Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 101279 August 6, 1992

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,
vs.
HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment, and JOSE N.
SARMIENTO, as Administrator of the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION,
respondents.
De Guzman, Meneses & Associates for petitioner.

GRIO-AQUINO, J.:
This petition for prohibition with temporary restraining order was filed by the Philippine Association of
Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and
Employment (DOLE) and the Administrator of the Philippine Overseas Employment Administration (or
POEA) from enforcing and implementing DOLE Department Order No. 16, Series of 1991 and POEA
Memorandum Circulars Nos. 30 and 37, Series of 1991, temporarily suspending the recruitment by
private employment agencies of Filipino domestic helpers for Hong Kong and vesting in the DOLE,
through the facilities of the POEA, the task of processing and deploying such workers.
PASEI is the largest national organization of private employment and recruitment agencies duly licensed
and authorized by the POEA, to engaged in the business of obtaining overseas employment for Filipino
landbased workers, including domestic helpers.
On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids
employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of
1991, temporarily suspending the recruitment by private employment agencies of "Filipino domestic
helpers going to Hong Kong" (p. 30, Rollo). The DOLE itself, through the POEA took over the business of
deploying such Hong Kong-bound workers.
In view of the need to establish mechanisms that will enhance the protection for Filipino
domestic helpers going to Hong Kong, the recruitment of the same by private employment
agencies is hereby temporarily suspended effective 1 July 1991. As such, the DOLE
through the facilities of the Philippine Overseas Employment Administration shall take
over the processing and deployment of household workers bound for Hong Kong, subject
to guidelines to be issued for said purpose.
In support of this policy, all DOLE Regional Directors and the Bureau of Local
Employment's regional offices are likewise directed to coordinate with the POEA in
maintaining a manpower pool of prospective domestic helpers to Hong Kong on a regional
basis.
For compliance. (Emphasis ours; p. 30, Rollo.)

Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991,
dated July 10, 1991, providing GUIDELINES on the Government processing and deployment of Filipino
domestic helpers to Hong Kong and the accreditation of Hong Kong recruitment agencies intending to
hire Filipino domestic helpers.
Subject: Guidelines on the Temporary Government Processing and Deployment of
Domestic Helpers to Hong Kong.
Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the
temporary government processing and deployment of domestic helpers (DHs) to Hong
Kong resulting from the temporary suspension of recruitment by private employment
agencies for said skill and host market, the following guidelines and mechanisms shall
govern the implementation of said policy.
I. Creation of a joint POEA-OWWA Household Workers Placement Unit (HWPU)
An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the supervision
of the POEA shall take charge of the various operations involved in the Hong Kong-DH
industry segment:
The HWPU shall have the following functions in coordination with appropriate units and
other entities concerned:
1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies
2. Manpower Pooling
3. Worker Training and Briefing
4. Processing and Deployment
5. Welfare Programs
II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong
Recruitment Agencies or Principals
Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers may
negotiate with the HWPU in Manila directly or through the Philippine Labor Attache's
Office in Hong Kong.
xxx xxx xxx
X. Interim Arrangement
All contracts stamped in Hong Kong as of June 30 shall continue to be processed by
POEA until 31 July 1991 under the name of the Philippine agencies concerned.
Thereafter, all contracts shall be processed with the HWPU.
Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in
Hong kong a list of their accepted applicants in their pool within the last week of July. The
last day of acceptance shall be July 31 which shall then be the basis of HWPU in

accepting contracts for processing. After the exhaustion of their respective pools the only
source of applicants will be the POEA manpower pool.
For strict compliance of all concerned. (pp. 31-35, Rollo.)
On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991,
on the processing of employment contracts of domestic workers for Hong Kong.
TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic
helpers for Hong Kong
Further to Memorandum Circular No. 30, series of 1991 pertaining to the government
processing and deployment of domestic helpers (DHs) to Hong Kong, processing of
employment contracts which have been attested by the Hong Kong Commissioner of
Labor up to 30 June 1991 shall be processed by the POEA Employment Contracts
Processing Branch up to 15 August 1991 only.
Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the
Philippines shall recruit under the new scheme which requires prior accreditation which
the POEA.
Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor
Attache, Philippine Consulate General where a POEA team is posted until 31 August
1991. Thereafter, those who failed to have themselves accredited in Hong Kong may
proceed to the POEA-OWWA Household Workers Placement Unit in Manila for
accreditation before their recruitment and processing of DHs shall be allowed.
Recruitment agencies in Hong Kong who have some accepted applicants in their pool
after the cut-off period shall submit this list of workers upon accreditation. Only those DHs
in said list will be allowed processing outside of the HWPU manpower pool.
For strict compliance of all concerned. (Emphasis supplied, p. 36, Rollo.)
On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the
aforementioned DOLE and POEA circulars and to prohibit their implementation for the following reasons:
1. that the respondents acted with grave abuse of discretion and/or in excess of their rulemaking authority in issuing said circulars;
2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are
unreasonable, unfair and oppressive; and
3. that the requirements of publication and filing with the Office of the National
Administrative Register were not complied with.
There is no merit in the first and second grounds of the petition.
Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment
and placement activities.
Art. 36. Regulatory Power. The Secretary of Labor shall have the power to restrict and
regulate the recruitment and placement activities of all agencies within the coverage of
this title [Regulation of Recruitment and Placement Activities] and is hereby authorized to
3

issue orders and promulgate rules and regulations to carry out the objectives and
implement the provisions of this title. (Emphasis ours.)
On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive
Order No. 797 on May 1, 1982 to take over the functions of the Overseas Employment Development
Board, the National Seamen Board, and the overseas employment functions of the Bureau of
Employment Services, is broad and far-ranging for:
1. Among the functions inherited by the POEA from the defunct Bureau of Employment
Services was the power and duty:
"2. To establish and maintain a registration and/or licensing system to
regulate private sector participation in the recruitment and placement of
workers, locally and overseas, . . ." (Art. 15, Labor Code, Emphasis
supplied). (p. 13, Rollo.)
2. It assumed from the defunct Overseas Employment Development Board the power and
duty:
3. To recruit and place workers for overseas employment of Filipino
contract workers on a government to government arrangement and in such
other sectors as policy may dictate . . . (Art. 17, Labor Code.) (p. 13, Rollo.)
3. From the National Seamen Board, the POEA took over:
2. To regulate and supervise the activities of agents or representatives of
shipping companies in the hiring of seamen for overseas employment; and
secure the best possible terms of employment for contract seamen workers
and secure compliance therewith. (Art. 20, Labor Code.)
The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional,
unreasonable and oppressive. It has been necessitated by "the growing complexity of the modern
society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are
necessary to help in the regulation of society's ramified activities. "Specialized in the particular field
assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be
expected from the legislature or the courts of justice" (Ibid.).
It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment
and deployment of Filipino landbased workers for overseas employment. A careful reading of the
challenged administrative issuances discloses that the same fall within the "administrative and policing
powers expressly or by necessary implication conferred" upon the respondents (People vs. Maceren, 79
SCRA 450). The power to "restrict and regulate conferred by Article 36 of the Labor Code involves a
grant of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine,
limit or stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect, foster,
promote, preserve, and control with due regard for the interests, first and foremost, of the public, then of
the utility and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA
218).
The Solicitor General, in his Comment, aptly observed:
. . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted
the scope or area of petitioner's business operations by excluding therefrom recruitment
and deployment of domestic helpers for Hong Kong till after the establishment of the

