Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and

ROBERT GOHIER, petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal and ELIGIO
DE GUZMAN & CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.

Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders and restrain the respondent judge from trying
Civil Case No. 779M of the defunct Court of First Instance of Rizal.

The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic, Zambales.
The base was one of those provided in the Military Bases Agreement between the Philippines and
the United States.

Sometime in May, 1972, the United States invited the submission of bids for the following projects

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.

2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment,
NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto,
the company received from the United States two telegrams requesting it to confirm its price
proposals and for the name of its bonding company. The company complied with the requests. [In its
complaint, the company alleges that the United States had accepted its bids because "A request to
confirm a price proposal confirms the acceptance of a bid pursuant to defendant United States'
bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the case
has not reached the trial stage.]

In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director,
Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the
Navy of the United States, who is one of the petitioners herein. The letter said that the company did
not qualify to receive an award for the projects because of its previous unsatisfactory performance
rating on a repair contract for the sea wall at the boat landings of the U.S. Naval Station in Subic
Bay. The letter further said that the projects had been awarded to third parties. In the
abovementioned Civil Case No. 779-M, the company sued the United States of America and
Messrs. James E. Galloway, William I. Collins and Robert Gohier all members of the Engineering
Command of the U.S. Navy. The complaint is to order the defendants to allow the plaintiff to perform
the work on the projects and, in the event that specific performance was no longer possible, to order
the defendants to pay damages. The company also asked for the issuance of a writ of preliminary
injunction to restrain the defendants from entering into contracts with third parties for work on the
projects.

The defendants entered their special appearance for the purpose only of questioning the jurisdiction
of this court over the subject matter of the complaint and the persons of defendants, the subject
matter of the complaint being acts and omissions of the individual defendants as agents of
defendant United States of America, a foreign sovereign which has not given her consent to this suit
or any other suit for the causes of action asserted in the complaint." (Rollo, p. 50.)

Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to
the issuance of the writ of preliminary injunction. The company opposed the motion. The trial court
denied the motion and issued the writ. The defendants moved twice to reconsider but to no avail.
Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-
M for lack of jurisdiction on the part of the trial court.

The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State from being sued in the courts of another State
without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not petrified; they
are constantly developing and evolving. And because the activities of states have multiplied, it has
been necessary to distinguish them-between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The result is that State immunity now
extends only to acts jure imperil The restrictive application of State immunity is now the rule in the
United States, the United Kingdom and other states in western Europe. (See Coquia and Defensor
Santiago, Public International Law, pp. 207-209 [1984].)

The respondent judge recognized the restrictive doctrine of State immunity when he said in his
Order denying the defendants' (now petitioners) motion: " A distinction should be made between a
strictly governmental function of the sovereign state from its private, proprietary or non-
governmental acts (Rollo, p. 20.) However, the respondent judge also said: "It is the Court's
considered opinion that entering into a contract for the repair of wharves or shoreline is certainly not
a governmental function altho it may partake of a public nature or character. As aptly pointed out by
plaintiff's counsel in his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and
which this Court quotes with approval, viz.:

It is however contended that when a sovereign state enters into a contract with a
private person, the state can be sued upon the theory that it has descended to the
level of an individual from which it can be implied that it has given its consent to be
sued under the contract. ...

xxx xxx xxx

We agree to the above contention, and considering that the United States
government, through its agency at Subic Bay, entered into a contract with appellant
for stevedoring and miscellaneous labor services within the Subic Bay Area, a U.S.
 Naval Reservation, it is evident that it can bring an action before our courts for any
contractual liability that that political entity may assume under the contract. The trial
court, therefore, has jurisdiction to entertain this case ... (Rollo, pp. 20-21.)

The reliance placed on Lyons by the respondent judge is misplaced for the following reasons:

In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of
First Instance of Manila to collect several sums of money on account of a contract between plaintiff
and defendant. The defendant filed a motion to dismiss on the ground that the court had no
jurisdiction over defendant and over the subject matter of the action. The court granted the motion
on the grounds that: (a) it had no jurisdiction over the defendant who did not give its consent to the
suit; and (b) plaintiff failed to exhaust the administrative remedies provided in the contract. The order
of dismissal was elevated to this Court for review.

In sustaining the action of the lower court, this Court said:

It appearing in the complaint that appellant has not complied with the procedure laid
down in Article XXI of the contract regarding the prosecution of its claim against the
United States Government, or, stated differently, it has failed to first exhaust its
administrative remedies against said Government, the lower court acted properly in
dismissing this case.(At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely
gratuitous and, therefore, obiter so that it has no value as an imperative authority.

The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level of an individual and can thus
be deemed to have tacitly given its consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its sovereign functions. In this case the
projects are an integral part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the highest order; they are
not utilized for nor dedicated to commercial or business purposes.

That the correct test for the application of State immunity is not the conclusion of a contract by a
State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case
the plaintiffs leased three apartment buildings to the United States of America for the use of its
military officials. The plaintiffs sued to recover possession of the premises on the ground that the
term of the leases had expired. They also asked for increased rentals until the apartments shall have
been vacated.

The defendants who were armed forces officers of the United States moved to dismiss the suit for
lack of jurisdiction in the part of the court. The Municipal Court of Manila granted the motion to
dismiss; sustained by the Court of First Instance, the plaintiffs went to this Court for review on
certiorari. In denying the petition, this Court said:

On the basis of the foregoing considerations we are of the belief and we hold that the
real party defendant in interest is the Government of the United States of America;
that any judgment for back or Increased rentals or damages will have to be paid not
by defendants Moore and Tillman and their 64 co-defendants but by the said U.S.
Government. On the basis of the ruling in the case of Land vs. Dollar already cited,
and on what we have already stated, the present action must be considered as one
 against the U.S. Government. It is clear hat the courts of the Philippines including the
Municipal Court of Manila have no jurisdiction over the present case for unlawful
detainer. The question of lack of jurisdiction was raised and interposed at the very
beginning of the action. The U.S. Government has not , given its consent to the filing
of this suit which is essentially against her, though not in name. Moreover, this is not
only a case of a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign government without said
government's consent, which renders more obvious the lack of jurisdiction of the
courts of his country. The principles of law behind this rule are so elementary and of
such general acceptance that we deem it unnecessary to cite authorities in support
thereof. (At p. 323.)

In Syquia,the United States concluded contracts with private individuals but the contracts
notwithstanding the States was not deemed to have given or waived its consent to be sued for the
reason that the contracts were for jure imperii and not for jure gestionis.

WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside
and Civil Case No. is dismissed. Costs against the private respondent.

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana,  * Escolin, Relova, Gutierrez, Jr., De la Fuente,
Cuevas and Alampay, JJ., concur.

Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI
(now RTC) of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered
into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved
stevedoring and labor services within the Subic Bay area, this Court further stated that inasmuch as
". . . the United States Government. through its agency at Subic Bay, entered into a contract with
appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S. Navy
Reservation, it is evident that it can bring an action before our courts for any contractual liability that
that political entity may assume under the contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a
private company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have
entered into a contract and thus waived the mantle of sovereign immunity from suit and descended
to the level of the ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering
into a contract (Santos vs. Santos, 92 Phil. 281, 284).
Justice and fairness dictate that a foreign government that commits a breach of its contractual
obligation in the case at bar by the unilateral cancellation of the award for the project by the United
States government, through its agency at Subic Bay should not be allowed to take undue advantage
of a party who may have legitimate claims against it by seeking refuge behind the shield of non-
suability. A contrary view would render a Filipino citizen, as in the instant case, helpless and without
redress in his own country for violation of his rights committed by the agents of the foreign
government professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda
Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic

courts of justice, such rule is inapplicable to cases in which the foreign government
enters into private contracts with the citizens of the court's jurisdiction. A contrary
view would simply run against all principles of decency and violative of all tenets of
morals.

Moral principles and principles of justice are as valid and applicable as well with
regard to private individuals as with regard to governments either domestic or
foreign. Once a foreign government enters into a private contract with the private
citizens of another country, such foreign government cannot shield its non-
performance or contravention of the terms of the contract under the cloak of non-
jurisdiction. To place such foreign government beyond the jurisdiction of the domestic
courts is to give approval to the execution of unilateral contracts, graphically
described in Spanish as 'contratos leoninos', because one party gets the lion's share
to the detriment of the other. To give validity to such contract is to sanctify bad faith,
deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract,
including governments and the most powerful of them, are amenable to law, and that
such contracts are enforceable through the help of the courts of justice with
jurisdiction to take cognizance of any violation of such contracts if the same had
been entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction
impinges unduly upon our sovereignty and dignity as a nation. Its application will particularly
discourage Filipino or domestic contractors from transacting business and entering into contracts
with United States authorities or facilities in the Philippines whether naval, air or ground forces-
because the difficulty, if not impossibility, of enforcing a validly executed contract and of seeking
judicial remedy in our own courts for breaches of contractual obligation committed by agents of the
United States government, always, looms large, thereby hampering the growth of Filipino enterprises
and creating a virtual monopoly in our own country by United States contractors of contracts for
services or supplies with the various U.S. offices and agencies operating in the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized.
Whether the parties are nations or private individuals, it is to be reasonably assumed and expected
that the undertakings in the contract will be complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the United States of
America, can always overwhelm small and weak nations. The declaration in the United Nations
Charter that its member states are equal and sovereign, becomes hollow and meaningless because
big nations wielding economic and military superiority impose upon and dictate to small nations,
subverting their sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its citizens invoke
principles of international law for their own benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on
one hand, and herein private respondent on the other, was honored more in the breach than in the
compliance The opinion of the majority will certainly open the floodgates of more violations of
contractual obligations. American authorities or any foreign government in the Philippines for that
matter, dealing with the citizens of this country, can conveniently seek protective cover under the
majority opinion. The result is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and
foreign political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA
360; Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government, through its
naval authorities at Subic Bay, should be held amenable to lawsuits in our country like any other
juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article
III of the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the
exercise of the above-mentioned rights, powers and authority, the United States agrees that the
powers granted to it will not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to
the aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and
maintain sound employment practices which will assure equality of treatment of all employees ... and
continuing favorable employer-employee relations ..." and "(B)elieving that an agreement will be
mutually beneficial and will strengthen the democratic institutions cherished by both Governments, ...
the United States Government agrees to accord preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by
employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1
of Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and
concessionaires performing work for the U.S. Armed Forces shall be required by their contract or
concession agreements to comply with all applicable Philippine labor laws and regulations, " even
though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by either of
the two Governments of such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the local courts,
actually clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed
on January 7, 1979, also amending RP-US Military Bases Agreement, which stresses that "it is the
duty of members of the United States Forces, the civilian component and their dependents, to
respect the laws of the Republic of the Philippines and to abstain from any activity inconsistent with
the spirit of the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure that they adhere
to them (Emphasis supplied).
The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on
the economic and social improvement of areas surrounding the bases, which directs that "moreover,
the United States Forces shall procure goods and services in the Philippines to the maximum extent
feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions
shall be conducted on the basis of the principles of equality of treatment, the right to organize, and
bargain collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis
supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President
Marcos and Vice-President Mondale of the United States dated May 4, 1978 that "the United States
re-affirms that Philippine sovereignty extends over the bases and that Its base shall be under the
command of a Philippine Base Commander, " which is supposed to underscore the joint
Communique of President Marcos and U.S. President Ford of December 7, 1975, under which "they
affirm that sovereign equality, territorial integrity and political independence of all States are
fundamental principles which both countries scrupulously respect; and that "they confirm that mutual
respect for the dignity of each nation shall characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and
responsibilities of both the Philippine and American Base Commanders that "in the performance of
their duties, the Philippine Base Commander and the American Base Commander shall be guided
by full respect for Philippine sovereignty on the one hand and the assurance of unhampered U.S.
military operations on the other hand and that "they shall promote cooperation understanding and
harmonious relations within the Base and with the general public in the proximate vicinity thereof"
(par. 2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
supplied).

