SECONDDIVISION

[G.R.No.126625.September23,1997]

KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner, vs. NATIONAL

LABORRELATIONSCOMMISSION,5THDIVISION,andBENJAMINRELUYA,
JR., EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES,
NESTOR BENOYA, RODOLFO GONGOB, DARIO BINOYA, BENJAMIN
BASMAYOR,ABELARDOSACURA,FLORENCIOSACURA,ISABELOMIRA,
NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO CILLON, VIRGILIO
QUIZON, GUARINO EVANGELISTA, ALEJANDRO GATA, BENEDICTO
CALAGO, NILO GATA, DIONISIO PERMACIO, JUANITO SALUD, ADOR
RIMPO, FELIPE ORAEZ, JULIETO TEJADA, TEOTIMO LACIO, ONOFRE
QUIZON, RUDY ALVAREZ, CRESENCIO FLORES, ALFREDO PERMACIO,
CRESENCIO ALVIAR, HERNANI SURILA, DIOSDADO SOLON, CENON
ALBURO, ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO BAGO,
JERRY VARGAS, EDUARDO BUENO, PASCUAL HUDAYA, ROGELIO
NIETES,andREYNALDONIETES,respondents.

DECISION
PUNO,J.:

Inthispetitionforcertiorari,petitionerKanlaonConstructionEnterprisesCo.,Inc.seekstoannul
the decision of respondent National Labor Relations Commission, Fifth Division and remand the
casestotheArbitrationBranchforaretrialonthemerits.
Petitioner is a domestic corporation engaged in the construction business nationwide with
principal office at No. 11 Yakan St., La Vista Subdivision, Quezon City. In 1988, petitioner was
contractedbytheNationalSteelCorporationtoconstructresidentialhousesforitsplantemployeesin
Steeltown, Sta. Elena, Iligan City. Private respondents were hired by petitioner as laborers in the
projectandworkedunderthesupervisionofEngineersPaulinoEstacioand Mario Dulatre. In 1989,
theprojectneareditscompletionandpetitionerstartedterminatingtheservicesofprivaterespondents
anditsotheremployees.
In 1990, private respondents filed separate complaints against petitioner before SubRegional
Arbitration Branch XII, Iligan City. Numbering fortyone (41) in all, they claimed that petitioner paid
themwagesbelowtheminimumandsoughtpaymentoftheirsalarydifferentialsandthirteenthmonth
pay.EngineersEstacioandDulatrewerenamedcorespondents.
Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others were
assigned to Labor Arbiter Nicodemus G. Palangan. Summonses and notices of preliminary
conference were issued and served on the two engineers and petitioner through Engineer Estacio.
The preliminary conferences before the labor arbiters were attended by Engineers Estacio and
Dulatre and private respondents. At the conference of June 11, 1990 before Arbiter Siao, Engineer
Estacioadmittedpetitioner'sliabilitytoprivaterespondentsandagreedtopaytheirwagedifferentials
andthirteenthmonthpayonJune19,1990.Asaresultofthisagreement,EngineerEstacioallegedly
waivedpetitioner'srighttofileitspositionpaper. [1]Privaterespondentsdeclaredthatthey,too,were
dispensingwiththeirpositionpapersandwereadoptingtheircomplaintsastheirpositionpaper.[2]
On June 19, 1990, Engineer Estacio appeared but requested for another week to settle the
claims. Labor Arbiter Siao denied this request. On June 21, 1990, Arbiter Siao issued an order
grantingthecomplaintanddirectingpetitionertopayprivaterespondents'claims.ArbiterSiaoheld:
"xxx.

"Consideringthelengthoftimethathaselapsedsincethesecaseswerefiled,andwhatthecomplainantsmight
thinkastohowthisbranchoperatesand/orconductsitsproceedingsastheyarenowrestless,thisArbiterhasno
otheralternativeorrecoursebuttoordertherespondenttopaytheclaimsofthecomplainants,subjectofcourse
tothecomputationoftheFiscalExaminerIIofthisBranchpursuanttotheoralmanifestationofrespondent.The
SupremeCourtruled:'Contractsthoughorallymadearebindingontheparties.'(LaoSokv.Sabaysabay,138
SCRA134).