"mechanisms" that will enhance the protection of Filipino domestic helpers going to Hong
Kong. In fine, other than the recruitment and deployment of Filipino domestic helpers for
Hongkong, petitioner may still deploy other class of Filipino workers either for Hongkong
and other countries and all other classes of Filipino workers for other countries.
Said administrative issuances, intended to curtail, if not to end, rampant violations of the
rule against excessive collections of placement and documentation fees, travel fees and
other charges committed by private employment agencies recruiting and deploying
domestic helpers to Hongkong. [They are reasonable, valid and justified under the
general welfare clause of the Constitution, since the recruitment and deployment
business, as it is conducted today, is affected with public interest.
xxx xxx xxx
The alleged takeover [of the business of recruiting and placing Filipino domestic helpers in
Hongkong] is merely a remedial measure, and expires after its purpose shall have been
attained. This is evident from the tenor of Administrative Order No. 16 that recruitment of
Filipino domestic helpers going to Hongkong by private employment agencies are hereby
"temporarily suspended effective July 1, 1991."
The alleged takeover is limited in scope, being confined to recruitment of domestic helpers
going to Hongkong only.
xxx xxx xxx
. . . the justification for the takeover of the processing and deploying of domestic helpers
for Hongkong resulting from the restriction of the scope of petitioner's business is confined
solely to the unscrupulous practice of private employment agencies victimizing applicants
for employment as domestic helpers for Hongkong and not the whole recruitment
business in the Philippines. (pp. 62-65, Rollo.)
The questioned circulars are therefore a valid exercise of the police power as delegated to the executive
branch of Government.
Nevertheless, they are legally invalid, defective and unenforceable for lack of power publication and filing
in the Office of the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of
the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which
provide:
Art. 2. Laws shall take effect after fifteen (15) days following the completion of their
publication in the Official Gazatte, unless it is otherwise provided. . . . (Civil Code.)
Art. 5. Rules and Regulations. The Department of Labor and other government
agencies charged with the administration and enforcement of this Code or any of its parts
shall promulgate the necessary implementing rules and regulations. Such rules and
regulations shall become effective fifteen (15) days after announcement of their adoption
in newspapers of general circulation. (Emphasis supplied, Labor Code, as amended.)
Sec. 3. Filing. (1) Every agency shall file with the University of the Philippines Law
Center, three (3) certified copies of every rule adopted by it. Rules in force on the date of
effectivity of this Code which are not filed within three (3) months shall not thereafter be
the basis of any sanction against any party or persons. (Emphasis supplied, Chapter 2,
Book VII of the Administrative Code of 1987.)

Sec. 4. Effectivity. In addition to other rule-making requirements provided by law not

inconsistent with this Book, each rule shall become effective fifteen (15) days from the
date of filing as above provided unless a different date is fixed by law, or specified in the
rule in cases of imminent danger to public health, safety and welfare, the existence of
which must be expressed in a statement accompanying the rule. The agency shall take
appropriate measures to make emergency rules known to persons who may be affected
by them. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987).
Once, more we advert to our ruling in Taada vs. Tuvera, 146 SCRA 446 that:
. . . Administrative rules and regulations must also be published if their purpose is to
enforce or implement existing law pursuant also to a valid delegation. (p. 447.)
Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of the administrative agency and not the public, need not be published. Neither
is publication required of the so-called letters of instructions issued by administrative
superiors concerning the rules or guidelines to be followed by their subordinates in the
performance of their duties. (p. 448.)
We agree that publication must be in full or it is no publication at all since its purpose is to
inform the public of the content of the laws. (p. 448.)
For lack of proper publication, the administrative circulars in question may not be enforced and
implemented.
WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No.
16, Series of 1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by the public
respondents is hereby SUSPENDED pending compliance with the statutory requirements of publication
and filing under the aforementioned laws of the land.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-75038 August 23, 1993

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA,
NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO,
JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET TAILORING
and/or RODOLFO ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.

Teresita Gandionco Oledan for private respondents.

NOCON, J.:
A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code
and other presidential issuances or labor legislations is the status and nature of one's employment.
Whether an employer-employee relationship exist and whether such employment is managerial in
character or that of a rank and file employee are primordial considerations before extending labor
benefits. Thus, petitioners in this case seek a definitive ruling on the status and nature of their
employment with Broad Street Tailoring and pray for the nullification of the resolution dated May 12, 1986
of the National Labor Relations Commissions in NLRC Case No. RB-IV- 21558-78-T affirming the
decision of Labor Arbiter Ernilo V. Pealosa dated May 28, 1979, which held eleven of them as
independent contractors and the remaining one as employee but of managerial rank.
The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop
owned by private respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw
Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a
monthly transportation allowance of P40.00. In addition to his work as cutter, Villuga was assigned the
chore of distributing work to the shop's tailors or sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their work conformed with the pattern he had prepared and if
not, he had them redone, repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for
every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the task.
Petitioners did not fill up any time record since they did not observe regular or fixed hours of work. They
were allowed to perform their work at home especially when the volume of work, which depended on the
number of job orders, could no longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For not
properly notifying his employer, he was considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor, Villuga
claimed that he was refused admittance when he reported for work after his absence, allegedly due to
his active participation in the union organized by private respondent's tailors. He further claimed that he
was not paid overtime pay, holiday pay, premium pay for work done on rest days and holidays, service
incentive leave pay and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they were
dismissed from their employment because they joined the Philippine Social Security Labor Union
(PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido,
Justilita Cabaneg and Domingo Saguit claimed that they stopped working because private respondents
gave them few pieces of work to do after learning of their membership with PSSLU. All the petitioners
laid claims under the different labor standard laws which private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision ordering the dismissal of the
complaint for unfair labor practices, illegal dismissal and other money claims except petitioner Villuga's
claim for 13th month pay for the years 1976, 1977 and 1980. The dispositive portion of the decision
states as follows:
WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or
Rodolfo Zapanta are hereby ordered to pay complainant Elias Villuga the sum of ONE

THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND SIXTY-SIX CENTAVOS

(P1,248.66) representing his 13th month pay for the years 1976, 1977 and 1978. His other
claims in this case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11) complainants are concerned should be, as
it is hereby dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the questioned decision in a resolution
dated May 12, 1986, the dispositive portion of which states as follows:
WHEREFORE, premises considered, the decision appealed from is, as it is hereby
AFFIRMED, and the appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner Gabriel
M. Gatchalian rendered a dissenting opinion which states as follows:
I am for upholding employer-employee relationship as argued by the complainants before
the Labor Arbiter and on appeal. The further fact that the proposed decision recognizes
complainant's status as piece-rate worker all the more crystallizes employer-employee
relationship the benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following grounds:
1. That the respondent National Labor Relations Commission abused its discretion when it
ruled that petitioner/complainant, Elias Villuga falls within the category of a managerial
employee;
2. . . . when it ruled that the herein petitioners were not dismissed by reason of their union
activities;
3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia,
Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and
Domingo Saguit were not employees of private respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and services
for Sundays and Legal Holidays; and
5. . . . when it failed to grant petitioners their respective claims under the provisions of P.D.
Nos. 925, 1123 and 851. 4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a
managerial staff, the following elements must concur or co-exist, to wit: (1) that his primary duty consists
of the performance of work directly related to management policies; (2) that he customarily and regularly
exercises discretion and independent judgment in the performance of his functions; (3) that he regularly
and directly assists in the management of the establishment; and (4) that he does not devote his twenty
per cent of his time to work other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or duty
is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the management
policies, as there is a manager and an assistant manager who perform said functions. It is true that in the
absence of the manager the assistant manager, he distributes and assigns work to employees but such
duty, though involving discretion, is occasional and not regular or customary. He had also the authority to
order the repair or resewing of defective item but such authority is part and parcel of his function as

