G.R. No.

L-32245 May 25, 1979 III

DY KEH BENG, Petitioner, vs. INTERNATIONAL LABOR and RESPONDENT COURT ERRED IN FINDING THAT THE
MARINE UNION OF THE PHILIPPINES, ET AL., Respondents. TESTIMONIES ADDUCED BY COMPLAINANT ARE
CONVINCING AND DISCLOSES (SIC) A PATTERN OF
A. M Sikat for petitioner DISCRIMINATION BY THE PETITIONER HEREIN.

D. A. Hernandez for respondents. IV

DE CASTRO, J.: RESPONDENT COURT ERRED IN DECLARING PETITIONER

GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of AND DESCRIBED IN THE COMPLAINT.
the Court of Industrial Relations dated March 23, 1970 in Case No.
3019-ULP and the Court's Resolution en banc of June 10, 1970 V
affirming said decision. The Court of Industrial Relations in that case
found Dy Keh Beng guilty of the unfair labor practice acts alleged and RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE
order him to RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES
FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL
reinstate Carlos Solano and Ricardo Tudla to their former jobs with FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF
backwages from their respective dates of dismissal until fully SENIORITY AND OF SUCH OTHER RIGHTS ALREADY
reinstated without loss to their right of seniority and of such other ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
rights already acquired by them and/or allowed by law. 1chanrobles
virtual law library The facts as found by the Hearing Examiner are as follows:

