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ASSOCIATED LABOR UNIONS (ALU) G.R. No.

156882
and DIVINE WORDUNIVERSITY EMPLOYEES UNION-ALU
(DWUEU-ALU), Present:
Petitioners,
CARPIO MORALES, J.,
Acting Chairperson,
- versus - AUSTRIA-MARTINEZ,*
CORONA,*
COURT OF APPEALS, THE ROMAN CATHOLIC ARCHBISHOP TINGA, and
OF PALO, LEYTE, and DIVINE WORDUNIVERSITY OF VELASCO, JR., JJ.
TACLOBAN,
Respondents.
Promulgated:

October 31, 2008


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

DECISION

VELASCO, JR., J.:

Petitioners Associated Labor Unions and Divine Word University Employees Union-ALU (Union) represented the Union
members which prevailed in the labor case entitled Divine Word University of Tacloban v. Secretary of Labor and Employment[1] under
G.R. No. 91915 and promulgated on September 11, 1992. A direct consequence of the case was that the Divine Word University of
Tacloban (DWUT) ended up owing petitioners over a hundred million pesos for unpaid benefits.

The Roman Catholic Archbishop of Palo, Leyte (RCAP) is a corporation sole which sold to Societas Verbum Dei (SVD) or the
Society of the Divine Word the subject 13 parcels of land, to wit: Lot Nos. 529, 4901, 528, 2067, 498, 507, 497, 506, 508, 2068E, 2068D,
2065, and 2410, the last four of which were untitled when the sale was concluded. The Deed of Sale[2] executed on October 1,
1958 contained the following conditions and restrictions, among others:

IV. That the SOCIETY OF THE DIVINE WORD shall use these lands and properties for educational purposes,
especially and as far as possible, for the maintenance and further development of the institution known as the ST.
PAULS COLLEGE;

xxxx

VI. That the above described properties and all improvements and any land, buildings or equipment which shall
have been later acquired by the ST. PAULS COLLEGE and which are in direct and actual use by the College, as
such, shall be turned over to the ownership and possession of the Roman Catholic Bishop of Palo in case there is
or are circumstances which will be beyond the control of the contracting parties forcing the abandonment of
educational and religious work of the Society of the Divine Word with no hope for its resumption in the
foreseeable future, that in this case the terms of the conversion of the property rights shall be determined by the
Apostolic [Nunciature] in Manila and/or the Apostolic See in Rome. (Emphasis added.)

While the conveying document was not notarized, the SVD was able to secure the corresponding transfer certificates of title
(TCTs) over the subject lots, but the deed conditions, restrictions, and reversionary right of the RCAP were not annotated on the new
titles.

It must be noted that before the sale, the Tacloban Catholic Institute, a school then run by the RCAP, was already standing
over some of the properties sold. At the time of the sale, the school had been renamed St. Pauls College. In line with the purpose of
the sale, that is, to further educational and religious work, the SVD would later rename St. Pauls College the Divine Word College and
then DWUT when the school attained university status.
Due to labor unrest, DWUT, run by the SVD, and petitioners engaged in a protracted legal battle from 1988 until the finality
of the decision in the Divine Word University of Tacloban case on February 11, 1994, or shortly after the Court denied DWUTs motion
for reconsideration on January 19, 1994. By then, DWUTs liability to petitioners amounted to PhP 200 million, more or less.

On April 27, 1995, the RCAP filed a petition[3] before the Regional Trial Court (RTC), Branch 8 in Tacloban City, docketed as
Cadastral Case No. 95-04-08 and entitled In the Matter of the Annotation of Encumbrances on Certain Titles [in the Name of Divine
Word University of Tacloban] to Show Restrictions on Use and a Reversionary Interest Therein. In it, the RCAP prayed for an order
directing the Registry of Deeds of Tacloban City to register the October 1, 1958 Deed of Sale and annotate on the corresponding SVD
titles the conditions, restrictions, and a reversionary interest of the RCAP stipulated in the deed.

On May 9, 1995, DWUT issued notices to petitioners members, advising them of the decision of the DWUT Board of
Trustees to close the university starting academic year 1995-1996, or on June 16, 1995, and, thus, to consider themselves dismissed
effective at the close of business hours of June 15, 1995.

Meanwhile, on July 7, 1995, the National Conciliation and Mediation Board ordered DWUT to pay PhP 163,089,337.57 to the
members of petitioner Union as partial satisfaction of the January 19, 1994 final resolution of this Court in G.R. No. 91915.

Prompted by the closure of DWUT and the resulting termination of its members services, the Union filed a complaint, as
later amended,[4] against DWUT, its Board of Trustees, and the RCAP for Unfair Labor Practice, Illegal Dismissal, and Damages before
the Regional Arbitration Branch (RAB) No. VIII in TaclobanCity, docketed as NLRC Case No. RCB-VIII-7-0299-95. The Union alleged in
its complaint that the sale of the subject properties over which the DWUT is located was incomplete due to the adverted conditions,
restrictions, and a reversionary right of the RCAP over the subject properties. What is more, the RCAP did not, despite the sale, sever
its employment relations with DWUT which, thus, rendered the RCAP solidarily liable with DWUT for the payment of the benefits of
the Union members.

On August 3, 1995, petitioners filed their Motion to Intervene in Cadastral Case No. 95-04-08, asserting their legal interest
over the subject properties, such interest, according to them, emanating from a judgment lien over the subject properties based on
the Entry of Final Judgment dated February 11, 1994 under G.R. No. 91915. And relying on Article 110 of the Labor Code in relation to
Arts. 2242, 2243, and 2244 of the Civil Code on concurrence and preference of credits, they asserted preferential rights over the
subject properties now owned by and registered under the name of the SVD.

On March 8, 1996, the RTC issued an Order[5] dismissing the petition in Cadastral Case No. 95-04-08.
The RTC held that it has no jurisdiction over the case for annotation owing to what it considered as petitioners right to a
judgment lien referred to earlier. The trial court also held that the RCAP violated SC Circular No. 04-94 on forum shopping on
account of the pendency of NLRC Case No. RCB-VIII-7-0299-95 where he was impleaded. Finally, the trial court deemed as moot the
resolution of RCAPs formal offer of evidence and petitioners motion to intervene.

Unsatisfied, the RCAP filed a motion for reconsideration faulting the RTC for misappreciating the facts of the case, the
evidence adduced, and the applicable laws. He argued that the RTC has jurisdiction over all cadastral cases, like the instant case, in
accordance with Section 2 of Presidential Decree No. 1529 entitled Amending and Codifying the Laws Relative to Registration of
Property and for Other Purposes, as applied in Ignacio v. Court of Appeals[6] and related cases.[7]Continuing, the RCAP contended that
he precisely filed the cadastral case because the October 1, 1958 Deed of Sale was not notarized, adding that the registration and
annotation process would be ministerial on the part of the register of deeds had the sale been in a public document.

Moreover, the RCAP asserted that the reference to the complaint in NLRC Case No. RCB-VIII-7-0299-95 was only made to
underscore the fact that the Unionduly acknowledged in the complaint the existence and due execution of the October 1, 1958 Deed
of Sale. Besides, he pointed out, DWUT, by its manifestation filed before the trial court, did not question the due execution of the
deed. Anent the issue of a judgment lien, the RCAP contended that he was never a party in the labor case under G.R. No. 91915 and,
hence, could not be bound by the decision in it, much less by its execution. Finally, he denied violating the circular on forum
shopping, alleging that the Union filed its complaint in NLRC Case No. RCB-VIII-7-0299-95 two months after he filed the cadastral
case for annotation.

The RTC by an Order[8] dated June 7, 1996 denied RCAPs motion for reconsideration.

While it concurred with the RCAPs arguments set forth in his motion for reconsideration, the trial court still denied the
motion on the ground of laches, noting that it took the RCAP 37 years after the execution of the deed of sale before taking judicial
action to assert his rights.

Aggrieved, the RCAP timely filed his Notice of Appeal assailing the above orders of the trial court before the Court of
Appeals (CA). The appeal was docketed as CA-G.R. CV No. 56482.

In the meantime, on February 24, 1997, the RCAP, the DWUT, and the Union entered into a Memorandum of
Agreement[9] (MOA) whereby they agreed on the following: (1) the Union would withdraw NLRC Case No. RCB-VIII-7-0299-95 against
DWUT and the RCAP; (2) DWUT would pay the Union PhP 100 million as final settlement of G.R. No. 91915 (NCMB-RB-80NS-04-024-
88) and NLRC Case No. RCB-VIII-7-0299-95; (3) DWUT would continue to recognize the Union as the sole bargaining agent for
collective bargaining agreement (CBA); and (4) DWUT and the Union would negotiate and enter into a new CBA in lieu of the CBA
imposed in G.R. No. 91915.

For the payment of the final settlement of PhP 100 million, it was agreed that PhP 15 million should be paid upfront, while
payment of the remaining PhP 85 million should be by dacion en pago. Covered by the dacion en pago arrangement were
the Imelda Village and a 1,000-sq. meter property known as San Jose land.The MOA signing paved the way for the re-opening of the
DWUT.

On April 29, 2002, the CA rendered the assailed decision,[10] reversing the March 8, 1996 and June 7, 1996 Orders of the RTC
and directed the annotation of encumbrances on the TCTs of the subject properties to show the restrictions on use and reversionary
interest of the RCAP. The decretal portion of the CAs decision reads:
WHEREFORE, premises considered, the Orders of the court a quo dated 08 March 1996 and 07 June
1996 respectively are hereby REVERSED. The petition for the annotation of encumbrances on certain titles to
show restrictions on use and a reversionary interest therein is GRANTED.

SO ORDERED.

At the outset, the CA noted that the RTC failed to categorically resolve the Unions motion for intervention under Sec. 2 of
Rule 12, as amended by Sec. 1, Rule 19 of the Rules of Court, since the RTC merely stated in its March 8, 1996 Order that the resolution
of the motion for intervention was mooted. Noted, moreover, was the fact that said order became final as against the Union on
account of its failure to question the order within the reglementary period available to it. Consequently, the CA held that
the Union cannot, on appeal, be considered a proper party in the instant case, as it did not acquire personality to be a party to the
proceedings in the case. Thus, the CA treated as mere scrap of paper the Unions appellees brief.