cutter to see to it that the items cut are sewn correctly lest the defective nature of the workmanship be
attributed to his "poor cutting." Elias Villuga does not participate in policy-making. Rather, the functions of
his position involve execution of approved and established policies. In Franklin Baker Company of the
Philippines v. Trajano, 5 it was held that employees who do not participate in policy-making but are given
ready policies to execute and standard practices to observe are not managerial employees. The test of
"supervisory or managerial status" depends on whether a person possesses authority that is not merely
routinary or clerical in nature but one that requires use of independent judgment. In other words, the
functions of the position are not managerial in nature if they only execute approved and established
policies leaving little or no discretion at all whether to implement said policies or not. 6
Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and
premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service incentive
leave pay) of the Labor Code, on the ground that he is a managerial employee is unwarranted. He is
definitely a rank and file employee hired to perform the work of the cutter and not hired to perform
supervisory or managerial functions. The fact that he is uniformly paid by the month does not exclude
him from the benefits of holiday pay as held in the case of Insular Bank of America Employees Union v.
Inciong. 7 He should therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay,
premium pay for holiday and rest day, and service incentive leave pay.
As to the dismissal of the charge for unfair labor practices of private respondent consisting of termination
of employment of petitioners and acts of discrimination against members of the labor union, the
respondent Commission correctly held the absence of evidence that Mr. Zapanta was aware of
petitioners' alleged union membership on February 22, 1978 as the notice of union existence in the
establishment with proposal for recognition and collective bargaining negotiation was received by
management only an March 3, 1978. Indeed, self-serving allegations without concrete proof that the
private respondent knew of their membership in the union and accordingly reacted against their
membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For
abandonment to constitute a valid cause for dismissal, there must be a deliberate and unjustified refusal
of the employee to resume his employment. Mere absence is not sufficient, it must be accompanied by
overt acts unerringly pointing to the fact that the employee simply does not want to work anymore. 8 At
any rate, dismissal of an employee due to his prolonged absence without leave by reason of illness duly
established by the presentation of a medical certificate is not justified. 9 In the case at bar, however,
considering that petitioner Villuga absented himself for four (4) days without leave and without submitting
a medical certificate to support his claim of illness, the imposition of a sanction is justified, but surely, not
dismissal, in the light of the fact that this is petitioner's first offense. In lieu of reinstatement, petitioner
Villuga should be paid separation pay where reinstatement can no longer be effected in view of the long
passage of time or because of the realities of the situation. 10 But petitioner should not be granted
backwages in addition to reinstatement as the same is not just and equitable under the circumstances
considering that he was not entirely free from blame. 11
As to the other eleven petitioners, there is no clear showing that they were dismissed because the
circumstances surrounding their dismissal were not even alleged. However, we disagree with the finding
of respondent Commission that the eleven petitioners are independent contractors.
For an employer-employee relationship to exist, the following elements are generally considered: "(1) the
selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the employee's
conduct." 12
Noting that the herein petitioners were oftentimes allowed to perform their work at home and were paid
wages on a piece-rate basis, the respondent Commission apparently found the second and fourth
elements lacking and ruled that "there is no employer-employee relationship, for it is clear that
9

respondents are interested only in the result and not in the means and manner and how the result is
obtained."
Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is no
argument that herein petitioners were not employees. The term "wage" has been 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. . . ." The facts of this case indicate that payment by the piece is just a method of compensation
and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply absence
of control and supervision. The control test calls merely for the existence of a right to control the manner
of doing the work, not the actual exercise of the right. 14
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." 15 Considering that petitioners who are either sewers, repairmen or ironer, have been in
the employ of private respondent as early as 1972 or at the latest in 1976, faithfully rendering services
which are desirable or necessary for the business of private respondent, and observing management's
approved standards set for their respective lines of work as well as the customers' specifications,
petitioners should be considered employees, not independent contractors.
Independent contractors are those who exercise independent employment, contracting to do a piece of
work according to their own methods and without being subjected to control of their employer except as
to the result of their work. By the nature of the different phases of work in a tailoring shop where the
customers' specifications must be followed to the letter, it is inconceivable that the workers therein would
not be subjected to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the tailoring
department, although paid weekly wages on piece work basis, are employees not independent
contractors. Accordingly, as regular employees, paid on a piece-rate basis, petitioners are not entitled to
overtime pay, holiday pay, premium pay for holiday/rest day and service incentive leave pay. Their claim
for separation pay should also be defined for lack of evidence that they were in fact dismissed by private
respondent. They should be paid, however, their 13th month pay under P.D. 851, since they are
employees not independent contractors.
WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor
Relations Commission is hereby MODIFIED by awarding
(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay and separation pay, in addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month pay.
The case is hereby REMANDED to the National Labor Relations Commission for the computation of the
claims herein-above mentioned.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

10

THIRD DIVISION

G.R. No. L-59229 August 22, 1991

HIJOS DE F. ESCAO INC., and PIER 8 ARRASTRE AND STEVEDORING SERVICES, INC.,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL ORGANIZATION OF WORKINGMEN
(NOWM) PSSLU-TUCP and ROLANDO VILLALOBOS, respondents.
Beltran, Beltran & Beltran for petitioners.
Bautista, Santiago & Associates for private respondents.

FELICIANO, J.:p
Petitioners seek to set aside the Decision of the National Labor Relations Commission ("NLRC") dated
11 November 1981, which affirmed the Decision of the Labor Arbiter dated 28 February 1980.
Private respondent National Organization of Workingmen ("NOWM") PSSLU-TUCP is a labor
organization that counts among its members a majority of the laborers of petitioner Pier 8 Arrastre &
Stevedoring Services, Inc. ("PIER 8 A&S") consisting, among others, of stevedores, dockworkers,
sweepers and forklift operators (hereinafter collectively referred to as "the stevedores"). On 31 July 1978,
NOWM PSSLU-TUCP and about 300 stevedores filed with the then Ministry of Labor and Employment
("MOLE") a complaint 1 for unfair labor practice ULP and illegal dismissal against PIER 8 A&S.
On 8 September 1978, NOWM PSSLU-TUCP amended its complaint to include the monetary claims of
the stevedores for overtime compensation, legal holiday pay, emergency cost of living allowance, 13th
month pay, night shift differential pay, and the difference between the salaries they received and that
prescribed under the minimum wage law. The complaint was also amended to implead petitioner Hijos
de F. Escao, Inc. (Escao) as respondent before the MOLE. 2
The MOLE Director in the National Capital Region certified for compulsory arbitration only the claims for
illegal dismissal and ULP Considering that NOWM PSSLU-TUCP wanted to include as well the other
issues it had raised in the amended complaint, it filed a motion for reconsideration. The motion was
denied because money claims, according to the MOLE Director, should be brought against Escao and
PIER 8 A&S in a separate complaint.
On the basis of the position papers submitted by the parties and the annexes attached thereto, the case
was considered submitted for resolution. On 28 February 1980, the Labor Arbiter rendered a Decision 3
with the following dispositive portion:
WHEREFORE, consonant with the foregoing premises, the respondents Hijos de F.
Escao and Pier 8 Arrastre and Stevedoring Services, Inc. are hereby found guilty of
committing acts of unfair labor practice and are ordered to jointly and severally reinstate
all of the petitioners named in the amended complaint, with payment of full backwages
counted from the time they were illegally dismissed which was on August 10, 1978 up to
March 27, 1979, inclusive, when the petitioners admitted having received return to work
notice from the respondent but refused to comply in view of the pendency of the present