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI
(now RTC) of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered
into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved
stevedoring and labor services within the Subic Bay area, this Court further stated that inasmuch as
". . . the United States Government. through its agency at Subic Bay, entered into a contract with
appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S. Navy
Reservation, it is evident that it can bring an action before our courts for any contractual liability that
that political entity may assume under the contract."
When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a
private company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have
entered into a contract and thus waived the mantle of sovereign immunity from suit and descended
to the level of the ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering
into a contract (Santos vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its contractual
obligation in the case at bar by the unilateral cancellation of the award for the project by the United
States government, through its agency at Subic Bay should not be allowed to take undue advantage
of a party who may have legitimate claims against it by seeking refuge behind the shield of non-
suability. A contrary view would render a Filipino citizen, as in the instant case, helpless and without
redress in his own country for violation of his rights committed by the agents of the foreign
government professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda
Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic

courts of justice, such rule is inapplicable to cases in which the foreign government
enters into private contracts with the citizens of the court's jurisdiction. A contrary
view would simply run against all principles of decency and violative of all tenets of
morals.

Moral principles and principles of justice are as valid and applicable as well with
regard to private individuals as with regard to governments either domestic or
foreign. Once a foreign government enters into a private contract with the private
citizens of another country, such foreign government cannot shield its non-
performance or contravention of the terms of the contract under the cloak of non-
jurisdiction. To place such foreign government beyond the jurisdiction of the domestic
courts is to give approval to the execution of unilateral contracts, graphically
described in Spanish as 'contratos leoninos', because one party gets the lion's share
to the detriment of the other. To give validity to such contract is to sanctify bad faith,
deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract,
including governments and the most powerful of them, are amenable to law, and that
such contracts are enforceable through the help of the courts of justice with
jurisdiction to take cognizance of any violation of such contracts if the same had
been entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction
impinges unduly upon our sovereignty and dignity as a nation. Its application will particularly
discourage Filipino or domestic contractors from transacting business and entering into contracts
with United States authorities or facilities in the Philippines whether naval, air or ground forces-
because the difficulty, if not impossibility, of enforcing a validly executed contract and of seeking
judicial remedy in our own courts for breaches of contractual obligation committed by agents of the
United States government, always, looms large, thereby hampering the growth of Filipino enterprises
and creating a virtual monopoly in our own country by United States contractors of contracts for
services or supplies with the various U.S. offices and agencies operating in the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized.
Whether the parties are nations or private individuals, it is to be reasonably assumed and expected
that the undertakings in the contract will be complied with in good faith.
One glaring fact of modern day civilization is that a big and powerful nation, like the United States of
America, can always overwhelm small and weak nations. The declaration in the United Nations
Charter that its member states are equal and sovereign, becomes hollow and meaningless because
big nations wielding economic and military superiority impose upon and dictate to small nations,
subverting their sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its citizens invoke
principles of international law for their own benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on
one hand, and herein private respondent on the other, was honored more in the breach than in the
compliance The opinion of the majority will certainly open the floodgates of more violations of
contractual obligations. American authorities or any foreign government in the Philippines for that
matter, dealing with the citizens of this country, can conveniently seek protective cover under the
majority opinion. The result is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and
foreign political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA
360; Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government, through its
naval authorities at Subic Bay, should be held amenable to lawsuits in our country like any other
juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article
III of the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the
exercise of the above-mentioned rights, powers and authority, the United States agrees that the
powers granted to it will not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to
the aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and
maintain sound employment practices which will assure equality of treatment of all employees ... and
continuing favorable employer-employee relations ..." and "(B)elieving that an agreement will be
mutually beneficial and will strengthen the democratic institutions cherished by both Governments, ...
the United States Government agrees to accord preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by
employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1
of Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and
concessionaires performing work for the U.S. Armed Forces shall be required by their contract or
concession agreements to comply with all applicable Philippine labor laws and regulations, " even
though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by either of
the two Governments of such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the local courts,
actually clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed
on January 7, 1979, also amending RP-US Military Bases Agreement, which stresses that "it is the
duty of members of the United States Forces, the civilian component and their dependents, to
respect the laws of the Republic of the Philippines and to abstain from any activity inconsistent with
the spirit of the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure that they adhere
to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on
the economic and social improvement of areas surrounding the bases, which directs that "moreover,
the United States Forces shall procure goods and services in the Philippines to the maximum extent
feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions
shall be conducted on the basis of the principles of equality of treatment, the right to organize, and
bargain collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis
supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President
Marcos and Vice-President Mondale of the United States dated May 4, 1978 that "the United States
re-affirms that Philippine sovereignty extends over the bases and that Its base shall be under the
command of a Philippine Base Commander, " which is supposed to underscore the joint
Communique of President Marcos and U.S. President Ford of December 7, 1975, under which "they
affirm that sovereign equality, territorial integrity and political independence of all States are
fundamental principles which both countries scrupulously respect; and that "they confirm that mutual
respect for the dignity of each nation shall characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and
responsibilities of both the Philippine and American Base Commanders that "in the performance of
their duties, the Philippine Base Commander and the American Base Commander shall be guided
by full respect for Philippine sovereignty on the one hand and the assurance of unhampered U.S.
military operations on the other hand and that "they shall promote cooperation understanding and
harmonious relations within the Base and with the general public in the proximate vicinity thereof"
(par. 2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
supplied).

Footnotes

* He signed before he left.

The Lawphil Project - Arellano Law Foundation

G.R. No. 121439. January 25, 2000

AKLAN ELECTRIC COOPERATIVE INCORPORATED

(AKELCO), Petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (Fourth Division), RODOLFO M. RETISO and
165 OTHERS,1 Respondents.
 DECISION

GONZAGA-REYES,  J.:

In his petition for certiorari and prohibition with prayer for writ of

preliminary injunction and/or temporary restraining order, petitioner
assails (a) the decision dated April 20, 1995, of public respondent
National Labor Relations Commission (NLRC), Fourth (4th) Division,
Cebu City, in NLRC Case No. V-0143-94 reversing the February 25,
1994 decision of Labor Arbiter Dennis D. Juanon and ordering
petitioner to pay wages in the aggregate amount of P6,485,767.90
to private respondents, and (b) the resolution dated July 28, 1995
denying petitioners motion for reconsideration, for having been
issued with grave abuse of discretion.

A temporary restraining order was issued by this Court on October

9, 1995 enjoining public respondent from executing the questioned
decision upon a surety bond posted by petitioner in the amount of
P6,400,000.00.2 cräläwvirtualibräry

The facts as found by the Labor Arbiter are as follows:3cräläwvirtualibräry

"These are consolidated cases/claims for non-payment of salaries

and wages, 13th month pay, ECOLA and other fringe benefits as
rice, medical and clothing allowances, submitted by complainant
Rodolfo M. Retiso and 163 others, Lyn E. Banilla and Wilson B.
Sallador against respondents Aklan Electric Cooperative, Inc.
(AKELCO), Atty. Leovigildo Mationg in his capacity as General
Manager; Manuel Calizo, in his capacity as Acting Board President,
Board of Directors, AKELCO.

Complainants alleged that prior to the temporary transfer of the

office of AKELCO from Lezo Aklan to Amon Theater, Kalibo, Aklan,
complainants were continuously performing their task and were duly
paid of their salaries at their main office located at Lezo, Aklan.

That on January 22, 1992, by way of resolution of the Board of

Directors of AKELCO allowed the temporary transfer holding of office
at Amon Theater, Kalibo, Aklan per information by their Project
Supervisor, Atty. Leovigildo Mationg, that their head office is closed
and that it is dangerous to hold office thereat;

Nevertheless, majority of the employees including herein

complainants continued to report for work at Lezo Aklan and were
paid of their salaries.

