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[G.R. No. 157214. June 7, 2005] PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE VERA, respondent.

FACTS: De Vera and petitioner company entered into a contract where respondent was to attend to the medical needs of petitioner’s employeeswhile being paid a retainer fee of P4,000 per month. Later, De Vera was informed y petitioner that the retainership will be discontinued. Respondent filed a case for illegal dismissal.

ISSUE: Whether or not de Vera is an employee of PhilComm or an independent contractor.

HELD: Applying the four fold test, de Vera is not an employee. There are several indicators apart from the fact that the power to terminate the arrangement lay on both parties:

from the time he started to work with petitioner, he never was included in its payroll; was never deducted any contribution for remittance to the Social Security System (SSS);

he was subjected by petitioner to the ten (10%) percentwithholding tax for his professional fee, in accordance with the National Internal Revenue Code, matters which are simply inconsistent with an employer-employee relationship;

the records are replete with evidence showing that respondent had to bill petitioner for his monthly professional fees. It simply runs against the grain of common experience to imagine that an ordinary employee has yet to bill his employer to receive his salary. Finally, the element of control s absent. Petition granted.




This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of the Labor

Arbiter finding private respondent to be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox.

The question raised in this case is whether private respondent is an employee of ,Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that private respondent is an employee of Fuji Xerox and accordingly dismiss the petition for certiorari of Fuji Xerox.

The following are the facts.

On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier machines of Fuji Xerox as part of the latter’s “Xerox Copier Project” in its sales offices. Private respondent Pedro Garado was assigned as key operator at Fuji Xerox’s branch at Buendia, Makati, Metro Manila, in February of 1980.

In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the spoilage, he tried to talk to a service technician of Fuji Xerox into stopping the meter of the machine.

The technician refused Garado’s request, but this incident came to the knowledge of Fuji Xerox which, on May 31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal.

The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed Garado’s complaint.

On the other hand, the NLRC found Garado to be in fact an employee of petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC found that although Garado’s request was wrongful, dismissal would be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact was that the copier machines, which

Garado operated, belonged to petitioner Fuji Xerox, and that although it was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that Skilipower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that Skilipower, Inc. was a labor-only contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of the agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered:

WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant Pedro Garado to his former position as key operator with three (3) years backwages, without qualification or reduction whatsoever x x x. Except as herein above MODIFIED, the appealed decision is hereby Affirmed.

Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is its employee for the following reasons:

(1) Garado was recruited by Skillpower, Inc.;

(2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox;

(3) Garado’s salaries and benefits were paid directly by Skillpower, Inc.;

(4) Garado worked under the control of Skillpower, Inc.; and

(5) Skillpower, Inc. is a highly-capitalized business venture.

The contentions are without merit.

Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later merely assigned to it (petitioner). It is undisputed, however, that since 1980, [1] when Garado was first assigned to work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984, he was already a member of the union which petitioned the company for his regularization. [2] From 1980 to 1984 he worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latter’s Xerox Copier Project. [3]

Petitioners claim that Skillpower, Inc. has other clients to whom it provided “temporary” services. That, however, is irrelevant. What is important is that once employed, Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only “temporary” services, Skilipower, Inc. actually supplied Fuji Xerox

the labor which the latter needed for its Xerox Copier Project for seven (7) years, from 1977 to 1984.

On January 1, 1983, private respondent signed a contract entitled “Appointment as Contract Worker,” in which it was stated that private respondent’s status was that of a contract worker for a definite period from January 1, 1983 to June 30, 1983. As such, private respondent’s employment was considered temporary, to terminate automatically six (6) months afterwards, without necessity of any notice and without entitling private respondent to separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower, Inc., and not of the client to which he was assigned. Therefore, the termination of the contract or any renewal or extension thereof did not entitle him to become an employee of the client and the latter was not under any obligation to appoint him as such, “notwithstanding the total duration of the contract or any extension or renewal thereof.”

This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private respondent by employing workers under six- month contracts which are later extended indefinitely through renewals. As this Court held in the Philippine Bank of Communications v. NLRC: [4]

It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to permit employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to prevent such a result.

Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners’ xerox machine, is not directly related nor necessary to the business of selling and leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to them. As such, the project is no different from other services which can legally be contracted out, such as security and janitorial services. Petitioners contend that the copier service can be considered as part of their “housekeeping” tasks which can be let to independent contractors. [5]

We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes goodwill for the company. It may not generate income for the company but there are activities which a company may find necessary to engage in because they ultimately redound to its

benefit. Operating the company’s copiers at its branches advertises the quality of their products and promotes the company’s reputation and public image. It also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for profit the copying service is not intended either to be “promotional,” as, indeed, petitioner charged a fee for the copies made.

It is wrong to say that if a task is not directly related to the employer’s business, or it falls under what may be considered “housekeeping activities,” the one performing the task is a job contractor. The determination of the existence of an employer-employee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved.

Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege that the salaries paid to Garado, as well as his employment records, vouchers and loan checks from the SSS were coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to Skilipower, Inc.

It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should not be dismissed for the spoilage in Fuji Xerox’s Buendia branch and suspended him pending the result of the investigation. According to petitioners, although they conducted an administrative investigation, the purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal liability of private respondent.

This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the company, to the union president, Nick Macaraig. The first letter, dated July 6, 1983, stated:

This has reference to your various letters dated today on administrative case concerning Messrs. Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes. In connection with the above and in the case likewise of Mr. Dionisio Guyala, please be advised that the proceedings against them are being carried out under the terms, and in accordance with the provisions of our Policy and Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1, 1982, and not under the Grievance Machinery under our CBA.

Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is premature. If we have allowed the Union to participate in our Investigation and Administrative panels, it is only a concession on management’s part in accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on

the investigation, the Personnel/Administrative Department may consult the Unionwhenever necessary.

We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject for grievance by the Union itself under the terms of our CBA.