In reversing the assailed RTC orders, the CA disagreed with the trial courts finding and application of the equitable remedy
of laches. Relying on Eduarte v. Court of Appeals[11] and related cases,[12] where the Court applied laches to bar judicial remedies in the
plaintiffs exercise of legal rights, as allowing plaintiff to do so would be inequitable and unjust to the defendant, the CA held that the
RCAP was not barred by laches from asserting his legal right to cause the annotation of the pertinent paragraphs of the deed of sale
on the TCTs covering the subject properties. It ratiocinated that despite the lapse of 37 years, the annotation would not be inequitable
or prejudicial to any party since the SVD, under whose name the TCTs of the subject properties were issued, did not interpose any
objection to the annotation. It noted that the June 7, 1996 RTC Order did not specify the party who would be prejudiced by the
annotation.
The Unions motion for reconsideration was rejected by the CA through the assailed January 20, 2003 Resolution.[13]

Hence, we have this Petition for Review on Certiorari under Rule 45, raising the following issues for our consideration:

WHETHER THE COURT OF APPEALS ERRED IN ALLOWING THE ANNOTATION OF ENCUMBRANCE ON CERTAIN
[TITLES] TO SHOW RESTRICTIONS ON USE AND REVERSIONARY INTERESTS THEREIN

WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CONSIDERING THE
APPELLEES BRIEF OF PETITIONERS AS A MERE SCRAP OF PAPER AND ASSAIL[ING] THE PERSONALITY OF THE
PETITIONER[S] IN THE INSTANT CASE[14]

On the first issue, petitioners argue that the appellate court erred in not affirming and applying the equitable remedy of
laches. They assert that due to the adjudged substantial liabilities of DWUT pursuant to G.R. No. 91915 and for which it is hard put of
meeting, the subject properties over which DWUT stands must be used. Considering that no annotations were made on the TCTs
covering the subject properties and considering too the resultant judgment lien attaching on them, the desired annotation is clearly
prejudicial and inequitable both for the DWUT and petitioners, for how, petitioners wonder, could the school pay its adjudged
obligations without the substantial assets composed of the subject properties?

Petitioners contend further that the instant case for annotation was pursued only after they have filed notices of lis
pendens over the subject properties for the ultimate satisfaction of their adjudicated monetary claims against DWUT. Clearly, they
posit, the RCAP is trying to move the subject properties out of the reach of petitioners through the requested annotation. Thus, they
conclude that the principle of laches has attached and the annotation of the encumbrance or reversionary right of the RCAP is
properly barred.
Corollary to the first issue, petitioners aver under the second issue that the appellate court gravely abused its discretion in
holding that petitioners are not prejudiced and will not be affected by the resolution of the instant case for annotation. As petitioners
would argue, their rights would greatly be prejudiced since the resolution ordering annotation will not only delay the execution
proceedings but will render for naught the final decision of this Court in G.R. No. 91915.

Petitioners also take umbrage of the CAs ruling on the issue of personality of the Union in the instant case as the RCAP
never questioned its standing in his opposition to the motion to intervene. Besides, they emphasize, the personality issue was not
raised in the proceedings before the trial court and, thus, cannot be raised for the first time on appeal.

On the other hand, the RCAP argues that petitioners have not sufficiently shown that they will be prejudiced by the
annotation of his interest over the subject properties. The RCAP contends: First, the SVD and DWUT, the parties who could be so
prejudiced, have not opposed the annotation. Second, petitioners have not shown that the SVD and DWUT have no other properties
to answer for the adjudicated liabilities in G.R. No. 91915. In fact, the February 24, 1997 MOA executed by the Union, DWUT,
represented by the SVD, and the RCAP envisioned a final settlement of petitioners claim without involving the subject
properties. Third, the judgment lien issue is immaterial since there is as yet no levy on execution over the subject properties. Besides,
the preference of credit asserted in connection with the perceived lien is only applicable where there is an insolvency proceeding and
payment of debts have to be equitably distributed among the creditors. And fourth, the CA can, on appeal, rule on the issue of the
Unions personality since an appeal opens the case de novo and the appellate court has discretion to rule on issues which it deems are
necessary for the proper adjudication of the case, like the matter of personality which the appellate court resolved motu proprio and
not upon the instance of the RCAP.

Considering the arguments and counter-arguments earnestly pressed by the parties, the main issues to be determined
are first, whether the Union has acquired legal personality to intervene in the instant case; and second, whether laches has set in to
bar the RCAPs cause of action.

We answer both issues in the negative.

As the appellate court aptly noted, the RTC did not resolve the motion for intervention of the Union. It bears stressing that
the March 8, 1996 RTC Order held that the dismissal of Cadastral Case No. 95-04-08 mooted the resolution of the Unions motion for
intervention. Likewise, the RTC did not allow intervention in its June 7, 1996 Order as it denied the RCAPs motion for reconsideration
on the ground of laches. Since it did not question these RTC orders which lapsed into finality later, the Union cannot be said to have
acquired any legal personality to intervene or participate in the instant case. Therefore, the appellate court did not gravely abuse its
discretion in holding that the Union has no legal personality to participate in the proceedings of the instant case, and consequently,
the instant petition of the Unionis dismissible on this ground alone.

The instant petition will nevertheless fail even if we concede that the Union has legal personality to institute it. The
judgment lien over the subject properties is really non-existent as it has not been shown that a levy on execution has been imposed
over the subject properties. While the Decision in G.R. No. 91915 is indeed final and executory, such reality does not ipso facto burden
all the lands and properties owned by the SVD over which the DWUT is erected, absent proof that the SVD cannot pay its adjudicated
obligations and that a levy on execution was indeed made over the subject properties.
We agree with the RCAP that a judgment lien over the subject properties has not legally attached and that Art. 110[15] of the
Labor Code, in relation to Arts. 2242, 2243, and 2244 of the Civil Code on concurrence and preference of credits, does not cover the
subject properties. Art. 110 of the Labor Code applies only to cases of bankruptcy and liquidation. Likewise, the abovementioned
articles of the Civil Code on concurrence and preference of credits properly come into play only in cases of insolvency. Since there is
no bankruptcy or insolvency proceeding to speak of, much less a liquidation of the assets of DWUT, the Union cannot look to said
statutory provisions for support.
Moreover, we note the utter lack of showing that DWUT has no other assets to answer its obligations. DWUT may have
liquidity problems hampering its ability to meet its judicially-imposed obligations. The school, however, appears to have other
properties it can and in fact did use to settle its obligations as shown in the February 24, 1997 MOA between DWUT, the Union, and
RCAP. A scrutiny of the MOA readily shows that the subject properties were not included in the assets or properties earmarked to
settle DWUTs obligations.

The Court takes judicial notice of the fact that the Union has judicially admitted the existence, due execution, and validity of
the October 1, 1958 Deed of Sale with the conditions, restrictions, and a reversionary right of the RCAP embodied in it. In its complaint
before the RAB for Unfair Labor Practice, Illegal Dismissal, and Damages, the Union impleaded the RCAP as solidarily liable with the
DWUT on the Unions monetary claims precisely on the basis of said conditions, restrictions, and a reversionary right of the RCAP.
Such averment is a clear admission against the interests of the Union.
The Union likewise cannot be permitted to take two opposite positions on the issue of the stipulated reversionary right of
RCAP over the subject properties. It cannot invoke such reversionary right of RCAP to render the RCAP solidarily liable with the DWUT
in the RAB case while, at the same time, resisting the annotation of that reversionary right in the instant case.

On the issue of laches, we agree and so hold that it is inapplicable to the instant case. Estate of the Late Encarnacion Vda.
de Panlilio v. Dizon explains the concept of laches in this wise:

According to settled jurisprudence, laches means the failure or neglect, for an unreasonable and
unexplained length of time, to do that whichby the exercise of due diligencecould or should have been done
earlier. Verily, laches serves to deprive a party guilty of it of any judicial remedies. Its elements are: (1) conduct on
the part of the defendant, or of one under whom the defendant claims, giving rise to the situation which the
complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge
or notice of the defendants conduct as having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right in which the
defendant bases the suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred.

In Santiago v. Court of Appeals, we explained that there is no absolute rule as to what


constitutes laches or staleness of demand; each case is to be determined according to its particular
circumstances.[16]

Of the foregoing elements, the fourth and most important element, that is, injury or prejudice to the defendant in the event
relief is accorded to the complainant or the suit is not held barred, is not present under the premises. As the CA aptly observed, no
prejudice can result from the annotation pleaded by the RCAP since the SVD, the property purchaser in the October 1,
1958 transaction, did not oppose the annotation of the conditions, restrictions, and a reversionary right of the RCAP over the subject
properties, as evidenced by a manifestation the DWUT filed before the trial court. More so, no prejudice can befall the Union for no
judgment lien has attached or been imposed over the subject properties and, as earlier explained, there is no showing that the
subject properties are the only properties the DWUT has or that its other assets and properties are insufficient to meet its
obligations. Thus, failing to show any actual interest over the subject properties that need judicial protection, the Union will not suffer
any damage with the annotation on SVDs titles of the conditions, restrictions, and a reversionary interest of the RCAP.

Indeed, there is no dispute as to the existence and due execution of the October 1, 1958 Deed of Sale in question. Its
validity is immediately apparent from the fact that the RCAPs titles over the properties covered by the deed had been canceled and
new TCTs issued in the name of the SVD. The fact that the deed is not notarized is of little moment because, for purposes of validity
between the parties, a deed of sale need not be in a public document.[17] With the judicial acquiescence of the SVD to the annotation,
the subject matter of the instant case, we so hold such to be in order.

WHEREFORE, we DENY this petition and AFFIRM IN TOTO the April 29, 2002 Decision and January 20, 2003 Resolution of
the CA in CA-G.R. CV No. 56482, with costs against petitioners.

SO ORDERED.

NASIPIT INTEGRATED ARRASTRE AND STEVEDORING G.R. No. 162411


SERVICES, INC. (NIASSI), represented by RAMON M. CALO,

Petitioner,
Present:

- versus -

CARPIO MORALES, J.,

NASIPIT EMPLOYEES LABOR UNION (NELU)-ALU-TUCP,


Acting Chairperson,
represented by DONELL P. DAGANI,

TINGA,
Respondent.

CHICO-NAZARIO,*

VELASCO, JR., and

BRION, JJ.

Promulgated:

June 27, 2008

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DECISION
VELASCO, JR., J.:

This petition for review[1] under Rule 45 seeks to nullify and set aside the Decision [2] dated September 30, 2003 and
Resolution[3] dated January 9, 2004, both issued by the Court of Appeals (CA) in CA-G.R. SP No. 70435 which dismissed
petitioner Nasipit Integrated Arrastre & Stevedoring Services, Inc.s (NIASSIs) petition for review of the Decision [4] dated February
22, 2002 rendered by Voluntary Arbitrator Jesus G. Chavez in VA Case No. 0925-XIII-08-003-01A.

The records yield the following facts:


NIASSI is a domestic corporation with office at Talisay, Nasipit, Agusan del Norte. Respondent Nasipit Employees Labor Union
(Union) wasand may still bethe collective bargaining agent of the rank-and-file employees of NIASSI and is a local chapter of the
Associated Labor Union.
The dispute started when, in October 1999, the Regional Tripartite Wages and Productivity Board (Wage Board) of Caraga
Region in Northeastern Mindanao issued Wage Order No. (WO) RXIII-02 which granted an additional PhP 12 per day cost of
living allowance to the minimum wage earners in that region. Owing allegedly to NIASSIs failure to implement the wage order,
the Union filed a complaint before the Department of Labor and Employment (DOLE) Caraga Regional Office for the inspection
of NIASSIs records and the enforcement of WO RXIII-02. A DOLE inspection team was accordingly dispatched to NIASSI. In its
reports dated May 30, 2000 and November 28, 2000, the inspection team stated that WO RXIII-02 was not applicable to NIASSIs
employees since they were already receiving a wage rate higher than the prescribed minimum wage.

Upon motion by the Union, the DOLE Regional Director indorsed the case to the National Labor Relations Commission (NLRC)
Regional Arbitration Branch for further hearing. On May 18, 2001, Executive Labor Arbiter Rogelio P. Legaspi, in turn, referred the
case to the National Conciliation and Mediation Board (NCMB) for voluntary arbitration.