That on February 6, 1992, the administrator of NEA, Rodrigo

Cabrera, wrote a letter addressed to the Board of AKELCO, that he
is not interposing any objections to the action taken by respondent
Mationg

That on February 11, 1992, unnumbered resolution was passed by

the Board of AKELCO withdrawing the temporary designation of
office at Kalibo, Aklan, and that the daily operations must be held
again at the main office of Lezo, Aklan;4cräläwvirtualibräry

That complainants who were then reporting at the Lezo office from
January 1992 up to May 1992 were duly paid of their salaries, while
in the meantime some of the employees through the instigation of
respondent Mationg continued to remain and work at Kalibo, Aklan;

That from June 1992 up to March 18, 1993, complainants who

continuously reported for work at Lezo, Aklan in compliance with the
aforementioned resolution were not paid their salaries;

That on March 19, 1993 up to the present, complainants were again

allowed to draw their salaries; with the exception of a few
complainants who were not paid their salaries for the months of
April and May 1993;

Per allegations of the respondents, the following are the facts:

1. That these complainants voluntarily abandoned their respective

work/job assignments, without any justifiable reason and without
notifying the management of the Aklan Electric Cooperative, Inc.
(AKELCO), hence the cooperative suffered damages and systems
loss;
2. That the complainants herein defied the lawful orders and other
issuances by the General Manager and the Board of Directors of the
AKELCO. These complainants were requested to report to work at
the Kalibo office x x x but despite these lawful orders of the General
Manager, the complainants did not follow and wilfully and
maliciously defied said orders and issuance of the General Manager;
that the Board of Directors passed a Resolution resisting and
denying the claims of these complainants, x x x under the principle
of "no work no pay" which is legally justified; That these
complainants have "mass leave" from their customary work on June
1992 up to March 18, 1993 and had a "sit-down" stance for these
periods of time in their alleged protest of the appointment of
respondent Atty. Leovigildo Mationg as the new General Manager of
the Aklan Electric Cooperative, Inc. (AKELCO) by the Board of
Directors and confirmed by the Administrator of the National
Electrification Administration (NEA), Quezon City; That they
engaged in " . . . slowdown mass leaves, sit downs, attempts to
damage, destroy or sabotage plant equipment and facilities of the
Aklan Electric Cooperative, Inc. (AKELCO)."

On February 25, 1994, a decision was rendered by Labor Arbiter

Dennis D. Juanon dismissing the complaints.5 cräläwvirtualibräry

Dissatisfied with the decision, private respondents appealed to the

respondent Commission.

On appeal, the NLRCs Fourth Division, Cebu City,6 reversed and set

aside the Labor Arbiters decision and held that private respondents
are entitled to unpaid wages from June 16, 1992 to March 18, 1993,
thus:7cräläwvirtualibräry

"The evidence on records, more specifically the evidence submitted

by the complainants, which are: the letter dated April 7, 1993 of
Pedrito L. Leyson, Office Manager of AKELCO (Annex "C";
complainants position paper; Rollo, p.102) addressed to respondent
Atty. Leovigildo T. Mationg; respondent AKELCO General Manager;
the memorandum of said Atty. Mationg dated 14 April 1993, in
answer to the letter of Pedrito Leyson (Annex "D" complainants
position paper); as well as the computation of the unpaid wages due
to complainants (Annexes "E" to "E-3"; complainants position paper,
Rollo, pages 1024 to 1027) clearly show that complainants had
rendered services during the period - June 16, 1992 to March 18,
1993. The record is bereft of any showing that the respondents had
submitted any evidence, documentary or otherwise, to controvert
this asseveration of the complainants that services were rendered
during this period. Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that respondent
Atty. Mationg responded to the request of the Office Manager, Mr.
Leyson, which We quote, to wit:

"Rest assured that We shall recommend your aforesaid request to

our Board of Directors for their consideration and appropriate
action. This payment, however, shall be subject, among others, to
the availability of funds."

This assurance is an admission that complainants are entitled to

payment for services rendered from June 16, 1992 to March 18,
1993, specially so that the recommendation and request comes
from the office manager himself who has direct knowledge
regarding the services and performance of employees under him.
For how could one office manager recommend payment of wages, if
no services were rendered by employees under him. An office
manager is the most qualified person to know the performance of
personnel under him. And therefore, any request coming from him
for payment of wages addressed to his superior as in the instant
case shall be given weight.

Furthermore, the record is clear that complainants were paid of

their wages and other fringe benefits from January, 1992 to May,
1992 and from March 19, 1993 up to the time complainants filed
the instant cases. In the interegnum, from June 16, 1992 to March
18, 1993, complainants were not paid of their salaries, hence these
claims. We could see no rhyme nor reason in respondents refusal to
pay complainants salaries during this period when complainants had
worked and actually rendered service to AKELCO.

While the respondents maintain that complainants were not paid

during this interim period under the principle of "no work, no pay",
however, no proof was submitted by the respondents to
substantiate this allegation. The labor arbiter, therefore, erred in
dismissing the claims of the complainants, when he adopted the "no
work, no pay" principle advanced by the respondents.

WHEREFORE, in view of the foregoing, the appealed decision dated

February 25, 1994 is hereby Reversed and Set Aside and a new one
entered ordering respondent AKELCO to pay complainants their
claims amounting to P6,485,767.90 as shown in the computation
(Annexes "E" to "E-3")."

A motion for reconsideration was filed by petitioner but the same

was denied by public respondent in a resolution dated July 28,
1995.8cräläwvirtualibräry

Petitioner brought the case to this Court alleging that respondent

NLRC committed grave abuse of discretion citing the following
grounds:9 cräläwvirtualibräry

1. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN REVERSING THE FACTUAL FINDINGS AND
CONCLUSIONS OF THE LABOR ARBITER, AND DISREGARDING THE
EXPRESS ADMISSION OF PRIVATE RESPONDENTS THAT THEY
DEFIED PETITIONERS ORDER TRANSFERRING THE PETITIONERS
OFFICIAL BUSINESS OFFICE FROM LEZO TO KALIBO AND FOR
THEM TO REPORT THEREAT.

2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN CONCLUDING THAT PRIVATE RESPONDENTS WERE
REALLY WORKING OR RENDERING SERVICE ON THE BASIS OF THE
COMPUTATION OF WAGES AND THE BIASED RECOMMENDATION
SUBMITTED BY LEYSON WHO IS ONE OF THE PRIVATE
RESPONDENTS WHO DEFIED THE LAWFUL ORDERS OF PETITIONER.

3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN CONSIDERING THE ASSURANCE BY PETITIONERS
GENERAL MANAGER MATIONG TO RECOMMEND THE PAYMENT OF
THE CLAIMS OF PRIVATE RESPONDENTS AS AN ADMISSION OF
LIABILITY OR A RECOGNITION THAT COMPENSABLE SERVICES
WERE ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO
REPORT AT THE LEZO OFFICE, IT IS STILL GRAVE ABUSE OF
DISCRETION FOR PUBLIC RESPONDENT TO CONSIDER THAT
PETITIONER IS LEGALLY OBLIGATED TO RECOGNIZE SAID
CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY WAGES TO
PRIVATE RESPONDENTS FOR DEFYING THE ORDER FOR THEM TO
REPORT FOR WORK AT THE KALIBO OFFICE WHERE THE OFFICIAL
BUSINESS AND OPERATIONS WERE CONDUCTED.

5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION AND SERIOUS, PATENT AND PALPABLE ERROR IN
RULING THAT THE "NO WORK, NO PAY" PRINCIPLE DOES NOT
APPLY FOR LACK OF EVIDENTIARY SUPPORT WHEN PRIVATE
REPONDENTS ALREADY ADMITTED THAT THEY DID NOT REPORT
FOR WORK AT THE KALIBO OFFICE.

6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN ACCORDING WEIGHT AND CREDIBILITY TO THE
SELF-SERVING AND BIASED ALLEGATIONS OF PRIVATE
RESPONDENTS, AND ACCEPTING THEM AS PROOF, DESPITE THE
ESTABLISHED FACT AND ADMISSION THAT PRIVATE RESPONDENTS
DID NOT REPORT FOR WORK AT THE KALIBO OFFICE, OR THAT
THEY WERE NEVER PAID FOR ANY WAGES FROM THE TIME THEY
DEFIED PETITIONERS ORDERS.

Petitioner contends that public respondent committed grave abuse

of discretion in finding that private respondents are entitled to their
wages from June 16, 1992 to March 18, 1993, thus disregarding the
principle of "no work, no pay". It alleges that private respondents
stated in their pleadings that they not only objected to the transfer
of petitioners business office to Kalibo but they also defied the
directive to report thereat because they considered the transfer
illegal. It further claims that private respondents refused to
recognize the authority of petitioners lawful officers and agents
resulting in the disruption of petitioners business operations in its
official business office in Lezo, AKlan, forcing petitioner to transfer
its office from Lezo to Kalibo transferring all its equipments, records
and facilities; that private respondents cannot choose where to
work, thus, when they defied the lawful orders of petitioner to
report at Kalibo, private respondents were considered dismissed as
far as petitioner was concerned. Petitioner also disputes private
respondents allegation that they were paid their salaries from
January to May 1992 and again from March 19, 1993 up to the
present but not for the period from June 1992 to March 18, 1993
saying that private respondents illegally collected fees and charges
due petitioner and appropriated the collections among themselves
for which reason they are claiming salaries only for the period from
June 1992 to March 1993 and that private respondents were paid
their salaries starting only in April 1993 when petitioners Board
agreed to accept private respondents back to work at Kalibo office
out of compassion and not for the reason that they rendered service
at the Lezo office. Petitioner also adds that compensable service is
best shown by timecards, payslips and other similar documents and
it was an error for public respondent to consider the computation of
the claims for wages and benefits submitted merely by private
respondents as substantial evidence.

The Solicitor General filed its Manifestation in lieu of Comment

praying that the decision of respondent NLRC be set aside and
payment of wages claimed by private respondents be denied for
lack of merit alleging that private respondents could not have
worked for petitioner's office in Lezo during the stated period since
petitioner transferred its business operation in Kalibo where all its
records and equipments were brought; that computations of the
claims for wages and benefits submitted by private respondents to
petitioner is not proof of rendition of work. Filing its own Comment,
public respondent NLRC claims that the original and exclusive
jurisdiction of this Court to review decisions or resolutions of
respondent NLRC does not include a correction of its evaluation of
evidence as factual issues are not fit subject for certiorari.