"Similarly,thisBranchwouldpresentinpassingthat'acourtcannotdecideacasewithoutfactseitheradmitted
oragreeduponbythepartiesorprovedbyevidence.'(YuChinPiaov.LimTuaco,33Phil.92Benedictov.
Yulo,26Phil.160),

"WHEREFORE,premisesconsidered,therespondentisherebyorderedtopaytheindividualclaimsofthe
abovenamedcomplainantsrepresentingtheirwagedifferentialswithinten(10)daysfromreceiptofthisOrder.

"TheFiscalExaminerIIofthisBranchislikewiseherebyorderedtocomputetheindividualclaimsoftheherein
complainants.

"SOORDERED."[3]

OnJune29,1990,ArbiterPalanganissuedasimilarorder,thus:

"WhentheaboveentitledcaseswerecalledforhearingonJune19,1990at10:00a.m.respondentthrutheir
representativemanifestedthattheywerewillingtopaytheclaimsofthecomplainantsandpromisedtopaythe
sameonJune28,1990at10:30a.m.

"However,whenthesecaseswerecalledpurposelytomaterializethepromiseoftherespondent,thelatterfailed
toappearwithoutanyvalidreason.

"Consideringthereforethattherespondenthasalreadyadmittedtheclaimsofthecomplainants,webelievethat
theissuesraisedhereinhavebecomemootandacademic.

"WHEREFORE,premisesconsidered,theaboveentitledcasesareherebyorderedClosedandTerminated,
however,therespondentisherebyorderedtopaythecomplainantstheirdifferentialpayand13thmonthpay
withinaperiodoften(10)daysfromreceipthereofbasedontheemploymentrecordonfilewiththerespondent.

"SOORDERED."[4]

Petitioner appealed to respondent National Labor Relations Commission. It alleged that it was
denied due process and that Engineers Estacio and Dulatre had no authority to represent and bind
petitioner.Petitioner'sappealwasfiledbyoneAtty.ArthurAbundiente.
InadecisiondatedApril27,1992,respondentCommissionaffirmedtheordersoftheArbiters.
Petitioner interposed this petition alleging that the decision of respondent Commission was
renderedwithoutjurisdictionandingraveabuseofdiscretion.Petitionerclaimsthat:
"I
"THEQUESTIONEDDECISIONRENDEREDBYTHEHONORABLECOMMISSIONISANULLITY,IT
HAVINGBEENISSUEDWITHOUTJURISDICTION

II

"PUBLICRESPONDENTNATIONALLABORRELATIONSCOMMISSIONGRAVELYABUSEDITS
DISCRETIONINARBITRARILY,CAPRICIOUSLYANDWHIMSICALLYMAKINGTHEFOLLOWING
CONCLUSIONSBASEDNOTONFACTSANDEVIDENCEBUTONSPECULATION,SURMISEAND
CONJECTURE:

A.PetitionerwasdeprivedoftheconstitutionalrighttodueprocessoflawwhenitwasadjudgedbytheNLRC
liablewithouttrialonthemeritsandwithoutitsknowledge

B.TheNLRCerroneously,patentlyandunreasonablyinterpretedtheprinciplethattheNLRCanditsArbitration
Brancharenotstrictlyboundbytherulesofevidence

C.ThereisnolegalnoractualbasisintheNLRC'srulingthatpetitionerisalreadyinestoppeltodisclaimthe
authorityofitsallegedrepresentatives.

D.TheNLRCcommittedmanifesterrorinrelyingmerelyonprivaterespondentsunsubstantiatedcomplaintsto
holdpetitionerliablefordamages."[5]

Inbrief,petitionerallegesthatthedecisionsofthelaborarbitersandrespondentCommissionare
voidforthefollowingreasons:(1)therewasnovalidserviceofsummons(2)EngineersEstacioand
Dulatre and Atty. Abundiente had no authority to appear and represent petitioner at the hearings
before the arbiters and on appeal to respondent Commission (3) the decisions of the arbiters and
respondentCommissionarebasedonunsubstantiatedandselfservingevidenceandwererendered
inviolationofpetitioner'srighttodueprocess.
Service of summons in cases filed before the labor arbiters is governed by Sections 4 and 5 of
RuleIVoftheNewRulesofProcedureoftheNLRC.Theyprovide:

"Section4.ServiceofNoticesandResolutions.(a)Noticesorsummonsandcopiesoforders,resolutionsor
decisionsshallbeservedonthepartiestothecasepersonallybythebailiffordulyauthorizedpublicofficer
withinthree(3)daysfromreceiptthereoforbyregisteredmailProvidedthatwhereapartyisrepresentedby
counselorauthorizedrepresentative,serviceshallbemadeonsuchcounselorauthorizedrepresentative
providedfurtherthatincasesofdecisionandfinalawards,copiesthereofshallbeservedonboththepartiesand
theircounselprovidedfinally,thatincasewherethepartiesaresonumerous,serviceshallbemadeoncounsel
anduponsuchnumberofcomplainantsasmaybepracticable,whichshallbeconsideredsubstantialcompliance
withArticle224(a)oftheLaborCode,asamended.