The case was, accordingly, referred to the NCMB which docketed the same as VA Case No. 0925-XIII-08-003-01A.

On February 22, 2002, Voluntary Arbitrator Jesus G. Chavez rendered a decision granting the Unions prayer for the
implementation of WO RXIII-02 on the rationale that WO RXIII-02 did not specifically prohibit the grant of wage increase to
employees earning above the minimum wage. On the contrary, Chavez said, the wage order specifically enumerated those who
are outside its coverage, but did not include in the enumeration those earning above the minimum wage. He also held that the
Collective Bargaining Agreement (CBA) between NIASSI and the Union provides that wage increases granted by the company
within one year from CBA signing shall not be creditable to future legally mandated wage increases. The voluntary arbitrator
further held that NIASSI would not incur any damage from the implementation of WO RXIII-02 since NIASSIs petition to increase
the tariff rates for all cargoesto counter the financial burden of implementing WO RXIII-02had been granted and had been in
effect since February 16, 2000.

Following the denial of its motion for reconsideration, NIASSI filed with the CA a petition for review under Rule 43 of the Rules of
Court to nullify the February 22, 2002 Decision of Chavez. The petition was docketed as CA-G.R. SP. No. 70435.

By a decision dated September 30, 2003, the CA found the decision of the voluntary arbitrator and the premises holding it
together to be in order and, accordingly, dismissed NIASSIs petition for review.
NIASSI is now before the Court via this Petition for Review on Certiorari, ascribing to the CA the commission of several errors all
which resolve themselves into the question of whether or not WO RXIII-02 applies or covers NIASSIs employees.

The Courts Ruling

In gist, NIASSI argues that its employees enjoy a daily wage level higher than the minimum wage mandated by the subject wage
order; thus, the wage order is not applicable. Corollary to this argument, NIASSI contends that the Wage Board did not envision
a wage order with an across-the-board wage increase effect; thus, it could be made to apply only to minimum wage earners. As
a final point, NIASSI states that, since WO RXIII-02 is not applicable, the issue respecting the interpretation of the NIASSI-Union
CBA provision on wage crediting finds no application either.

As a counterpoint, the Union maintains that Section 2, Article XIX of the CBA clearly mandates the implementation of WO RXIII-
02 to cover all NIASSIs employees. While admitting that the new wage rates specifically finds application only to minimum wage
earners, the Union would nonetheless argue that WO RXIII-02, as couched, does not specifically prohibit the grant of wage
increase to employees already receiving wages over the prescribed minimum wage.

The petition is impressed with merit.

The main issue in this case is whether WO RXIII-02 may be made to apply and cover Nasipits employees who, at the time of the
issuance and effectivity of the wage order, were already receiving a wage rate higher than the prevailing minimum wage.

The pertinent portion of WO RXIII-02 provides, as follows:

Section 1. COVERAGE. The rates prescribed under this Wage Order shall apply to minimum wage earners in the
private sector regardless of their position designation or status and irrespective of the method by which their
wages are paid.

Not covered by the provisions of this Order are household or domestic helpers and persons employed in the
personal service of another, including family drivers. (Emphasis supplied.)

The provision of the wage orders Implementing Rules and Regulations (IRR)[5] pertinent to the instant issue reads, as
follows:

RULE II
NEW MINIMUM WAGE RATES

Section 1. COVERAGE

a. The minimum wage rates prescribed under the Order shall apply to the minimum wage earners in the
private sector regardless of their position, designation or status and irrespective of the method by which
their wages are paid.
b. Not covered by the provision of the Order are household or domestic helpers or persons employed in the
personal service of another including family drivers.

c. Workers and employees who, prior to the effectivity of the Order were receiving a basic wage rate per day
or its monthly equivalent of more than those prescribed under the Order, may receive wage
increases through the correction of wage distortions in accordance with Section 1, Rule IV of this Rules.
(Emphasis supplied.)

It is abundantly clear from the above quoted provisions of WO RXIII-02 and its IRR that only minimum wage earners are entitled
to the prescribed wage increase. Expressio unius est exclusio alterius.[6] The express mention of one person, thing, act, or
consequence excludes all others. The beneficent, operative provision of WO RXIII-02 is specific enough to cover only minimum
wage earners. Necessarily excluded are those receiving rates above the prescribed minimum wage. The only situation when
employees receiving a wage rate higher than that prescribed by the WO RXIII-02 may still benefit from the order is, as indicated
in Sec. 1 (c) of the IRRs, through the correction of wage distortions.

In any case, it would be highly irregular for the Wage Board to issue an across-the-board wage increase, its mandate being
limited to determining and fixing the minimum wage rates within its area of concern, in this case the Caraga Region, and to issue
the corresponding wage orders and implementing rules. In Metropolitan Bank and Trust Company, Inc., v. National Wages and
Productivity Commission, the Court elucidated on the authority of the Regional Tripartite Wages and Productivity Board, thus:

R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to promote
productivity improvement and gain-sharing measures to ensure a decent standard of living for the workers and
their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns
on investment, expansion and growth.

In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to prescribe rules and
guidelines for the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and authorized the RTWPB to determine and fix the minimum wage rates applicable
in their respective regions, provinces, or industries therein and issue the corresponding wage orders, subject to
the guidelines issued by the NWPC. Pursuant to its wage fixing authority, the RTWPB may issue wage orders
which set the daily minimum wage rates, based on the standards or criteria set by Article 124 of the Labor
Code.[7]

In the same case, the Court held that a RTWPB commits ultra vires and unreasonable act when, instead of setting a
minimum wage rate, it prescribes a wage increase cutting across all levels of employment and wage brackets:
In the present case, the RTWPB did not determine or fix the minimum wage rate by the floor-wage method or
the salary-ceiling method in issuing the Wage Order. The RTWPB did not set a wage level nor a range to which a
wage adjustment or increase shall be added. Instead, it granted an across-the-board wage increase of P15.00 to
all employees and workers of Region 2. In doing so, the RTWPB exceeded its authority by extending the
coverage of the Wage Orders to wage earners receiving more than the prevailing minimum wage rate, without a
denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits not
contemplated by R.A. No. 6727.[8]

Clearly then, only employees receiving salaries below the prescribed minimum wage are entitled to the wage increase set forth
under WO RXIII-02, without prejudice, of course, to the grant of increase to correct wage distortions consequent to the
implementation of such wage order. Considering that NIASSIs employees are undisputedly already receiving a wage rate higher
than that prescribed by the wage order, NIASSI is not legally obliged to grant them wage increase.[9]

The Union, in a bid to bolster its case for wage increase for its members under NIASSIs employ, invokes its CBA with the
company and invites attention to Chavezs favorable ruling. The pertinent CBA provision reads:

Article XIX, Section 2.

All general wage increases granted by the company after one (1) year from the signing of this CBA shall not be
creditable to any future wage increases mandated by any wage legislation and/or issuance of the Regional Wage
Board.

Chavezs decision, on the other hand, pertinently states:

It is likewise undisputed that complainant members are receiving more than the minimum wage. Although, as
mentioned earlier, the Notice of Inspection Report was not attached to respondents Position Paper, complainant
did not rebut respondents contention that the complainant members receive more than the minimum wage.
However, there is no evidence that the overage results from wage increases granted by the company within one
(1) year from the signing of the CBA. Doubt is resolved in favor of labor. Therefore, the overage could not be
credited to the P12.00 COLA mandated by Wage Order No. 2 pursuant to the aforequoted CBA provision.
xxxx

Moreover, Wage Order No. 2 does not expressly prohibit the granting of P12.00 COLA to those receiving more
than the minimum wage. It only says under Section 2 thereof that all minimum wage earners in the private sector
in Caraga Region shall receive a Cost of Living Allowance (COLA) in the amount of TWELVE PESOS (P12.00) per
day upon the effectivity of this Wage Order. On the other hand, Section 1 of the same Wage Order positively
enumerates those not covered: household or domestic helpers and persons employed in the personal service of
another, including family drivers. If Wage Order No. 2, therefore, meant to exclude those receiving more than the
minimum wage, then it would have specifically provided so.[10]
Petitioners reliance on the above quoted CBA provision and on the flawed arbitrators case disposition is really
misplaced. Consider that in his decision, Chavez, after admitting that NIASSIs employees were receiving a wage rate higher than
the prescribed minimum wage, proceeded to fault NIASSI for not presenting evidence to show that the overage or excess
resulted from general wage increases granted by the company itself within one year from the effectivity of the CBA in 1997. By
simplistically utilizing the adage doubt is resolved in labor, instead of relying on the case records and the evidence adduced, the
voluntary arbitrator extended the coverage of WO RXIII-02 to include those who, by the terms of the order, are not supposed to
receive the benefit. If only the voluntary arbitrator was circumspect enough to consider the facts on hand, he would have seen
that the CBA provision on non-creditability finds no application in the present case, because creditability is not the real issue in
this case. And neither is the interpretation of the CBA provision. The real issue in this case, as discussed above, is the coverage
and application of WO RXIII-02.

While it behooves the Court to accord protection to the working class, tilting the balance of justice in its favor
whenever appropriate, it is not possible to resolve every dispute to further the cause of labor. In every case, justice is to be
granted to the deserving and dispensed in the light of established facts and the applicable law and doctrine, [11] as here.

WHEREFORE, premises considered, the Decision of the CA dated September 30, 2003 and its Resolution of January 9, 2004 in CA-G.R.
SP No. 70435, affirming the Decision dated February 22, 2002 of Voluntary Arbitrator Jesus G. Chavez in VA Case No. 0925-XIII-08-
003-01A, are hereby REVERSED and SET ASIDE.

The Unions complaint for the enforcement of Wage Order No. RXIII-02 is, accordingly, DISMISSED for lack of merit.

SO ORDERED.

TSPIC CORPORATION, G.R. No. 163419


Petitioner,
Present:
QUISUMBING, J., Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
TSPIC EMPLOYEES UNION (FFW),
representing MARIA FE FLORES,
FE CAPISTRANO, AMY DURIAS,[1]
CLAIRE EVELYN VELEZ, JANICE
OLAGUIR, JERICO ALIPIT, GLEN
BATULA, SER JOHN HERNANDEZ,
RACHEL NOVILLAS, NIMFA ANILAO,
ROSE SUBARDIAGA, VALERIE
CARBON, OLIVIA EDROSO, MARICRIS
DONAIRE, ANALYN AZARCON,
ROSALIE RAMIREZ, JULIETA ROSETE,
JANICE NEBRE, NIA ANDRADE,
CATHERINE YABA, DIOMEDISA
ERNI,[2] MARIO SALMORIN, LOIDA
COMULLO,[3] MARIE ANN DELOS
SANTOS,[4] JUANITA YANA, and Promulgated:
SUZETTE DULAY,
Respondents. February 13, 2008
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern dealings
between labor and management. Seemingly conflicting provisions should be harmonized to arrive at an interpretation that is within
the parameters of the law, compassionate to labor, yet, fair to management.

In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the October
22, 2003 Decision[5] and April 23, 2004 Resolution[6] of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the
September 13, 2001 Decision[7] of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board
Case No. JBJ-AVA-2001-07-57.