Accordingly, we are proceeding with our investigations on the administrative charges with or without your presence or that of the respondents if it is the latter’s preference, as in the case of Crisostomo Cruz, to ignore the same. (Italics ours)

The second letter, dated July 13, 1983, [6] read:

You obviously persist in pursuing the misconception that our allowing your presence in the administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play. We can only reiterate our statement in our letter of July 6 that we were implementing Policy and Procedures on Termination dated October 1, 1982 and that your presence in helping bolster the defense for the respondents was only with our forbearance in the spirit of cooperation in order to better ferret out the truth.

The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of Management, something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is limited to settling disputes and misunderstanding as to interpretation, application, or violation of any provisions of the CBA agreement x x x. As likewise pointed out in our letter of July 6 recourse to Grievance may possibly be resorted to if in the Union’s opinion a penalty imposed upon a respondent Union member is discriminating to the member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to the NLRC, as in similar cases in the past. (Italics ours)

These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any doubt that Fuji Xerox exercised disciplinary authority over Garado and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of petitioner.

Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an “independent employer” with the Securities and Exchange Commission as well as the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding P5 million pesos and at least 20 typewriters,

office equipment and service vehicles. It had employees of its own and a pool of 25 clerks assigned to clients on a temporary basis.

Petitioners cite the case of Neri v. NLRC, [7] in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case [8] the Court had already found that the BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.

Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was in the business of providing. Although in the Neri case the telex machine operated by the employee belonged to the employer, the service was deemed permissible because it was specific and technical. This cannot be said of the service rendered by private respondent Garado.

The Rules to Implement of the Labor Code, Book III, Rule VIII, §8, provide that there is job contracting when the following conditions are fulfilled:

(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

Otherwise, according to Art. 106 of the Labor Code,

There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal

business of such employer. In such 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.

Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The phrase “substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business,” in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the employer.

Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is an independent contractor and that the workers hired by it “shall not, in any manner and under any circumstances, be considered employees of [the] Company, and that the Company has no control or supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the Contractor’s obligations under this AGREEMENT.”

In Tabas v. California Manufacturing Company, Inc., [9] this Court held on facts similar to those in the case at bar:

There is no doubt that in the case at bar, Livi performs “manpower services,” meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is “an independent contractor.” The nature of one’s business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter’s own business. In this connection, we do not agree that the petitioners had been made to perform activities “which are not directly related to the general business of manufacturing,” California’s purported “principal operation activity.” The petitioners had been charged with “merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occasional [sic] price tagging,” an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its

(California’s) promotions or sales arm or agents, or otherwise, rendered a piece of work it (California) could not have itself done; Livi as a placement agency, had simply supplied it with the manpower necessary to carry out its (California’s) merchandising activities, using its (California’s) premises and equipment.




The fact that the petitioners have allegedly admitted being Livi’s “direct employees” in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolve Californiasince liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declaration of parties.

Skilipower, Inc. is, therefore, a “labor-only” contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent.

ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.


Regalado, J. (Chairman), Romero, and Puno, JJ., concur.

3. Sevilla vs. CA


A contract by and between Noguera and Tourist World Service (TWS), represented by Canilao, wherein TWSleased the premises belonging to Noguera as branch office of TWS. When the branch office was opened, it was runby appellant Sevilla payable to TWS by any airline for any fare brought in on the efforts of Mrs. Sevilla, 4% was togo to Sevilla and 3% was to be withheld by the TWS.Later, TWS was informed that Sevilla was connected with rival firm, and since the branch office was losing, TWS considered closing down its office.On January 3, 1962, the contract with appellee for the use of the branch office premises was terminatedand while the effectivity thereof was January 31, 1962, the appellees no longer used it. Because of this, Canilao, thesecretary of TWS, went over to the branch office, and finding the premises locked, he padlocked the premises.When neither appellant Sevilla nor any of his employees could enter, a complaint was filed by the appellants against the appellees. TWS insisted that Sevilla was a mere employee, being the “branch manager” of its branch office and thatshe had no say on the lease executed with the private respondent, Noguera.


W/N ER-EE relationship exists between Sevilla and TWS


The records show that petitioner, Sevilla, was not subject to control by the private respondent TWS. In thef i rs t p la c e , u n d e r t h e c o n t ra c t o f le a s e , s h e

h a d b ou n d h e rs e lf in s o l id u m a s a n d f or re n t a l p a y m e n t s , a

would belie claims of a master-servant relationship. That does not make her an employee of TWS,since a true employee cannot be made to part with his own money in pursuance of his employer’s business, orotherwise,assumeany liability thereof.In the second place, when the branch office was opened, the same was run by the appellant Sevilla payableto TWS by any airline for any fare brought in on the effort of Sevilla. Thus, it cannot be said that Sevilla was underthe control of TWS. Sevilla in pursuing the business, relied on her own capabilities.It is further admitted that Sevilla was not in the company’s payroll. For her efforts, she retained 4% incommissions from airline bookings, the remaining 3% going to TWS. Unlike an

employee, who earns a fixed salary,she earned compensation in fluctuating amount depending on her booking successes. The fact that Sevilla had been designated “branch manager” does not make her a TWS employee. It appears that Sevilla is a bona fide travel agent herself, and she acquired an interest in the business entrusted toher. She also had assumed personal obligation for the operation thereof, holding herself solidary liable for the payment of rentals.Wherefore, TWS and Canilao are jointly and severally liable to indemnify the petitioner,Sevilla.

n arrangement that



Facts: This is originally filed with the Social Security Commission (SSC) viapetition of 17 persons who styled themselves as “ Caddies of Manila Golfand Country Club-PTCCEA” for the coverage and availment of benefits of the Social Security Act as amended, PTCCEA (Philippine Technical, Clerical, Commercial Employees Association) a labor organization where which they claim for membership.

The same time two other proceedings were filed and pending. These are certification election case filed by PTCCEA on behalf of the same caddiesof Manila Golf and Country club which was in favor of the caddies and compulsory arbitration case involving PTCCEA and Manila Golf and Country Club which was dismissed and ruled that there was no employer-employee relationship between the caddies and the club.