"xxx.

"Section5.Proofandcompletenessofservice.Thereturnisprimafacieproofofthefactsindicatedtherein.
Servicebyregisteredmailiscompleteuponreceiptbytheaddresseeorhisagent.xxx."

UndertheNLRCRulesofProcedure,summonsontherespondentshallbeservedpersonallyorby
registered mail on the party himself. If the party is represented by counsel or any other authorized
representativeoragent,summonsshallbeservedonsuchperson.
Ithasbeenestablishedthatpetitionerisaprivatedomesticcorporationwithprincipaladdressin
Quezon City. The complaints against petitioner were filed in Iligan City and summonses therefore
served on Engineer Estacio in Iligan City. The question now is whether Engineer Estacio was an
agentandauthorizedrepresentativeofpetitioner.
Todeterminethescopeormeaningoftheterm"authorizedrepresentative"or"agent"ofparties
onwhomsummonsmaybeserved,theprovisionsoftheRevisedRulesofCourtmayberesortedto.
[6]

UndertheRevisedRulesofCourt, [7]serviceuponaprivatedomesticcorporationorpartnership
mustbemadeuponitsofficers,suchasthepresident,manager,secretary,cashier,agent,oranyof
its directors. These persons are deemed so integrated with the corporation that they know their
responsibilitiesandimmediatelydiscernwhattodowithanylegalpapersservedonthem.[8]
Inthecaseatbar,EngineerEstacio,assistedbyEngineerDulatre,managedandsupervisedthe
constructionproject. [9]AccordingtotheSolicitorGeneralandprivaterespondents,EngineerEstacio
attendedtotheprojectinIliganCityandsupervisedtheworkoftheemployeesthereat.Asmanager,
hehadsufficientresponsibilityanddiscretiontorealizetheimportanceofthelegalpapersservedon
him and to relay the same to the president or other responsible officer of petitioner. Summons for
petitionerwasthereforevalidlyservedonhim.
Engineer Estacio's appearance before the labor arbiters and his promise to settle the claims of
privaterespondentsisanothermatter.
The general rule is that only lawyers are allowed to appear before the labor arbiter and
respondentCommissionincasesbeforethem.TheLaborCodeandtheNewRulesofProcedureof
theNLRC,nonetheless,liststhree(3)exceptionstotherule,viz:

"Section6.Appearances.xxx.

"AnonlawyermayappearbeforetheCommissionoranyLaborArbiteronlyif:

"(a)herepresentshimselfaspartytothecase

"(b)herepresentstheorganizationoritsmembers,providedthatheshallbemadetopresentwrittenproofthat
heisproperlyauthorizedor

"(c)heisadulyaccreditedmemberofanylegalaidofficedulyrecognizedbytheDepartmentofJusticeorthe
IntegratedBarofthePhilippinesincasesreferredtheretobythelatter.xxx."[10]

A nonlawyer may appear before the labor arbiters and the NLRC only if: (a) he represents
himself as a party to the case (b) he represents an organization or its members, with written
authorizationfromthemor(c)heisadulyaccreditedmemberofanylegalaidofficedulyrecognized
bytheDepartmentofJusticeortheIntegratedBarofthePhilippinesincasesreferredtobythelatter.
[11]