Private respondents, in their Comment, allege that review of a

decision of NLRC in a petition for certiorari under Rule 65 does not
include the correctness of its evaluation of the evidence but is
confined to issues of jurisdiction or grave abuse of discretion and
that factual findings of administrative bodies are entitled to great
weight, and accorded not only respect but even finality when
supported by substantial evidence. They claim that petitioner's
Board of Directors passed an unnumbered resolution on February
11, 1992 returning back the office to Lezo from Kalibo Aklan with a
directive for all employees to immediately report at Lezo; that the
letter-reply of Atty. Mationg to the letter of office manager Leyson
that he will recommend the payment of the private respondents'
salary from June 16, 1992 to March 18, 1993 to the Board of
Directors was an admission that private respondents are entitled to
such payment for services rendered. Private respondents state that
in appreciating the evidence in their favor, public respondent NLRC
at most may be liable for errors of judgment which, as differentiated
from errors of jurisdiction, are not within the province of the special
civil action of certiorari.

Petitioner filed its Reply alleging that review of the decision of public
respondent is proper if there is a conflict in the factual findings of
the labor arbiter and the NLRC and when the evidence is insufficient
and insubstantial to support NLRCs factual findings; that public
respondents findings that private respondents rendered
compensable services were merely based on private respondents
computation of claims which is self-serving; that the alleged
unnumbered board resolution dated February 11, 1992, directing all
employees to report to Lezo Office was never implemented because
it was not a valid action of AKELCOs legitimate board.

The sole issue for determination is whether or not public respondent

NLRC committed grave abuse of discretion amounting to excess or
want of jurisdiction when it reversed the findings of the Labor
Arbiter that private respondents refused to work under the lawful
orders of the petitioner AKELCO management; hence they are
covered by the "no work, no pay" principle and are thus not entitled
to the claim for unpaid wages from June 16, 1992 to March 18,
1993.

We find merit in the petition.

At the outset, we reiterate the rule that in certiorari proceedings

under Rule 65, this Court does not assess and weigh the sufficiency
of evidence upon which the labor arbiter and public respondent
NLRC based their resolutions. Our query is limited to the
determination of whether or not public respondent NLRC acted
without or in excess of its jurisdiction or with grave abuse of
discretion in rendering the assailed resolutions.10 While
administrative findings of fact are accorded great respect, and even
finality when supported by substantial evidence, nevertheless, when
it can be shown that administrative bodies grossly misappreciated
evidence of such nature as to compel a contrary conclusion, this
court had not hesitated to reverse their factual findings.11 Factual
findings of administrative agencies are not infallible and will be set
aside when they fail the test of arbitrariness.12 Moreover, where the
findings of NLRC contradict those of the labor arbiter, this Court, in
the exercise of its equity jurisdiction, may look into the records of
the case and reexamine the questioned findings.13 cräläwvirtualibräry

We find cogent reason, as shown by the petitioner and the Solicitor

General, not to affirm the factual findings of public respondent
NLRC.

We do not agree with the finding that private respondents had

rendered services from June 16, 1992 to March 18, 1993 so as to
entitle them to payment of wages. Public respondent based its
conclusion on the following: (a) the letter dated April 7, 1993 of
Pedrito L. Leyson, Office Manager of AKELCO addressed to AKELCOs
General Manager, Atty. Leovigildo T. Mationg, requesting for the
payment of private respondents unpaid wages from June 16, 1992
to March 18, 1993; (b) the memorandum of said Atty. Mationg
dated 14 April 1993, in answer to the letter request of Pedrito
Leyson where Atty. Mationg made an assurance that he will
recommend such request; (c) the private respondents own
computation of their unpaid wages. We find that the foregoing does
not constitute substantial evidence to support the conclusion that
private respondents are entitled to the payment of wages from June
16, 1992 to March 18, 1993. Substantial evidence is that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.14 These evidences relied upon by
public respondent did not establish the fact that private respondents
actually rendered services in the Kalibo office during the stated
period.
The letter of Pedrito Leyson to Atty. Mationg was considered by
public respondent as evidence that services were rendered by
private respondents during the stated period, as the
recommendation and request came from the office manager who
has direct knowledge regarding the services and performance of
employees under him. We are not convinced. Pedrito Leyson is one
of the herein private respondents who are claiming for unpaid
wages and we find his actuation of requesting in behalf of the other
private respondents for the payment of their backwages to be
biased and self-serving, thus not credible.

On the other hand, petitioner was able to show that private

respondents did not render services during the stated period.
Petitioners evidences show that on January 22, 1992, petitioners
Board of Directors passed a resolution temporarily transferring the
Office from Lezo, Aklan to Amon Theater, Kalibo, Aklan upon the
recommendation of Atty. Leovigildo Mationg, then project
supervisor, on the ground that the office at Lezo was dangerous and
unsafe. Such transfer was approved by then NEA Administrator,
Rodrigo E. Cabrera, in a letter dated February 6, 1992 addressed to
petitioners Board of Directors.15 Thus, the NEA Administrator, in the
exercise of supervision and control over all electric cooperatives,
including petitioner, wrote a letter dated February 6, 1992
addressed to the Provincial Director PC/INP Kalibo Aklan requesting
for military assistance for the petitioners team in retrieving the
electric cooperatives equipments and other removable facilities
and/or fixtures consequential to the transfer of its principal business
address from Lezo to Kalibo and in maintaining peace and order in
the cooperatives coverage area.16 The foregoing establishes the fact
that the continuous operation of the petitioners business office in
Lezo Aklan would pose a serious and imminent threat to petitioners
officials and other employees, hence the necessity of temporarily
transferring the operation of its business office from Lezo to Kalibo.
Such transfer was done in the exercise of a management
prerogative and in the absence of contrary evidence is not
unjustified. With the transfer of petitioners business office from its
former office, Lezo, to Kalibo, Aklan, its equipments, records and
facilities were also removed from Lezo and brought to the Kalibo
office where petitioners official business was being conducted; thus
private respondents allegations that they continued to report for
work at Lezo to support their claim for wages has no basis.

Moreover, private respondents in their position paper admitted that

they did not report at the Kalibo office, as Lezo remained to be their
office where they continuously reported, to wit:17cräläwvirtualibräry

"On January 22, 1991 by way of a resolution of the Board of

Directors of AKELCO it allowed the temporary holding of office at
Amon Theater, Kalibo, Aklan, per information by their project
supervisor, Atty. Leovigildo Mationg that their head office is closed
and that it is dangerous to hold office thereat.

Nevertheless, majority of the employees including the herein

complainants, continued to report for work at Lezo, Aklan and were
paid of their salaries.

xxx

The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal
for failure to comply with the legal requirements under P.D. 269,
the complainants remained and continued to work at the Lezo Office
until they were illegally locked out therefrom by the respondents.
Despite the illegal lock out however, complainants continued to
report daily to the location of the Lezo Office, prepared to continue
in the performance of their regular duties.

Complainants thus could not be considered to have abandoned their

work as Lezo remained to be their office and not Kalibo despite the
temporary transfer thereto. Further the fact that they were allowed
to draw their salaries up to May, 1992 is an acknowledgment by the
management that they are working during the period.

xxx

It must be pointed out that complainants worked and continuously

reported at Lezo office despite the management holding office at
Kalibo. In fact, they were paid their wages before it was withheld
and then were allowed to draw their salaries again on March 1993
while reporting at Lezo up to the present.
Respondents acts and payment of complainants salaries and again
from March 1993 is an unequivoecognition on the part of
respondents that the work of complainants is continuing and
uninterrupted and they are therefore entitled to their unpaid wages
for the period from June 1992 to March 1993."

The admission is detrimental to private respondents cause. Their

excuse is that the transfer to Kalibo was illegal but we agree with
the Labor Arbiter that it was not for private respondents to declare
the managements act of temporarily transferring the AKELCO office
to Kalibo as an illegal act. There is no allegation nor proof that the
transfer was made in bad faith or with malice. The Labor Arbiter
correctly rationalized in its decision as follows:18
cräläwvirtualibräry

"We do not subscribe to complainants theory and assertions. They,

by their own allegations, have unilaterally committed acts in
violation of managements/respondents directives purely classified
as management prerogative. They have taken amongst themselves
declaring managements acts of temporarily transferring the holding
of the AKELCO office from Lezo to Kalibo, Aklan as illegal. It is never
incumbent upon themselves to declare the same as such. It is
lodged in another forum or body legally mantled to do the same.
What they should have done was first to follow managements
orders temporarily transferring office for it has the first presumption
of legality. Further, the transfer was only temporary. For:

"The employer as owner of the business, also has inherent rights,

among which are the right to select the persons to be hired and
discharge them for just and valid cause; to promulgate and enforce
reasonable employment rules and regulations and to modify, amend
or revoke the same; to designate the work as well as the employee
or employees to perform it; to transfer or promote employees; to
schedule, direct, curtail or control company operations; to introduce
or install new or improved labor or money savings methods,
facilities or devices; to create, merge, divide, reclassify and abolish
departments or positions in the company and to sell or close the
business.

xxx
Even as the law is solicitous of the welfare of the employees it must
also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose can not be denied.
The transfer of assignment of a mediepresentative from Manila to
the province has therefore been held lawful where this was
demanded by the requirements of the drug companys marketing
operations and the former had at the time of his employment
undertaken to accept assignment anywhere in the Philippines.
(Abbot Laboratories (Phils.), Inc., et al. vs. NLRC, et al., G.R. No. L-
76959, Oct. 12, 1987).

It is the employers prerogative to abolish a position which it deems

no longer necessary, and the courts, absent any findings of malice
on the part of the management, cannot erase that initiative simply
to protect the person holding office (Great Pacific Life Assurance
Corporation vs. NLRC, et al., G.R. No. 88011, July 30, 1990)."