Now, Dy Keh Beng assigns the following errors 2as having been A charge of unfair labor practice was filed against Dy Keh Beng,
committed by the Court of Industrial Relations: proprietor of a basket factory, for discriminatory acts within the
meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
I 875, 3 by dismissing on September 28 and 29, 1960, respectively,
Carlos N. Solano and Ricardo Tudla for their union activities. After
RESPONDENT COURT ERRED IN FINDING THAT preliminary investigation was conducted, a case was filed in the Court
RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF of Industrial Relations for in behalf of the International Labor and
PETITIONERS. Marine Union of the Philippines and two of its members, Solano and
Tudla In his answer, Dy Keh Beng contended that he did not know
II Tudla and that Solano was not his employee because the latter came to
the establishment only when there was work which he did
RESPONDENT COURT ERRED IN FINDING THAT on pakiaw basis, each piece of work being done under a separate
RESPONDENTS SOLANO AND TUDLA WERE DISMISSED contract. Moreover, Dy Keh Beng countered with a special defense of
FROM THEIR EMPLOYMENT BY PETITIONER. simple extortion committed by the head of the labor union, Bienvenido
Onayan.
After trial, the Hearing Examiner prepared a report which was According to petitioner, these facts show that respondents Solano and
subsequently adopted in toto by the Court of Industrial Relations. An Tudla are only piece workers, not employees under Republic Act 875,
employee-employer relationship was found to have existed between where an employee 8 is referred to as
Dy Keh Beng and complainants Tudla and Solano, although Solano
was admitted to have worked on piece basis. 4 The issue therefore shall include any employee and shag not be limited to the employee of
centered on whether there existed an employee employer relation a particular employer unless the Act explicitly states otherwise and
between petitioner Dy Keh Beng and the respondents Solano and shall include any individual whose work has ceased as a consequence
Tudla. of, or in connection with any current labor dispute or because of any
unfair labor practice and who has not obtained any other substantially
According to the Hearing Examiner, the evidence for the complainant equivalent and regular employment.
Union tended to show that Solano and Tudla became employees of Dy
Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that while an employer 9
except in the event of illness, their work with the establishment was
continuous although their services were compensated on piece basis. includes any person acting in the interest of an employer, directly or
Evidence likewise showed that at times the establishment had eight (8) indirectly but shall not include any labor organization (otherwise than
workers and never less than five (5); including the complainants, and when acting as an employer) or anyone acting in the capacity of officer
that complainants used to receive ?5.00 a day. sometimes or agent of such labor organization.
less. 6chanrobles virtual law library
Petitioner really anchors his contention of the non-existence of
According to Dy Keh Beng, however, Solano was not his employee for employee-employer relationship on the control test. He points to the
the following reasons: case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al.,
L-13130, October 31, 1959, where the Court ruled that:
(1) Solano never stayed long enought at Dy's establishment;
The test ... of the existence of employee and employer relationship is
(2) Solano had to leave as soon as he was through with the whether there is an understanding between the parties that one is to
render personal services to or for the benefit of the other and
(3) order given him by Dy recognition by them of the right of one to order and control the other in
the performance of the work and to direct the manner and method of
(4) When there were no orders needing his services there was nothing its performance.
for him to do;
Petitioner contends that the private respondents "did not meet the
(5) When orders came to the shop that his regular workers could not control test in the fight of the ... definition of the terms employer and
fill it was then that Dy went to his address in Caloocan and fetched employee, because there was no evidence to show that petitioner had
him for these orders; and the right to direct the manner and method of respondent's
work. 10 Moreover, it is argued that petitioner's evidence showed that
(6) Solano's work with Dy's establishment was not continuous. , "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.
While this Court upholds the control test 11 under which an employer- a labor contract -between employers and employees, between
employee relationship exists "where the person for whom the services capitalists and laborers.
are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end, " it finds Insofar as the other assignments of errors are concerned, there is no
no merit with petitioner's arguments as stated above. It should be borne showing that the Court of Industrial Relations abused its discretion
in mind that the control test calls merely for the existence of the right when it concluded that the findings of fact made by the Hearing
to control the manner of doing the work, not the actual exercise of the Examiner were supported by evidence on the record. Section 6,
right. 12Considering the finding by the Hearing Examiner that the Republic Act 875 provides that in unfair labor practice cases, the
establishment of Dy Keh Beng is "engaged in the manufacture of factual findings of the Court of Industrial Relations are conclusive on
baskets known as kaing, 13it is natural to expect that those working the Supreme Court, if supported by substantial evidence. This
under Dy would have to observe, among others, Dy's requirements of provision has been put into effect in a long line of decisions where the