EngineersEstacioandDulatrewerenotlawyers.Neitherweretheydulyaccreditedmembersofa
legal aid office. Their appearance before the labor arbiters in their capacity as parties to the cases
wasauthorizedunderthefirstexceptiontotherule.However,theirappearanceonbehalfofpetitioner
requiredwrittenproofofauthorization.It was incumbent upon the arbiters to ascertain this authority
especiallysincebothengineerswerenamedcorespondentsinthecasesbeforethearbiters.Absent
thisauthority,whateverstatementsanddeclarationsEngineerEstaciomadebeforethearbiterscould
notbindpetitioner.
TheappearanceofAtty.ArthurAbundienteinthecasesappealedtorespondentCommissiondid
not cure Engineer Estacio's representation. Atty. Abundiente, in the first place, had no authority to
appearbeforetherespondentCommission.Theappellants'briefhefiledwasverifiedbyhim,notby
petitioner. [12] Moreover, respondent Commission did not delve into the merits of Atty.Abundiente's
appeal and determine whether Engineer Estacio was duly authorized to make such promise. It
dismissed the appeal on the ground that notices were served on petitioner and that the latter was
estoppedfromdenyingitspromisetopay.
Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were authorized to
appearasrepresentativesofpetitioner,theycouldbindthelatteronlyinproceduralmattersbeforethe
arbiters and respondent Commission. Petitioner's liability arose from Engineer Estacio's alleged
promisetopay.Apromisetopayamountstoanoffertocompromiseandrequiresaspecialpowerof
attorneyortheexpressconsentofpetitioner.Theauthoritytocompromisecannotbelightlypresumed
andshouldbedulyestablishedbyevidence.[13]ThisisexplicitfromSection7ofRuleIIIoftheNLRC
RulesofProcedure,viz:

"Section7.Authoritytobindparty.Attorneysandotherrepresentativesofpartiesshallhaveauthoritytobind
theirclientsinallmattersofprocedurebuttheycannot,withoutaspecialpowerofattorneyorexpressconsent,
enterintoacompromiseagreementwiththeopposingpartyinfullorpartialdischargeofaclient'sclaim."

ThepromisetopayallegedlymadebyEngineerEstaciowasmadeatthepreliminaryconference
andconstitutedanoffertosettlethecaseamicably.Thepromisetopaycouldnotbepresumedtobe
asingleunilateralact,contrarytotheclaimoftheSolicitorGeneral. [14]Adefendant'spromisetopay
andsettletheplaintiff'sclaimsordinarilyrequiresareciprocalobligationfromtheplaintifftowithdraw
thecomplaintanddischargethedefendantfromliability. [15]Ineffect,theoffertopaywasanofferto
compromisethecases.
Incivilcases,anoffertocompromiseisnotanadmissionofanyliability,andisnotadmissiblein
evidenceagainsttheofferor. [16]Ifthisrulewereotherwise,noattempttosettlelitigationcouldsafely
bemade. [17]Settlementofdisputesbywayofcompromiseisanacceptedanddesirablepracticein
courts of law and administrative tribunals. [18] In fact, the Labor Code mandates the labor arbiter to
exert all efforts to enable the parties to arrive at an amicable settlement of the dispute within his
jurisdictiononorbeforethefirsthearing.[19]
Clearly, respondent Commission gravely abused its discretion in affirming the decisions of the
labor arbiters which were not only based on unauthorized representations, but were also made in
violationofpetitioner'srighttodueprocess.
Section3ofRuleVoftheNLRCRulesofProcedureprovides:

"Section3.SubmissionofPositionPapers/Memorandum.Shouldthepartiesfailtoagreeuponanamicable
settlement,inwholeorinpart,duringtheconferences,theLaborArbitershallissueanorderstatingthereinthe
matterstakenupandagreeduponduringtheconferencesanddirectingthepartiestosimultaneouslyfiletheir
respectiveverifiedpositionpapers.

"xxx."
After petitioner's alleged representative failed to pay the workers' claims as promised, Labor
Arbiters Siao and Palangan did not order the parties to file their respective position papers. The
arbitersforthwithrenderedadecisiononthemeritswithoutatleastrequiringprivaterespondentsto
substantiatetheircomplaints.Thepartiesmayhaveearlierwaivedtheirrighttofilepositionpapersbut
petitioner'swaiverwasmadebyEngineerEstacioonthepremisethatpetitionershallhavepaidand
settledtheclaimsofprivaterespondentsatthescheduledconference.Sincepetitionerrenegedonits
"promise,"therewasafailuretosettlethecaseamicably.Thisshouldhavepromptedthearbitersto
orderthepartiestofiletheirpositionpapers.
Article 221 of the Labor Code mandates that in cases before labor arbiters and respondent
Commission, they "shall use every and all reasonable means to ascertain the facts in each case
speedilyandobjectivelyandwithoutregardtotechnicalitiesoflaworprocedure,allintheinterestof
due process." The rule that respondent Commission and the Labor Arbiters are not bound by
technical rules of evidence and procedure should not be interpreted so as to dispense with the
fundamentalandessentialrightofdueprocess. [20]Andthisrightissatisfied,attheveryleast,'when
thepartiesaregiventheopportunitytosubmitpositionpapers. [21]LaborArbitersSiaoandPalangan
erredindispensingwiththisrequirement.
 Indeed,thelaborarbitersandtheNLRCmustnot,attheexpenseofdueprocess,bethefirstto
arbitrarilydisregardspecificprovisionsoftheRuleswhicharepreciselyintendedtoassisttheparties
inobtainingthejust,expeditiousandinexpensivesettlementoflabordisputes.[22]
IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the National Labor
Relations Commission, Fifth Division, is annulled and set aside and the case is remanded to the
RegionalArbitrationBranch,IliganCityforfurtherproceedings.
SOORDERED.
Regalado,(Chairman),andTorres,Jr.,JJ.,concur.
Mendoza,J.,onofficialleave.