Private respondents claim that petitioners Board of Directors passed

an unnumbered resolution dated February 11, 1992 returning back
the office from its temporary office in Kalibo to Lezo. Thus, they did
not defy any lawful order of petitioner and were justified in
continuing to remain at Lezo office. This allegation was controverted
by petitioner in its Reply saying that such unnumbered resolution
was never implemented as it was not a valid act of petitioners
Board. We are convinced by petitioners argument that such
unnumbered resolution was not a valid act of petitioners legitimate
Board considering the subsequent actions taken by the petitioners
Board of Directors decrying private respondents inimical act and
defiance, to wit (1) Resolution No. 411, s. of 1992 on September 9,
1992, dismissing all AKELCO employees who were on illegal strike
and who refused to return to work effective January 31, 1992
despite the directive of the NEA project supervisor and petitioners
acting general manager;19 (2) Resolution No. 477, s. of 1993 dated
March 10, 1993 accepting back private respondents who staged
illegal strike, defied legal orders and issuances, out of compassion,
reconciliation, Christian values and humanitarian reason subject to
the condition of "no work, no pay"20 (3) Resolution No. 496, s. of
1993 dated June 4, 1993, rejecting the demands of private
respondents for backwages from June 16, 1992 to March 1993
adopting the policy of "no work, no pay" as such demand has no
basis, and directing the COOP Legal Counsel to file criminal cases
against employees who misappropriated collections and officers who
authorized disbursements of funds without legal authority from the
NEA and the AKELCO Board.21 If indeed there was a valid board
resolution transferring back petitioners office to Lezo from its
temporary office in Kalibo, there was no need for the Board to pass
the above-cited resolutions.

We are also unable to agree with public respondent NLRC when it

held that the assurance made by Atty. Mationg to the letter-request
of office manager Leyson for the payment of private respondents
wages from June 1992 to March 1993 was an admission on the part
of general manager Mationg that private respondents are indeed
entitled to the same. The letter reply of Atty. Mationg to Leyson
merely stated that he will recommend the request for payment of
backwages to the Board of Directors for their consideration and
appropriate action and nothing else, thus, the ultimate approval will
come from the Board of Directors. We find well-taken the argument
advanced by the Solicitor General as follows:22 cräläwvirtualibräry

The allegation of private respondents that petitioner had already

approved payment of their wages is without basis. Mationgs offer to
recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to
recommend payment. Moreover, the offer is conditional. It is
subject to the condition that petitioners Board of Directors will give
its approval and that funds were available. Mationgs reply to
Leysons letter for payment of wages did not constitute approval or
assurance of payment. The fact is that, the Board of Directors of
petitioner rejected private respondents demand for payment (Board
Resolution No. 496, s. 1993).

We are accordingly constrained to overturn public respondents

findings that petitioner is not justified in its refusal to pay private
respondents wages and other fringe benefits from June 16, 1992 to
March 18, 1993; public respondents stated that private respondents
were paid their salaries from January to May 1992 and again from
March 19, 1993 up to the present. As cited earlier, petitioners Board
in a Resolution No. 411 dated September 9, 1992 dismissed private
respondents who were on illegal strike and who refused to report for
work at Kalibo office effective January 31, 1992; since no services
were rendered by private respondents they were not paid their
salaries. Private respondents never questioned nor controverted the
Resolution dismissing them and nowhere in their Comment is it
stated that they questioned such dismissal. Private respondents also
have not rebutted petitioners claim that private respondents illegally
collected fees and charges due petitioner and appropriated the
collections among themselves to satisfy their salaries from January
to May 1992, for which reason, private respondents are merely
claiming salaries only for the period from June 16, 1992 to March
1993.

Private respondents were dismissed by petitioner effective January

31, 1992 and were accepted back by petitioner, as an act of
compassion, subject to the condition of "no work, no pay" effective
March 1993 which explains why private respondents were allowed
to draw their salaries again. Notably, the letter-request of Mr.
Leyson for the payment of backwages and other fringe benefits in
behalf of private respondents was made only in April 1993, after a
Board Resolution accepting them back to work out of compassion
and humanitarian reason. It took private respondents about ten
months before they requested for the payment of their backwages,
and the long inaction of private respondents to file their claim for
unpaid wages cast doubts as to the veracity of their claim.

The age-old rule governing the relation between labor and capital,
or management and employee of a "fair days wage for a fair days
labor" remains as the basic factor in determining employees wages.
If there is no work performed by the employee there can be no
wage or pay unless, of course, the laborer was able, willing and
ready to work but was illegally locked out, suspended or
dismissed,23 or otherwise illegally prevented from working,24 a
situation which we find is not present in the instant case. It would
neither be fair nor just to allow private respondents to recover
something they have not earned and could not have earned because
they did not render services at the Kalibo office during the stated
period.

Finally, we hold that public respondent erred in merely relying on

the computations of compensable services submitted by private
respondents. There must be competent proof such as time cards or
office records to show that they actually rendered compensable
service during the stated period to entitle them to wages. It has
been established that the petitioners business office was transferred
to Kalibo and all its equipments, records and facilities were
transferred thereat and that it conducted its official business in
Kalibo during the period in question. It was incumbent upon private
respondents to prove that they indeed rendered services for
petitioner, which they failed to do. 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 the affirmative
allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent
has to prove the affirmative allegation in his affirmative defenses
and counterclaim.25 cräläwvirtualibräry

WHEREFORE, in view of the foregoing, the petition

for CERTIORARI is GRANTED. Consequently the decision of public
respondent NLRC dated April 20, 1995 and the Resolution dated July
28, 1995 in NLRC Case No. V-0143-94 are hereby REVERSED and
SET ASIDE for having been rendered with grave abuse of discretion
amounting to lack or excess of jurisdiction. Private respondents
complaint for payment of unpaid wages before the Labor Arbiter is
DISMISSED.

SO ORDERED.

Melo,  (Chairman), Vitug, Panganiban,  and  Purisima,  JJ.,  concur.

G.R. No. 128845 INTERNATIONAL SCHOOL ALLIANCE OF

EDUCATORS v. QUISUMBING 333 SCRA 13
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS v.
QUISUMBING
333 SCRA 13
G.R. No. 128845
 June 1, 2000
FACTS: International School Alliance of Educators (the School) hires both foreign and local teachers as
members of its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires.

In which, the School grants foreign-hires certain benefits not accorded local-hires including housing,
transportation, shipping costs, taxes, home leave travel allowance and  a salary rate 25% more than local
hires based on “significant economic disadvantages”

The labor union and the collective bargaining representative of all faculty members of the School,
contested the difference in salary rates between foreign and local-hires. 

The Union claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

ISSUE: Whether or not the Union can invoke the equal protection clause to justify its claim of parity.

RULING: Yes. The Labor Code’s and the Constitution’s provisions impregnably institutionalize in this
jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with
substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid
similar salaries.

If an employer accords employees the same position and rank, the presumption is that these employees
perform equal work. If the employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. That would be adding insult to injury.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions.

Hence, the Court finds the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires.

G.R. No. 128845               June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of
Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today. 1âwphi1.nêt
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents. To enable the School to continue carrying out its
1 

educational program and improve its standard of instruction, Section 2(c) of the same decree
authorizes the School to employ its own teaching and management personnel selected by it either
locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment, except laws that have been or will be
enacted for the protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:

a. What is one's domicile?

b. Where is one's home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines?
2

Should the answer to any of these queries point to the Philippines, the faculty member is classified
as a local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires.  These include housing,
1avvphi1

transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on
two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation
factor" and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his
family and friends, and take the risk of deviating from a promising career path — all for the
purpose of pursuing his profession as an educator, but this time in a foreign land. The new
foreign hire is faced with economic realities: decent abode for oneself and/or for one's family,
effective means of transportation, allowance for the education of one's children, adequate
insurance against illness and death, and of course the primary benefit of a basic
salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic
reality after his term: that he will eventually and inevitably return to his home country where
he will have to confront the uncertainty of obtaining suitable employment after along period in
a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive
on an international level in terms of attracting competent professionals in the field of
international education.3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members" of the School, contested the difference in salary rates
4 
between foreign and local-hires. This issue, as well as the question of whether foreign-hires should
be included in the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues
in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied
petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief
in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in
all, with nationalities other than Filipino, who have been hired locally and classified as local
hires. The Acting Secretary of Labor found that these non-Filipino local-hires received the same
5 

benefits as the Filipino local-hires.

The compensation package given to local-hires has been shown to apply to all, regardless of
race. Truth to tell, there are foreigners who have been hired locally and who are paid equally
as Filipino local hires.
6

The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:

The Principle "equal pay for equal work" does not find applications in the present case. The
international character of the School requires the hiring of foreign personnel to deal with
different nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to
foreign hired personnel which system is universally recognized. We agree that certain
amenities have to be provided to these people in order to entice them to render their
services in the Philippines and in the process remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment
unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and
other benefits would also require parity in other terms and conditions of employment which
include the employment which include the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary
and professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion
to recruit and hire expatriate teachers from abroad, under terms and conditions that
are consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff
(OSRS) salary schedule. The 25% differential is reflective of the agreed value of
 system displacement and contracted status of the OSRS as differentiated from the
tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the
status of two types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is
not violated by legislation or private covenants based on reasonable classification. A
classification is reasonable if it is based on substantial distinctions and apply to all members
of the same class. Verily, there is a substantial distinction between foreign hires and local
hires, the former enjoying only a limited tenure, having no amenities of their own in the
Philippines and have to be given a good compensation package in order to attract them to
join the teaching faculty of the School.7

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution in the Article on Social Justice and
8 

Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of
his rights and in the performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith.

International law, which springs from general principles of law, likewise proscribes discrimination.
9 

General principles of law include principles of equity,  i.e., the general principles of fairness and
10 

justice, based on the test of what is reasonable.  The Universal Declaration of Human Rights,  the
11  12 

International Covenant on Economic, Social, and Cultural Rights,  the International Convention on
13 

the Elimination of All Forms of Racial Discrimination,  the Convention against Discrimination in
14 

Education,  the Convention (No. 111) Concerning Discrimination in Respect of Employment and
15 

Occupation  — all embody the general principle against discrimination, the very antithesis of
16 

fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part
of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution  specifically provides that labor is entitled to "humane conditions of work." These
17 

conditions are not restricted to the physical workplace — the factory, the office or the field — but
include as well the manner by which employers treat their employees.