Issue: Whether or not rendering caddying services for members of golfclubs and their guests in said clubs’ courses or premises are the employees of such clubs and therefore within the compulsory coverage of the Social Security System (SSS).

Ruling: The








logically point





In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation withinthe premises and grounds of whatever club they do work in. They work for the club to which they attach themselves on sufferance but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long they like.

These considerations clash frontally with the concept of employment. It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such circumstances, the caddy may leave the premises and to go to such other place of work that he wishes. These are things beyond the control of the petitioner.

The caddy (LLamar) is not an employee of petitioner Manila Golf and Country Club and the petitioner is under no obligation to report him for compulsory coverage of SSS.

5. FRANCISCO vs. NLRC Case Digest


Facts: Petitoner was hired by Kasei Corporation during the incorporation stage. She was designated as accountant and corporate secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liason Officer to the City of Manila to secure permits for the operation of the company.

In 1996, Petitioner was designated as Acting Manager. She was assigned to handle recruitment of all employees and perform managementadministration functions. In 2001, she was replaced by Liza Fuentes as Manager. Kasei Corporation reduced her salary to P2,500 per month which was until September. She asked for her salary but was informed that she was no longer connected to the company. She did not anymore report to work since she was not paid for her salary. She filed an action forconstructive dismissal with the Labor Arbiter.

The Labor Arbiter found that the petitioner was illegally dismissed. NLRC affirmed the decision while CA reversed it.

Issue: Whether or not there was an employer-employee relationship.

Ruling: The court held that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer- employee relationship.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship.

In Sevilla v. Court of Appeals, the court observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in thepayrolls, to give a clearer picture in determining the existence of an

employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct controland supervision of Seiji Kamura, the corporation’s Technical Consultant. It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latter’s line of business.

There can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to Respondent Corporation on a regular basis over an indefinite period of engagement. Respondent Corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, Respondent Corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.



MANUEL P. ESITA was for twenty (20) years a compressor operator of Tiongson Ice Plant in San Pablo City. In 1980 he was hired as compressor operator-mechanic for the ice plants of petitioner Dr. Melchor Opulencia located in Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the ice plant in Tanauan, Esita would work from seven o'clock in the morning to five o'clock in the afternoon receiving a daily wage of P35.00.

In 1986, Esita was transferred to the ice plant in Calamba, which was then undergoing overhauling, taking the place of compressor operator Lorenzo Eseta, who was relieved because he was already old and weak. For less than a month, Esita helped in the construction- remodeling of Dr. Opulencia's house.

In February 1989, for demanding the correct amount of wages due him, Esita was dismissed

from service. Consequently, he filed with Sub-Regional Arbitration in San Pablo City, a complaint for illegal dismissal, underpayment, non-payment for overtime, legal holiday, premium for holiday and rest day, 13th month, separation/retirement pay and allowances against petitioners.

Petitioners deny that Esita is an employee. They claim that Esita could not have been employed in 1980 because the Tanauan ice plant was not in operation due to low voltage of electricity and that Esita was merely a helper/peon of one of the contractors they had engaged to do major repairs and renovation of the Tanauan ice plant in 1986. Petitioners further allege that when they had the Calamba ice plant repaired and expanded, Esita likewise rendered services in a similar capacity, and thus admitting that he worked as a helper/peon in the repair or remodeling of Dr. Opulencia's residence in Tanauan.

In December 1989, Labor Arbiter Villena rendered a decision 1 finding the existence of an employer-employee relationship between petitioners and Esita and accordingly directed them to pay him separation pay, underpayment of wages, allowances, 13th month, holiday, premium for holiday, and rest day pays. Almost a year after, NLRC affirmed the decision of Labor Arbiter Villena but reduced the monetary award as it was not proven that Esita worked every day including rest days and on the days before the legal holidays. In March 1991, petitioners' motion for reconsideration was denied.


W/N there was an employee-employer relationship between Opulencia and Esita.




No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored considering that it should take much weightier proof to invalidate a written instrument.

On the claim that Esita's construction work could not ripen into a regular employment in the ice plant because the construction work was only temporary and unrelated to the ice-making business, needless to say, the one month spent by Esita in construction is insignificant compared to his nine-year service as compressor operator in determining the status of his employment as such, and considering further that it was Dr. Opulencia who requested Esita to work in the construction of his house.

In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate crops to augment his income, there is no doubt that petitioners should be commended; however, in view of the existence of an employer-employee relationship as found by public respondents, we cannot treat humanitarian reasons as justification for emasculating or taking away the rights and privileges of employees granted by law. Benevolence, it is said, does not operate as a license to circumvent labor laws. If petitioners were genuinely altruistic in extending to their employees privileges that are not even required by law, then there is no reason why they should not be required to give their employees what they are entitled to receive.

Moreover, as found by public respondents, Esita was enjoying the same privileges granted to the other employees of petitioners, so that in thus treating Esita, he cannot be considered any less than a legitimate employee of petitioners.


Q. Melchor, a taxi driver under the boundary system, met a vehicular accident. After filing a report to the office of respondents, he was allegedly advised to stop working and have a rest. He thus filed a complaint for illegal dismissal. The company maintains that Melchor was not illegally dismissed, there being in the first place no employer-employee relationship between them. Is there an employer-employee relationship under the boundary system?

A. The employer-employee relationship was deemed to exist. (Martinez v. NLRC) The relationship of taxi owners and taxi drivers is the same as that between jeepney owners and jeepney drivers under the “boundary system”. The taxi operator exercises control over the driver. In Martinez v NLRC this court already ruled that the relationship of taxi owners and taxi drivers is the same as that between jeepney owners and jeepney drivers under the “boundary system.” In both cases the employer-employee relationship was deemed to exist, viz: “The relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of Thus, private respondent were employees xxx because they had been engaged to perform activities which were usually necessary or desirable in the usual trade or business of the employer.

