33-46. Penned by Associate Justice Celia C. Librea-Leagogo and concurred in by
Associate Justice Bienvenido L. Reyes (now a member of this Court) and Associate Justice
Stephen C. Cruz.
[2]
Id. at 30-31.
[3]
Id. at 77-86.
[4]
Docketed as NLRC LAC No. 02-000346-09(8) and NLRC NCR CN. 05-07424-08.
[5]
Rollo, p. 78.
[6]
Decision of LA, id. at 88.
[7]
Id. at 87.
[8]
Id. at 78.
[9]
Id. at 92-93.
[10]
Id. at 80.
[11]
Id. at 86.
[12]
Id. at 42.
[13]
Id. at 44.
[14]
Id. at 16.
[15]
Id. at 20.
[16]
Id.
[17]
489 Phil. 44 (2005).
[18]
Dealco Farms v. NLRC, G.R. No. 153192, January 30, 2009, 577 SCRA 280.
[19]
Rollo, pp. 207-220.
[20]
Id. at 209.
[21]
Id. at 211.
[22]
G.R. No. 155731, September 3, 2007, 532 SCRA 56.
[23]
Respondents Comment, rollo, p. 212.
[24]
Id. at 215-216.
[25]
Id. at 216.
[26]
Masing and Sons Development Corporation and Crispin Chan v. Gregorio P. Rogelio, G.R.
No. 161787, April 27, 2011.
[27]
Id., citing Opulencia Ice Plant and Storage v. NLRC, G.R. No. 98368, December 15, 1993, 228
SCRA 473, 478.
[28]
The rules of procedure and evidence prevailing in courts of law and equity shall not be
controlling and the Commission shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively, without regard to technicalities of law or procedure, all in the
interest of due process.
[29]
Salvador Lacorte v. Hon. Amado G. Inciong, 248 Phil. 232 (1988), citing Gelmart Industries
[Phil.] Inc. v. Leogardo, Jr., 239 Phil. 386 (1987).
[30]
People's Broadcasting (Bombo Radyo Phils., Inc.) v. The Secretary of the Department of Labor
and Employment, G.R. No. 179652, May 8, 2009, 587 SCRA 724, citing Opulencia Ice Plant and
Storage v. NLRC, G.R. No. 98368, December 15, 1993, 228 SCRA 473 andInsular Life Assurance
Co., Ltd. Employees Association-Natu v. Insular Life Assurance Co., Ltd., 166 Phil. 505 (1977).
[31]
Id.
[32]
Jebsens Maritime Inc., represented by Ms. Arlene Asuncion and/or Alliance Marine Services,
Ltd. v. Enrique Undag, G.R. No. 191491, December 14, 2011.
[33]
Alex C. Cootauco v. MMS Phil. Maritime Services, Inc., Ms. Mary C. Maquilan and/or MMS
Co. Ltd., G.R. No. 184722, March 15, 2010, 615 SCRA 529, 544-545.
[34]
Rollo, p. 126.
[35]
Avelino Lambo and Vicente Belocura v. NLRC and J.C. Tailor Shop and/or Johnny Co., 375
Phil. 855 (1999), citing Makati Haberdashery, Inc. v. NLRC, 259 Phil. 52 (1989).
[36]
Dionisio C. Ladignon v. Court of Appeals and Luzviminda C. Dimaun, 390 Phil. 1161 (2000),
citing Heirs of Gregorio v. Court of Appeals, 360 Phil. 753 (1998).
[37]
Elias Villuga v. NLRC, G.R. No. L-75038, August 23, 1993, 225 SCRA 537, citing Dy Keh
Beng v. International Labor and Marine Union of the Philippines, 179 Phil. 131 (1979).
[38]
Avelino Lambo and Vicente Belocura v. NLRC and J.C. Tailor Shop and/or Johnny Co., supra
note 35, citing Elias Villuga v. NLRC, G.R. No. L-75038, August 23, 1993, 225 SCRA 537.
[39]
Philippine Rural Reconstruction Movement (PRRM) v. Virgilio E. Pulgar, G.R. No. 169227,
July 5, 2010, 623 SCRA 244, 257.

[Syllabus]
SECOND DIVISION

[G.R. No. 117983. September 6, 1996]

RIZALINO P. UY, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION


(Fourth Division), FELIPE O. MAGBANUA, CARLOS DELA CRUZ, REMY
ARNAIZ, BILLY ARNAIZ, ROLLY ARNAIZ, DOMINGO SALARDA, JULIO
CAHILIG, and NICANOR LABUEN, respondents.