The Constitution  also directs the State to promote "equality of employment opportunities for all."
18 

Similarly, the Labor Code  provides that the State shall "ensure equal work opportunities regardless
19 

of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and ensure equal employment opportunities,
closes its eyes to unequal and discriminatory terms and conditions of employment.  20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes  the payment of lesser compensation to a female employee as
21 

against a male employee for work of equal value. Article 248 declares it an unfair labor practice for
an employer to discriminate in regard to wages in order to encourage or discourage membership in
any labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment
of just and favourable conditions of work, which ensure, in particular:

a. Remuneration which provides all workers, as a minimum, with:

(i) Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal pay for equal work;

x x x           x x x          x x x

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries.  This rule applies to the
22 

School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.  The Court finds this argument a little cavalier. If an employer accords
23 

employees the same position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the employer pays one employee
less than the rest, it is not for that employee to explain why he receives less or why the others
receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission,  we said that:
24 

"salary" means a recompense or consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," or more fancifully from "sal,"
the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. (Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in
salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not enjoyed by local-hires, such as
housing, transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"  "to25 

afford labor full protection."  The State, therefore, has the right and duty to regulate the relations
26 

between labor and capital.  These relations are not merely contractual but are so impressed with
27 

public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.  Should such contracts contain stipulations that are contrary to public policy, courts
28 

will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is
no reasonable distinction between the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to foreign-hires contravenes public policy and,
certainly, does not deserve the sympathy of this Court. 1avvphi1

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of
the entire body of employees, consistent with equity to the employer, indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law."  The factors in determining the appropriate collective bargaining unit are (1) the will of the
29 

employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment
status.  The basic test of an asserted bargaining unit's acceptability is whether or not it is
30 

fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights.  31

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also
shows that these groups were always treated separately. Foreign-hires have limited tenure; local-
hires enjoy security of tenure. Although foreign-hires perform similar functions under the same
working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-
hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the
former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997,
are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.
Atok Big Wedge Mutual Benefit Association v Atok Big Wedge
Mining Co. Inc (1955)

Atok Big Wedge Mutual Benefit Association v Atok Big Wedge Mining Co. Inc. 
GR No. L-7349
July 19, 1955

FACTS:
On September 4, 1950, a demand was submitted to petitioner by respondent union through its officers for
various concessions, among which were:
(a) An increase of P0.50 in wages;
(b) Commutation of sick and vacation leave if not enjoyed during the year;
(c) Various privileges, such as free medical care, medicine, and hospitalization; 
(d) Right to a closed shop, check off etc.;
(e) No dismissal without prior just cause and with a prior investigation, etc.

Some of the demands were granted by petitioner and the others were rejected. Hearings were held in the
Court of Industrial Relations. After the hearing, the respondent court rendered a decision fixing the minimum
wage for the laborers at P3.20 without rice ration and 2.65 a day with rice ration, declaring that additional
compensation representing efficiency bonus should not be included as part of the wage, and making the
award effective from September 4, 1950 (the date of the presentation of the original demand, instead of from
April 5, 1951, the date of the amended demand).

Atok Company asked the Court for authority to stop operations & lay off employees and laborers, for the
reason that due to the heavy losses, increased taxes, high cost of materials, negligible quantity of ore deports,
and the enforcement of the Minimum Wage Law, the continued operation of the company and the consequent
lay-off of hundreds of laborers and employees.

The parties reached an agreement on October 29, 1952 after the SC decision which states agreement that the
following facilities heretofore given or actually being given by petitioner to its workers and laborers, and
which constitute as part of their wages, be valued as follows:

Rice ration P.55 per day 

Housing facility 40 per day 
All other facilities at least 85 per day

It is understood that the said amount of facilities valued at the above mentioned prices, may be charged in full
or partially by the Company against laborer or employee, as they may see fit pursuant to the exigencies of its
operation.

This was approved by the Court on December 26, 1952.

Later, another case was decided involving the 2 parties giving the employees minimum cash wage of 3.45 a
day with rice ration or 4.00 without rice ration.

ISSUES:
 1.

(1)  Which of the two decisions would prevail? The agreement or the subsequent decision giving the
employees minimum case wage?, and;
WON the Agreement of October 29, 1952 from the minimum daily wage of P4 would be a waiver of the
minimum wage fixed by the law and hence null and void, since RA 602 sec. 20 provides that “no agreement or
contract, oral or written, to accept a lower wage or less than any other under this Act, shall be valid”. 

1.
1.

(2)  WON additional compensation should be paid by the Company to its workers for work rendered on
Sundays and holidays which should be based on the minimum wage of 4.00 and not on the cash portion which
is 2.20. [Currently the company pays additional compensation of 50% based on the 2.20 wage] 

HELD:
(1)  The Agreement subsists.

An agreement to deduct certain facilities received by the laborers from their employer is not a waiver of the
minimum wage fixed by the law. Wage includes the fair and reasonable value as determined by the Secretary
of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee (Sec 2 of
RA 602).

Thus, the law permits the deduction of such facilities from the laborer’s minimum wage of P4, as long as their
value is “fair and reasonable” 

1.
2.

(2)  NO. The Company is correct.

Section 4 of the Commonwealth Act No. 444 (Eight Hour Labor Law) provides:
No person, firm, or corporations... shall compel an employee or laborer to work during Sundays and holidays,
unless he is paid an additional sum of at least 25% of his regular remuneration.
Thus, the Company even pays the laborers higher wage than the minimum. Thus, no law is violated. 
OTHER NOTES:

DIFFERENCE BETWEEN A SUPPLEMENT and FACILITY

(1)  Supplements, defined – extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages [vacation and holidays not worked; paid sick leave
or maternity leave; overtime rate in excess of what is required by law; sick, pension, retirement and death
benefits; profit sharing; family allowances; Christmas, war risk and cost of living bonuses or other bonuses
other than those paid as a reward for extra output or time spent on the job]. 

1.

(2)  Facilities, defined – items of expense necessary for laborer’s and his family’s existence and subsistence, so
that by express provision of the law, they form part of the wage and when furnished by the employer are
deductible therefrom since if they are not so furnished, the laborer would spend and pay for them just the
same. 

FIRST DIVISION

[G.R. No. L-7349. July 19, 1955.]

ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, Petitioner, v. ATOK-BIG

WEDGE MINING COMPANY, INCORPORATED, Respondents.

Pablo C. Sanidad for Petitioner.

Roxas & Sarmiento for Respondents.

SYLLABUS

1. EMPLOYER AND LABORERS; AGREEMENT BETWEEN THEM INTERPRETED; WAGES;

MINIMUM WAGE LAW. — Under the facts of the case, the compromise agreement
between the petitioner labor association and the respondent company to abide by
whatever decision the Supreme Court may render in Case L-5276)then pending appeal)
can only be interpreted thus: That the company agreed to pay whatever award this
Court would make in said case from the date fixed by the decision (which was that of
the original demand, September 4, 1950) up to August 3, 1952 (the day previous to
the effectivity of the Compromise Agreement), and from August 4, 1952 to December
31, 1945, they are to be bound by their agreement of October 29, 1952.

2. ID.; WAGES; MINIMUM WAGE LAW; AGREEMENT TO DEDUCT FROM WAGES

CERTAIN FACILITIES RECEIVED IS NOT WAIVER OF MINIMUM WAGE FIXED BY LAW. —
Section 20 of Republic Act 602 provides that "no agreement or contract. . . to accept a
lower wage or less than any other under this Act, shall be valid." An agreement to
deduct certain facilities received by the laborers from their employer is not prohibited
waiver of the minimum wage fixed by the law. Wage, as defined by section 2 of
Republic Act No. 602, "includes the fair and reasonable value as determined by the
Secretary of Labor, or board, lodging, or other facilities customarily furnished by the
employer to the employee." The law permits the decision of such facilities from the
labor’s minimum wage, as their value is "fair and reasonable." cralaw virtua1aw library

3. ID.; ID.; ID.; "SUPPLEMENTS" AND FACILITIES" DISTINGUISHED. — "Supplements"

constitute extra remuneration or special privileges or benefits given to or received by
the laborers over and above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer’s and his family’s existence and
subsistence, so that by express provision of the law (sec. 2[g]) they form part of the
wage and when furnished by the employer are deductible therefrom, since they are not
so furnished, the laborer would spend and pay for them just the same.

DECISION

REYES, J.B.L., J.:

On September 4, 1950, the petitioner labor union, the Atok-Big Wedge Mutual Benefit
Association, submitted to the Atok-Big Wedge Mining Co., Inc. (respondent herein)
several demands, among which was an increase of P0.50 in daily wage. The matter was
referred by the mining company to the Court of Industrial Relations for arbitration and
settlement (Case No. 523-V). In the course of conciliatory measures taken by the
Court, some of the demands were granted, and others (including the demand for
increased wages) rejected, and so, hearings proceeded and evidence submitted on the
latter. On July 14, 1951, the Court rendered a decision (Record, pp. 25-32) fixing the
minimum wage at P2.65 a day with rice ration, or P3.20 without rice ration; denying
the deduction from such minimum wage, of the value of housing facilities furnished by
the company to the laborers, as well as the efficiency bonus given to them by the
company; and ordered that the award be made effective retroactively from the date of
the demand, September 4, 1950, as agreed by the parties. From this decision, the
mining company appealed to this Court (G. R. No. L-5276).