G.R. No. 147816

May 9, 2003




On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth time, into an agreement with petitioner Efren P. Paguio, appointing the latter to be an account executive of the firm. 1 Again, petitioner was to solicit advertisements for "The Manila Times," a newspaper of general circulation, published by respondent company. Petitioner, for his efforts, was to receive compensation consisting of a 15% commission on direct advertisements less withholding tax and a 10% commission on agency advertisements based on gross revenues less agency commission and the corresponding withholding tax. The commissions, released every fifteen days of each month, were to be given to petitioner only after the clients would have paid for the advertisements. Apart from commissions, petitioner was also entitled to a monthly allowance of P2,000.00 as long as he met the P30,000.00-monthly quota. Basically, the contentious points raised by the parties had something to do with the following stipulations of the agreement; viz:

"12. You are not an employee of the Metromedia Times Corporation nor does the company have any obligations towards anyone you may employ, nor any responsibility for your operating expenses or for any liability you may incur. The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended or modified in any way except with the duly authorized consent in writing of both parties.

"13. Either party may terminate this agreement at any time by giving written notice to the other, thirty (30) days prior to effectivity of termination." 2

On 15 August 1992, barely two months after the renewal of his contract, petitioner received the following notice from respondent firm -

"Dear Mr. Paguio,

"Please be advised of our decision to terminate your services as Account Executive of Manila Times effective September 30, 1992.

"This is in accordance with our contract signed last July 1, 1992." 3

Apart from vague allegations of misconduct on which he was not given the opportunity to defend himself, i.e., pirating clients from his co-executives and failing to produce results, no definite cause for petitioner's termination was given. Aggrieved, petitioner filed a case before the labor arbiter, asking that his dismissal be declared unlawful and that his reinstatement, with entitlement to backwages without loss of seniority rights, be ordered. Petitioner also prayed that respondent company officials be held accountable for acts of unfair labor practice, for P500,000.00 moral damages and for P200,000.00 exemplary damages.

In their defense, respondent Metromedia Times Corporation asserted that it did not enter into any agreement with petitioner outside of the contract of services under Articles 1642 and 1644 of the Civil Code of the Philippines. 4 Asserting their right to terminate the contract with petitioner, respondents pointed to the last provision thereof stating that both parties could opt to end the contract provided that either party would serve, thirty days prior to the intended date of termination, the corresponding notice to the other.

The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter ordered respondent Metromedia Times Corporation and its officers to reinstate petitioner to his former position, without loss of seniority rights, and to pay him his commissions and other remuneration accruing from the date of dismissal on 15 August 1992 up until his reinstatement. He likewise adjudged that Liberato I. Gomez, general manager of respondent corporation, be held liable to petitioner for moral damages in the amount of P20,000.00.

On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and declared the contractual relationship between the parties as being for a fixed-term employment. The NLRC declared a fixed-term employment to be lawful as long as "it was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the worker and absent any other circumstances vitiating his consent." 5 The finding of the NLRC was primarily hinged on the assumption that petitioner, on account of his educated stature, having indeed personally prepared his pleadings without the aid of counsel, was an unlikely victim of a lopsided contract. Rejecting the assertion of petitioner that he was a regular employee, the NLRC held: "The decisive determinant would not be the activities that the employee (was) called upon to perform but rather, the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be that which (would) necessarily come, although it (might) not be known when." 6

Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld in toto the findings of the commission. In his petition for review on certiorari, petitioner raised the following issues for resolution:




The crux of the matter would entail the determination of the nature of contractual relationship between petitioner and respondent company - was it or was it not one of regular employment?

A "regular employment," whether it is one or not, is aptly gauged from the concurrence, or the non-

concurrence, of the following factors - a) the manner of selection and engagement of the putative employee, b) the mode of payment of wages, c) the presence or absence of the power of dismissal; and d) the presence or absence of the power to control the conduct of the putative employee or the power to control the employee with respect to the means or methods by which his work is to be accomplished. 8 The "control test" assumes primacy in the overall consideration. Under this test, an employment relation obtains where work is performed or services are rendered under the control and supervision of the party contracting for the service, not only as to the result of the work but also as to the manner and details of the performance desired. 9

An indicum of regular employment, rightly taken into account by the labor arbiter, was the reservation by respondent Metromedia Times Corporation not only of the right to control the results

to be achieved but likewise the manner and the means used in reaching that end. 10 Metromedia

Times Corporation exercised such control by requiring petitioner, among other things, to submit a daily sales activity report and also a monthly sales report as well. Various solicitation letters would

indeed show that Robina Gokongwei, company president, Alda Iglesia, the advertising manager, and Frederick Go, the advertising director, directed and monitored the sales activities of petitioner.

The Labor Code, in Article 280 thereof, provides:

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

"An employment shall be deemed to be casual if it is not covered by the proceeding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists."

Thus defined, a regular employee is one who is engaged to perform activities which are necessary and desirable in the usual business or trade of the employer as against those which are undertaken for a specific project or are seasonal. Even in these latter cases, where such person has rendered at least one year of service, regardless of the nature of the activity performed or of whether it is continuous or intermittent, the employment is considered regular as long as the activity exists, it not being indispensable that he be first issued a regular appointment or be formally declared as such before acquiring a regular status. 11

That petitioner performed activities which were necessary and desirable to the business of the employer, and that the same went on for more than a year, could hardly be denied. Petitioner was an account executive in soliciting advertisements, clearly necessary and desirable, for the survival and continued operation of the business of respondent corporation. Robina Gokongwei, its President, herself admitted that the income generated from paid advertisements was the lifeblood of the newspaper's existence. Implicitly, respondent corporation recognized petitioner's invaluable contribution to the business when it renewed, not just once but five times, its contract with petitioner.

Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been called upon to perform. 12 The law affords protection to an employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to deprive the employee of his security of tenure. 13 The sheer inequality that characterizes employer-employee relations, where the scales generally tip against the employee, often scarcely provides him real and better options.