DECISION
PUNO, J.:

Petitioner Fizalino P. Uy files this petition for certiorari and prohibition to annul and
set aside the Decision and Resolution of the National Labor Relations Commission in
NLRC Case No. V-0427-93 finding him liable for illegal dismissal and ordering him to pay
private respondents back wages, separation pay and wage differentials.
Private respondents Felipe O. Magbanua, Carlos dela Cruz, Remy Arnaiz, Billy
Arnaiz, Rolly Arnaiz, Domingo Salarda, Julio Cahilig and Nicanor Labuen were
employees of petitioner, a private contractor engaged principally in the construction
business. On September 27, 1990, private respondents filed separate complaints against
petitioner before Sub-Regional Arbitration Branch No. VI, Iloilo City, Department of Labor
and Employment for illegal dismissal, payment of back wages, overtime pay, separation
pay, 13th-month pay, service incentive leave pay, holiday pay, premium pay and
damages.[1]
Felipe Magbanua alleged that he was employed by petitioner as mason from 1982 to
June 1990 with an initial daily wage of P18.00 which was increased to P60.00 at the time
of his dismissal. Carlos dela Cruz alleged that he was employed as laborer from 1982 to
March 1990 with a fixed daily wage of P40.00. Remy Arnaiz claimed that he was
employed as mason from 1980 to August 1990 with an initial daily wage of P20.00 which
was increased to P70.00 at the time of his dismissal. Billy Arnaiz alleged that he was
employed as a laborer from 1985 to August 1990 with a daily wage of P45.00. Rolly
Arnaiz claimed that he was employed as a laborer from 1983 to 1987 and from 1989 to
August 1990 with an initial daily wage of P17.00 which was increased
to P45.00. Domingo Salarda alleged that he was employed as laborer from 1982 to
December 1989 with a fixed daily wage of P40.00. Julio Cahilig alleged that he was
employed as mason from 1987 to August 1990 with an initial daily wage of P40.00 which
was increased toP70.00. Nicanor Labuen alleged that he was employed as a carpenter
from 1979 to 1989 with an initial daily wage of P25.00 and increased to P60.00 at the time
of his dismissal.[2]
Private respondents alleged in common that during their employment with petitioner,
they rendered services in petitioner's construction projects and in his other businesses
such as gasoline station, lumber and equipment yards; that their working hours were from
7:00 A.M. to 5:00 P.M. with a one to two-hour noon break for six days a week, from
Monday to Saturday; that they worked during holidays but were paid only their daily
wages; and that after their dismissal, petitioner hired new workers at wages lower that
what they were receiving at the time they were dismissed.[3]
In his answer, petitioner denied having businesses other than his construction
company. He alleged that private respondents were project employees; that they were
hired by his foremen who paid them on a "pakyaw" or daily wage basis in a construction
project; that after completion of a project, private respondents were free to find other jobs
and engage in other sources of livelihood; that in fact, Felipe Magbanua and Nicanor
Labuen were farmers who worked for petitioner only after the harvest season, Carlos dela
Cruz worked for another businessman and was hired by petitioner only once in 1985,
Remy Arnaiz worked for the National Irrigation Administration, Billy and Rolly Arnaiz were
fishermen and Rolly was sometimes employed by the Department of Public Works and
Highways, Domingo Salarda was a tricycle driver who also worked in a farm, and Julio
Cahilig was a carpenter who worked for petitioner whenever his services were not
contracted by other persons.[4]
On August 23, 1993, the labor arbiter[5] dismissed the complaints for lack of merit
declaring that private respondents were project employees of petitioner.
In a decision dated May 31, 1994, the National Labor Relations
Commission[6] reversed the labor arbiter after finding private respondents to be regular,
not project, employees of petitioner, thus:

"WHEREFORE, judgment is hereby rendered reversing and setting aside the aforementioned
decision dated August 23, 1993 of Labor Arbiter Dennis D. Juanon and ordering that:

1. The respondent-appellee shall pay to the complainant-appellants backwages to be computed


from the date or dates of their illegal dismissal from the service up to the finality of this decision
less earnings elsewhere, if any, during the aforesaid period. The Labor Arbiter shall make the
computation of the backwages to be paid to the complainant-appellants in accordance with this
order and for this purpose the Arbiter is directed to ascertain through proper evidence and
appropriate proceedings the specific dates of termination of employment of the complainant-
appellants and to apply the salary rates indicated in the foregoing discussions in computing the
backwages to which the herein complainant-appellants are entitled.

2. The respondent-appellee shall pay to the complainant-appellants their claims for separation
pay at the rate of one month for every year of service. The Labor Arbiter is hereby directed to
make the computation of the amounts of separation pay that should be paid to complainant-
appellants particularly based on the salary rates that they were supposed to receive at the time of
their dismissal from the service in accordance with the statutory minimum wage, as indicated in
the foregoing discussions on this subject.

3. The respondent-appellee shall pay to the complainant-appellants the following salary


differentials:
Name Amount

1. Felipe O. Magbanua P 31,320.00

2. Carlos de la Cruz 53,920.00

3. Remy Arnaiz 20,520.00

4. Billy Arnaiz 47,520.00

5. Rolly Arnaiz 47,520.00

6. Domingo Salarda 52,920.00

7. Julio Cahilig 20,520.00

8. Nicanor Labuen 31,320.00

Total P 304,560.00

4. The claims for overtime pay, 13th-month pay, holiday pay, rest-day pay, and for moral and
exemplary damages of complainant-appellants are hereby DISMISSED for lack of merit.