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication,
automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the
registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias,
Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga,
Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine
Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of
the Union.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)[8] for the years 2000 to 2004. The CBA included a
provision on yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows:

Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall be granted salary/wage increases
as follows:

a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or
before said date shall be granted a salary increase equivalent to ten percent (10%) of their
basic monthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or
before said date shall be granted a salary increase equivalent to twelve (12%) of their basic
monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or
before said date shall be granted a salary increase equivalent to eleven percent (11%) of their
basic monthly salary as of December 31, 2001.

The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase,
including the wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order
No. NCR-07.

The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum
wage increases under future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be
considered as correction of any wage distortion that may have been brought about by the said future Wage
Orders. Thus the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders
after Wage Order No. NCR-07.

Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary.
Accordingly, the following nine (9) respondents (first group) who were already regular employees received the said increase in their
salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez,
and Rachel Novillas.[9]

The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a
particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2 of the CBA
provides:

SECTION 2. Regularization Increase.A covered daily paid employee who acquires regular status within the
year subsequent to the effectivity of a particular salary/wage increase mentioned in Section 1 above shall be
granted a salary/wage increase in proportionate basis as follows:

Regularization Period Equivalent Increase


- 1st Quarter 100%
- 2nd Quarter 75%
- 3rd Quarter 50%
- 4th Quarter 25%

Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000,
i.e., during the second quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will
be entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay. In
the same manner, an employee who acquires regular status on December 1, 2000 will be entitled to a salary
increase equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.

On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement
shall be granted regularization increase equivalent to 10% of his regular basic salary.

Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage
Order No. NCR-08[10] (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000.
Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa
Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased to PhP
250.00 effective November 1, 2000.

On various dates during the last quarter of 2000, the above named 17 employees attained regular employment[11] and
received 25% of 10% of their salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first
group), who were senior to the above-listed recently regularized employees, received less wages.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPICs Human Resources Department
notified 24 employees,[12]namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula,
Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn
Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo,
and Marie Ann Delos Santos, that due to an error in the automated payroll system, they were overpaid and the overpayment would
be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous
computation was based on the crediting provision of Sec. 1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from
employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach
an agreement.

Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts
of the management in making deductions from the salaries of the affected employees constituted diminution of pay.

On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated Art.
100[13] of the Labor Code. The fallo reads:

WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is
hereby rendered in favor of the Union and the named individual employees and against the company, thereby
ordering the [TSPIC] to pay as follows:

1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a
total of P113,780.16 for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24
(for all), or P790.14 (for each), for every month after 30 September 2001, until full payment, with legal
interests for every month of delay;

2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount
of entitlements, according to the Unions correct computation, ranging from P110.22 per month (or
P991.98 for nine months) to P450.58 a month (or P4,055.22 for nine months), as well as corresponding
monthly entitlements after 30 September 2001, plus legal interests until full payment,

3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly
entitlements after 30 September 2001, plus legal interest until full payment,

4) Attorneys fees equal to 10% of all the above monetary awards.

The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this
Award and thus, submit to this Office jointly, a written proof of voluntary compliance with this DECISION within
ten (10) days after the finality hereof.

SO ORDERED.[14]

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.

Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate
court, through its October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The
CA declared TSPICs computation allowing PhP 287 as daily wages to the newly regularized employees to be correct, noting that the
computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate
court that the deduction was a result of a system error in the automated payroll system. The CA explained that when WO No. 8 took
effect on November 1, 2000, the concerned employees were still probationary employees who were receiving the minimum wage of
PhP 223.50. The CA said that effective November 1, 2000, said employees should have received the minimum wage of PhP 250. The
CA held that when respondents became regular employees on November 29, 2000, they should be allowed the salary increase
granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year
2001 and the 10% increase for the year 2002 should also be made applicable to them.[15]
TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.

TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs decision to deduct the alleged
overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor Code?

TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed, inasmuch as
it completely disregarded the crediting provision contained in the last paragraph of Sec. 1, Art. X of the CBA.

We find TSPICs contention meritorious.

A Collective Bargaining Agreement is the law between the parties

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to
comply with its provisions.[16] We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:

A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses,
terms and conditions as they may deem convenient provided these are not contrary to law, morals, good
customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law
between the parties and compliance therewith is mandated by the express policy of the law. [17]

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of their stipulations shall control.[18] However, sometimes, as in this case, though the provisions of the CBA seem
clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted
by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that the salary/wage
increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under future wage orders that may be
issued after Wage Order No. 7. The Union, on the other hand, insists that the crediting provision of the CBA finds no application in
the present case, since at the time WO No. 8 was issued, the probationary employees (second group) were not yet covered by the
CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. [19] Littera necat spiritus
vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical
and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is
intended to serve.[20] Absurd and illogical interpretations should also be avoided. Considering that the parties have unequivocally
agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be
given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees on
regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of
their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular employees
and (2) are within the bargaining unit.

Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted under WO
No. 7 and the correction of the wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and 2002 shall
be deemed inclusive of the mandated minimum wage increases under future wage orders, that may be issued after WO No. 7, and
shall be considered as correction of the wage distortions that may be brought about by the said future wage orders. Thus, the
wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.

Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with
the last paragraph which specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage
increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting provisions
should be harmonized to give effect to all.[21] Likewise, when general and specific provisions are inconsistent, the specific provision
shall be paramount to and govern the general provision.[22] Thus, it may be reasonably concluded that TSPIC granted the salary
increases under the condition that any wage order that may be subsequently issued shall be credited against the previously granted
increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the employee
shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be credited against any wage
order issued after WO No. 7.

Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have
received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then
be allowed to avoid the crediting provision which is an accompanying condition.

Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was
issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA; and
consequently, TSPIC rightfully credited that 12% increase against the increase granted by WO No. 8.

Proper formula for computing the salaries for the year 2001

Thus, the proper computation of the salaries of individual respondents is as follows:


(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No.
8, the computation is as follows:

For respondents Jerico Alipit and Glen Batula:[23]

Wage rate before WO No. 8... PhP 234.67


Increase due to WO No. 8
setting the minimum wage at PhP 250. 15.33
Total Salary upon effectivity of WO No. 8. PhP 250.00

Increase for 2001 (12% of 2000 salary)........... PhP 30.00


Less the wage increase under WO No. 8. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000..... PhP 250.00
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 14.67
Total (Wage rate range beginning January 1, 2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:[24]

Wage rate range before WO No. 8.PhP 234.68


Increase due to WO No. 8
setting the minimum wage at PhP 250.. 15.32
Total Salary upon effectivity of WO No. 8... PhP 250.00

Increase for 2001 (12% of 2000 salary) PhP 30.00


Less the wage increase under WO No. 8.. 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8. PhP 14.68

Wage rate by December 2000......... PhP 250.00


Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 14.68
Total (Wage rate range beginning January 1, 2001) .. PhP 264.68

For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:[25]

Wage rate range before WO No. 8.. PhP 240.26


Increase due to WO No. 8
setting the minimum wage at PhP 250 9.74
Total Salary upon effectivity of WO No. 8. PhP 250.00

Increase for 2001 (12% of 2000 salary). PhP 30.00


Less the wage increase under WO No. 8 9.74
Total difference between the wage increase for 2001
and the increase granted under WO No. 8.. PhP 20.26
Wage rate by December 2000. PhP 250.00
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 20.26
Total (Wage rate range beginning January 1, 2001).. PhP 270.26

For respondents Ma. Fe Flores and Fe Capistrano:[26]

Wage rate range before WO No. 8 PhP 245.85


Increase due to WO No. 8
setting the minimum wage at PhP 250.. 4.15
Total Salary upon effectivity of WO No. 8... PhP 250.00
Increase for 2001 (12% of 2000 salary). PhP 30.00
Less the wage increase under WO No. 8........... 4.15
Total difference between the wage increase for 2001
and the increase granted under WO No. 8. PhP 25.85

Wage rate by December 2000. PhP 250.00


Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 25.85

Total (Wage rate range beginning January 1, 2001).. PhP 275.85

(2) With regard to the second group of employees, who attained regular employment status after the implementation of
WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez,
Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos,
Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance with the CBA, is as follows:

Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from the
minimum wage per the wage order to arrive at the wage increase, thus:

Minimum Wage per Wage Order.. PhP 250.00


Wage rate before Wage Order.. 223.50
Wage Increase. PhP 26.50

Upon attainment of regular employment status, the employees salaries were increased by 25% of 10% of their basic
salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25,
computed as follows:

Wage rate after WO No. 8. PhP 250.00


Regularization increase (25 % of 10% of basic salary). 6.25
Total (Salary for the end of year 2000).. PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees salaries as of
December 31, 2000; then subtract from that amount, the amount increased in salaries as granted under WO No. 8 in accordance with
the crediting provision of the CBA, to arrive at the increase in salaries for the year 2001 of the recently regularized employees. Add the
result to their salaries as of December 31, 2000 to get the proper salary beginning January 1, 2001, thus:

Increase for 2001 (12% of 2000 salary)... PhP 30.75


Less the wage increase under WO No. 8. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No. 8.... PhP 4.25

Wage rate after regularization increase... PhP 256.25


Plus total difference between the wage increase and
the increase granted under WO No. 8. 4.25
Total (Wage rate beginning January 1, 2001). PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and second
group of employees is cured. The first group of employees who attained regular employment status before the implementation of
WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending
on their wage rate before the implementation of WO No. 8. The second group that attained regular employment status after the
implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting January 1, 2001.

Diminution of benefits

TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their
salaries does not constitute diminution of benefits.

We agree with TSPIC.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is
diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long
period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful
or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.[27]

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by
TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without violating the
prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the
law. Payment may be said to have been made by reason of a mistake in the construction or application of a
doubtful or difficult question of law. (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past
error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under
Article 100 of the Labor Code may be said to have resulted by virtue of the correction.[28]

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for
the year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally
deducted by TSPIC from the employees salaries. It was also compassionate and fair that TSPIC deducted the overpayment in
installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the overpaid
employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in excess of
what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision.

As a last word, it should be reiterated that though it is the states responsibility to afford protection to labor, this policy
should not be used as an instrument to oppress management and capital. [29] In resolving disputes between labor and capital, fairness
and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always
been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social justice does
not, however, mandate that every dispute should be automatically decided in favor of labor. In any case, justice is to be granted to
the deserving and dispensed in the light of the established facts and the applicable law and doctrine.[30]

WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation
Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are
hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases in accordance with this
Decision, as follows:

No. of Working No. of Months


Name of Employee Daily Wage Rate Days in a Month in a Year Total Salary for 2001
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos Santos 260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20

The award for attorneys fees of ten percent (10%) of the total award is MAINTAINED.

SO ORDERED.

RAUL G. LOCSIN and G.R. No. 185251


EDDIE B. TOMAQUIN,
Petitioners,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision [1] and November 4, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v. National
Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of the National
Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision dated February
13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for reconsideration of the assailed
decision.

The Facts

On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of
the Philippines (SSCP) entered into a Security Services Agreement[3] (Agreement) whereby SSCP would provide armed security guards
to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were
allegedly directed to remain at their post by representatives of respondent. In support of their contention, petitioners provided the
Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.[5]

Then, on September 30, 2002, petitioners services were terminated.

Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay,
holiday pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral and
exemplary damages against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were
found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to
serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural due process before
termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The dispositive
portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance
and Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their separation pay
and back wages computed as follows:

NAME SEPARATION PAY BACKWAGES


1. Raul E. Locsin P127,500.00 P240,954.67
2. Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34

All other claims are DISMISSED for want of factual basis.

Let the computation made by the Computation and Examination Unit form part of this decision.

SO ORDERED.

PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.

Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.

Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as well
as the Labor Arbiters Decision. The CA rendered the assailed decision granting PLDTs petition and dismissing petitioners complaint.
The dispositive portion of the CA Decision provides:

WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and August
28, 2006 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents
complaint against Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.

The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the
parties but did not find such relationship. It determined that SSCP was not a labor-only contractor and was an independent contractor
having substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing the Agreement
whereby it was stipulated that there shall be no employer-employee relationship between the security guards and PLDT.

Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence,
SSCP continued to pay the salaries of petitioners after the Agreement. This fact allegedly proved that petitioners continued to be
employees of SSCP albeit performing their work at PLDTs premises.

From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.

Hence, we have this petition.

The Issues

1. Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001,
the effectivity of the termination of the contract of complainants agency SSCP, up to September 30, 2002,
without a renewed contract, constitutes an employer-employee relationship between respondent and the
complainants.

2. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants
extended services to the respondent for another one (1) year without a contract be considered as
contractual employment.

3. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants
thirteen (13) years of service to the respondent with manifestation to the respondent thirteen (13) years
renewal of its security contract with the complainant agency SSCP, can be considered only as seasonal in
nature or fixed as [specific projects] or undertakings and its completion or termination can be dictated as
[controlled] by the respondent anytime they wanted to.

4. Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen
(13) years as they were then covered by a contract, becomes regular employees of the respondent as the
one (1) year extended services of the complainants were not covered by a contract, and can be considered
as direct employment pursuant to the provision of the Article 280 of the Labor Code.

5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled]
the labor [arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as
illegal.[6]

The Courts Ruling

This petition is hereby granted.


An Employer-Employee
Relationship Existed Between the Parties

It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first
assignment to respondent by SSCP in 1988 until the alleged termination of the Agreement between respondent and SSCP. In fact, this
was the conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone Company,[7] where we ruled that
petitioners therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners
were among those declared to be employees of their respective security agencies and not of PLDT.

The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and
respondent was terminated.

This must be answered in the affirmative.

Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the
Agreement was terminated. And it is this fact that must be explained.

To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP
was a labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.

In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT
with the required security guards, while furnishing PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA
gave weight to the provision in the Agreement that SSCP warranted that it carry on an independent business and has substantial
capital or investment in the form of equipment, work premises, and other materials which are necessary in the conduct of its business.

Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express
provision of the Agreement, stating that no employer-employee relationship existed between the parties herein. The CA disregarded
the pay slips of Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of
the Agreement. Notably, in its Comment dated March 10, 2009,[8] respondent never denied that petitioners remained at their post
until September 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to remain at
their post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their
salaries would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to vacate their
posts. Respondent said that it did not know why petitioners remained at their posts.

Rule 131, Section 3(y) of the Rules of Court provides:

SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but


may be contradicted and overcome by other evidence:

xxxx

(y) That things have happened according to the ordinary course of nature and the ordinary habits of
life.
In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency
with whom the owners or managers have severed ties with to continue to stay within the business premises. This is because upon the
termination of the owners or managers agreement with the security agency, the agencys undertaking of liability for any damage that
the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or
managers would, therefore, be opening themselves up to liability for acts of security guards over whom the owners or managers
allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining
at their posts, and would have a clear understanding of the circumstances of the guards stay. It is but logical that responsible business
owners or managers would be aware of the situation in their premises.

We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing
respondents premises despite the termination of their Agreement. Obviously, it would only be respondent that would benefit from
such a situation. And it is seriously doubtful that a security agency that was established for profit would allow its security guards to
secure respondents premises when the Agreement was already terminated.

From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the
instructions of respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their regular
duties to secure the premises during operating hours. This, to our mind and under the circumstances, is sufficient to establish the
existence of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more believable than the irrational
denials made by respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:[9]

Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in
itself such as the common experience and observation of mankind can approve as probable under the
circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge,
observation and experience. Whatever is repugnant to these belongs to the miraculous and is outside judicial
cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).

To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement,
petitioners remained at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP. Clearly,
such a situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable
to conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such
are indicia of control that respondent exercised over petitioners.

Such power of control has been explained as the right to control not only the end to be achieved but also the means to be
used in reaching such end.[10] With the conclusion that respondent directed petitioners to remain at their posts and continue with their
duties, it is clear that respondent exercised the power of control over them; thus, the existence of an employer-employee relationship.

In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft repeated rule that control is the most
important element in the determination of the existence of an employer-employee relationship:

In the determination of whether an employer-employee relationship exists between two parties, this
Court applies the four-fold test to determine the existence of the elements of such relationship. In Pacific
Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is
in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct. It is the so-called control test which constitutes the most important
index of the existence of the employer-employee relationship that is, whether the employer controls or
has reserved the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished. Stated otherwise, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in
reaching such end.

Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of
this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and
the workers recruited and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter
were directly employed by him. (Emphasis supplied.)

Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:

Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared


prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and
any of the following elements are present:

(i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or

(ii) the contractor does not exercise the right to control over the performance of the work of
the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor
Code, as amended.

Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.

On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:

Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be


considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code
and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of
any violation of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases
as declared by a competent authority:

(a) where there is labor-only contracting; or

(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof. (Emphasis supplied.)

Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the
termination of the Agreement onwardsas this was the only time that any evidence of control was exhibited by respondent over
petitioners and in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and
benefits of employees of respondent, including due process requirements in the termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to
do so, respondent is guilty of illegal dismissal.

WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398. We
hereby REINSTATE the Labor Arbiters Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.

No costs.
SO ORDERED.

G.R. No. L-60337 August 21, 1987

UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA CORPORATION), petitioner,


vs.
THE NATIONAL LABOR RELATIONS COMMISSION and JOSE ARMAS,

The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in which we held that Presidential Decree No.
851, 2 the 13th-month pay law, does not cover employers already paying their employees an "equivalent" to the 13th month pay.

There is no dispute as to the facts.

Sometime in May, 1972, the petitioner and the Universal Corn Products Workers Union entered into a collective bargaining agreement
in which it was provided, among other things, that:

xxx xxx xxx

The COMPANY agrees to grant all regular workers within the bargaining unit with at least one (1) year of
continuous service, a Christmas bonus equivalent to the regular wages for seven (7) working days, effective
December, 1972. The bonus shall be given to the workers on the second week of December.

In the event that the service of a worker is not continuous due to factory shutdown, machine breakdown or
prolonged absences or leaves, the Christmas bonus shall be prorated in accordance with the length of services
that worker concerned has served during the year . 3

xxx xxx xxx

The agreement had a duration of three years, effective June 1, 1971, or until June 1, 1974.

On account however of differences between the parties with respect to certain economic issues, the collective bargaining agreement
in question expired without being renewed. On June 1, 1979, the parties entered into an "addendum" stipulating certain wage
increases covering the years from 1974 to 1977. Simultaneously, they entered into a collective bargaining agreement for the years
from 1979 to 1981. Like the "addendum," the new collective bargaining agreement did not refer to the "Christmas bonus" theretofore
paid but dealt only with salary adjustments. According to the petitioner, the new agreements deliberately excluded the grant of
Christmas bonus with the enactment of Presidential Decree No. 851 4 on December 16, 1975. It further claims that since 1975, it had
been paying its employees 13th-month pay pursuant to the Decree. 5

For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in accordance with the 1972 CBA, the
union went to the labor arbiter for relief. In his decision, 6 the labor arbiter ruled that the payment of the 13th month pay precluded
the payment of further Christmas bonus. The union appealed to the National Labor Relations Commission (NLRC). The NLRC set aside
the decision of the labor arbiter appealed from and entered another one, "directing respondent company [now the petitioner] to pay
the members concerned of complainants [sic] union their 7-day wage bonus in accordance with the 1972 CBA from 1975 to 1978."
Justifying its reversal of the arbiter's decision, the NLRC held:
xxx xxx xxx

It is clear that the company implemented the aforequoted provision of the CBA in 1972, 1973 and 1974. In view
thereof it is our considered opinion that the crediting of said benefit to the 13th month pay cannot be sanctioned
on the ground that it is contrary to Section 10 of the Rules and Regulations Implementing Presidential Decree No.
85 1, which provides, to wit;

Section 10. Prohibition against reduction or elimination of benefits. — Nothing herein shall
be construed to authorize any employer to eliminate, or diminish in any way, supplements,
or other employee benefits or favorable practice being enjoyed by the employee at the time
of promulgation of this issuance.

More so because the benefit involved was not magnanimously extended by the company to its employees but
was obtained by the latter thru bargaining negotiations. The aforementioned CBA was the law between the
parties and the provisions thereof must be faithfully observed by them during its effectivity. In this connection, it
should be noted that the same parties entered into another 3-year CBA on June 11, 1979, which no longer
provides for a 7-day wage Christmas bonus. In effect, therefore, the parties agreed to discontinue the privilege,
which agreement should also be respected. 7

xxx xxx xxx

We hold that in the case at bar, Ovejera (La Carlota) case does not apply.

We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent decision. In that case this Court, speaking through Mr.
Justice Edgardo Paras, held:

xxx xxx xxx

... If the Christmas bonus was included in the 13th month pay, then there would be no need for having a specific
provision on Christmas bonus in the CBA. But it did not provide for a bonus in graduated amounts depending on
the length of service of the employee. The intention is clear therefore that the bonus provided in the CBA was
meant to be in addition to the legal requirement. Moreover, why exclude the payment of the 1978 Christmas
bonus and pay only the 1979-1980 bonus. The classification of the company's workers in the CBA according to
their years of service supports the allegation that the reason for the payment of bonus was to give bigger award
to the senior employees-a purpose which is not found by P.D. 851. A bonus under the CBA is an obligation
created by the contract between the management and workers while the 13th month pay is mandated by the law
(P. D. 851). 9

xxx xxx xxx

In the same vein, we consider the seven-day bonus here demanded "to be in addition to the legal requirement." Although unlike
the Valenzuela CBA, which took effect after the promulgation of Presidential Decree No. 851 in 1975, the subject agreement was
entered into as early as 1972, that is no bar to our application of Valenzuela. What is significant for us is the fact that, like
the Valenzuela, agreement, the Christmas bonus provided in the collective bargaining agreement accords a reward, in this case, for
loyalty, to certain employees. This is evident from the stipulation granting the bonus in question to workers "with at least one (1) year
of continuous service." As we said in Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse between the parties beginning 1974 through 1979, no collective
bargaining agreement was in force during those intervening years. Hence, there is allegedly no basis for the money award granted by
the respondent labor body. But it is not disputed that under the 1972 collective bargaining agreement, [i]f no agreement and
negotiations are continued, all the provisions of this Agreement shall remain in full force up to the time a new agreement is
executed." 11 The fact, therefore, that the new agreements are silent on the seven-day bonus demanded should not preclude the
private respondents' claims thereon. The 1972 agreement is basis enough for such claims for the whole writing is " "instinct with an
obligation," imperfectly express." 12

WHEREFORE, premises considered, the petition is hereby DISMISSED. The Decision of the public respondent NLRC promulgated on
February 11, 1982, and its Resolution dated March 23, 1982, are hereby AFFIRMED. The temporary restraining order issued on May 19,
1982 is LIFTED.