The real question that should thus be posed is whether or not petitioner has been justly dismissed from service. A lawful dismissal must meet both substantive and procedural requirements; in fine, the dismissal must be for a just or authorized cause and must comply with the rudimentary due process of notice and hearing. It is not shown that respondent company has fully bothered itself with either of these requirements in terminating the services of petitioner. The notice of termination recites no valid or just cause for the dismissal of petitioner nor does it appear that he has been given an opportunity to be heard in his defense.

The evidence, however, found by the appellate court is wanting that would indicate bad faith or malice on the part of respondents, particularly by respondent Liberato I. Gomez, and the award of moral damages must thus be deleted.

WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in C.A. G.R. SP No. 527773 and that of the National Labor Relations Commission are hereby SET ASIDE and that of the Labor Arbiter is REINSTATED except with respect to the P20,000.00 moral damages adjudged against respondent Liberato I. Gomez which award is deleted.


8.Pan American World Airways System Vs. Pan American Employees Association

G.R. No. L-16275 February 23, 1961


The employees of Pan American World Airways System alleges that the company does not provide them of a one-hour break period. The employees were asked to wait in case of any emergencies while having their break or they will be reprimanded, thus the petition of the employees to ask the court for a proper compensation from the employers. The employees allege that the said one-hour break actually constitutes working over time.


Whether or not the time given to the employees for break is considered an over time?


The Industrial Court's order for permanent adoption of a straight 8-hour shift including the meal period was but a consequence of its finding that the meal hour was not one of complete rest, but was actually a work hour, since for its duration, the laborers had to be on ready call. Of course, if the Company practices in this regard should be modified to afford the mechanics a real rest during that hour (f. ex., by installing an entirely different emergency crew, or any similar arrangement), then the modification of this part of the decision may be sought from the Court below. As things now stand, we see no warrant for altering the decision.

The judgment appealed from is affirmed. Costs against appellant.


Petitioner herein claims that the one hour meal period should not be considered as overtime work, because the evidence showed that complainants could rest completely, and were not in any manner under the control of the company during that period. The court below found, on the contrary, that during the so-called meal period, the mechanics were required to stand by for emergency work; that if they happened not to be available when called, they were reprimanded by the lead man; that as in fact it happened on many occasions, the mechanics had been called from their meals or told to hurry up eating to perform work during this period.


Whether or not the 1 hour meal period of the mechanics is considered working time.


Yes. The Industrial Court’s order for permanent adoption of a straight 8-hour shift including the meal period was but a consequence of its finding that the meal hour was not one of complete rest but was actually a work hour, since for its duration, the laborers had to be on ready call.

9. G.R. No. 82797 February 27, 1991



This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals in CA-G.R. No. 11960 entitled "ROCES-REYES REALTY, INC. vs. HONORABLE JUDGE REGIONAL TRIAL COURT OF MANILA, BRANCH 44, GOOD EARTH EMPORIUM, INC. and LIM KA PING" reversing the decision of respondent Judge ** of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 85-30484, which reversed the resolution of the Metropolitan Trial Court Of Manila, Branch 28 in Civil Case No. 09639, *** denying herein petitioners' motion to quash the alias writ of execution issued against them.

As gathered from the records, the antecedent facts of this case, are as follows:

A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES REALTY, INC., as lessor, and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years beginning November 1, 1981 and ending October 31, 1984 at a monthly rental of P65,000.00 (Rollo, p. 32; Annex "C" of Petition). The building which was the subject of the contract of lease is a five- storey building located at the corner of Rizal Avenue and Bustos Street in Sta. Cruz, Manila.

From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of rentals, as a consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter designated as ROCES for brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer) against herein petitioners, GOOD EARTH EMPORIUM, INC. and LIM KA PING, hereinafter designated as GEE, (Rollo, p. 21; Annex "B" of the Petition). After the latter had tendered their responsive pleading, the lower court (MTC, Manila) on motion of Roces rendered judgment on the pleadings dated April 17, 1984, the dispositive portion of which states:

Judgment is hereby rendered ordering defendants (herein petitioners) and all persons claiming title under him to vacate the premises and surrender the same to the plaintiffs (herein respondents); ordering the defendants to pay the plaintiffs the rental of P65,000.00 a month beginning March 1983 up to the time defendants actually vacate the premises and deliver possession to the plaintiff; to pay attorney's fees in the amount of P5,000.00 and to pay the costs of this suit. (Rollo, p. 111; Memorandum of Respondents)

On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984 simultaneous with the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the trial court resolved such motion ruling:

After considering the motion for the issuance of a writ of execution filed by counsel for the plaintiff (herein respondents) and the opposition filed in relation thereto and finding that the defendant failed to file the necessary supersedeas bond, this court resolved to grant the same for being meritorious. (Rollo, p. 112)

On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was assigned to the Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru counsel filed with the Regional Trial Court of Manila, a motion to withdraw appeal citing as reason that they are satisfied with the decision of the Metropolitan Trial Court of Manila, Branch XXVIII, which said court granted in its Order of August 27, 1984 and the records were remanded to the trial court (Rollo, p. 32; CA Decision). Upon an ex-parte Motion of ROCES, the trial court issued an Alias Writ of Execution dated February 25, 1985 (Rollo, p. 104; Annex "D" of Petitioner's Memorandum), which was implemented on February 27, 1985. GEE thru counsel filed a motion to quash the writ of execution and notice of levy and an urgent Ex-parte Supplemental Motion for the issuance of a restraining order, on March 7, and 20, 1985, respectively. On March 21, 1985, the lower court issued a restraining order to the sheriff to hold the execution of the judgment pending hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC Decision). While said motion was pending resolution, GEE filed a Petition for Relief from judgment before another court, Regional Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No. 80-30019, but the petition was dismissed and the injunctive writ issued in connection therewith set aside. Both parties appealed to the Court of Appeals; GEE on the order of dismissal and Roces on denial of his motion for indemnity, both docketed as CA-G.R. No. 15873-CV. Going back to the original case, the Metropolitan Trial Court after hearing and disposing some other incidents, promulgated the questioned Resolution, dated April 8, 1985, the dispositive portion of which reads as follows:

Premises considered, the motion to quash the writ is hereby denied for lack of merit.