SO ORDERED.[7]

Petitioner filed a Motion for Reconsideration. In addition, he filed a "Manifestation and


Motion to Admit and Consider Evidence" praying for the admission of additional evidence
consisting of typical construction contracts between his firm and government
agencies.[8] The Motion and Manifestation were denied by respondent Commission
on November 8, 1994.[9] Hence this recourse.
Petitioner asserts that:

(1)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN


DISREGARDING THE FACT THAT PETITIONER IS A MODEST GENERAL
CONTRACTOR CATERING TO SMALL AND MEDIUM-SCALE GOVERNMENT
CONTRACTS FOR PUBLIC WORKS WITH SHORT-TERM PERIODS FOR COMPLETION.

(2)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN HOLDING


THAT PRIVATE RESPONDENTS HEREIN ARE REGULAR EMPLOYEES. DESPITE
THEIR ADMISSIONS AND CORROBORATING EVIDENCE ON RECORD THAT THEY
WORKED ON PROJECTS.
(3)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN RULING


THAT PRIVATE RESPONDENTS BELONGED TO A "WORK POOL" DESPITE THE
UNCONTROVERTED EVIDENCE THAT EACH HAD A REGULAR SOURCE OF
LIVELIHOOD, AND THAT THEY WERE FREE TO SEEK EMPLOYMENT ELSEWHERE
BETWEEN PROJECTS.

(4)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN


DISREGARDING THE UNCONTROVERTED EVIDENCE THAT PETITIONER HAS NO
OTHER BUSINESS ESTABLISHMENT WHERE PRIVATE RESPONDENTS COULD
HAVE WORKED BETWEEN PROJECTS.

(5)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN HOLDING


THAT PRIVATE RESPONDENTS HAVE BECOME REGULAR EMPLOYEES BY YEARS
OF WORK, CONTRARY TO THE RULING IN MERCADO V. NLRC, 201 SCRA 332 [1991]
AND AL U-TUCP V NLRC, G.R. NO. 109902, AUGUST 02, 1994.

(6)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION AND DENIED


PETITIONER DUE PROCESS IN REFUSING TO ADMIT AND CONSIDER THE
ADDITIONAL EVIDENCE OF PETITIONER, CONTRARY TO THE RULING IN NEW
VALLEY TIMES V NLRC, 211 SCRA 509 [1992].

(7)

THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN


ARBITRARILY AND CAPRICIOUSLY AWARDING WAGE
DIFFERENTIALS UNIFORMLY TO ALL PRIVATE RESPONDENTS FOR THREE (3) FULL
YEARS FROM 1988-1990, THEREBY ERRONEOUSLY APPLYING THE PRESCRIPTIVE
PERIOD IN ARTICLE 291 OF THE LABOR CODE, DISREGARDING THE EVIDENCE,
PER THE STATEMENTS OF PRIVATE RESPONDENTS THEMSELVES, THAT THEY
HAD DIFFERENT PERIODS OF EMPLOYMENT, AND DISREGARDING THE
APPLICABLE WAGE RATES FOR THE PERIODSCOVERED BY THE CLAIMS."[10]

Petitioner argues that private respondents were project employees and as such they
were validly terminated upon completion of the construction project for which they were
hired.[11]
In dismissal cases, the burden of proving that the dismissal was for a valid or
authorized cause rests on the employer and his failure to do so results in a finding that
the dismissal was unjustified.[12]
Petitioner has failed to discharge this burden.
Article 280 of the Labor Code defines "project employees" as:

"Art. 280. Regular and Casual Employment. - The provisions of written agreements to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee
or where the work or services to be performed is seasonal in nature and the employment is for
the duration of the season.[13]

Project employees are those workers hired (1) for a specific project or undertaking; and
(2) the completion or termination of which project or undertaking has been determined at
the time of engagement of the employee.
Petitioner has not shown that private respondents were hired for a specific project the
duration of which had been determined at the time of hiring. In fact, petitioner has not
identified the specific project or undertaking or any phase thereof for which private
respondents were hired.[14] He failed to submit any document such as private respondents
employment contracts and employment records that would show the dates of hiring and
termination in relation to the particular construction project or the phases in which they
were employed.[15] More importantly, petitioner has not presented the termination reports
required to be submitted to the Department of Labor and Employment Regional Office
every time his employees' services were terminated upon completion of a project. [16]
The claim that private respondents were paid on a "pakyaw" basis and that between
projects they worked for, or were at least free to offer their services to other employers,
has not been sufficiently substantiated. The affidavit of petitioner and two of his foremen
are self-serving.[17] The construction contracts between petitioner and government
agencies are insufficient. These additional evidence were correctly disregarded by
respondent Commission for having been filed belatedly.
Even assuming that the contracts were admitted, they, at best, prove that petitioner
was engaged in construction projects in the province of Antique and Region VI, [18] and
that his firm is capable of undertaking several major construction projects
simultaneously[19] contrary to petitioner's claims of being a modest provincial
contractor. In two of these contracts, petitioner is referred to as "Rizalino P. Uy General
Merchant."[20] This description ironically supports private respondents' allegation that
aside from his construction firm, petitioner was also engaged as in other businesses to
which he assigned private respondents in-between projects.
Private respondents' allegations therefore remain unrebutted. All eight (8) of them
worked for petitioner continuously without having been laid off for several years -the
minimum being three (3) years in the case of Cahilig and the maximum being ten (10)
years in the cases of Remy Arnaiz and Nicanor Labuen. Their jobs were continuous and
on-going such that when a project to which they were individually assigned was
completed, they were reassigned to the other businesses of petitioner or to the next
project, if any. In short, they were employed by petitioner without reference to any
particular construction project and belonged to a work pool from which petitioner, in his
discretion, drew workers for assignment to his various projects and businesses.
Policy Instructions No. 20 is the regulation that governed employer-employee
relations in the construction industry at the time this case arose. It provides:

"Members of a work pool from which a construction company draws its project employees are
non-project employees if considered employees of the construction company while in the work
pool, for an indefinite period. If they are employed in a particular project, the completion of the
project or of any phase thereof will not mean severance of employer-employee relationship."

Clearly, private respondents were non-project employees. As mason, carpenter and


laborer, they performed work necessary and desirable in the usual business of petitioner,
and are thus deemed regular employees.[21] They were, however, dismissed without just
cause and without proper notice and hearing. Their dismissal was illegal for which reason
the respondent Commission correctly awarded them back wages and separation pay.
However, we cannot sustain the amount of P304,560.00 as salary differential for
1988-1990. The complaints were filed on September 27, 1990 and under Article 291 of
the Labor Code, money claims arising from an employer-employee relationship must be
filed within three years from the time the cause of action accrued.[22] Wage differentials
can only be recovered from September 27, 1987, i.e., three years before September 27,
1990, until the date of dismissal. Moreover, in computing wage differentials, the actual
minimum wage rate then prevailing should be used as basis, in the absence of proof of
the amount of wages received during said period.[23] The difference between the minimum
wage and the actual wage received must be multiplied by 26, not 30 days as the
respondent Commission erroneously computed.Private respondents alleged that they
worked for 6 days a week, hence, 26 days a month.
IN VIEW WHEREOF, the decision of the National Labor Relations Commission in
NLRC Case No. V-0427-93 is affirmed with modification. The Labor Arbiter is ordered to
compute private respondents' wage differentials in accordance with the minimum daily
wage from 1987 to 1990 as discussed above.
SO ORDERED.
Regalado (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

[1] RAB Cases No. VI-06-0950394 to 06-09-50400-90.


[2] Records, pp.1-17.
[3] Records, pp.33-46, 54-61, 71-73, 78-80.
[4] Records, pp.30-32, 50-53.
[5] Labor Arbiter Dennis D. Juanan.
[6] Fourth Division.
[7] NLRC Decision, pp.53-55, Rollo, pp.246-248.
[8] Records, pp.307-359.
[9] Rollo, pp.59-60.
[10] Petition, pp.11-12, Rollo, pp.12-13; Underscoring as copied.
[11] Petition, p.13; Rollo, p.14.
[12] Labor Code, Article 277 (b); Golden Donuts, Inc. v. National Labor Relations

Commission, 230 SCRA 153 [1994]; Reyes & Lim Co., Inc. v. National Labor Relations
Commission, 201 SCRA 772, 775 [1991]
[13] Underscoring supplied.
[14] ALU-TUCP v. National Labor Relations Commission, 234 SCRA 678, 685 [1994];

Fernandez v. National Labor Relations Commission, 230 SCRA 460 [1994].


[15] cf. Fernandez v. National Labor Relations Commission, supra, at 465; Philippine

National Oil Co.- Energy Dev. Corp. v. National Labor Relations Commission, 220
SCRA 695, 699-701 [1993]; Rada v. National Labor Relations Commission, 205 SCRA
69, 81 [1992].
[16] Policy Instructions No. 20; Phesco, Inc. v. National Labor Relations Commission,

239 SCRA 446, 450 [1994]; Caramol v. National Labor Relations Commission, 225
SCRA 582, 588-589 [1993].
[17] Annexes "A", "B", and "C to Position Paper of Rizalino Uy before the Labor Artbiter,

Records, pp.30-32.
[18] Annex "L" to Manifestation, Records, p.354.
[19] Annexes "J", "L", and "K" to Manifestation, Records, pp. 347-356, Rollo, pp. 161-170.

1) Annex "J" - Executed on May 23, 1989, the contract amount is P525,709.93 for the
construction of a river control for 180 days.
2) Annex "L" - Executed on July 5, 1989, the contract amount is P2,134,470.30 for the
construction of a bridge for 210 days.
3) Annex "K" - Executed on July 7, 1989, the contract amount is P989,415.90 for the
construction of an additional hospital ward for 240 days.
Petitioner has failed to dispute private respondent's claim that these projects took place
simultaneously.
[20] Annexes "K" and "M" to Manifestation, Records, pp.350, 357, Rollo, pp.164, 171.
[21] Labor Code, Article 280, 1st sentence.
[22] Central Negros Electric Cooperative, Inc. v. National Labor Relations Commission,

236 SCRA 108 [1994].


[23] The complaints were filed on September 27, 1990 and the minimum daily wage at

that time was 54.00 which was increased to P64.00 on December 14, 1987 (R.A. 6640)
and later increased to P89.00 on July 1, 1989 (R.A. 6727).