This Decision is IMMEDIATELY EXECUTORY.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 85197 March 18, 1991

NESTLÉ PHILIPPINES, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, EUGENIA C. NUNEZ, LIZA T. VILLANUEVA, EMMANUEL S. VILLENA, RUDOLPH C.
ARMAS, RODOLFO M. KUA and RODOLFO A. SOLIDUM, respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner.


Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondents.

GRIÑO-AQUINO, J.:

This petition for certiorari seeks a review of the resolutions dated May 28, 1988 and September 1, 1988 of the National Labor Relations
Commission (NLRC) in Injunction Case No. 1582 granting the injunction prayed for by the private respondents, to hold in abeyance
the cancellation of their car loans and payments of the monthly amortizations thereon pending the resolution of their complaints for
illegal dismissal.

The private respondents were employed by the petitioner either as sales representatives or medical representatives. By reason of the
nature of their work they were each allowed to avail of the company's car loan policy. Under that policy, the company advances the
purchase price of a car to be paid back by the employee through monthly deductions from his salary, the company retaining the
ownership of the motor vehicle until it shall have been fully paid for. All of the private respondents availed of the petitioner's car loan
policy.

On September 14, 1987, private respondents Nuñez, Villanueva, Villena and Armas were dismissed from the service for having
participated in an illegal strike. On December 26, 1987, respondents Kua and Solidum were also dismissed for certain irregularities. All
the private respondents filed complaints for illegal dismissal in the Arbitration Branch of the NLRC. The Labor Arbiter dismissed their
complaints and upheld the legality of their dismissal. They appealed to the NLRC where their appeals are still pending.

In the Notices of Dismissal which they received from Nestlé, the private respondents had been directed to either settle the remaining
balance of the cost of their respective cars, or return them to the company for proper disposition.

As they failed and refused to avail of either option, the company filed in the Regional Trial Court of Makati a civil suit to recover
possession of the cars. The Court issued an Order dated March 7, 1988 directing the Deputy Sheriff to take the motor vehicles into his
custody.

The private respondents sought a temporary restraining order in the NLRC to stop the company from cancelling their car loans and
collecting their monthly amortizations pending the final resolution of their appeals in the illegal dismissal case.

On May 27, 1988, the NLRC en banc, issued a resolution granting their petition for injunction. Its order reads:

Acting on the Urgent Petition for the Issuance of a Temporary Restraining Order, the Commission sitting en banc after
deliberation, Resolved to hold in abeyance the cancellation of the petitioners' car loans and the payment of the monthly
amortizations thereof pending resolution of their illegal dismissal cases. (p. 5, Rollo.)

The company filed a motion for reconsideration, but it was denied for tardiness. Hence, this petition for certiorarialleging that the
NLRC acted with grave abuse of discretion amounting to lack of jurisdiction when it issued a labor injunction without legal basis and
in the absence of any labor dispute related to the same.

The private respondents, in their comment on the petition, alleged that there is a labor dispute between the petitioner and the private
respondents and that their default in paying the amortizations for their cars was brought about by their illegal dismissal from work by
the petitioner as punishment for their participation in the illegal strike of the Union of Filipro Employees of which they are members. If
they had not participated in the strike, they would not have been dismissed from work and they would not have defaulted in the
payment of their amortizations. Private respondents admitted their civil obligation to the petitioner.

The Office of the Solicitor General filed a manifestation on June 13, 1989, stating that "after judicious scrutiny of the records, . . . and in
consonance with the applicable law and jurisprudence on the matter, the Office of the Solicitor General is convinced that it cannot,
without violating the law, sustain the findings of the National Labor Relations Commission in the case at bar. So as not to prejudice
NLRC's case, the OSG deems it best to refrain from filing its Comment, even as it begs leave of the Honorable Court to be excused
from further appearing in behalf of the NLRC in this particular case" (p. 173, Rollo).

Filing its own comment, the NLRC argued that as the illegal dismissal case is a labor dispute which is still pending resolution before it,
"it is clothed with authority to issue the contested resolutions because under the law, PD 442, otherwise known as the Labor Code of
the Philippines as amended, it is vested with the authority to resolve labor disputes" (p. 252, Rollo).

The power of the NLRC to issue writs of injunction is found in Article 218 of the Labor Code, which provides:

Art. 218 Powers of the Commission. — The Commission shall have the power and authority:

xxx xxx xxx


(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute which, if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision in favor of such party: . . . (Emphasis ours.)

That power, as the statute provides, can only be exercised in a labor dispute. Paragraph (1) of Article 212 of the Labor Code defines a
labor dispute as follows:

(1) "Labor dispute" includes any controversy or matters concerning terms or conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the proximate relation of employer and employee.

Nestlé's demand for payment of the private respondents' amortizations on their car loans, or, in the alternative, the return of the cars
to the company, is not a labor, but a civil, dispute. It involves debtor-creditor relations, rather than employee-employer relations.

Petitioner Nestlé Philippines, Inc., correctly pointed out that:

The twin directives contained in petitioner's letters to the private respondents to either (1) settle the remaining balance on
the value of their assigned cars under the company car plan or return the cars to the company for proper disposition; or (2)
to pay all outstanding accountabilities to the company — are matters related to the enforcement of a civil obligation
founded on contract. It is not dependent on or related to any labor aspect under which a labor injunction can be issued.
Whether or not the private respondents remain as employees of the petitioner, there is no escape from their obligation to
pay their outstanding accountabilities to the petitioner; and if they cannot afford it, to return the cars assigned to them.

As noted, the options given to the private respondents are civil in nature arising from contractual obligations. There is no
labor aspect involved in the enforcement of those obligations. (p. 7, Rollo.)

The NLRC gravely abused its discretion and exceeded its jurisdiction by issuing the writ of injunction to stop the company from
enforcing the civil obligation of the private respondents under the car loan agreements and from protecting its interest in the cars
which, by the terms of those agreements, belong to it (the company) until their purchase price shall have been fully paid by the
employee. The terms of the car loan agreements are not in issue in the labor case. The rights and obligations of the parties under
those contracts may be enforced by a separate civil action in the regular courts, not in the NLRC.

WHEREFORE, the petition for certiorari is granted. The questioned resolution dated May 27, 1988 of the NLRC in Injunction Case No.
1582 (Annex A) is hereby annulled and set aside. Costs against the private respondents.

SO ORDERED.

VELASCO JR., J.:

The Case

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the October 4, 2011 Decision of the Court
of Appeals (CA), as effectively reiterated in its January 30, 2012 Resolution, in CA-G.R. SP No. 112102, entitled Manila International
Freight Forwarders, Inc./MIFFI Logistics Company, Inc. v. National Labor Relations Commission and Marian B. Navarette . The CA
issuances reversed and set aside the February 27, 2009 Decision and October 19, 2009 Resolution of the National Labor Relations
Commission (NLRC) and reinstated the May 24, 2004 Decision of the Labor Arbiter which dismissed the complaint for illegal dismissal.

The Facts

Respondents Manila International Freight Forwarders, Inc. (MIFFI) and MIFFI Logistics Company, Inc. (MCLI) are corporations engaged
in the business of freight and cargo forwarding, hauling, carrying, handling, distributing, loading and unloading of general cargoes
and all classes of goods, wares and merchandise.

MIFF1 had, during the period material, entered into a contract with MBI Millennium Experts, Inc. (MBI) for the provision of production
workers and technical personnel for MIFFI's projects or temporary needs, including the assignment of employees to temporarily
replace those in the Packaging Department who are on maternity leave. To be able to address the immediate concerns of the
employees detailed to the aforesaid department, MBI assigned a supervisor/coordinator, Ma. Glynnis Quindo (Quindo), to MIFFI.

On January 15, 2002, MBI hired petitioner Marian Navarette (Navarette) and, on the same day, assigned her as a temporary project
employee to MIFFI's Packaging Department. There, for a fixed period of three (3) months, or until April of 2002, she worked amongst
MIFFI's regular employees who performed the same tasks as hers. She also used MIFFI's equipment and was supervised by Gidey
Fajiculay and Sonny Porto, both employees of MIFFI.

A second contract was later concluded between Navarette and MBI, under which she was to serve as MIFFI's warehouse staff from
April 16, 2002 to October 1, 2002. Another contract effective March 1, 2003 until August 1, 2003 resulted in Navarette being
transferred to respondent MLCI - MIFFI's subsidiary.

On July 29, 2003, Navarette, joined by other employees, filed a complaint for inspection against MIFFI, MLCI, MBI and a certain PAMS
with the Department of Labor and Employment (DOLE) Regional Arbitration Branch IV. Following an inspection of respondents'
premises on August 5, 2003, certain violations of labor laws were uncovered, including labor-only contracting by MBI. Several
hearings were had and eventually, the parties decided to submit an agreement to be signed by all concerned and to be approved by
DOLE officials.

Pursuant to said covenant, MBI called a meeting where Navarette and her co-workers were handed and asked to sign a document
entitled "Minutes of the Hearing/Agreement, [DOLE], Region IV." Navarette found the contents of the document to be erroneous
since it stated that the parties had already come to an agreement on the issues and conditions when, in fact, no such agreement was
made. This angered Navarette, causing her to throw the document and to say, "Hindi ito ang pinag-usapan natin sa DOLE! Niloloko
niyo long kami." Her actuations, to MBI, constituted serious misconduct, for which a show cause memorandum was issued directing
her to explain herself. Dissatisfied with her explanation that her actuations were so because the Minutes did not reflect the truth MBI
issued another memorandum which Navarette, upon perusal, tore and threw away.

After issuing several memoranda setting conferences on the matter to which Navarette could not attend because of her work
schedule, MBI finally terminated Navarette's employment on October 6, 2003.[1] On October 23, 2003, Navarette filed a complaint for
illegal dismissal before the NLRC against MBI, MIFFI and MCLI, docketed as NLRC-NCR Case No. 00-10-11705-03.

In a Decision dated May 24, 2004, Labor Arbiter Dolores M. Peralta-Beley dismissed the complaint on the finding that Navarette's acts
complained of constituted serious misconduct, a valid cause for dismissal. Too, MBI, being a legitimate job contractor, is Navarette's
employer, not MIFFI or MCLI. The fallo of the Decision reads:

In the light of the foregoing, the complaint for illegal dismissal must be dismissed for want of factual and legal basis. Necessarily, the
claim for back wages must likewise be dismissed as it is granted only to illegally dismissed employees by way of relief.

xxxx

WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit.