size and quality of the kaing. Some control would necessarily be Supreme Court did not reverse the findings of fact of the Court of
exercised by Dy as the making of the kaing would be subject to Dy's Industrial Relations when they were supported by substantial
specifications. Parenthetically, since the work on the baskets is done at evidence.
Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed. Nevertheless, considering that about eighteen (18) years have already
elapsed from the time the complainants were dismissed, 15and that the
As to the contention that Solano was not an employee because he decision being appealed ordered the payment of backwages to the
worked on piece basis, this Court agrees with the Hearing Examiner employees from their respective dates of dismissal until finally
that reinstated, it is fitting to apply in this connection the formula for
backwages worked out by Justice Claudio Teehankee in "cases not
circumstances must be construed to determine indeed if payment by terminated sooner." 16 The formula cans for fixing the award of
the piece is just a method of compensation and does not define the backwages without qualification and deduction to three years, "subject
essence of the relation. Units of time ... and units of work are in to deduction where there are mitigating circumstances in favor of the
establishments like respondent (sic) just yardsticks whereby to employer but subject to increase by way of exemplary damages where
determine rate of compensation, to be applied whenever agreed upon. there are aggravating circumstances. 17 Considering there are no such
We cannot construe payment by the piece where work is done in such circumstances in this case, there is no reason why the Court should not
an establishment so as to put the worker completely at liberty to turn apply the abovementioned formula in this instance.
him out and take in another at pleasure.
WHEREFORE; the award of backwages granted by the Court of
At this juncture, it is worthy to note that Justice Perfecto, concurring Industrial Relations is herein modified to an award of backwages for
with Chief Justice Ricardo Paras who penned the decision in "Sunrise three years without qualification and deduction at the respective rates
Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, of compensation the employees concerned were receiving at the time
523), opined that of dismissal. The execution of this award is entrusted to the National
Labor Relations Commission. Costs against petitioner.
judicial notice of the fact that the so-called "pakyaw" system
mentioned in this case as generally practiced in our country, is, in fact,
G.R. No. L-41182-3 April 16, 1988 herein appellant Una 0. Sevilla payable to Tourist
World Service Inc. by any airline for any fare brought
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners- in on the efforts of Mrs. Lina Sevilla, 4% was to go to
appellants, Lina Sevilla and 3% was to be withheld by the Tourist
vs. World Service, Inc.
THE COURT OF APPEALS, TOURIST WORLD SERVICE,
INC., ELISEO S.CANILAO, and SEGUNDINA On or about November 24, 1961 (Exhibit 16) the
NOGUERA, respondents-appellees. Tourist World Service, Inc. appears to have been
informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the
branch office was anyhow losing, the Tourist World
SARMIENTO , J.: Service considered closing down its office. This was
firmed up by two resolutions of the board of directors
The petitioners invoke the provisions on human relations of the Civil of Tourist World Service, Inc. dated Dec. 2, 1961
Code in this appeal by certiorari. The facts are beyond dispute: (Exhibits 12 and 13), the first abolishing the office of
the manager and vice-president of the Tourist World
xxx xxx xxx Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to receive
On the strength of a contract (Exhibit A for the the properties of the Tourist World Service then located
appellant Exhibit 2 for the appellees) entered into on at the said branch office. It further appears that on Jan.
Oct. 19, 1960 by and between Mrs. Segundina Noguera, 3, 1962, the contract with the appellees for the use of
party of the first part; the Tourist World Service, Inc., the Branch Office premises was terminated and while
represented by Mr. Eliseo Canilao as party of the the effectivity thereof was Jan. 31, 1962, the appellees
second part, and hereinafter referred to as appellants, no longer used it. As a matter of fact appellants used it
the Tourist World Service, Inc. leased the premises since Nov. 1961. Because of this, and to comply with
belonging to the party of the first part at Mabini St., the mandate of the Tourist World Service, the corporate
Manila for the former-s use as a branch office. In the secretary Gabino Canilao went over to the branch
said contract the party of the third part held herself office, and, finding the premises locked, and, being
solidarily liable with the party of the part for the prompt unable to contact Lina Sevilla, he padlocked the
payment of the monthly rental agreed on. When the premises on June 4, 1962 to protect the interests of the
branch office was opened, the same was run by the Tourist World Service. When neither the appellant Lina
Sevilla nor any of her employees could enter the locked SEVILLA IS ESTOPPED FROM DENYING THAT
premises, a complaint wall filed by the herein SHE WAS A MERE EMPLOYEE OF DEFENDANT-
appellants against the appellees with a prayer for the APPELLEE TOURIST WORLD SERVICE, INC.
issuance of mandatory preliminary injunction. Both EVEN AS AGAINST THE LATTER.
appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court IV. THE LOWER COURT ERRED IN NOT
ordered the dismissal of the case without prejudice. HOLDING THAT APPELLEES HAD NO RIGHT TO
EVICT APPELLANT MRS. LINA O. SEVILLA
The appellee Segundina Noguera sought FROM THE A. MABINI OFFICE BY TAKING THE
reconsideration of the order dismissing her LAW INTO THEIR OWN HANDS.
counterclaim which the court a quo, in an order dated
June 8, 1963, granted permitting her to present evidence V. THE LOWER COURT ERRED IN NOT