The restraining orders issued on March 11 and 23, 1985 are hereby recalled, lifted and set aside. (Rollo, p. 20, MTC Decision)

GEE appealed and by coincidence. was raffled to the same Court, RTC Branch IX. Roces moved to dismiss the appeal but the Court denied the motion. On certiorari, the Court of Appeals dismissed Roces' petition and remanded the case to the RTC. Meantime, Branch IX became vacant and the case was re-raffled to Branch XLIV.

On April 6, 1987, the Regional Trial Court of Manila, finding that the amount of P1 million evidenced by Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2") were in full satisfaction of the judgment obligation, reversed the decision of the Municipal Trial Court, the dispositive portion of which reads:

Premises considered, judgment is hereby rendered reversing the Resolution appealed from quashing the writ of execution and ordering the cancellation of the notice of levy and declaring the judgment debt as having been fully paid and/or Liquidated. (Rollo, p. 29).

On further appeal, the Court of Appeals reversed the decision of the Regional Trial Court and reinstated the Resolution of the Metropolitan Trial Court of Manila, the dispositive portion of which is as follows:

WHEREFORE, the judgment appealed from is hereby REVERSED and the Resolution dated April 8, 1985, of the Metropolitan Trial Court of Manila Branch XXXIII is hereby REINSTATED. No pronouncement as to costs. (Rollo, p. 40).

GEE's Motion for Reconsideration of April 5, 1988 was denied (Rollo, p. 43). Hence, this petition.

The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor of respondent corporation which would justify the quashing of the Writ of Execution.

A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said exhibits was there any writing alluding to or referring to any settlement between the parties of petitioners' judgment obligation (Rollo, pp. 45-48).

Moreover, there is no indication in the receipt, Exhibit "1", that it was in payment, full or partial, of the judgment obligation. Likewise, there is no indication in the pacto de retro sale which was drawn in favor of Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the obligation embodied therein had something to do with petitioners' judgment obligation with respondent corporation.

Finding that the common exhibit, Exhibit 1/A had been signed by persons other than judgment creditors (Roces-Reyes Realty, Inc.) coupled with the fact that said exhibit was not even alleged by GEE and Lim Ka Ping in their original motion to quash the alias writ of execution (Rollo, p. 37) but produced only during the hearing (Ibid.) which production resulted in petitioners having to claim belatedly that there was an "overpayment" of about half a million pesos (Rollo, pp. 25-27) and remarking on the utter absence of any writing in Exhibits "1/A" and "2/B" to indicate payment of the judgment debt, respondent Appellate Court correctly concluded that there was in fact no payment of the judgment debt. As aptly observed by the said court:

What immediately catches one's attention is the total absence of any writing alluding to or referring to any settlement between the parties of private respondents' (petitioners') judgment obligation. In moving for the dismissal of the appeal Lim Ka Ping who was then assisted by counsel simply stated that defendants (herein petitioners) are satisfied with the decision of the Metropolitan Trial Court (Records of CA, p. 54).

Notably, in private respondents' (petitioners') Motion to Quash the Writ of Execution and Notice of Levy dated March 7, 1985, there is absolutely no reference to the alleged payment of one million pesos as evidenced by Exhibit 1 dated September 20, 1984. As pointed out by petitioner (respondent corporation) this was brought out by Linda Panutat, Manager of Good Earth only in the course of the latter's testimony. (Rollo, p. 37)

Article 1240 of the Civil Code of the Philippines provides that:

Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.

In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its

successor in interest nor is there positive evidence that the payment was made to a person authorized to receive it. No such proof was submitted but merely inferred by the Regional Trial Court (Rollo, p. 25) from Marcos Roces having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. The latter, however, was no longer President or even an officer of Roces-Reyes Realty, Inc. at the time he received the money (Exhibit "1") and signed the sale with pacto de retro (Exhibit "2"). He, in fact, denied being in possession of authority to receive payment for the respondent corporation nor does the receipt show that he signed in the same capacity as he did in the Lease Contract at a time when he was President for respondent corporation (Rollo, p. 20, MTC decision).

On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt (Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. The assertion is home by the receipt itself whereby they acknowledged payment of the loan in their names and in no other capacity.

A corporation has a personality distinct and separate from its individual stockholders or members.

Being an officer or stockholder of a corporation does not make one's property also of the corporation, and vice-versa, for they are separate entities (Traders Royal Bank v. CA-G.R. No. 78412, September 26, 1989; Cruz v. Dalisay, 152 SCRA 482). Shareowners are in no legal sense the owners of corporate property (or credits) which is owned by the corporation as a distinct legal person (Concepcion Magsaysay-Labrador v. CA-G.R. No. 58168, December 19, 1989). As a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or credit that of the corporation (Prof. Jose Nolledo's "The Corporation Code of the Philippines, p. 5, 1988 Edition, citing Professor Ballantine).

The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that the IOU was subsequently delivered to private respondents (Rollo, pp. 97-98). Contrary to the Regional Trial Court's premise that it was incumbent upon respondent corporation to prove that the amount was delivered to the Roces brothers in the payment of the loan in the latter's favor, the delivery of the amount to and the receipt thereof by the Roces brothers in their names raises the presumption that the said amount was due to them. There is a disputable presumption that money paid by one to the other was due to the latter (Sec. 5(f) Rule 131, Rules of Court). It is for GEE and Lim Ka Ping to prove otherwise. In other words, it is for the latter to prove that the payments made were for the satisfaction of their judgment debt and not vice versa.