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-41182-3 April 16, 1988


DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal
by certiorari. The facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the part
for the prompt payment of the monthly rental agreed on. When the branch
office was opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
and 3% was to be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with a
rival firm, the Philippine Travel Bureau, and, since the branch office was
anyhow losing, the Tourist World Service considered closing down its
office. This was firmed up by two resolutions of the board of directors of
Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
first abolishing the office of the manager and vice-president of the Tourist
World Service, Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist World Service
then located at the said branch office. It further appears that on Jan. 3,
1962, the contract with the appellees for the use of the Branch Office
premises was terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the
Tourist World Service, the corporate secretary Gabino Canilao went over
to the branch office, and, finding the premises locked, and, being unable
to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to
protect the interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack
of interest of the parties therein, the trial court ordered the dismissal of the
case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order


dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered
both cases dismiss for lack of merit, on the basis of which was elevated
the instant appeal on the following assignment of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE


NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS.


LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-
EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-


APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES


HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM
THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN
HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL


APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI
PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved
are:

1. Whether the appellee Tourist World Service unilaterally disco the


telephone line at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service
was actionable or not; and

3. Whether or not the lessee to the office premises belonging to the


appellee Noguera was appellees TWS or TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture
was entered into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife


of an eminent eye, ear and nose specialist as well as a
imediately columnist had been in the travel business prior to
the establishment of the joint business venture with appellee
Tourist World Service, Inc. and appellee Eliseo Canilao, her
compadre, she being the godmother of one of his children,
with her own clientele, coming mostly from her own social
circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement


dated 19 October 1960 (Exh. 'A') covering the premises at A.
Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for
the prompt payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from


appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building;
nor was she an employee thereof, having no participation in
nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not
for any of the business of appellee Tourist World Service,
Inc.) obtained from the airline companies. She shared the
7% commissions given by the airline companies giving
appellee Tourist World Service, Lic. 3% thereof aid retaining
4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of


maintaining the A. Mabini St. office, paying for the salary of
an office secretary, Miss Obieta, and other sundry expenses,
aside from desicion the office furniture and supplying some
of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other
expenses in consideration for the 3% split in the co procured
by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant


Mrs. Sevilla would be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.), appellee Eliseo
Canilao admit that it was just a title for dignity (p. 36 tsn.
June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-
39 tsn April 61965-testimony of corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager. 1

xxx xxx xxx

The trial court 2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises. 3 It likewise found the
petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and
as such, she was bound by the acts of her employer. 4 The respondent Court of
Appeal 5 rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court,
erred. Specifically, they state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE
PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND
CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA
O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL
FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING
INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE
SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY
BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ...
(DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP.
7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES
TO THE RULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


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

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-
APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND
21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF
YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY
BY TOURIST WORLD SERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation
between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to
rule on the question, the crucial issue, in its opinion being "whether or not the
padlocking of the premises by the Tourist World Service, Inc. without the knowledge
and consent of the appellant Lina Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office of
the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the
other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its
Ermita "branch" office and that inferentially, she had no say on the lease executed with
the private respondent, Segundina Noguera. The petitioners contend, however, that
relation between the between parties was one of joint venture, but concede
that "whatever might have been the true relationship between Sevilla and Tourist World
Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the
law into their own hands,8 in reference to the padlocking now questioned.

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

In this jurisdiction, there has been no uniform test to determine the evidence of an
employer-employee relation. In general, we have relied on the so-called right of control
test, "where the person for whom the services are performed reserves a right to control
not only the end to be achieved but also the means to be used in reaching such
end." 10Subsequently, however, we have considered, in addition to the standard of right-
of control, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, in determining the existence of an employer-
employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the
private respondent Tourist World Service, Inc., either as to the result of the enterprise or
as to the means used in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound herself in solidumas and
for rental payments, an arrangement that would be like claims of a master-servant
relationship. True the respondent Court would later minimize her participation in the
lease as one of mere guaranty, 12 that does not make her an employee of Tourist World,
since in any case, a true employee cannot be made to part with his own money in
pursuance of his employer's business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist
World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina
Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the
control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the
business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she
retained 4% in commissions from airline bookings, the remaining 3% going to Tourist
World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo,
Tourist World's employee. As we said, employment is determined by the right-of-control
test and certain economic parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a


consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a
joint venture or otherwise, a partnership. And apparently, Sevilla herself did not
recognize the existence of such a relation. In her letter of November 28, 1961, she
expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of
your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the
manner in which the business was run. A joint venture, including a partnership,
presupposes generally a of standing between the joint co-venturers or partners, in
which each party has an equal proprietary interest in the capital or property
contributed 15 and where each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves out as partners, and the
building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu
of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must
have done so pursuant to a contract of agency. It is the essence of this contract that the
agent renders services "in representation or on behalf of another. 18 In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself based on her letter of November 28,
1961, pre-assumed her principal's authority as owner of the business undertaking. We
are convinced, considering the circumstances and from the respondent Court's recital of
facts, that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it
is one coupled with an interest, the agency having been created for mutual interest, of
the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent
herself, and as such, she had acquired an interest in the business entrusted to her.
Moreover, she had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the business, using her
own name, after Tourist World had stopped further operations. Her interest, obviously,
is not to the commissions she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of management delegated to her. It
is an agency that, as we said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.

As we have stated, the respondent Court avoided this issue, confining itself to the
telephone disconnection and padlocking incidents. Anent the disconnection issue, it is
the holding of the Court of Appeals that there is 'no evidence showing that the Tourist
World Service, Inc. disconnected the telephone lines at the branch office. 20 Yet, what
cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have
them reconnected. Assuming, therefore, that it had no hand in the disconnection now
complained of, it had clearly condoned it, and as owner of the telephone lines, it must
shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking
incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease
con-tract did not accord it any authority to terminate that contract without notice to its
actual occupant, and to padlock the premises in such fashion. As this Court has ruled,
the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and
necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a third party in charge
of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures
that she had worked for a rival firm. To be sure, the respondent court speaks of alleged
business losses to justify the closure '21 but there is no clear showing that Tourist World
Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had
moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist
World's board of directors adopted two resolutions abolishing the office of 'manager"
and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the
takeover of its branch office properties. On January 3, 1962, the private respondents
ended the lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office
was padlocked, personally by the respondent Canilao, on the pretext that it was
necessary to Protect the interests of the Tourist World Service. " 22 It is strange indeed
that Tourist World Service, Inc. did not find such a need when it cancelled the lease five
months earlier. While Tourist World Service, Inc. would not pretend that it sought to
locate Sevilla to inform her of the closure, but surely, it was aware that after office
hours, she could not have been anywhere near the premises. Capping these series of
"offensives," it cut the office's telephone lines, paralyzing completely its business
operations, and in the process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish
Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to
elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the
private respondent, Tourist World Service, Inc., should be sentenced to pay damages.
Under the Civil Code, moral damages may be awarded for "breaches of contract where
the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral
injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the
power of attorney granted to her on the authority of Article 21 of the Civil Code, in
relation to Article 2219 (10) thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. 24

ART. 2219. Moral damages 25 may be recovered in the following and


analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and
35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to


respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no


evidence has been shown that she had connived with Tourist World Service, Inc. in the
disconnection and padlocking incidents. She cannot therefore be held liable as a
cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00
as exemplary damages, 25and P5,000.00 as nominal 26 and/or temperate 27 damages, to
be just, fair, and reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the


Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby
REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and
Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina
Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and
for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.

Costs against said private respondents.

SO ORDERED.

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


Footnotes

1 Rollo, 30-45.

2 Court of First Instance of Manila, Branch XIX Montesa, Agustin,


Presiding Judge.

3 Rollo, Id 55; Record on Appeal, 38.

4 Record on Appeal, Id., 37-38.

5 Gaviola, Jr., RAmon, J., Reyes, Luis, and De Castro, Pacific, JJ.,
Conccurring

6 Rollo, Id., 124; Brief for Petitioners, 1-2.

7 Rollo, Id., 36.

8 Id., 21; emphasis in the original.

9 See Rep. Act No. 875 See also Rep. Act No. 1052, as amended by Rep.
Act No. 1787.

10 LVN Pictures, Inc. v. Philippine Musicians Guild, No. L-12582, January


28,1961, 1 SCRA 132,173 (1961); emphasis in the original.

11 Visayan Stevedore Trans. Co., et al. v. C.I.R., et al., No. L-21696,


February 25,1967,19 SCRA 426 (1967).

12 Rollo, Id., 40.

13 Id 31.

14 Id., 47.

15 BAUTISTA, TREATISE ON PHILIPPINE PARTNERSHIP LAW 34


(1978).

16 Op cit 37. In Tuazon v. Balanos [95 Phil. 106 (1954)], this Court
distinguished between a joint venture and a partnership but this view has
since raised questions from authorities. According to Campos, there
seems to be no fundamental distinction between the two forms of
business combinations. CAMPOS, THE CORPORATION CODE 12
(1981).] For p of this case, we use the terms of interchangeable.
17 See rollo, id.

18 CIVIL CODE, art. 1868.

19 See VI PADILLA, CIVIL LAW 350 (1974).

20 Rollo, id., 36.

21 Id, 31.

22 Id.

23 CIVIL CODE, art. 2220.

24 Supra.

25 Supra, art. 2232.

26 Supra art. 2221.

27 Supra, art. 2224.

The Lawphil Project - Arellano Law Foundation

Zamudio vs. NLRC


Employee-Employer Relationship

ZAMUDIO VS. NLRC


GR NO. 76723
March 25, 1990

Facts:
Petitioners rendered services essential for the cultivation of respondent’s farm. While
the services were not continuous in the sense that they were not rendered everyday
throughout the year, as is the nature of farm work, petitioners had never stopped
working for respondent from year to year from the time he hired them to the time he
dismissed.