[1]SeeOrderdatedJune21,1990ofArbiterSiao,Rollo,p.53.

[2]Id.

[3]Id.,pp.5354.

[4]OrderdatedJune29,1990ofArbiterPalangan,Rollo,pp.5051.

[5]Petition,pp.14,17,19,21,27,32,Rollo,pp.19,22,24,26,27,32.

[6]PhilippineNationalConstructionCorporationv.FerrerCalleja,167SCRA294,302[1988].

[7]Section13,Rule14oftheRevisedRulesofCourtprovides:

"Section13.Serviceuponprivatedomesticcorporationorpartnership.Ifthedefendantisacorporationorganizedunder
the laws of the Philippines or a partnership duly registered, service may be made on the president, manager,
secretary,cashier,agent,oranyofitsdirectors."
Section11,Rule14ofthe1997RulesofCivilProcedurereads:
"Section 11. Service upon domestic private juridical entity. When the defendant is a corporation, partnership or
associationorganizedunderthelawsofthePhilippineswithajuridicalpersonality,servicemaybemadeonthe
president,managingpartner,generalmanager,corporatesecretary,treasurer,orinhousecounsel."
[8]G&GTradingCorp.v.CourtofAppeals,158SCRA466,468[1988]VillaReyTransit,Inc.v.FarEastMotorCorp.,81
SCRA298,303[1978].
[9]CommentoftheSolicitorGeneral,pp.910Rollo,pp.182183.

[10]Section6,RuleIII,TheNewRulesofProcedureoftheNLRCseealsoArticle222,LaborCode.

[11]Section6,RuleIII,NLRCRulesofProcedure.

[12] Private respondents do not deny petitioner's allegation that Atty. Abundiente of the Macalalag and Associates Law
OfficeinIliganCitywasretainedcounseloftheNationalSteelCorporation,andthatasamatterofduty,hemay
havetakenituponhimselftoappealthecasesagainstpetitionersandthetwoengineers.
[13] Jag & Haggar Jeans & Sportswear Corp. v. National Labor Relations Commission, 241 SCRA 635, 641 [1995]
GeneralRubber&FootwearCorp.v.Drilon,169SCRA808,814[1989].
[14]Acompromiseisacontractwherebytheparties,inmakingreciprocalconcessions,avoidalitigationorputanendto
onealreadycommenced.(Article2028,CivilCode).
[15]Whereaconveyancebytheheirsismadeinexchangeforthesettlementofanyclaimwhichthegranteemayhave
against the heirs, the agreement may be considered as a contract of compromise (Aquino v. Esguerra, 87 Phil.
397,399[1950]).
[16]Section27,Rule130oftheRevisedRulesonEvidence.

[17]Martin,RevisedRulesonEvidence,p.219[1989]Francisco,HandbookonEvidence,p.130[1984].

[18] Jag & Haggar Jeans & Sportswear Corp. v. National Labor Relations Commission, supra, at 640 Santiago v. de
Guzman,177SCRA344,349[1989].
[19]Article221,paragraph2,LaborCode.

[20]Ang Tibayv. Court of Industrial Relations, 69 Phil. 635 [1940] Gelmart Industries (Phils.), Inc. v. Leogardo, Jr., 155
SCRA403,410[1987].
[21]PepsiColaDistributorsofthePhilippines,Inc.v.NationalLaborRelationsCommission,247SCRA386,394[1995]
PNOCEnergy Development Corporation v. National Labor Relations Commission, 201 SCRA 487, 494 [1991]
Odin Security Agency v. De La Serna, 182 SCRA 472, 479 [1990] Manila Doctors' Hospital v. National Labor
RelationsCommission,135SCRA262,266267[1985].
[22]Manebov.NationalLaborRelationsCommission,229SCRA240,248[1994].