in support of her counterclaim. CONSIDERING AT .ALL APPELLEE NOGUERA'S
RESPONSIBILITY FOR APPELLANT LINA O.
On June 17,1963, appellant Lina Sevilla refiled her case SEVILLA'S FORCIBLE DISPOSSESSION OF THE
against the herein appellees and after the issues were A. MABINI PREMISES.
joined, the reinstated counterclaim of Segundina
Noguera and the new complaint of appellant Lina VI. THE LOWER COURT ERRED IN FINDING
Sevilla were jointly heard following which the court a THAT APPELLANT APPELLANT MRS. LINA O.
quo ordered both cases dismiss for lack of merit, on the SEVILLA SIGNED MERELY AS GUARANTOR
basis of which was elevated the instant appeal on the FOR RENTALS.
following assignment of errors:
On the foregoing facts and in the light of the errors asigned the issues
I. THE LOWER COURT ERRED EVEN IN to be resolved are:
APPRECIATING THE NATURE OF PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA'S 1. Whether the appellee Tourist World Service
COMPLAINT. unilaterally disco the telephone line at the branch office
on Ermita;
II. THE LOWER COURT ERRED IN HOLDING
THAT APPELLANT MRS. LINA 0. SEVILA'S 2. Whether or not the padlocking of the office by the
ARRANGEMENT (WITH APPELLEE TOURIST Tourist World Service was actionable or not; and
WORLD SERVICE, INC.) WAS ONE MERELY OF
EMPLOYER-EMPLOYEE RELATION AND IN 3. Whether or not the lessee to the office premises
FAILING TO HOLD THAT THE SAID belonging to the appellee Noguera was appellees TWS
ARRANGEMENT WAS ONE OF JOINT BUSINESS or TWS and the appellant.
VENTURE.
In this appeal, appealant Lina Sevilla claims that a joint
III. THE LOWER COURT ERRED IN RULING bussiness venture was entered into by and between her
THAT PLAINTIFF-APPELLANT MRS. LINA O. and appellee TWS with offices at the Ermita branch
office and that she was not an employee of the TWS to 4. Appellant Mrs. Sevilla earned
the end that her relationship with TWS was one of a commissions for her own passengers, her
joint business venture appellant made declarations own bookings her own business (and not
showing: for any of the business of appellee
Tourist World Service, Inc.) obtained
1. Appellant Mrs. Lina 0. Sevilla, a from the airline companies. She shared
prominent figure and wife of an eminent the 7% commissions given by the airline
eye, ear and nose specialist as well as a companies giving appellee Tourist
imediately columnist had been in the World Service, Lic. 3% thereof aid
travel business prior to the establishment retaining 4% for herself (pp. 18 tsn. Id.)
of the joint business venture with
appellee Tourist World Service, Inc. and 5. Appellant Mrs. Sevilla likewise shared
appellee Eliseo Canilao, her compadre, in the expenses of maintaining the A.
she being the godmother of one of his Mabini St. office, paying for the salary
children, with her own clientele, coming of an office secretary, Miss Obieta, and
mostly from her own social circle (pp. 3- other sundry expenses, aside from
6 tsn. February 16,1965). desicion the office furniture and
supplying some of fice furnishings (pp.
2. Appellant Mrs. Sevilla was signatory 15,18 tsn. April 6,1965), appellee
to a lease agreement dated 19 October Tourist World Service, Inc. shouldering
1960 (Exh. 'A') covering the premises at the rental and other expenses in
A. Mabini St., she expressly warranting consideration for the 3% split in the co
and holding [sic] herself 'solidarily' procured by appellant Mrs. Sevilla (p. 35
liable with appellee Tourist World tsn Feb. 16,1965).
Service, Inc. for the prompt payment of
the monthly rentals thereof to other 6. It was the understanding between
appellee Mrs. Noguera (pp. 14-15, tsn. them that appellant Mrs. Sevilla would
Jan. 18,1964). be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.),
3. Appellant Mrs. Sevilla did not receive appellee Eliseo Canilao admit that it was
any salary from appellee Tourist World just a title for dignity (p. 36 tsn. June 18,
Service, Inc., which had its own, 1965- testimony of appellee Eliseo
separate office located at the Trade & Canilao pp. 38-39 tsn April 61965-
Commerce Building; nor was she an testimony of corporate secretary Gabino
employee thereof, having no Canilao (pp- 2-5, Appellants' Reply
participation in nor connection with said Brief)
business at the Trade & Commerce
Building (pp. 16-18 tsn Id.). Upon the other hand, appellee TWS contend that the
appellant was an employee of the appellee Tourist
 World Service, Inc. and as such was designated THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
manager.1 AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED
xxx xxx xxx TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS
AND COUNTERCLAIMS LODGED BY BOTH APPELLEES
The trial court2 held for the private respondent on the premise that the WERE WITHDRAWN." (ANNEX "A" P. 8)
private respondent, Tourist World Service, Inc., being the true lessee,
it was within its prerogative to terminate the lease and padlock the III
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and as such, she was THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
bound by the acts of her employer. 4 The respondent Court of AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN
Appeal 5 rendered an affirmance. FACT NOT PASSING AND RESOLVING-APPELLANT
SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20
The petitioners now claim that the respondent Court, in sustaining the AND 21 OF THE CIVIL CODE ON RELATIONS.
lower court, erred. Specifically, they state:
IV
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING
AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING
"THE PADLOCKING OF THE PREMISES BY TOURIST WORLD HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT
OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING COUPLED WITH AN INTEREST WHICH COULD NOT BE
MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND TERMINATED OR REVOKED UNILATERALLY BY TOURIST
WITHOUT INFORMING COUNSEL FOR THE APPELLANT WORLD SERVICE INC.6
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING
INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE As a preliminary inquiry, the Court is asked to declare the true nature
SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY of the relation between Lina Sevilla and Tourist World Service, Inc.
THE PERSON WHO PADLOCKED THE SAID OFFICE), IN The respondent Court of see fit to rule on the question, the crucial
THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY issue, in its opinion being "whether or not the padlocking of the
BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST premises by the Tourist World Service, Inc. without the knowledge
WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE and consent of the appellant Lina Sevilla entitled the latter to the relief
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. of damages prayed for and whether or not the evidence for the said
2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO appellant supports the contention that the appellee Tourist World
THE RULE OF LAW. Service, Inc. unilaterally and without the consent of the appellant
disconnected the telephone lines of the Ermita branch office of the
II appellee Tourist World Service, Inc.7 Tourist World Service, Inc.,
insists, on the other hand, that Lina SEVILLA was a mere employee,
being "branch manager" of its Ermita "branch" office and that
inferentially, she had no say on the lease executed with the private liability thereof. In that event, the parties must be bound by some other
respondent, Segundina Noguera. The petitioners contend, however, relation, but certainly not employment.
that relation between the between parties was one of joint venture, but
concede that "whatever might have been the true relationship between In the second place, and as found by the Appellate Court, '[w]hen the
Sevilla and Tourist World Service," the Rule of Law enjoined Tourist branch office was opened, the same was run by the herein appellant
World Service and Canilao from taking the law into their own Lina O. Sevilla payable to Tourist World Service, Inc. by any airline
hands, 8 in reference to the padlocking now questioned. for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under
these circumstances, it cannot be said that Sevilla was under the
The Court finds the resolution of the issue material, for if, as the control of Tourist World Service, Inc. "as to the means used." Sevilla
private respondent, Tourist World Service, Inc., maintains, that the in pursuing the business, obviously relied on her own gifts and
relation between the parties was in the character of employer and capabilities.
employee, the courts would have been without jurisdiction to try the
case, labor disputes being the exclusive domain of the Court of It is further admitted that Sevilla was not in the company's payroll. For
Industrial Relations, later, the Bureau Of Labor Relations, pursuant to her efforts, she retained 4% in commissions from airline bookings, the
statutes then in force. 9 remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating
In this jurisdiction, there has been no uniform test to determine the amounts depending on her booking successes.
evidence of an employer-employee relation. In general, we have relied
on the so-called right of control test, "where the person for whom the The fact that Sevilla had been designated 'branch manager" does not
services are performed reserves a right to control not only the end to be make her, ergo, Tourist World's employee. As we said, employment is
achieved but also the means to be used in reaching such determined by the right-of-control test and certain economic
end." 10 Subsequently, however, we have considered, in addition to the parameters. But titles are weak indicators.
standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in In rejecting Tourist World Service, Inc.'s arguments however, we are
the payrolls, in determining the existence of an employer-employee not, as a consequence, accepting Lina Sevilla's own, that is, that the
relationship.11 parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of such
The records will show that the petitioner, Lina Sevilla, was not subject a relation. In her letter of November 28, 1961, she expressly 'concedes
to control by the private respondent Tourist World Service, Inc., either your [Tourist World Service, Inc.'s] right to stop the operation of your
as to the result of the enterprise or as to the means used in connection branch office 14 in effect, accepting Tourist World Service, Inc.'s
therewith. In the first place, under the contract of lease covering the control over the manner in which the business was run. A joint
Tourist Worlds Ermita office, she had bound herself in solidum as and venture, including a partnership, presupposes generally a of standing
for rental payments, an arrangement that would be like claims of a between the joint co-venturers or partners, in which each party has an
master-servant relationship. True the respondent Court would later equal proprietary interest in the capital or property contributed 15 and
minimize her participation in the lease as one of mere guaranty, 12 that where each party exercises equal rights in the conduct of the
does not make her an employee of Tourist World, since in any case, a business.16 furthermore, the parties did not hold themselves out as
true employee cannot be made to part with his own money in partners, and the building itself was embellished with the electric sign
pursuance of his employer's business, or otherwise, assume any "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina no hand in the disconnection now complained of, it had clearly
Sevilla, agreed to (wo)man the private respondent, Tourist World condoned it, and as owner of the telephone lines, it must shoulder
Service, Inc.'s Ermita office, she must have done so pursuant to a responsibility therefor.
contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another.18 In the The Court of Appeals must likewise be held to be in error with respect
case at bar, Sevilla solicited airline fares, but she did so for and on to the padlocking incident. For the fact that Tourist World Service, Inc.