SO ORDERED.[2]
On appeal,[3] the NLRC reversed the Decision of the Labor Arbiter and ordered Navarette's reinstatement with backwages and other
benefits. To the commission, MBI is a labor-only contractor, thus making MIFFI and MCLI Navarette's employer. The NLRC disposed of
the case in this wise:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision of the Labor Arbiter dated May 24, 2004
is REVERSED and SET ASIDE, and a NEW ONE rendered finding respondent MBI as a labor-only contractor. Consequently,
respondents MIFFI/MCLI are declared to be complainant's employer, and accordingly respondents MIFFI/MCLI are ordered to:

1. Reinstate complainant to her former position or equivalent position without loss of seniority rights;

2. Pay complainant her full backwages computed from the time she was illegally dismissed up to the finality of this Decision;
and

3. Pay complainant attorney's fees in an amount equivalent to ten (10%) of the total monetary award.

Complainant's monetary award is provisionally computed as follows:

Backwages

1.) Basic Salary


10/6/03-6/15/05
250x26x20.30 131,950.00
6/16/05-7/10/06
275x26x12.83 91,734.50
7/11/06-8/27/07
300x26x13.57 105,846.00
8/28/07-6/13/08
362x26x9.53 89,696.36
6/14/08-8/27/08
377x26x2.47 24,210.94
8/28/08-2/3/09
382x26x5.17 51,348.44 494,786.24
2.) 13th mo pay
494,786.24/12 41,232.19
3.) SILP

250x5/12x20.30 2,114.58
275x5/12x12.83 1.470.10
300x5/12x13.57 1,696.25
362x5/12x9.53 1,437.44
377x5/12x2.47 387.99
382x5/12x5.17 822.89 7,929.25
4.) COLA

10/6/03-7/9/04
50x26x9.10 11,830.00
7/10/04-8/27/07
50x26x37.60 48,880.00
6/14/08-8/27/08
5x26x24.7 321.10 61,031.10 604,978.78
Attorney's fee 10% 60,497.88
Total Award P665.476.66[4]
Aggrieved, respondents moved for reconsideration, alleging that Navarette is not their employee, MBI being a legitimate job
contractor, as held by the NLRC in the related case of Manlangit v. MIFFI and/or MCLI and MBI.[5] The NLRC, however, in its October
19, 2009 Resolution, found no merit therein and sustained its earlier Decision.

Respondents, thus, sought a review of the NLRC Decision and Resolution before the CA via a Petition for Certiorari under Rule 65 of
the Rules of Court. Before the CA could dispose of said petition, the Court, on August 31, 2011, in Manlangit, et al. v. MIFFI, et
al.,[6] issued a Resolution where it dismissed the Manlangit petition and upheld the ruling of the CA that MBI's contract with
MIFF1/MCL1, respondents in said case as well as in the case at bar, was one of legitimate job contracting, contrary to the assertions of
therein petitioners.

Eventually, the CA, in the present case, ordered the reversal of the NLRC Decision and the reinstatement of the Labor Arbiter's ruling.
The dispositive portion of the appellate court's Decision is hereunder quoted:

WHEREFORE, the petition is GRANTED. The Decision dated February 27, 2009 and Resolution dated October 19, 2009 of the [NLRC]
are REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated May 24, 2004, which dismissed the complaint for lack of merit
is REINSTATED.

SO ORDERED.[7]
Petitioner's motion for reconsideration was also denied.

The Issues

Petitioner presently seeks a review of the CA Decision on the following grounds:

The Honorable [CA] misapplied the law and misapprehended the facts in ruling that there is absence of employer-employee
relationship between the petitioner and the respondent [MIFFI].
The Hon. [CA] misapplied the law in ruling that petitioner is not entitled to the reliefs prayed for.
The issues in the case at bar are as follows: (1) whether petitioner Navarette is respondents' employee; and (2) whether her dismissal is
illegal.

Our Ruling

We resolve to deny the petition.

Navarette is MBI's employee

A fundamental principle in Philippine labor law is the application of the four-fold test in determining the existence of an employer-
employee relationship, thus: (1) selection and engagement; (2) payment of wages; (3) power to dismiss; and (4) power of control over
the means and methods by which the work is to be accomplished.[8] There are, however, instances when these elements are not
exercised by a single person or entity. There are cases where one or more of the said factors are assumed by another entity, for which
reason, the Court made it clear that of the four tests mentioned, it is the power of control that is determinative.[9] One such instance is
whenever an employer supplies workers to another pursuant to a contracting agreement, i.e., job contracting.

Per DOLE Order No. 3, Series of 2001, there is contracting or subcontracting whenever an employer, referred to as the principal, farms
out the performance of a part of its business to another, referred to as the contractor or subcontractor, and for the purpose of
undertaking the principal's business that is farmed out, the contractor or subcontractor then employs its own employees. In such an
arrangement, the four-fold test must be satisfied by the contractor or subcontractor.[10] Otherwise, it is the principal that shall be
considered as the employer.

Not all forms of contracting arrangements are, however, permitted. In contrast, there is the so-called labor-only contracting.

Labor-only contracting exists when: (1) the person supplying workers to the purported principal does not have substantial capital or
investments in the form of tools, equipment, machineries, work premises, among others; and (2) the workers recruited and placed by
such person/entity perform activities which are directly related to the principal business of the alleged principal.[11] Finding that a
contractor is engaged in labor-only contracting is then equivalent to declaring that there exists an employer-employee relationship
between the supposed principal and the employee of the purported contractor.[12] It also results in the following: (1) the subcontractor
will be treated as the agent of the principal whose acts and representations bind the latter; (2) the principal, being the employer, will
be responsible to the employees for all their entitlements and benefits under labor laws; and (3) the principal and the subcontractor
will be solidarity treated as the employer.

With the mentioned effects of labor-only contracting on employment status, a determination of the legitimacy or illegality of the
contracting arrangement between the principal and the contractor is necessary not only to determine who between the two entities is
the real employer of the employee but also to determine upon whom liability should be imposed in the event that the employee is
illegally dismissed, as here, among others.

In this respect, respondents contend that MBI is a legitimate job contractor[13] and consequently, Navarette is MBI's employee,
invoking the application of the principle of res judicata. According to respondents, the Court has already passed upon and ruled on
the legitimacy of MBI's contract with them that it is one of permissible job contracting when We affirmed the contract's status through
a Resolution dated August 31, 2011 in the adverted case of Manlangit, et al. v. MIFFI, et al., docketed as G.R. No. 196175.
Briefly, Manlangit involved a complaint for regularization, illegal deduction, wage distortion and attorney's fees, later amended to
include illegal dismissal, filed by Gabriel Manlangit and thirty six (36) other workers against MIFFI, MLCI, and MBI. Like Navarette,
Manlangit, et al. were also hired by MBI and assigned to MIFFI.

After due proceedings, the Labor Arbiter found for MIFFI, MLCI and MBI and dismissed the complaint, ruling that Manlangit, et al.
were project employees of MBI, whose employments were coterminous with the service agreement between MBI and MIFFI/MLCI.
Therefrom, Manlangit, et al. went to the NLRC which dismissed their appeal for lack of merit and for non-perfection in view of their
failure to comply with the mandatory provision on verification and certification of non-forum shopping. Upon the review of the case,
the CA, then later this Court, veritably affirmed the Decision of the Labor Arbiter, as effectively upheld by the NLRC. [14]

In light of Manlangit, respondents add, the ruling on the legality of MBI and respondents' contractual relationship, being one of
permissible job contracting, can no longer be disturbed.

We agree with respondents that Our adjudication in Manlangit of the issue of the legitimacy of MBI's contract with respondents and
necessarily, the question who between MBI and MIFFI is Navarette's employer, have already been settled by the Court and must not
be disturbed. Per Manlangit, MBI is respondents' employer and res judicata by conclusiveness of judgment bars further challenge on
this issue.

For res judicata by conclusiveness of judgment to apply, the following elements should be present, viz: (1) the judgment sought to bar
the new action must be final; (2) the decision must have been rendered by a court having jurisdiction over the subject matter and the
parties; (3) the disposition of the case must be a judgment on the merits; and (4) there must be as between the first and second
action, identity of parties, but not identity of causes of action.[15]

When applicable, the doctrine of conclusiveness of judgment has this effect: the prior judgment is conclusive in the second case only
as to those matters actually and directly controverted and determined and not as to matters merely involved therein. Stated
differently, conclusiveness of judgment finds application when a fact or question has been squarely put in issue, judicially passed
upon, and adjudged in a former suit by a court of competent jurisdiction.[16]

As to the first requisite, Manlangit which is being set as a bar to the instant case is a final judgment. With respect to the second
requisite, the decision was rendered by the Court of Appeals which was affirmed by this Court, both of which have jurisdiction over
the subject matter and the parties. Anent the third requisite, the dispositions were judgments on the merit.

Regarding the fourth requisite, there is identity or similarity of parties but no identity of causes of action. While Navarette is not a
party in Manlangit, there is commonality or similarity of parties in the two cases. Navarette and the petitioners in Manlangit are
similarly situated, being co-workers performing the same tasks of packaging, barcoding, and sealing, among others. Too, their
assignment to herein respondents proceeded from the same job contracting agreement between MBI and respondents.[17] In fact, it
was the petitioners in Manlangit who supported herein petitioner, Navarette, their leader, when she filed the complaint for inspection
against respondents before the DOLE which, as previously mentioned, yielded a finding that there is a labor-only contracting
arrangement between MBI and respondents. It is this complaint for inspection that triggered the chain of events which eventually led
to the filing by therein petitioners of a complaint for regularization, later converted into one for illegal dismissal,[18] as well as
Navarette's subsequent filing of her own complaint for illegal dismissal against MBI and herein respondents. Thus, based on these
circumstances, there is commonality or similarity of parties. An absolute identity of parties is not necessary because a shared identity
of interest will suffice for res judicata to apply. A mere substantial identity of parties or even community of interests between the
parties in the prior and subsequent cases would be sufficient.[19]

With respect to the causes of action, the cause of action in this petition is for illegal dismissal, while in Manlangit, the causes of action
are for regularization, illegal deduction, wage distortion and attorney's fees.

Thus, all the requisites of res judicata by conclusiveness of judgment are present. The Court applies Manlangit to the instant petition
moored on res judicata by conclusiveness of judgment. To rule otherwise will not enhance and strengthen stability of judicial
decisions.

With the finding that MBI is a legitimate labor contractor and is the employer of petitioner Navarette, the Court cannot, however, pass
upon the issue of whether MBI is guilty of illegal dismissal. The antecedents show that while the MBI is a party respondent in NLRC-
NCR Case No. 00-10-11705-03 together with respondents MIFFI and MLCI, the ruling of Labor Arbiter Peralta-Beley is to dismiss
petitioner's complaint upon a finding of a valid dismissal grounded on serious misconduct.

Petitioner appealed said adverse decision to the NLRC against the MBI and herein respondents in NLRC CA No. 040934-04, and the
NLRC found MIFFI and MLCI liable but not MBI. As a consequence, respondents MIFFI and MLCI filed a petition under Rule 65 with
the CA in CA-G.R. SP No. 112102. MBI did not join said respondents since it was not adjudged liable by the NLRC. On the other hand,
petitioner did not file a petition with the CA questioning the NLRC decision declaring MIFFI and MLCI liable but absolving MBI. Thus,
the NLRC decision dated February 27, 2004 excluding MBI from any liability to petitioner became FINAL when petitioner no longer
challenged said ruling before the CA.