Issue:

Are the petitioners considerdd as employees?

Ruling:

The nature of their employment, i.e. “Pakyao” basis, does not make petitioner
independent contractors. Pakyao workers are considered employees as long as the
employer exercises control over the means by which such workers are to perform their
work inside private respondents farm, the latter necessarily exercised control over the
performed by petitioners.

The seasonal nature of petitioner’s work does not detract from the conclusion that
employer – employee relationship exits. Seasonal workers whose work is not merely for
the duration of the season, but who are rehired every working season are considered
regular employees. The circumstances that petitioners do not apears in respondent’s
payroll does not destroy the employer – employee relationship between them. Omission
of petitioners in the payroll was not within their control, they had no hand in the
preparation of the payroll. This circumstance, even if true, cannot be taken against
petitioners.

Acknowledgement: Jaja Oftana

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION
G.R. No. L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO


CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO
B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO
NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF
THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL
CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO
VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.

Armando V. Ampil for petitioners.

Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists
between petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM)
and respondent San Miguel Corporation, is the main issue in this petition. The disputed decision of
public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains a brief summary
of the facts involved:

1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now
defunct Court of Industrial Relations, charging San Miguel Corporation, and the
following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair
labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
No. 875 and of Legal dismissal. It was alleged that respondents ordered the
individual complainants to disaffiliate from the complainant union; and that
management dismissed the individual complainants when they insisted on their union
membership.

On their part, respondents moved for the dismissal of the complaint on the grounds
that the complainants are not and have never been employees of respondent
company but employees of the independent contractor; that respondent company
has never had control over the means and methods followed by the independent
contractor who enjoyed full authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting that they are
employees of respondent company.

While pending with the Court of Industrial Relations CIR pleadings and testimonial
and documentary evidences were duly presented, although the actual hearing was
delayed by several postponements. The dispute was taken over by the National
Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the
hearing of the case intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was
concurred in by the NLRC in a decision dated June 28, 1976. The amount of
backwages awarded, however, was reduced by NLRC to the equivalent of one (1)
year salary.

On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC
ruling, stressing the absence of an employer-mployee relationship as borne out by
the records of the case. ...

The petitioners strongly argue that there exists an employer-employee relationship between them
and the respondent company and that they were dismissed for unionism, an act constituting unfair
labor practice "for which respondents must be made to answer."

Unrebutted evidence and testimony on record establish that the petitioners are workers who have
been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years
of service at the time of their termination. They worked as "cargadores" or "pahinante" at the SMC
Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from company
trucks and warehouses. At times, they accompanied the company trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate
passes signed by Camahort and were provided by the respondent company with the tools,
equipment and paraphernalia used in the loading, unloading, piling and hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-
charge. In turn, the assistant informs the warehousemen and checkers regarding the same. The
latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile, pallet or clean.

Work in the glass factory was neither regular nor continuous, depending wholly on the volume of
bottles manufactured to be loaded and unloaded, as well as the business activity of the company.
Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this, they
were neither paid overtime nor compensation for work on Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of
cartons and wooden shells they were able to load, unload, or pile. The group leader notes down the
number or volume of work that each individual worker has accomplished. This is then made the
basis of a report or statement which is compared with the notes of the checker and warehousemen
as to whether or not they tally. Final approval of report is by officer-in-charge Camahort. The pay
check is given to the group leaders for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the total earnings of the group, the group
leader gets a participation or share of ten (10%) percent plus an additional amount from the earnings
of each individual.

The petitioners worked exclusive at the SMC plant, never having been assigned to other companies
or departments of SMC plant, even when the volume of work was at its minimum. When any of the
glass furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was
temporarily suspended. Thereafter, the petitioners would return to work at the glass plant.

Sometime in January, 1969, the petitioner workers — numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law, inhuman treatment, being
forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their consent. However, their gripes and grievances
were not heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations
in connection with the dismissal of some of its members who were allegedly castigated for their
union membership and warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were scheduled in order to
thresh out their differences, On February 12, 1969, union member Rogelio Dipad was dismissed
from work. At the scheduled conference on February 19, 1969, the complainant union through its
officers headed by National President Artemio Portugal Sr., presented a letter to the respondent
company containing proposals and/or labor demands together with a request for recognition and
collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the workers are not their
employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied
entrance to respondent company's glass factory despite their regularly reporting for work. A
complaint for illegal dismissal and unfair labor practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had begun.

The question of whether an employer-employee relationship exists in a certain situation continues to


bedevil the courts. Some businessmen try to avoid the bringing about of an employer-employee
relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism.
(Mafinco Trading Corporation v. Ople, 70 SCRA 139).