behalf of her principal, Tourist World Service, Inc. As compensation, was the lessee named in the lease con-tract did not accord it any
she received 4% of the proceeds in the concept of commissions. And authority to terminate that contract without notice to its actual
as we said, Sevilla herself based on her letter of November 28, 1961, occupant, and to padlock the premises in such fashion. As this Court
pre-assumed her principal's authority as owner of the business has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in
undertaking. We are convinced, considering the circumstances and the business itself, and necessarily, in the equipment pertaining
from the respondent Court's recital of facts, that the ties had thereto. Furthermore, Sevilla was not a stranger to that contract having
contemplated a principal agent relationship, rather than a joint been explicitly named therein as a third party in charge of rental
managament or a partnership.. payments (solidarily with Tourist World, Inc.). She could not be
ousted from possession as summarily as one would eject an interloper.
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot The Court is satisfied that from the chronicle of events, there was
be revoked at will. The reason is that it is one coupled with an interest, indeed some malevolent design to put the petitioner, Lina Sevilla, in a
the agency having been created for mutual interest, of the agent and bad light following disclosures that she had worked for a rival firm. To
the principal. 19 It appears that Lina Sevilla is a bona fide travel agent be sure, the respondent court speaks of alleged business losses to
herself, and as such, she had acquired an interest in the business justify the closure '21 but there is no clear showing that Tourist World
entrusted to her. Moreover, she had assumed a personal obligation for Ermita Branch had in fact sustained such reverses, let alone, the fact
the operation thereof, holding herself solidarily liable for the payment that Sevilla had moonlit for another company. What the evidence
of rentals. She continued the business, using her own name, after discloses, on the other hand, is that following such an information (that
Tourist World had stopped further operations. Her interest, obviously, Sevilla was working for another company), Tourist World's board of
is not to the commissions she earned as a result of her business directors adopted two resolutions abolishing the office of 'manager"
transactions, but one that extends to the very subject matter of the and authorizing the corporate secretary, the respondent Eliseo Canilao,
power of management delegated to her. It is an agency that, as we said, to effect the takeover of its branch office properties. On January 3,
cannot be revoked at the pleasure of the principal. Accordingly, the 1962, the private respondents ended the lease over the branch office
revocation complained of should entitle the petitioner, Lina Sevilla, to premises, incidentally, without notice to her.
damages.
It was only on June 4, 1962, and after office hours significantly, that
As we have stated, the respondent Court avoided this issue, confining the Ermita office was padlocked, personally by the respondent
itself to the telephone disconnection and padlocking incidents. Anent Canilao, on the pretext that it was necessary to Protect the interests of
the disconnection issue, it is the holding of the Court of Appeals that the Tourist World Service. " 22 It is strange indeed that Tourist World
there is 'no evidence showing that the Tourist World Service, Inc. Service, Inc. did not find such a need when it cancelled the lease five
disconnected the telephone lines at the branch office. 20 Yet, what months earlier. While Tourist World Service, Inc. would not pretend
cannot be denied is the fact that Tourist World Service, Inc. did not that it sought to locate Sevilla to inform her of the closure, but
take pains to have them reconnected. Assuming, therefore, that it had surely, it was aware that after office hours, she could not have been
anywhere near the premises. Capping these series of "offensives," it Tourist World Service, Inc. in the disconnection and padlocking
cut the office's telephone lines, paralyzing completely its business incidents. She cannot therefore be held liable as a cotortfeasor.
operations, and in the process, depriving Sevilla articipation therein.
The Court considers the sums of P25,000.00 as and for moral
This conduct on the part of Tourist World Service, Inc. betrays a damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as
sinister effort to punish Sevillsa it had perceived to be disloyalty on nominal 26 and/or temperate27 damages, to be just, fair, and reasonable
her part. It is offensive, in any event, to elementary norms of justice under the circumstances.
and fair play.
WHEREFORE, the Decision promulgated on January 23, 1975 as well
We rule therefore, that for its unwarranted revocation of the contract of as the Resolution issued on July 31, 1975, by the respondent Court of
agency, the private respondent, Tourist World Service, Inc., should be Appeals is hereby REVERSED and SET ASIDE. The private
sentenced to pay damages. Under the Civil Code, moral damages may respondent, Tourist World Service, Inc., and Eliseo Canilao, are
be awarded for "breaches of contract where the defendant acted ... in ORDERED jointly and severally to indemnify the petitioner, Lina
bad faith. 23 Sevilla, the sum of 25,00.00 as and for moral damages, the sum of
P10,000.00, as and for exemplary damages, and the sum of P5,000.00,
We likewise condemn Tourist World Service, Inc. to pay further as and for nominal and/or temperate damages.
damages for the moral injury done to Lina Sevilla from its brazen
conduct subsequent to the cancellation of the power of attorney Costs against said private respondents.
granted to her on the authority of Article 21 of the Civil Code, in
relation to Article 2219 (10) thereof — SO ORDERED.