WHEREFORE, premises considered, the instant petition is hereby DENIED. Accordingly, the Decision of the Court of Appeals dated
October 4, 2011 and its Resolution dated January 30, 2012 in CA-G.R. SP No. 112102 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 101761. March 24, 1993] NATIONAL SUGAR REFINERIES CORPORATION vs. NATIONAL LABOR RELATIONS COMMISSION

FACTS: Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by the

Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. Private respondent union represents the

former supervisors of the NASUREFCO Batangas Sugar Refinery.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to department

heads. As a result, all positions were re-evaluated, and all employees including the members of respondent union were granted salary

adjustments and increases in benefits commensurate to their actual duties and functions.

For about ten years prior to the JE Program, the members of respondent union were treated in the same manner as rank-and file

employees. As such, they used to be paid overtime, rest day and holiday pay. With the implementation of the JE Program, the

following adjustments among others were made: (1) the members of respondent union were re-classified under levels S-5 to S-8

which are considered managerial staff for purposes of compensation and benefits; (2) there was an increase in basic pay of the

average of 50% of their basic pay prior to the JE Program, with the union members now enjoying a wide gap (P1,269.00 per month) in

basic pay compared to the highest paid rank-and-file employee.


On May 11, 1990, petitioner NASUREFCO recognized herein respondent union as the bargaining representative of all the supervisory

employees at the NASUREFCO Batangas Sugar Refinery.

Two years after the implementation of the JE Program the members of herein respondent union filed a complaint for non-payment of

overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

ISSUE: W/N supervisory employees should be considered as officers or members of the managerial staff under Article 82, Book III of

the same Code, and hence are not entitled to overtime rest day and holiday pay.

HELD: YES. Article 212(m), Book V of the Labor Code on Labor Relations reads:

“(m) ‘Managerial employee’ is one who is vested with powers or prerogatives to lay down and execute management policies and/or

to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory employees are those who, in the

interest of the employer effectively recommend such managerial actions if the exercise of such authority is not merely routinary or

clerical in nature but requires the use of independent judgment. All employees not falling within any of those above definitions are

considered rank-and-file employees of this Book.”

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that the latter

are not managerial employees, adopted the definition stated in the aforequoted statutory provision.

A cursory perusal of the Job Value Contribution Statements of the union members will readily show that these supervisory employees

are under the direct supervision of their respective department superintendents and that generally they assist the latter in planning,

organizing, staffing, directing, controlling communicating and in making decisions in attaining the company’s set goals and objectives.

These supervisory employees are likewise responsible for the effective and efficient operation of their respective departments. The

members of respondent union discharge duties and responsibilities which ineluctably qualify them as officers or members of the

managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary

duty consists of the performance of work directly related to management policies of their employer; (2) they customarily and regularly

exercise discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty

consist of the management of a department of the establishment in which they are employed (4) they execute, under general

supervision, work along specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under

general supervision, special assignments and tasks; and (6) they do not devote more than 20% of their hours worked in a work-week

to activities which are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, the union members should be considered as officers and members of the managerial staff and

are, therefore, exempt from the coverage of Article 82 hence they are not entitled to overtime, rest day and holiday.

G.R. No. 101761. March 24, 1993.


NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY
UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as defined in Article
212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of
the same Code, and hence are not entitled to overtime rest day and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by the
Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union represents the former supervisors of the NASUREFCO
Batangas Sugar Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor,
Senior Financial/Budget Analyst, General Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler
Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor, Community
Development Officer, Employment and Training Supervisor, Assistant Safety and Security Officer, Head and Personnel Services, Head
Nurse, Property Warehouse Supervisor, Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to department
heads. The JE Program was designed to rationalized the duties and functions of all positions, reestablish levels of responsibility, and
recognize both wage and operational structures. Jobs were ranked according to effort, responsibility, training and working conditions
and relative worth of the job. As a result, all positions were re-evaluated, and all employees including the members of respondent
union were granted salary adjustments and increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of respondent union were treated in the
same manner as rank-and file employees. As such, they used to be paid overtime, rest day and holiday pay pursuant to the provisions
of Articles 87, 93 and 94 of the Labor Code as amended. With the implementation of the JE Program, the following adjustments were
made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which are considered managerial staff for
purposes of compensation and benefits; (2) there was an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest paid rank-
and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they were entitled to increased company
COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for rest day/holiday work.

On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to Republic Act NO.
6715 allowing supervisory employees to form their own unions, as the bargaining representative of all the supervisory employees at
the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein respondent union filed a
complainant with the executive labor arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of Article
100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed by them instead of
the P100.00 special allowance which was implemented on June 11, 1988; and

2. pay the individual members of complainant union the difference in money value between the P100.00 special allowance and the
overtime pay, rest day pay and holiday pay that they ought to have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time during which the benefits were
being paid to the supervisors has accused the payment thereof to ripen into contractual obligation; at the complainants cannot be
estopped from questioning the validity of the new compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the implementation of the Job Evaluation Program, hence
there was no way for the individual supervisors to express their collective response thereto prior to the formation of the union; and
the comparative computations presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay and holiday pay not been
discontinued, which arrangement, therefore, amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations Commission (NLRC)
affirmed the decision of the labor arbiter on the ground that the members of respondent union are not managerial employees, as
defined under Article 212 (m) of the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent
NLRC declared that these supervisory employees are merely exercising recommendatory powers subject to the evaluation, review and
final action by their department heads; their responsibilities do not require the exercise of discretion and independent judgment; they
do not participate in the formulation of management policies nor in the hiring or firing of employees; and their main function is to
carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was denied in a resolution of public
respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission committed a grave
abuse of discretion in refusing to recognized the fact that the members of respondent union are members of the managerial staff
who are not entitled to overtime, rest day and holiday pay; and in making petitioner assume the "double burden" of giving the
benefits due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest day and holiday
pay. Before this can be resolved, however it must of necessity be ascertained first whether or not the union members, as supervisory
employees, are to be considered as officers or members of the managerial staff who are exempt from the coverage of Article 82 of
the Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined employees, as defined under Article
212(m), Book V of the Labor Code on Labor Relations, which reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer effectively recommend such managerial actions if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent judgment. All employees not falling within any of those above definitions are
considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that the latter
are not managerial employees, adopted the definition stated in the aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are entitled to
overtime, rest day and holiday pay, said employees should be considered as "officers or members of the managerial staff" as defined
under Article 82, Book III of the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of
the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and undertakings whether for profit or
not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff." (Emphasis
supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify for exemption under the
condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or subdivision
thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring
and firing and as to the promotion or any other change of status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the management of the
establishment in which he is employed or subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under general supervision special assignments and
tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly and closely related
to the performance of the work described in paragraphs (1), (2), and above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying managerial
positions, they are clearly officers or members of the managerial staff because they meet all the conditions prescribed by law and,
hence, they are not entitled to overtime, rest day and supervisory employees under Article 212 (m) should be made to apply only to
the provisions on Labor Relations, while the right of said employees to the questioned benefits should be considered in the light of
the meaning of a managerial employee and of the officers or members of the managerial staff, as contemplated under Article 82 of
the Code and Section 2, Rule I Book III of the implementing rules. In other words, for purposes of forming and joining unions,
certification elections, collective bargaining, and so forth, the union members are supervisory employees. In terms of working
conditions and rest periods and entitlement to the questioned benefits, however, they are officers or members of the managerial staff,
hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed
that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court
has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however,
has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the circumstances of
the particular case, In determining whether an employee is within the terms of the statutes, the criterion is the character of the work
performed, rather than the title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent commission, substantial justice
and the peculiar circumstances obtaining herein mandate a deviation from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these supervisory
employees are under the direct supervision of their respective department superintendents and that generally they assist the latter in
planning, organizing, staffing, directing, controlling communicating and in making decisions in attaining the company's set goals and
objectives. These supervisory employees are likewise responsible for the effective and efficient operation of their respective
departments. More specifically, their duties and functions include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled and manning
complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary action on erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their
development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all NASUREFCO employees,
recommends revisions or modifications to said rules when deemed necessary, and initiates and prepares reports for any observed
abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which ineluctably
qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to
Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work directly related to management policies of
their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly assist
the managerial employee whose primary duty consist of the management of a department of the establishment in which they are
employed (4) they execute, under general supervision, work along specialized or technical lines requiring special training, experience,
or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they do not devote more than 20%
of their hours worked in a work-week to activities which are not directly and clearly related to the performance of their work
hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be considered as
officers and members of the managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not
entitled to overtime, rest day and holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are managerial employees, to
determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is admitted that these union members
are supervisory employees and this is one instance where the nomenclatures or titles of their jobs conform with the nature of their
functions. Hence, to distinguish them from a managerial employee, as defined either under Articles 82 or 212 (m) of the Labor Code,
is puerile and in efficacious. The controversy actually involved here seeks a determination of whether or not these supervisory
employees ought to be considered as officers or members of the managerial staff. The distinction, therefore, should have been made
along that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the union members
has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file employees such
as overtime, rest day and holiday pay, simply because they were treated in the same manner as rank-and-file employees, and their
basic pay was nearly on the same level as those of the latter, aside from the fact that their specific functions and duties then as
supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact is apparent from the clarification
made by petitioner in its motion for reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated
August 16, 1991, wherein, it lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly classified as
'supervisory' and found after the JE Program to be rank-and-file were classified correctly and continue to receive overtime, holiday
and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in most cases their
organizational positions re-designated to confirm their superior rank and duties. Thus, after the JE program, complainants cannot be
said to occupy the same positions." 9

It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its pleadings filed
before herein public respondent or with this Court. Hence, it can be safely concluded therefrom that the members of respondent
union were paid the questioned benefits for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program,
they could not be categorically classified as members or officers of the managerial staff considering that they were then treated
merely on the same level as rank-and-file. Consequently, the payment thereof could not be construed as constitutive of voluntary
employer practice, which cannot be now be unilaterally withdrawn by petitioner. To be considered as such, it should have been
practiced over a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowingly fully well that said employees are not covered by the law requiring payment thereof. 11 In the case at bar,
respondent union failed to sufficiently establish that petitioner has been motivated or is wont to give these benefits out of pure
generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private respondent union were re-classified
under levels S-5 S-8 which were considered under the program as managerial staff purposes of compensation and benefits, that they
occupied re-evaluated positions, and that their basic pay was increased by an average of 50% of their basic salary prior to the JE
Program. In other words, after the JE Program there was an ascent in position, rank and salary. This in essence is a promotion which is
defined as the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach and pertain
exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance with the conditions set forth
therein. With the promotion of the members of respondent union, they occupied positions which no longer met the requirements
imposed by law. Their assumption of these positions removed them from the coverage of the law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which attach to their
former positions, there was nothing to prevent them from refusing to accept their promotions and their corresponding benefits. As
the sating goes by, they cannot have their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and
fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management, provided it is done in
good faith. In the case at bar, private respondent union has miserably failed to convince this Court that the petitioner acted
implementing the JE Program. There is no showing that the JE Program was intended to circumvent the law and deprive the members
of respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of employment. This
flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of
its business. Such management prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employer's interest and not for the purpose of defeating on circumventing the rights of employees under
special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice
or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission promulgated on July 19,
1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having been rendered and adopted with grave
abuse of discretion, and the basic complaint of private respondent union is DISMISSED.

Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

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:

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 fullpayment 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 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). 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.