11

case, based on their individual rate at the time of their dismissal or on the minimum wage
then prevailing whichever is more beneficial to them.
For purposes of this decision, the Socio-Economic Analyst of this branch is hereby
directed to compute the backwages of the individual petitioners as mandated herein, and
to submit his report within ten 10 days from receipt hereof which shall form part of this
award.
SO ORDERED.
Petitioners appealed to the NLRC which, however, affirmed the Decision of the Labor Arbiter.
The instant Petition for certiorari imputes grave abuse of discretion to the NLRC in upholding the finding
of the Labor Arbiter that the stevedores are employees not only of PIER 8 A&S but also of Escao.
Petitioners also assail that portion of the Decision which directed them to reinstate the dismissed
stevedores with the obligation to pay backwages from 10 August 1978 to 27 March 1979.
In his Decision, the Labor Arbiter took the view that PIER 8 A&S was a labor only contractor and held that
Escao was the principal employer of the stevedores. For that reason, the Labor Arbiter adjudged the
petitioners solidarily liable for payment of backwages to the stevedores as well as for reinstatement.
While petitioner PIER 8 A&S does not dispute that the stevedores were its employees, petitioner Escao
denies the existence of an employer-employee relationship between it and the stevedores. Escao
therefore contends that liability, if any, should attach only to PIER 8 A&S.
PIER 8 A&S is a corporation providing Arrastre and stevedoring services to vessels docked at Pier 8 of
the Manila North Harbor. Prior to the incorporation of PIER 8 A&S two (2) stevedoring companies had
been servicing vessels docking at Pier 8. One of these was the Manila Integrated Services, Inc. MISI
which was servicing Escao vessels, then berthing at Pier 8. The other was the San Nicolas Stevedoring
and Arrastre Services, Inc. (SNSASI) which was servicing Compania Maritima vessels. Aside, of course,
from MISI and SNSASI there were individual contractors known as the "cabos" who were operating in
Pier 8.
On 11 July 1974, the Philippine Port Authority ("PPA") was created pursuant to the policy of the State to
implement an integrated program of port development for the entire country. 4 Towards this end, the PPA
issued Administrative Order No. 1377 specifically adopting the policy of "one pier, one Arrastre and/or
stevedoring company." MISI and SNSASI merged to form the Pier 8 Arrastre and Stevedoring Services,
Inc.
Sometime in June 1978, Escao had transferred berth to Pier 16 with the approval of the PPA. PIER 8
A&S then started to encounter problems; it found its business severely reduced with only Compania
Maritima vessels to service. Even if it had wanted to continue servicing the vessels of Escao at Pier 16,
that was simply not possible as there was another company exclusively authorized to handle and render
Arrastre and stevedoring services at Pier 16.
Because of its resulting manpower surplus, PIER 8 A&S altered the work schedule of its stevedores by
rotating them. The rotation scheme was resisted by the stevedores, especially those formerly assigned to
service Escao vessels. It appears that the employees formerly belonging to MISI continued to service
Escao vessels in like manner that those employees formerly belonging to SNSASI continued to service
Compania Maritima vessels, although MISI and SNSASI had already merged to form PIER 8 A&S The
affected stevedores boycotted Pier 8 leading to their severance from employment by PIER 8 A&S on 10
August 1978. Their refusal to work continued even after they were served with a return-to-work order.

12

The stevedores claim that since they had long been servicing Escao vessels, i.e. from the time Escao
was exclusively serviced by MISI until the time MISI was merged with SNSASI to form PIER 8 A&S they
should also be considered as employees of Escao. Escao disclaimed any employment relationship
with the stevedores. In its Position Paper, Escao alleged that the stevedores are included in the payroll
of PIER 8 A&S and that the SSS and Medicare contributions of the stevedores are paid by PIER 8 A&S
as well.
It is firmly settled that the existence or non-existence of the employer-employee relationship is commonly
to be determined by examination of certain factors or aspects of that relationship. These include: (a) the
manner of selection and engagement of the putative employee; (b) the mode of payment of wages; (c)
the presence or absence of the power of dismissal; and (d) the presence or absence of a power to
control the putative employee's conduct. 5
The Court notes that in finding against PIER 8 A&S and Escao the Labor Arbiter relied solely on the
position paper of the parties. The record of the case is bare of evidence tending to support such
allegations; what is found in the record instead are the self-serving statements from both parties. It is not
clear to the Court from examination of the record which entity paid the salaries of the stevedores. While
the stevedores attached to their amended complaint a list of their daily wages set forth opposite their
individual names under the heading "Hijos de F. Escao Inc. and/or Pier 8 Arrastre and Stevedoring
Services, Inc. 6 apparently to show that they are paid for their services by either or both of petitioners,
they did not submit direct evidence, e.g., copies of payrolls and remittances to the SSS and Medicare,
establishing this fact. Further, the stevedores failed to substantiate their allegation that the supervisors of
Escao had control over them while discharging their (stevedores') duties. On the contrary, their Position
Paper submitted to the Labor Arbiter disclosed that the supervisors of Escao "merely supervised" them.
The record includes letters written by the National President of NOWM PSSLU-TUC to which the
stevedores belong-relating to collective bargaining and other operating matters, were all addressed to
the management of PIER 8 A&S indicating that they recognized PIER 8 A&S as their employer.
Specifically, in the letter dated 21 May 1977, the stevedores proposed that PIER 8 A&S recognize their
union as the sole and exclusive representative of the stevedores for the purpose of collective bargaining.
They also sought to submit for collective bargaining with PIER 8 A&S such other labor standard issues
as wage increases, 13th month pay and vacation and sick leave pay. 7
The stevedores, however, now contend that PIER 8 A&S is not an independent contract but a labor only
contractor. In their Amended Complaint and Position Paper, the stevedores alleged that:
(1) They perform their duties or work assignments under the close supervision of
supervisors of respondent Hijos de F. Escao Inc.;
(2) The machineries, equipment, tools and other facilities complainants used, while in the
performance of their jobs, are owned by respondent Hijos de F. Escao, Inc.;
(3) The jobs they were performing from the time they were first employed, until their
dismissals, are principal phases of respondent's operations; and
(4) The so-called Pier 8 Arrastre & Stevedoring Services, Inc. is a mere middleman; its
vital role is purely one of supplying workers to respondent Hijos de F. Escao, Inc. in
short, a mere recruiting agent. Plainly, said contractor can be categorized as an agent of
respondent Hijos de F. Escao, Inc. as it performs activities directly related to the principal
business of said Hijos de F. Escao, Inc.
Although the record does not show that the stevedores had submitted any evidence to fortify their claim
that PIER 8 A&S is a labor only contractor, the Labor Arbiter simply conceded that claim to be factual.

13

The Labor Arbiter added that the business of PIER 8 A&S is "desirable and indispensable in the business
of Hijos de F. Escao and without [the stevedores], its vessels could not be operated."
The Court is unable to agree with the conclusion reached by the Labor Arbiter, particularly that portion
where the Labor Arbiter supposed stevedoring to be an indispensable part of the business of Escao.
Escao is a corporation engaged in inter-island shipping business, being the operator of the Escao
Shipping Lines. It was not alleged, nor has it been shown, that Escao or any other shipping company is
also engaged in Arrastre and stevedoring services. Stevedoring is not ordinarily included in the business
of transporting goods, it (stevedoring) being a special kind of service which involves the loading
unloading of cargo on or from a vessel on port. It consists of the handling of cargo from the hold of the
ship to the dock, in case of pier-side unloading, or to a barge, in case of unloading at sea. The loading on
a ship of outgoing cargo is also part of stevedoring work. 8 Arrastre, upon the other hand, involves the
handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and
the ships tackle. 9 Considering that a shipping company is not normally or customarily engaged in
stevedoring and arrastre activities either for itself or other vessels, it contracts with other companies
offering those services. The employees, however, of the stevedoring and/or arrastre company should not
be deemed the employees of the shipping company, in the absence of any showing, that the arrastre
and/or stevedoring company in fact acted as an agent only of the shipping company. No such showing
was made in this case.
We turn next to the stevedores' contention that PIER 8 A&S is guilty of ULP. In this respect, the Labor
Arbiter had found that:
Now comes the issue of unfair labor practice. This Labor Arbiter believes that respondents
are guilty as charged. The unfair labor practice acts of the respondents started when they
came to know that the petitioners have organized themselves and affiliated with the
NOWM Subsequent acts of the respondents like requiring the petitioners to disaffiliate
with the NOWM and affiliate with the General Maritime Stevedores Union and later on to
Independent Workers Union, requiring them to sign applications for membership therein,
they were threatened and coerced, are all acts of unfair labor practices. Thereafter, the
petitioners' working schedules were rotated when the respondent Hijos de F. Escao
transferred to Pier 16 through the alleged approval of the Philippine Port Authority and
later on the said petitioners were left without work, were all in furtherance of such unfair
labor practice acts. ... 10
Both the Constitution and the Labor Code guarantee to the stevedores a right to self-organization. It was
unlawful for PIER 8 A&S to deprive them of that right by its undue interference. The Constitution (Article
III, Section 7) expressly recognizes the right of employees, whether of the public or the private sector, to
form unions. Article 248 of the Labor Code provides:
Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to
commit any of the following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of their right to selforganization;
(b) To require as a condition of employment that a person or an employee shall not join a
labor organization or shall withdraw from one to which he belongs;
(c) To contract out services or functions being performed by union members when such
will interfere with, restrain or coerce employees in the exercise of their rights to selforganization;