Subsequently, an urgent petition was presented in Court on October 15, 1952 by the
Atok-Big Wedge Mining Company for authority to stop operations and lay off employees
and laborers, for the reason that due to heavy losses, increased taxes, high cost of
materials, negligible quantity of ore deposits, and the enforcement of the Minimum
Wage Law, the continued operation of the company would lead to its immediate
bankruptcy and collapse (Rec. pp. 100-109). To avert the closure of the company and
the consequent lay-off of hundreds of laborers and employees, the Court, instead of
hearing the petition on the merits, convened the parties for voluntary conciliation and
mediation. After lengthy discussions and exchange of views, the parties on October 29,
1952 reached an agreement effective from August 4, 1952 to December 31, 1954 (Rec.
pp. 18-23). The Agreement in part provides: chanrob1es virtual 1aw library

That the petitioner, Atok-Big Wedge Mining Company, Incorporated, agrees to abide by
whatever decision that the Supreme Court may render with respect to Case No. 523-V
(G. R. 5276) and Case No. 523-1 (10) (G. R. 5594).

x          x           x

III
 x          x           x

That the petitioner, Atok-Big Wedge Mining Company, Incorporated, and the
respondent, Atok-Big Wedge Mutual Benefit Association, agree that the following
facilities heretofore given or actually being given by the petitioner to its workers and
laborers, and which constitute as part of their wages, be valued as follows: chanrob1es virtual 1aw library

Rice ration P.55 per day

Housing facility .40 per day

All other facilities such as recreation facilities,

medical treatment to dependents of laborers,

school facilities, rice ration during off-days,

water, light, fuel, etc., equivalent to at least .85 per day

It is understood that the said amount of facilities valued at the above-mentioned prices,
may be charged in full or partially by the Atok-Big Wedge Mining Company, Inc.,
against laborer or employee, as it may see fit pursuant to the exigencies of its
operation." cralaw virtua1aw library

The agreement was submitted to the Court for approval and on December 26, 1952,
was approved by the Court in an order giving it effect as an award or decision in the
case (Rec., p. 24).

Later, Case No. G. R. No. L-5276 was decided by this Court (promulgated March 3,
1953), affirming the decision of the Court of Industrial Relations fixing the minimum
cash wage of the laborers and employees of the Atok-Big Wedge Mining Co. at P3.20
cash, without rice ration, or P2.65, with rice ration. On June 13, 1953, the labor union
presented to the Court a petition for the enforcement of the terms of the agreement of
October 29, 1952, as allegedly modified by the decision of this Court in G. R. No. L-
5276 and the provisions of the Minimum Wage Law, which has since taken effect,
praying for the payment of the minimum cash wage of P3.45 a day with rice ration, or
P4.00 without rice ration, and the payment of differential pay from August 4, 1952,
when the award became effective. The mining company opposed the petition claiming
that the Agreement of October 29, 1952 was entered into by the parties with the end in
view that the company’s cost of production be not increased in any way, so that it was
intended to supersede whatever decision the Supreme Court would render in G. R. No.
L-5276 and the provisions of the Minimum Wage Law with respect to the minimum cash
wage payable to the laborers and employees. Sustaining the opposition, the Court of
Industrial Relations, in an order issued on September 22, 1953 (Rec. pp. 44-49),
denied the petition, upon the ground that when the Agreement of the parties of October
29, 1952 was entered into by them, they already knew the decision of said Court
(although subject to appeal to the Supreme Court) fixing the minimum cash wage at
P3.20 without rice ration, or P2.65 with rice ration, as well as the provisions of the
Minimum Wage Law requiring the payment of P4 minimum daily wage in the provinces
effective August 4, 1952; so that the parties had intended to be regulated by their
Agreement of October 29, 1952. On the same day, the Court issued another order (Rec.
pp. 50-55), denying the claim of the labor union for payment of an additional 50 per
cent based on the basic wage of P4 for work on Sundays and holidays, holding that the
payments being made by the company were within the requirements of the law. Its
motion for the reconsideration of both orders having been denied, the labor union filed
this petition for review by certiorari.

The first issue submitted to us arises from an apparent contradiction in the

Agreement of October 29, 1952. By paragraph III thereof, the parties by
common consent evaluated the facilities furnished by the Company to its
laborers (rice rations, housing, recreation, medical treatment, water, light,
fuel, etc.) at P1.80 per day, and authorized the company to have such value
"charge in full or partially — against any laborer or employee as it may see fit"
; while in paragraph I, the Company agreed to abide by the decision of this
Court (pending at the time the agreement was had) in G. R. No. L-5594; and as
rendered, the decision was to the effect that the Company could deduct from
the minimum wage only the value of the rice ration.

It is contended by the petitioner union that the two provisions should be

harmonized by holding paragraph III (deduction of all facilities) to be merely
provisional, effective only while this Court had not rendered its decision in
G.R. No. L-5594; and that the terms of said paragraph should be deemed
superseded by the decision from the time the latter became final, some four or
five months after the agreement was entered into; in consequence, (it is
claimed), the laborers became entitled by virtue of said decision to the
prevailing P4.00 minimum wage with no other deduction than that of the rice
ration, or a net cash wage of P3.45.

This contention, in our opinion, is untenable. The intention of the parties could
not have been to make the arrangement in paragraph III a merely provisional
arrangement pending the decision of the Supreme Court for "this agreement"
was expressly made retroactive and effective as of August 4, 1952, and to be
in force up to and including December 31, 1954" (Par. IV). When concluded on
October 29, 1952, neither party could anticipate the date when the decision of
the Supreme Court would be rendered; nor is any reason shown why the
parties should desire to limit the effects of the decision to the period 1952-
1954 if it was to supersede the agreement of October 29, 1952.

To ascertain the true import of paragraph I of said Agreement providing that the
respondent company agreed to abide by whatever decision the Supreme Court would
render in G. R. No. L-5276, it is important to remember that, as shown by the records,
the agreement was prompted by an urgent petition filed by the respondent mining
company to close operations and lay-off laborers because of heavy losses and the full
enforcement of the Minimum Wage Law in the provinces, requiring it to pay its laborers
the minimum wage of P4; to avoid such eventuality, through the mediation of the Court
of Industrial Relations, a compromise was reached whereby it was agreed that the
company would pay the minimum wage fixed by the law, but the facilities then being
received by the laborers would be evaluated and charged as part of the wage, but
without in any way reducing the P2.00 cash portion of their wages which they were
receiving prior to the agreement (hearing of Oct. 28, 1952, CIR, t. s. n. 47). In other
words, while it was the objective of the parties to comply with the requirements of the
Minimum Wage Law, it was also deemed important that the mining company should not
have to increase the cash wages it was then paying its laborers, so that its cost of
production would not also be increased, in order to prevent its closure and the lay-off of
employees and laborers. And as found by the Court below in the order appealed from
(which finding is conclusive upon us), "it is this eventuality that the parties did not like
to happen, when they have executed the said agreement" (Rec. p. 49). Accordingly,
after said agreement was entered into, the Company started paying its laborers a basic
cash or "take-home" wage of P2.20 (Rec. p. 9), representing the difference between P4
(minimum wage) and P1.80 (value of all facilities).

With this background, the provision to abide by our decision in G. R. L-5276 can only be
interpreted thus: That the company agreed to pay whatever award this Court would
make in said case from the date fixed by the decision (which was that of the original
demand, September 4, 1950) up to August 3, 1952 (the day previous to the effectivity
of the Compromise Agreement) and from August 4, 1952 to December 31, 1954, they
are to be bound by their agreement of October 29, 1952.

This means that during the first period (September 4, 1950 to August 3, 1952), only
rice rations given to the laborers are to be regarded as forming part of their wage and
deductible therefrom. The minimum wage was then fixed (by the Court of Industrial
Relations, and affirmed by this Court) at P3.20 without rice ration, or P2.65 with rice
ration. Since the respondent company had been paying its laborers the basic cash or
"take-home" wage of P2 prior to said decision and up to August 3, 1952, the laborers
are entitled to a differential pay of P0.65 per working day from September 4, 1950 (the
date of the effectivity of the award in G. R. L-5276) up to August 3, 1952.

From August 4, 1952, the date when the Agreement of the parties of October 29, 1952
became effective (which was also the date when the Minimum Wage Law became fully
enforceable in the provinces), the laborers should be paid a minimum wage of P4 a day.
From this amount, the respondent mining company is given the right to charge each
laborer "in full or partially", the facilities enumerated in par. III of the Agreement; i. e.,
rice ration at P0.55 per day, housing facility at P0.40 per day, and other facilities at
P0.85 per day (or a total of P1.80), which facilities "constitute part of his wages." It
appears that the company had actually been paying its laborers the minimum wage of
P2.20 since August 4, 1952; hence they are not entitled to any differential pay from
this date.

Petitioner argues that to allow the deductions stipulated in the Agreement of October
29, 1952 from the minimum daily wage of P4 would be a waiver of the minimum wage
fixed by the law and hence null and void, since Republic Act No. 602, section 20,
provides that "no agreement or contract, oral or written, to accept a lower wage or less
than any other under this Act, shall be valid." An agreement to deduct certain facilities
received by the laborers from their employer is not a waiver of the minimum wage fixed
by the law. Wage, as defined by section 2 of Republic Act No. 602, "includes the fair
and reasonable value as determined by the Secretary of Labor, of board, lodging, or
other facilities customarily furnished by the employer to the employee." Thus, the law
permits the deduction of such facilities from the laborer’s minimum wage of P4, as long
as their value is "fair and reasonable." It is not here claimed that the valuations fixed in
the Agreement of October 29, 1952 are not fair and reasonable. On the contrary, the
agreement expressly states that such valuations: chanrob1es virtual 1aw library

‘have been arrived at after careful study and deliberation by both representatives of
both parties, with the assistance of their respective counsels, and in the presence of the
Honorable Presiding Judge of the Court of Industrial Relations’ (Rec. p. 2).

Neither is it claimed that the parties, with the aid of the Court of Industrial Relations in
a dispute pending before it, may not fix by agreement the valuation of such facilities,
without referring the matter to the Department of Labor.

Petitioner also argues that to allow the deductions of the facilities appearing in the
Agreement referred to, would be contrary to the mandate of section 19 of the law, that
"nothing in this Act shall . . . justify an employer . . . in reducing supplements furnished
on the date of enactment."