In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished. It. is the called "control test"
that is the most important element (Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra,and Rosario Brothers, Inc. v. Ople, 131
SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent
asserts that the petitioners are employees of the Guaranteed Labor Contractor, an independent
labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally established by the following


criteria: "whether or not the contractor is carrying on an independent business; the nature and extent
of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises tools, appliances, materials and labor; and
the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27
AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance of a
specified piece of work, the nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial outfit, such as the San Miguel
Corporation, entered into mere oral agreements of employment or labor contracting where the same
would involve considerable expenses and dealings with a large number of workers over a long
period of time. Despite respondent company's allegations not an iota of evidence was offered to
prove the same or its particulars. Such failure makes respondent SMC's stand subject to serious
doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked
continuously and exclusively for the respondent company's shipping and warehousing department.
Considering the length of time that the petitioners have worked with the respondent company, there
is justification to conclude that they were engaged to perform activities necessary or desirable in the
usual business or trade of the respondent, and the petitioners are, therefore regular employees (Phil.
Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission
(supra):

... [T]he employer-employee relationship between the parties herein is not


coterminous with each loading and unloading job. As earlier shown, respondents are
engaged in the business of fishing. For this purpose, they have a fleet of fishing
vessels. Under this situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated vans, are necessary
or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on
any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo). lwphl@itç

so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for
repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced, or
assigned elsewhere until the present controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of petitioners' work bolsters their claim of employee
status vis-a-vis respondent company,

Even under the assumption that a contract of employment had indeed been executed between
respondent SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:

Job contracting. — There is job contracting permissible under the Code if the
following conditions are met:

(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.

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools, equipment
and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors supply, suggesting the
existence of a "labor only" contracting scheme prohibited by law (Article 106, 109 of the Labor Code;
Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact,
even the alleged contractor's office, which consists of a space at respondent company's warehouse,
table, chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the conduct of its business, in the maintenance
thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the actuality of an employer-
employee relationship whether between respondent company and petitioners or between the alleged
independent contractor and petitioners. It is important to emphasize that in a truly independent
contractor-contractee relationship, the fees are paid directly to the manpower agency in lump sum
without indicating or implying that the basis of such lump sum is the salary per worker multiplied by
the number of workers assigned to the company. This is the rule in Social Security System v. Court
of Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum representing only the
salaries the workers were entitled to, arrived at by adding the salaries of each worker which depend
on the volume of work they. had accomplished individually. These are based on payrolls, reports or
statements prepared by the workers' group leader, warehousemen and checkers, where they note
down the number of cartons, wooden shells and bottles each worker was able to load, unload, pile or
pallet and see whether they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of the latter. Nor is the
profit or gain of the alleged contractor in the conduct of its business provided for as an amount over
and above the workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of the earnings
of each individual worker, which, perhaps, accounts for the petitioners' charge of unauthorized
deductions from their salaries by the respondents.

Anent the argument that the petitioners are not employees as they worked on piece basis, we
merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece is


just a method of compensation and does not define the essence of the relation. Units
of time . . . and units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in such
an establishment so as to put the worker completely at liberty to turn him out and
take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:

... 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.

Firmly establishing respondent SMC's role as employer is the control exercised by it over the
petitioners that is, control in the means and methods/manner by which petitioners are to go about
their work, as well as in disciplinary measures imposed by it.

Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the
means and manner of performing the same is practically nil. For, how many ways are there to load
and unload bottles and wooden shells? The mere concern of both respondent SMC and the alleged
contractor is that the job of having the bottles and wooden shells brought to and from the warehouse
be done. More evident and pronounced is respondent company's right to control in the discipline of
petitioners. Documentary evidence presented by the petitioners establish respondent SMC's right to
impose disciplinary measures for violations or infractions of its rules and regulations as well as its
right to recommend transfers and dismissals of the piece workers. The inter-office memoranda
submitted in evidence prove the company's control over the petitioners. That respondent SMC has
the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who
is alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication of
respondent company's right of control over the petitioners as direct employer. There is no evidence
to show that the alleged labor contractor had such right of control or much less had been there to
supervise or deal with the petitioners.

The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant.
Respondent company would have us believe that this was a case of retrenchment due to the closure
or cessation of operations of the establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its furnaces needing repair. Operations
continued after such repairs, but the petitioners had already been refused entry to the premises and
dismissed from respondent's service. New workers manned their positions. It is apparent that the
closure of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then
agitating the respondent company for benefits, reforms and collective bargaining as a union. There
is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to
warrant their separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is
clear that the respondent company had an existing collective bargaining agreement with the IBM
union which is the recognized collective bargaining representative at the respondent's glass plant.

There being a recognized bargaining representative of all employees at the company's glass plant,
the petitioners cannot merely form a union and demand bargaining. The Labor Code provides the
proper procedure for the recognition of unions as sole bargaining representatives. This must be
followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages. However,
where reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners
separation pay equivalent to one (1) month pay for every year of service.

SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

The Lawphil Project - Arellano Law Foundation

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