14

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration
of any labor organization, including the giving of financial or other support to it or its
organizations or supporters;
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization.
xxx xxx xxx
(Emphasis supplied.)
Not only was PIER 8 A&S guilty of ULP; it was also liable for illegal dismissal. PIER 8 A&S did not obtain
prior clearance from the MOLE before it dismissed the stevedores, as required by the law then in force
which read:
Section 1. Requirement for shutdown or dismissal. No employer may shut down his
establishment or dismiss any of his employees with at least one year of service during the
last two years, whether the service is broken or continuous, without prior clearance issued
therefor in accordance with this Rule. Any provision in a collective bargaining agreement
dispensing with the clearance requirement shall be null and void.
Section 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without
prior clearance shall be conclusively presumed to be a termination of employment without
a just cause. The Regional Director shall, in such case, order the immediate reinstatement
of the employee and the payment of his wages from the time of the shutdown or dismissal
until the time of reinstatement. 11
B.P. Blg. 130 amended the Labor Code on 4 September 1981 by abolishing the requirement of prior
clearance from the MOLE but since the dismissal of the stevedores was effected prior to the
promulgation of B.P. Blg. 130, PIER 8 A&S was then bound to comply with the old law. The Court,
interpreting Sections 1 and 2 above quoted, has consistently held that a dismissal without said clearance
shall be conclusively presumed a termination without just cause. 12 The record is bare of any evidence
that could compel the Court to overturn the factual findings of the Labor Arbiter on this point.
WHEREFORE, considering the absence of an employer-employee relationship between Hijos de F.
Escao, Inc. and private respondents, the Decision of the Labor Arbiter dated 28 February 1980 in NLRC
Case No. RB-IV-2326-79 and the Decision of the NLRC dated 11 November 1981 are hereby MODIFIED
so that only Pier 8 Arrastre & Stevedoring Services, Inc. shall be liable for reinstatement and payment of
backwages. As so modified, both Decisions are hereby AFFIRMED. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988

15

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

16

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).

17

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:
I
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 ...

18

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

19

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." 10 Subsequently, 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 solidum as 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..

20

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.

21

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, 25 and 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

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16600

December 27, 1961

22

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,

vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.
Luis G. Hofilea for petitioner.
J. T. de Leon for respondents.
PAREDES, J.:
As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora Fabrigar
(common-law wife) and their children, filed a claim for compensation with the Workmen's Compensation
Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants, vs. Iloilo Chinese Commercial
School, Respondent." In this claim, it was alleged that the cause of death was " pulmonary tuberculosis contracted
during and as a result of his employment as janitor." The Hearing Officer of the WCC denied the claim and
dismissed the case, finding that the claimant failed to prove the casual effect of employment and death; nothing was
shown that the disease was contracted in line of duty; that whatever evidence claimant presented about the cause of
death was only a mere suggestion that progressively developed from tuberculosis with heart trouble to a sudden
fatal turn, ending up for the cause of "beriberi adult" at the time of death, as per certification of Sanitary Inspector
Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).
The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation Commission which, on
November 12, 1959, rendered judgment reversing the decision of its Hearing Officer, making the following
findings of facts:
That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of the respondent
Iloilo Chinese Commercial School, his work consisting of sweeping and scrubbing the floors, cleaning the
classrooms and the school premises, and other janitorial chores; on March 11, 1956, preparatory to graduation day,
he carried desks and chairs from the classrooms to the auditorium, set the curtains and worked harder and faster
than usual; that although he felt shortness of breath and did not feel very well that day, he continued working at the
request of the overseer of respondent, that on the following day he reported for work, but on March 13, he spat
blood and stopped working; that from April 29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico
Villareal "for far advanced pulmonary tuberculosis and for heart disease"; and that previous to said treatment, he
was attended by Dr. Jaranilla for pulmonary tuberculosis. The Commission concluded that the short period of
intervention between his last day of work (March 13, 1956) when he spat blood and his death on June 28, 1956, due
to pulmonary tuberculosis, indicated that he had been suffering from such disease even during the time he was
employed by the respondent and considering the strenuous work he performed, his employment as janitor
aggravated his pre-existing illness; that although here is a discrepancy between the cause of death "beriberi adult,"
as appearing in the death Certificate and the testimony of Dr. Villareal, the latter deserves more credence, because
the information (cause of death) was given by the sanitary inspector who did not, in any way, examine the deceased
before or after his death. The Commission, therefore, ordered the respondent Chinese Commercial School, Inc., in
said case
1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito, Gloria,
Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY
SIX and 00/00 Pesos (P2,496.00) as Death benefits; and
2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428, as amended.
The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had
been denied, petitioner alleging that the Commission erred:
1. In disregarding completely the evidentiary value of the death certificate of the attending physician which
was presented as evidence by both claimants and respondent (Exhibits C & 4) to prove the cause of death;

23

2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was contracted during
and as a result of the nature of his employment;
3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and
4. In not holding that the herein petitioner is exempt from the scope of the Workmen's Compensation
Law.lawphil.net
Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in its favor.
Considering the doctrine that the Commission, like the Court of Industrial Relations, is bound not by the rule of
preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence (Ang Tibay vs. CIR, 69
Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772,
W.C. Act), petitioner's pretension is without merit. Substantial evidence supports the decision of the Commission.
While seemingly there exists an inconsistency in the cause of death, as appearing in the death certificate by Dr.
Labitoria and in Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary Inspector did not
examine the deceased before and after his death. "Undoubtedly," says the Commission, "the information that he
died of beriberi adult, as appearing in the death certificate was given because it appears that the deceased had also
edema of the extremities (swollen legs)." The evidence of record sustains the following findings of the
Commission, is Fabrigar's cause of death to wit
The short period of time intervening between his last day of work (March 13, 1956) when he spat blood
and his death June 28, 1956 due to pulmonary tuberculosis indicates that he had been suffering from the
disease even during the time that he was employed by the respondent. Considering the strenuous work that
he performed while in the service of the respondents and the unusually long hours of work he rendered
(6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legal working
hours, we find that his employment aggravated his pre-existing illness and brought about his death.
Moreover, our conclusion finds support in the fact that immediately preceding his last day of work with the
respondent, he had an unusually hard day lifting desks and other furnitures and assisting in the preparations
for the graduation exercises of the school. Considering also his complaints during that day (March 11),
among which was "shortness of breath", we may also say that his work affected an already existing heart
ailment.
We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the present
appeal by certiorari.
It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese Chamber of
Commerce which was the one that furnished the janitor service in the premises of its buildings, including the part
thereof occupied by the petitioner; that the Chamber of Commerce paid the salaries of janitors, including the
deceased; that the petitioner could not afford to pay rentals of its premises and janitor due to limited finances
depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and Chinese
nationals who helped the school. In other words, it is pretended that the deceased was not an employee of the
school but of the Chinese Chamber of Commerce which should be the one responsible for the compensation of the
deceased. On one hand, according to the Commission, there is substantial proof to the effect that Fabrigar was
employed by and rendered service for the petitioner and was an employee within the purview of the Workmen's
Compensation Law. On the other hand, the most important test of employer-employee relation is the power to
control the employee's conduct. The records disclose that the person in charge (encargado) of the respondent school
supervised the deceased in his work and had control over the manner he performed the same.
It is finally contended that petitioner is an institution devoted solely for learning and is not an industry within the
meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt from the scope of the same
law. Considering that this factual question has not been properly put in issue before the Commission, it may not
now be entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing
International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision of the Commission

24

does not show that the matter was taken up. We are at a loss to state whether the issue was raised in the motion for
reconsideration filed with the Commission, because the said motion is not found in the record before us. And the
resolution to the motion for reconsideration does not touch this question.
IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from is
affirmed, with costs against the herein petitioner.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and De Leon, JJ., concur.
Padilla, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 114787 June 2, 1995

MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO respondents.