The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that the payment was in favor of the latter, especially in the case at bar where the amount was not receipted for by respondent corporation and there is absolutely no indication in the receipt from which it can be reasonably inferred, that said payment was in satisfaction of the judgment debt. Likewise, no such inference can be made from the execution of the pacto de retro sale which was not made in favor of respondent corporation but in favor of the two Roces brothers in their individual capacities without any reference to the judgment obligation in favor of respondent corporation.

In addition, the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale

with pacto de retro(Exhibit "2/B") all in the sum of P2 million, far exceeds petitioners' judgment

obligation in favor of respondent corporation in the sum of P1,560,000.00 by P440,000.00, which militates against the claim of petitioner that the aforesaid amount (P2M) was in full payment of the judgment obligation.

Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease contract (Rollo, pp. 25-28) is belied by the absence of any interest awarded in the case and of any agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash the Alias Writ of Execution.

Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the assailed factual findings as contrary to the evidence and applicable decisions of this Honorable Court are therefore, patently unfounded. Respondent court was correct in stating that it "cannot go beyond what appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in the absence of clear and convincing evidence" that would support its claim that the judgment obligation has indeed been fully satisfied which would warrant the quashal of the Alias Writ of Execution.

It has been an established rule that when the existence of a debt is fully established by the evidence (which has been done in this case), 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 plaintiff creditor (herein respondent corporation) (Chua Chienco v. Vargas, 11 Phil. 219; Ramos v. Ledesma, 12 Phil. 656; Pinon v. De Osorio, 30 Phil. 365). For indeed, it is well-entrenched in Our jurisprudence that each party in a case must prove his own affirmative allegations by the degree of evidence required by law (Stronghold Insurance Co. v. CA, G.R. No. 83376, May 29,1989; Tai Tong Chuache & Co. v. Insurance Commission, 158 SCRA 366).

The appellate court cannot, therefore, be said to have gravely abused its discretion in finding lack of convincing and reliable evidence to establish payment of the judgment obligation as claimed by petitioner. The burden of evidence resting on the petitioners to establish the facts upon which their action is premised has not been satisfactorily discharged and therefore, they have to bear the consequences.

PREMISES CONSIDERED, the petition is hereby DENIED and the Decision of the Respondent court is hereby AFFIRMED, reinstating the April 8, 1985 Resolution of the Metropolitan Trial Court of Manila.


G.R. No. L-13806


May 23, 1960


Govt. Corp. Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for petitioner. Ezer R. Yutuc for the respondent CIR. Vicente T. Ocampo for respondent Union.


This is a petition for review by certiorari taken by the Price Stabilization Corporation (PRISCO) from the decision of the Court of Industrial Relations (in Case No. 840-V [6]) of December 27, 1957.

It appears that under date of February 15, 1955, respondent PRISCO Worker's Union, a labor organization duly registered with the Department of Labor, filed with respondent court, a petition praying that herein petitioner-employer PRISCO be ordered to pay its present employees, claimants- members of the said Union, their basic pay and at least 25 per cent additional compensation for one hour overtime work they had previously rendered as security guards of petitioner, from April 17, 1953 to January 13, 1954, and the additional compensation of at least 25 per cent for the work they have been rendering on Sundays and legal holidays, from March 7, 1954 and on.

On March 15, 1955, the petitioner filed an answer denying respondent Union's claim for payment of one hour overtime work, asserting that such overtime, if rendered, not having been authorized; although some of the said claimants had rendered work in Sundays and legal holidays, the same had already been paid from March 6, 1954; and finally alleging that the same claim for work on Sundays and legal holidays had already been withdrawn.

The case was thereafter heard and, after hearing, respondent court, on December 27, 1957, issued an order requiring petitioner to pay the said claimants, members of respondent Union, their basic pay and 25 per cent additional compensation for the one hour overtime work they had rendered from April 16, 1953 to January 13, 1954. However, for lack of evidence and in view of a petition signed by 59 of the 131 claimants withdrawing their claim for pay for work performed on Sundays and legal holidays, the court dismissed the second claim.

On January 8, 1958, petitioner corporation filed a motion for reconsideration of said order, which motion was resolved by respondent court, en banc, as follows: 2 judges voting for straight denial; 2 judges voting for the setting aside of the order as null and void on the ground of lack of jurisdiction; and 1 judge concurring in the denial of the motion for reconsideration, on the ground that the question of lack of jurisdiction has not been raised in the pleading. As a result; petitioner corporation has filed this present petition.

There are two questions of law to be determined in this case, to wit: (1) whether respondent court had jurisdiction over the present claim for overtime pay filed by respondent Union; and (2) whether the same court correctly applied Articles 1393 and 1396 to the new Civil Code to the case.

As to the first question, there still seems to be some lack of clear and definite understanding of the jurisdiction of the Court of Industrial Relations, with regards to money claims of laborers or employees against their employers. The fact that in the present case the judges themselves of the Court of Industrial Relations are divided on this matter, attests to the existence of such misapprehension. It is well therefore to review some of the leading decided cases touching on this point, for the purpose of clarifying this fundamental question.

In the PAFLU vs. Tan Case, 1 we held that the Court of Industrial Relations has jurisdiction over cases (1) when the labor dispute affects an industry which is indispensable in the national interest and is so certified by the President to the industrial court (Sec. 10, Rep. Act No. 875); (2) when the controversy refers to the minimum wage under the Minimum Wage Law (Rep. Act No. 602); (3)

when it involves hours of employment under the Eight-Hour Labor Law (Com. Act No. 444); and (4) when it involves an unfair labor practice (Sec. 5-a, Rep. Act No. 875).