The meaning of the term "supplements" has been fixed by the Code of Rules and
Regulations promulgated by the Wage Administration Office to implement the Minimum
Wage Law (Ch. 1, [c]), as: jgc:chanrobles.com.ph

"extra renumeration or benefits received by wage earners from their employers and
include but are not restricted to pay for vacation and holidays not worked; paid sick
leave or maternity leave; overtime rate in excess of what is required by law; sick,
pension, retirement, and death benefits; profit-sharing; family allowances; Christmas,
war risk and cost-of-living bonuses; or other bonuses other than those paid as a reward
for extra output or time spent on the job." cralaw virtua1aw library

"Supplements", therefore, constitute extra renumeration or special privileges or

benefits given to or received by the laborers over and above their ordinary earnings or
wages. Facilities, on the other hand, are items of expense necessary for the laborer’s
and his family’s existence and subsistence, so that by express provision of the law (sec.
2[g]) they form part of the wage and when furnished by the employer are deductible
therefrom since if they are not so furnished, the laborer would spend and pay for them
just the same. It is thus clear that the facilities mentioned in the agreement of October
29, 1952 do not come within the term "supplements" as used in Art. 19 of the Minimum
Wage Law. For the above reasons, we find the appeal from the Order of the Court a quo
of September 22, 1953 denying the motion of the petitioner labor union for the
payment of the minimum wage of P3.45 per day plus rice ration, or P4 without rice
ration, to be unmeritorious and untenable.

The second question involved herein relates to the additional compensation that should
be paid by the respondent company to its laborers for work rendered on Sundays and
holidays. It is admitted that the respondent company is paying an additional
compensation of 50 per cent based on the basic "cash portion" of the laborer’s wage of
P2.20 per day; i.e., P1.10 additional compensation for each Sunday or holiday’s work.
Petitioner union insists, however, that this 50 per cent additional compensation should
be computed on the minimum wage of P400 and not on the "cash portion" of the
laborer’s wage of P2.20, under the provisions of the Agreement of October 29, 1952
and the Minimum Wage Law.

SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law)
provides: jgc:chanrobles.com.ph

"No person, firm, or corporations, business establishment or place or center of labor

shall compel an employee or laborer to work during Sundays and holidays, unless he is
paid an additional sum of at least twenty-five per centum of his regular renumeration:
1aw library
chanrob1es virtual

The minimum legal additional compensation for work on Sundays and legal holidays is,
therefore, 25 per cent of the laborer’s regular renumeration. Under the Minimum Wage
Law, this minimum additional compensation is P1 a day (25 per cent of P4, the
minimum daily wage).

While the respondent company computes the additional compensation given to its
laborers for work on Sundays and holidays on the "cash portion" of their wages of
P2.20, it is giving them 50 per cent thereof, or P1.10 a day. Considering that the
minimum additional compensation fixed by the law is P1 (25 per cent of P4), the
compensation being paid by the respondent company to its laborers is even higher than
such minimum legal additional compensation. We, therefore, see no error in the holding
of the Court a quo that the respondent company has not violated the law with respect
to the payment of additional compensation for work rendered by its laborers on
Sundays and legal holidays.

Finding no reason to sustain the present petition for review, the same is, therefore,
dismissed, with costs against the petitioner Atok-Big Wedge Mutual Benefit Association.

Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador
and Concepcion, JJ., concur.

https://www.scribd.com/document/320583032/Atok-Big-Wedge-Mutual-Benefit-Association-v-Atok-
Big-Wedge-Company

G.R. No. L-12444             February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.

Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had a
collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September
12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay;
that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and
officers were not required to pay their meals and that because Captain Carlos Asensi had refused to
yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00,
monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is
one of comparative ease; that petitioners have suffered financial losses in the operation of their
vessels and that there is no law which provides for the payment of sick leave or vacation leave to
employees or workers of private firms; that as regards the claim for overtime pay, the petitioners
have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law),
notwithstanding the fact that it does not apply to those who provide means of transportation; that the
shipowners and operators in Cebu were paying the salaries of their officers and men, depending
upon the margin of profits they could realize and other factors or circumstances of the business; that
in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of
P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain
Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the
contract between said officer and the petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction
over case No. 740-V, notwithstanding the fact that those who had dispute with the
petitioners, were less than thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the
companies, and the court declared itself with jurisdiction to take cognizance of the
case. Against this order, the herein petitioners did not file a motion for
reconsideration or a petition for certiorari. The finding of fact made by the CIR
became final and conclusive, which We are not now authorized to alter or modify. It
is axiomatic that once the CIR had acquired jurisdiction over a case, it continues to
have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v.
Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that
there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of
the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the
time of the filing of the petition, the respondent union had a total membership of 159,
working with the herein petitioners, who were presumed interested in or would be
benefited by the outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963).
Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of
herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only
7 witnesses testified, does not warrant the conclusion that the employees who had
 some dispute with the present petitioners were less than 30. The ruling of the CIR,
with respect to the question of jurisdiction is, therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping
articles, the herein petitioners have bound themselves to supply the crew with provisions and
with such "daily subsistence as shall be mutually agreed upon" between the master and the
crew, no deductions for meals could be made by the aforesaid petitioners from their wages
or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to
meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule,
which section 19 thereof is the exception, the cost of said meals may not be legally deducted
from the wages or salaries of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of
meals from the wages or salaries after August 4, 1951, is illegal and same should be
reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated
opposite their names, the salaries or wages they would receive. All seamen, whether members of
the crew or deck officers or engineers, have been furnished free meals by the ship owners or
operators. All the shipping articles signed by the master and the crew members, contained, among
others, a stipulation, that "in consideration of which services to be duly performed, the said master
hereby agrees to pay to the said crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b],
shipping articles), and during the duration of the contract "the master of the vessel will provide each
member of the crew such daily subsistence as shall be mutually agreed daily upon between said
master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the
time of execution of these articles that adequate daily rations be furnished each member of the
crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of
the respective salaries or wages, set opposite the names of the crew members, the petitioners
bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which
include food.

This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of
crew members; but no such deductions were made from the salaries of the deck officers and
engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges
on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts. 
1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free
meals by the shipowners, operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk
ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of
any interested party result in a different determination of the fair and reasonable value,
the furnishing of meals shall be valued at not more than thirty centavos per meal for
agricultural employees and not more than forty centavos for any other employees covered by
this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other employees covered
by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the
daily wage, otherwise, no rate for meals should have been provided.

However, section 19, same law, states —

SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an
employee of the right to seek fair wages, shorter working hours and better working conditions
nor justify an employer in violating any other labor law applicable to his employees, in
reducing the wage now paid to any of his employees in excess of the minimum wage
established under this Act, or in reducing supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized.
And even if there is such a conflict, the respondent CIR should resolve the same in favor of the
safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages,
because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair
wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are
defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits

given to or received by the laborers over and above their ordinary earnings or wages.
"Facilities", on the other hand, are items of expense necessary for the laborer's and his
family's existence and subsistence so that by express provision of law (Sec. 2[g]), they form
part of the wage and when furnished by the employer are deductible therefrom, since if they
are not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage, is supplement; and when said benefit or
privilege is part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind
of the benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering,
therefore, as definitely found by the respondent court that the meals were freely given to crew
members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as
a necessary matter in the maintenance of the health and efficiency of the crew personnel during the
voyage", the deductions therein made for the meals given after August 4, 1951, should be returned
to them, and the operator of the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the
company. The order CIR to the company to continue granting this privilege, was upheld by this
Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum
wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed intention
of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to
pay for their meals or food, while the deck officers and marine engineers receiving higher pay and
provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust
discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-
7177, May 31, 1955).

Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat
docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the
vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet.
This statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V
Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa),
are incompetent and unreliable. And considering the established fact that the work of Severino
Pepito was continuous, and during the time he was not working, he could not leave and could not
completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act
No. 444, which states "When the work is not continuous, the time during which the laborer is not
working and can leave his working place and can rest completely shall not be counted", find no
application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos
Asensi to his former position, considering the fact that said officer had been employed since January
9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.

The CIR held —

 Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged
lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby
dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and
that his failure to report for work is not sufficient cause for his absolute dismissal,
respondents are hereby ordered to reinstate him to his former job without back salary but
under the same terms and conditions of employment existing prior to his lay-off, without loss
of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is
empowered to reduce the punishment meted out to an erring employee (Standard Vacuum
Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in
consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new
trial, and in overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation
of meals and facilities, are irrelevant to the present issue, it having been found and held that the
meals or food in question are not facilities but supplements. The original petition in the CIR having
been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to
express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon,
Regala and Makalintal, JJ., concur.

The Lawphil Project - Arellano Law Foundation

States Marine Corp. vs. Cebu Seamen’s Assc. DIGEST

DECEMBER 19, 2016 ~ VBDIAZ

States Marine Corp. vs. Cebu Seamen’s Assc.

GR L 12444 February 28, 1963

Facts:

On September 12, 1952, the respondent union filed with the Court of Industrial
Relations (CIR), a petition (Case No. 740-V) against the States Marine Corporation,
later amended on May 4, 1953, by including as party respondent, the petitioner Royal
Line, Inc. The Union alleged that that after the Minimum Wage Law had taken effect,
the petitioners required their employees on board their vessels, to pay the sum of P.40
for every meal, while the masters and officers were not required to pay their meals.
The petitioners’ shipping companies, answering, averred that in enacting Rep. Act No.
602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per
meal, furnished to employees should be deducted from the daily wages.
Issue: WON meals are deductable from wages.
Held:

It is argued that the food or meals given to the deck officers, marine engineers and
unlicensed crew members in question, were mere “facilities” which should be
deducted from wages, and not “supplements” which, according to said section 19,
should not be deducted from such wages, because it is provided therein: “Nothing in
this Act shall deprive an employee of the right to such fair wage … or in reducing
supplements furnished on the date of enactment.” In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms
are defined as follows —
“Supplements”, therefore, constitute extra remuneration or special privileges or
benefits given to or received by the laborers over and above their ordinary earnings
or wages. “Facilities”, on the other hand, are items of expense necessary for the
laborer’s and his family’s existence and subsistence so that by express provision of
law (Sec. 2[g]), they form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.
Facilities may be charged to or deducted from wages. Supplements, on the other hand,
may not be so charged. Thus, when meals are freely given to crew members of a
vessel while they were on the high seas, not as part of their wages but as a necessary
matter in the maintenance of the health and efficiency of the crew personnel during
the voyage, the deductions made therefrom for the meals should be returned to them,
and the operator of the coastwise vessels affected should continue giving the same
benefit.
Petition dismissed.