VITUG, J.:
A prime focus in the instant petition is the question of when to hold a director or officer of a corporation
solidarily obligated with the latter for a corporate liability.
The case originated from a complaint filed with the Labor Arbiter by private respondent Celso B.
Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM") and its Vice
President Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave pay, 13th
month pay (for the years 1988 and 1989), holiday pay and rest day pay. Balbastro alleged that he was
employed by MAM as a pump operator in 1982 and had since performed such work at its Rancho Estate,
Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for seven days of work a week
that started from 6:00 a.m. to up until 6:00 p.m. daily.
MAM countered that Balbastro had previously been employed by Francisco Cacho and Co., Inc., the
developer of Rancho Estates. Sometime in May 1982, his services were contracted by MAM for the
operation of the Rancho Estates' water pump. He was engaged, however, not as an employee, but as a
service contractor, at an agreed fee of P1,590.00 a month. Similar arrangements were likewise entered
into by MAM with one Rodolfo Mercado and with a security guard of Rancho Estates III Homeowners'
Association. Under the agreement, Balbastro was merely made to open and close on a daily basis the
water supply system of the different phases of the subdivision in accordance with its water rationing
scheme. He worked for only a maximum period of three hours a day, and he made use of his free time by
offering plumbing services to the residents of the subdivision. He was not at all subject to the control or
supervision of MAM for, in fact, his work could so also be done either by Mercado or by the security
guard. On 23 May 1990, prior to the filing of the complaint, MAM executed a Deed of Transfer, 1 effective

25

01 July 1990, in favor of the Rancho Estates Phase III Homeowners Association, Inc., conveying to the
latter all its rights and interests over the water system in the subdivision.
In a decision, dated 23 December 1991, the Labor Arbiter dismissed the complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission ("NLRC") rendered judgment (a)
setting aside the questioned decision of the Labor Arbiter and (b) referring the case, pursuant to Article
218(c) of the Labor Code, to Arbiter Cristeta D. Tamayo for further hearing and submission of a report
within 20 days from receipt of the Order. 2 On 21 March 1994, respondent Commissioner, after
considering the report of Labor Arbiter Tamayo, ordered:
WHEREFORE, the respondents are hereby directed to pay jointly and severally
complainant the sum of P86,641.05 as above-computed. 3
The instant petition asseverates that respondent NLRC gravely abused its discretion, amounting
to lack or excess of jurisdiction, (1) in finding that an employer-employee relationship existed
between petitioners and private respondent and (2) in holding petitioners jointly and severally
liable for the money claims awarded to private respondent.
Once again, the matter of ascertaining the existence of an employer-employee relationship is raised.
Repeatedly, we have said that this factual issue is determined by:
(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 result of the work to
be done and to the means and methods by which the work is to be accomplished.
We see no grave abuse of discretion on the part of NLRC in finding a full satisfaction, in the case
at bench, of the criteria to establish that employer-employee relationship. The power of control,
the most important feature of that relationship and, here, a point of controversy, refers merely to
the existence of the power and not to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of duties of the employee; it is enough that the
former has a right to wield the power. 4 It is hard to accede to the contention of petitioners that
private respondent should be considered totally free from such control merely because the work
could equally and easily be done either by Mercado or by the subdivision's security guard. Not
without any significance is that private respondent's employment with MAM has been registered
by petitioners with the Social Security System. 5
It would seem that the money claims awarded to private respondent were computed from 06 March 1988
to 06 March 1991, 6 the latter being the date of the filing of the complaint. The NLRC might have missed
the transfer by MAM of the water system to the Homeowners Association on 01 July 1990, a matter that
would appear not to be in dispute. Accordingly, the period for the computation of the money claims
should only be for the period from 06 March 1988 to 01 July 1990 (when petitioner corporation could be
deemed to have ceased from the activity for which private respondent was employed), and petitioner
corporation should, instead, be made liable for the employee's separation pay equivalent to one-half
(1/2) month pay for every year of
service. 7 While the transfer was allegedly due to MAM's financial constraints, unfortunately for petitioner
corporation, however, it failed to sufficiently establish that its business losses or financial reverses were
serious enough that possibly can warrant an exemption under the law. 8

26

We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and severally liable
with MAM. A corporation, being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct
accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the following cases: 9
1. When directors and trustees or, in appropriate cases, the officers of a corporation
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons. 10
2. When a director or officer has consented to the issuance of watered stocks or who,
having knowledge thereof, did not forthwith file with the corporate secretary his written
objection thereto. 11
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation. 12
4 When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action. 13
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable
with the corporation for the termination of employment of employees done with malice or in bad
faith. 14
In the case at Bench, there is nothing substantial on record that can justify, prescinding from the
foregoing, petitioner Centeno's solidary liability with the corporation.
An extra note. Private respondent avers that the questioned decision, having already become final and
executory, could no longer be reviewed by this Court. The petition before us has been filed under Rule
65 of the Rules of Court, there being no appeal, or any other plain, speedy and adequate remedy in the
ordinary course of law from decisions of the National Labor Relations Commission; it is a relief that is
open so long as it is availed of within a reasonable time.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the NLRC for a
re-computation of private respondent's monetary awards, which, conformably with this opinion, shall be
paid solely by petitioner MAM Realty Development Corporation. No special pronouncement on costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

27

G.R. No. 116960 April 2, 1996

BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators of JJ's TRUCKING, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PEDRO JUANATAS and FREDELITO JUANATAS,
respondents.

REGALADO, J.:p
This petition for certiorari seeks the annulment of the decision of respondent National Labor Relations
Commission (NLRC), dated May 27, 1994, as well as its resolution, dated August 8, 1994, denying
petitioners's motion for reconsideration, 1 which assailed decision affirmed with modifications the adverse
decision of the labor arbiter against herein petitioners.
On June 29, 1990, herein private respondent Pedro and Fredelito Juanatas, father and son, filed a claim
for unpaid wages/commissions, separation pay and damages against JJ's Trucking and/or Dr. Bernardo
Jimenez. Said respondents, as complainants therein, alleged that in December, 1987, they were hired by
herein petitioner Bernardo Jimenez as driver/mechanic and helper, respectively, in his trucking firm, JJ
Trucking. They were assigned to a ten-wheeler truck to haul soft drinks of Coca-Cola Bottling Company
and paid on commission basis, initially fixed at 17% but later increased to 20% in 1988.
Private respondents further alleged that for the years 1988 and 1989 they received only a partial
commission of P84,000.00 from petitioners' total gross income of almost P1,000,000.00 for the said two
years. Consequently, with their commission for that period being computed at 20% of said income, there
was an unpaid balance to them of P106,211.86; that until March, 1990 when their services were illegally
terminated, they were further entitled to P15,050.309 which, excluding the partial payment of P7,000.00,
added up to a grand total of P114,261.86 due and payable to them; and that petitioners' refusal to pay
their aforestated commission was a ploy to unjustly terminate them.
Disputing the complaint, petitioners contend that respondent Fredelito Juanatas was not an employee of
the firm but was merely a helper of his father Pedro; that all commissions for 1988 and 1989, as well as
those up to March, 1990, were duly paid; and that the truck driven by respondent Pedro Juanatas was
sold to one Winston Flores in 1991 and, therefore, private respondents were not illegally dismissed. 2
After hearings duly conducted, and with the submission of the parties' position/supporting papers, Labor
Arbiter Rogue B. de Guzman rendered a decision dated March 9, 1993, with this decretal portion:
WHEREFORE, decision is hereby issued ordering respondents JJ's Trucking and/or Dr.
Bernardo Jimenez to pay jointly and severally complainant Pedro Juanatas a separation
pay of FIFTEEN THOUSAND FIFTY (P15,050.00) PESOS, plus attorney's fee equivalent
to ten percent (10%) of the award. The complaint of Fredelito Juanatas is hereby
dismissed for lack of merit. 3
On appeal filed by private respondents, the NLRC modified the decision of the labor arbiter and disposed
as follows:
PREMISES CONSIDERED, the Decision of March 9, 1993 is hereby MODIFIED, to wit:

28

1. Complainant Fredelito Juanatas is hereby declared respondents' employee and shares

in (the) commission and separation pay awarded to complainant Pedro Juanatas, his
father.
2. Respondent JJ's Trucking and Dr. Bernardo Jimenez are jointly and severally liable to
pay complainants their unpaid commissions in the total amount of Eighty Four Thousand
Three Hundred Eighty Seven Pesos and 05/100 (P84,387.05).
3. The award of attorney's fees is reduced accordingly to eight thousand four hundred
thirty eight pesos and 70/100 (P8,438.70).
4. The other findings stand affirmed. 4
Petitioners' motion for reconsideration having been denied thereafter in public respondent's resolution
dated August 8, 1994, 5 petitioners have come to us in this recourse, raising for resolution the issues as
to whether or not respondent NLRC committed grave abuse of discretion in ruling (a) that private
respondents were not paid their commissions in full, and (b) that respondent Fredelito Juanatas was an
employee of JJ's Trucking.
The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave
abuse of discretion. 6 As a rule, this Court does not review supposed errors in the decision of the NLRC
which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are
accorded not only respect but even finality, 7 aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the
facts is necessary since the factual findings of the NLRC and the labor arbiter are at odds with each
other. 8
On the first issue, we find no reason to disturb the findings of respondent NLRC that the entire amount of
commissions was not paid, this by reason of the evident failure of herein petitioners to present evidence
that full payment thereof has been made. It is a basic rule in evidence that each party must prove his
affirmative allegation. Since the burden of evidence lies with the party who asserts an affirmative
allegation, the plaintiff or complainant has to prove his affirmative allegations in the complaint and the
defendant or respondent has to prove the affirmative allegations in his affirmative defenses and
counterclaim. Considering that petitioners herein assert that the disputed commissions have been paid,
they have the bounden duty to prove that fact.
As a general rule, one who pleads payment has the burden of proving it. 9 Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather
than on the plaintiff to prove non-payment. 10 The debtor has the burden of showing with legal certainty
that the obligation has been discharged by payment. 11
When the existence of a debt is fully established by the evidence contained in the record, the burden of
proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to
the claim of the creditor. 12 Where the debtor introduces some evidence of payment, the burden of going
forward with the evidence as distinct from the general burden of proof shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment. 13
In the instant case, the right of respondent Pedro Juanatas to be paid a commission equivalent to 17%,
later increased to 20%, of the gross income is not disputed by petitioners. Although private respondents
admit receipt of partial payment, petitioners still have to present proof of full payment. Where the
defendant sued for a debt admits that the debt was originally owed, and pleads payment in whole or in
part, it is incumbent upon him to prove such payment. That a plaintiff admits that some payments have

29

been made does not change the burden of proof. The defendant still has the burden of establishing
payments beyond those admitted by plaintiff. 14
The testimony of petitioners which merely denied the claim of private respondents, unsupported by
documentary evidence, is not sufficient to establish payment. Although petitioners submitted a notebook
showing the alleged vales of private respondents for the year 1990, 15 the same is inadmissible and
cannot be given probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity. 16
The positive testimony of a creditor may be sufficient of it self to show non-payment, even when met by
indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show
payment, but, where his testimony is contradicted by the other party or by a disinterested witness, the
issue may be determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be regarded as conclusive on that issue. 17
Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and in
effect admitted the allegations of private respondents.
With respect to the second issue, however, we agree with petitioners that the NLRC erred in holding that
the son, Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of an employer-employee relationship, the
elements that are generally considered are the following: (1) the selection and engagement of the
employee; (2) the Payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct, 18 with the control test assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The agreement was between petitioner
JJ's Trucking and respondent Pedro Juanatas. The hiring of a helper was discretionary on the part of
Pedro. Under their contract, should he employ a helper, he would be responsible for the latter's
compensation. With or without a helper, respondent Pedro Juanatas was entitled to the same percentage
of commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the compensation he
received was paid by his father out of the latter's commission. Further, Fredelito was not subject to the
control and supervision of and dismissal by petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of the labor arbiter that Fredelito was
not an employee of petitioners, to wit:
Public respondent committed grave abuse of discretion in holding that said private
respondent is an employee of JJ's Trucking on the ground that, citing Article 281 of the
Labor Code, "Fredelito's functions as helper was (sic) necessary and desirable to
respondent's trucking business".
In the first place, Article 281 of the Labor Code does not refer to the basic factors that
must underlie every existing employer-employee relationship, the absence of any of which
will negate such existence. It refers instead to the qualifications of "(A)n employee who is
allowed to work after a probationary period" and who, as a consequence, "shall be
considered a regular employee." Secondly, the test in determining the existence of an
employee-employer relationship is not the necessity and/or desirability of one's functions
in relation to an employer's business, but "(1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct. The latter is the most important element" (Singer Sewing
Machine Company vs. Drilon, 193 SCRA 270, 275; Deferia vs. NLRC, 194 SCRA 531,
525; Ecal vs. NLRC, 224, 228, Hijos De F. Escano, Inc vs. NLRC, 224 SCRA 781, 785).

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The aforequoted pertinent findings of the Labor Arbiter indicate (that) the foregoing
requirements do not exist between petitioner and private respondent Fredelito Juanatas.
Thus, the labor arbiter stated that respondent Fredelito Juanatas was never hired by
petitioners. Instead the former's services were availed of by respondent Pedro Juanatas
his father, who, at the same time, supervised and controlled his work and paid his
commissions. Respondent NLRC's ruling did not traverse these findings of the labor
arbiter. 19
WHEREFORE, the judgment of respondent National Labor Relations Commission is hereby AFFIRMED,
with the MODIFICATION that paragraph 1 thereof, declaring Fredelito Juanatas an employee of
petitioners and entitled to share in the award for commission and separation pay, is hereby DELETED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48605 December 14, 1981
DOMNA N. VILLAVERT, petitioner,
vs.
EMPLOYEES' COMPENSATION COMMISSION & GOVERNMENT SERVICE INSURANCE SYSTEM
(Philippine Constabulary), respondents.