Later, in the case of Detective and Protective Bureau Incorporated vs. Felipe Guevarra, et al., 2 involving claims for refunds of deductions from respondents' salaries, payment of additional compensation for work performed on Sundays and holidays, and for night work, and grant of vacation and sick leave pay, this Court held that the Court of Industrial Relations had jurisdiction, inasmuch as the claimants were all employees of the Detective and Protective Bureau, Inc., at the time of filing of their claims in Case No. 764-V in the Court of Industrial Relations. To the same effect is the case of Isaac Peral Bowling Alley vs. United Employees Welfare Association, et al., (102 Phil.,


Subsequently, in the case of Santiago Aguilar vs. Jose Salumbides (G.R. No. L-10124, prom, December 28, 1957), this Court declared that the Court of Industrial Relations had no longer jurisdiction to hear and determine claims of ex-employees against their former employer for overtime, wage differential, and separation pays.

Again, in the case of Roman Catholic Archbishop of Manila vs. Yanson, et al.,(G.R. No. L-12341) and Elizalde and Co. Inc., vs. Yanson et al., (G.R. No. L-12345) jointly decide on April 30, 1958, this Court, in a unanimous opinion, declared:

In the present case, it is apparent that the petition below is simply for the collection of unpaid salaries and wages alleged to be due for the services rendered years ago. No labor dispute appears to be presently involved since the petition itself indicates that the employment has long terminated and petitioners are not asking that they be reinstated. Clearly, the petition does not fall under any of the cases enumerated in the law as coming within the jurisdiction of the Industrial Court, so that it was error for that court not to have ordered its dismissal.

Indeed, even under Commonwealth Act No. 103, as amended by Com. Act No. 559, the court below could not have taken cognizance of the present case. For in order for that court to acquire jurisdiction under that law, the requisites mentioned in section 4 thereof must all be present, one of them being that there must be an industrial or agricultural dispute which is causing of likely to cause a strike or lockout. With the employment already terminated years ago, this last mentioned requisite cannot be supposed to still exist.

Then came the decision in the NASSCO vs. Almin, et al., case (104 Phil., 835;56 Off. Gaz. [9] 1879) in which this Court upheld again the jurisdiction of the Court of Industrial Relations to hear and determine the claim of respondents at the time presently and actually in the employ of the petitioner for overtime compensation for work they were then rendering since 1950 on Sundays and holidays and even at night.

On the same theory, this Tribunal and the Chua Workers' Union (NLU) vs. City Automotive Company, et al., case 3 were the claimants for differential and overtime pays were former employees of the respondent company, ruled that the Court of Industrial Relations had no jurisdiction.

The latest case is that of Monares vs. CNS Enterprises, et al., (G.R. No. L-11749, prom. May 29, 1959) in which this Court, speaking through the Chief Justice, held that the Court of Industrial Relations and not the Court of First Instance, has jurisdiction where the claimant, although no longer in the service of the employer, seeks in his petition the payment of differential and overtime pay and his reinstatement.

Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in express terms, is that where the employer-employee relationship is still existing or is sought to be reestablished because of its wrongful severance (as where the employee seeks reinstatement), the Court of Industrial Relations has jurisdiction over all claims arising out of, or in connection with employment, such as those related to the Minimum Wage Law and the Eight-Hour Labor Law. After the termination of the relationship and no reinstatement is sought, such claims becomes mere money claims, and come within the jurisdiction of the regular courts.

We are aware that in 2 cases, 4 some statements implying a different view have been made, but we now hold and declare the principle set forth in the preceding paragraph as the one governing all cases of this nature.

It appearing that in the present case, the respondents-claimants are, or at least were, at the time of

presenting their claims, actually in the employ of herein petitioner, the Court of Industrial Relations correctly took cognizance of the case.

In respect of the second issue, it appears that claimants-security guards have been employed and required to observe a 24-hour guard duty divided into 3 shifts of 8 hours each. On April 15, 1953, the

Assistant Chief Security Officer of petitioner corporation, acting for the Chief Security Officer, issued

a Memorandum (Annex A), directing the Security guards to report for duty 2 hours in advance of the

usual time for guard work. Pursuant thereto, claimants had been rendering such overtime work until

January 13, 1954 when the order was revoked after a change of management.

Petitioner, however, contends that said memorandum of the Assistant Chief Security Officer was issued without authority and, therefore, it is not bound to pay for the alleged overtime. But, as found by respondent court, shortly after the enforcement of the aforementioned memorandum, the security guards protested to the management of petitioner corporation, more particularly to Mr. Santiago de la Cruz, General Manager, Atty. Graciano Borja, Director, and Mr. Espiritu, Director. Instead of revoking said memorandum on the ground that it was unauthorized by the management, General Manager De la Cruz told the security guards that the reason why it was being enforced, was to discipline them and that their work was only light and that 1 hour was of no importance. This, the lower court held, amounted to a tacit ratification of the memorandum, on the part of the said official who, as claimed by petitioner itself, had the power to validly act for it. (See also Sec. 6, Exec. Order No. 350, series of 1950.) Hence, the lower court concluded, applying the provisions of Articles 1393 and 1396 5 of the new Civil Code, that any defect, if any which said memorandum of the Assistant Chief Security Officer may have at the time it was constituted, was, therefore, corrected.

But petitioner urges that Articles 1393 and 1396 refer to voidable contracts and the questioned memorandum is not such a contract but an order issued by one not authorized and, therefore, is illegal and cannot be ratified tacitly.

This view is without merit. There is no question that a contract of employment exists between petitioner and claimants-respondents, and that pursuant to the terms thereof, the latter are to render 8 hours labor. When petitioner's official required respondents to render an additional hour work, and the respondents had to comply (as non-compliance was punishable and actually punished with disciplinary action), a supplemental contractual obligation was created both under the terms of the original contract of employment and of the Eight-hour Labor Law, that such additional work was to be compensated. That the memorandum giving rise to this situation was originally authorized, did not make it illegal to the extent of not being capable of ratification by the duly authorized official, the General Manager of petitioner corporation. Hence, the lower court correctly applied Articles 1393 and 1396, upon the facts found by it in this case and amply supported by the record. Wherefore,

finding no error in the decision appealed from and the resolution upholding it, the same are hereby affirmed, with costs against the petitioner. So ordered.

Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, and Gutierrez David, JJ., concur.