FERNANDEZ, J.:
This is a petition to review the decision of the Employees' Compensation Commission in ECC Case No.
0692, entitled "Domna N. Villavert, appellant versus Government Service Insurance System (Philippine
Constabulary), respondents," affirming the decision of the Government Service Insurance System
denying the claim for death benefits. 1
The petitioner, Domna N. Villavert, is the mother of the late, Marcelino N. Villavert who died of acute
hemorrhagic pancreatitis on December 12, 1975 employed as a Code Verifier in the Philippine
Constabulary. She filed a claim for income benefits for the death of her son under P.D. No. 626 as
amended with the Government Service Insurance System on March 18, 1976. The said claim was
denied by the Government Service Insurance System on the ground that acute hemorrhagic pancreatitis
is not an occupational disease and that the petitioner had failed to show that there was a causal
connection between the fatal ailment of Marcelino N. Villavert and the nature of his employment.
The petitioner appealed to the Employees' Compensation Commission which affirmed on May 31, 1978
the decision of the respondent, Government Service Insurance System, denying the claim.
The record shows that in addition to his duties as Code Verifier, Marcelino N. Villavert also performed the
duties of a computer operator and clerk typist. In the morning of December 11, 1975, Marcelino reported
as usual to the Constabulary Computer Center at Camp Crame, Quezon City. He performed his duties
not only as code verifier but also handled administrative functions, computer operation and typing jobs
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due to shortage of civilian personnel. Although he was complaining of chest pain and headache late in
the afternoon of December 11, 1975, after a whole day of strenuous activities, Marcelino was still
required to render overtime service until late in the evening of the same day, typing voluminous classified
communications, computing allowances and preparing checks for the salary of Philippine Constabulary
and Integrated National Police personnel throughout the country for distribution on or before December
15, 1975. He went home late at night and due to fatigue, he went to bed as soon as he arrived without
taking his meal. Shortly thereafter, Marcelino was noticed by his mother, the herein petitioner, gasping for
breath, perspiring profusely, and mumbling incoherent words. The petitioner tried to wake him up and
after all efforts to bring him to his senses proved futile, she rushed Marcelino to the UE Ramon
Magsaysay Memorial Hospital where he was pronounced dead at 5:30 o'clock in the morning of
December 12, 1975 without regaining consciousness. The case of death was acute hemorrhagic
pancreatitis.
To support the claim that Marcelino N. Villavert died of acute hemorrhagic pancreatitis as a result of his
duties as a code verifier, computer operator and typist of the Philippine Constabulary, the petitioner
submitted the following certification of Lt. Colonel Felino C. Pacheco Jr., commanding officer, of the
Philippine Constabulary, which reads:
THIS IS TO CERTIFY that MARCELINO N. VILLAVERT, a regular employee of the
Constabulary Computer Center, had been performing the following duty assignments in
this office in addition to his appointment as Coder Verifier before his death;
a. Computer Operator As computer operator he was subject to excessive heat and cold;
b. Clerk TypistAs typist he was responsible for typing important communications not
only for the office of the Constabulary Computer Center but also for other posts, including
engagement speeches of the Chief of Constabulary and other ranking officers of the
Command;
c. Due to the shortage of qualified civilian personnel to handle the task, he was given
excessive work responsibilities in the office which could have aggravated his ailment.
d. That more often he took his meals irregularly late in view of the nature of his work
especially during the preparation of checks for the salary of the Philippine Constabulary
and the National Integrated Police personnel throughout the country;
e. He used to perform rotation duties, thereby leaving him in sufficient time to consult the
Constabulary Medical Dispensary for routine physical check up about his health.
f. That subject employee never drinks alcoholic liquor, neither smokes nor engages on
immoral habits during his lifetime.
g. That he died in line of duty after retiring from his night shift.
This certification is being issued in behalf of legal heirs in order to justify their claim for
payment of benefits from the Employees' Compensation to reciprocate the services
rendered by the late Marcelino N. Villavert, a loyal and dedicated public servant. 2
The foregoing certification of Lt. Col. Felino C. Pacheco, Jr. was corroborated by the affidavit of Rustico
P. Valenzuela, Chief Clerk of the Constabulary Computer Center, which reads:
I, RUSTICO P. VALENZUELA, Master Sergeant, Philippine Constabulary, Filipino of legal
age, married and presently Chief Clerk of the Constabulary Computer Center, Camp

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Crame, Quezon City after having been duly sworn to in accordance to law hereby depose
and say:
a. That as Chief Clerk I am responsible to my Commanding Officer about the accounting,
detail, duties, etc. of all military and civilian personnel in the office and therefore the duties
of the late Marcelino N. Villavert are personally known to me prior to his death;
b. That the late Marcelino N. Villavert although was appointed as Coder Verifier, still he
was instructed to perform extra additional workload due to shortage of qualified civilian
personnel to handle administrative function, he being a graduate of the Computer
Operator and an expert typist which is seldom found among the qualities of civilian
personnel assigned in the Constabulary Computer Center;
c. That the late Marcelino N. Villavert was complaining of chest pain and headache prior
to his death but because of an urgent call to the service, although it necessitated his rest;
he was obliged to go on strenuous duty on the night of December 11, 1975, typing
voluminous classified communications, compute allowances and prepare checks for the
salary of Philippine Constabulary and Integrated National Police personnel throughout the
country for distribution on or before December 15, 1975, scheduled payday, thereby
aggravating his ailment due to excessive work, disposed to heat and cold, operating
computer machine and over fatigue that caused his sudden death;
d. That the late Marcelino N. Villavert before his death have insufficient time to consult the
Medical Dispensary for routine physical check-up due to the rotation of his duties and
therefore no record of his physical examination could be found in this Headquarters;
e. That the death of late Marcelino N. Villavert was service connected in view of the fact
that he died while in the performance of his official duties.
Affiant further sayeth none.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of August 1977 at
Quezon City.
(SGD) RUSTICO P. VALENZUEL
Affiant
SUBSCRIBED AND SWORN to before me this 22nd day of August 1977 at Quezon City,
Metro Manila. Affiant exhibited his Residence Certificate No. A-1183510 issued at Taguig,
Metro Manila on January 10, 1977.
(SGD) ENRIQUE C VILLANUEVA JR
1Lt. PC Administrative Officer 3
The Government Service Insurance System and the Employees' Compensation Commission denied the
claim for compensation on the ground that the petitioner did not present evidence that the illness of
Marcelino N. Villavert, acute hemorrhagic pancreatitis, was caused or aggravated by the nature of his
duties as employee of the Philippine Constabulary.
The Employees' Compensation Commission, citing a book on medicine, said:

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In medical science, acute hemorrhagic pancreatitis is "acute inflammation with

hemorrhagic necrosis of the pancreas." It occurs most commonly in association with
alcoholism. The onset of the symptoms often occurs during or shortly after bouts of
alcoholic intoxication. It also occurs in association with biliary tract disease. Occasionally,
it occurs as a complication of peptic ulcer, mumps, viral hepatitis or following the use of
drugs such as glucocorticoids, or chlorothiazide. It is sometimes associated with metabolic
disorders such as hyperpidemia and hyperparathyroidism. It may also be associated with
a genetic type of pancreatitis with onset in childhood. Trauma is a relatively frequent
cause of pancreatitis; it may result from a severe blow to the abdomen, a penetrating
injury from a bullet or knife wound, inadvertent trauma from surgical procedures in the
upper abdomen or rarely, electric shock. Approximately 20% of the patients have no
apparent underlying or predisposing cause. (Principles of Internal Medicine by Harrison,
7th Edition, pp. 157) 4
However, the Medico Legal Officer of the National Bureau of Investigation stated that the exact cause of
acute hemorrhagic pancreatitis is still unknown despite extensive researches in this field, although most
research data are agreed that physical and mental stresses are strong causal factors in the development
of the disease. 5
From the foregoing facts of record, it is clear that Marcelino N. Villavert died of acute hemorrhagic
pancreatitis which was directly caused or at least aggravated by the duties he performed as coder
verifier, computer operator and clerk typist of the Philippine Constabulary. There is no evidence at all that
Marcelino N. Villavert had a "bout of alcoholic intoxication" shortly before he died. Neither is there a
showing that he used drugs.
It should be noted that Article 4 of the Labor Code of the Philippines, as amended, provides that "All
doubts in the implementation and interpretation of this Code, including its implementing rules and
regulations shall be resolved in favor of labor."
WHEREFORE, the decision of the Employees' Compensation Commission sought to be reviewed is set
aside and judgment is hereby rendered ordering the Government Service Insurance System to pay the
petitioner death benefits in the amount of SIX THOUSAND PESOS (P6,000.00).
SO ORDERED.

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