ART. 21. Any person who wilfully causes loss or injury

to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage.24

ART. 2219. Moral damages25 may be recovered in the

following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28,
29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby

ordered to respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is

concerned, no evidence has been shown that she had connived with
G.R. No. 170087 August 31, 2006 In 1996, petitioner was designated Acting Manager. The corporation
also hired Gerry Nino as accountant in lieu of petitioner. As Acting
ANGELINA FRANCISCO, Petitioner, Manager, petitioner was assigned to handle recruitment of all
vs. employees and perform management administration functions;
NATIONAL LABOR RELATIONS COMMISSION, KASEI represent the company in all dealings with government agencies,
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO especially with the Bureau of Internal Revenue (BIR), Social Security
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD System (SSS) and in the city government of Makati; and to administer
LIZA and RAMON ESCUETA, Respondents. all other matters pertaining to the operation of Kasei Restaurant which
is owned and operated by Kasei Corporation. 7
DECISION
For five years, petitioner performed the duties of Acting Manager. As
YNARES-SANTIAGO, J.: of December 31, 2000 her salary was P27,500.00 plus P3,000.00
housing allowance and a 10% share in the profit of Kasei
This petition for review on certiorari under Rule 45 of the Rules of Corporation. 8
Court seeks to annul and set aside the Decision and Resolution of the
Court of Appeals dated October 29, 2004 1 and October 7, In January 2001, petitioner was replaced by Liza R. Fuentes as
2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the Manager. Petitioner alleged that she was required to sign a prepared
complaint for constructive dismissal filed by herein petitioner resolution for her replacement but she was assured that she would still
Angelina Francisco. The appellate court reversed and set aside the be connected with Kasei Corporation. Timoteo Acedo, the designated
Decision of the National Labor Relations Commission (NLRC) dated Treasurer, convened a meeting of all employees of Kasei Corporation
April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed and announced that nothing had changed and that petitioner was still
with modification the decision of the Labor Arbiter dated July 31, connected with Kasei Corporation as Technical Assistant to Seiji
2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private Kamura and in charge of all BIR matters. 9
respondents were liable for constructive dismissal.
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a
In 1995, petitioner was hired by Kasei Corporation during its month beginning January up to September 2001 for a total reduction of
incorporation stage. She was designated as Accountant and Corporate P22,500.00 as of September 2001. Petitioner was not paid her mid-
Secretary and was assigned to handle all the accounting needs of the year bonus allegedly because the company was not earning well. On
company. She was also designated as Liaison Officer to the City of October 2001, petitioner did not receive her salary from the company.
Makati to secure business permits, construction permits and other She made repeated follow-ups with the company cashier but she was
licenses for the initial operation of the company. 5 advised that the company was not earning well. 10

Although she was designated as Corporate Secretary, she was not On October 15, 2001, petitioner asked for her salary from Acedo and
entrusted with the corporate documents; neither did she attend any the rest of the officers but she was informed that she is no longer
board meeting nor required to do so. She never prepared any legal connected with the company. 11
document and never represented the company as its Corporate
Secretary. However, on some occasions, she was prevailed upon to Since she was no longer paid her salary, petitioner did not report for
sign documentation for the company. 6 work and filed an action for constructive dismissal before the labor
arbiter.
Private respondents averred that petitioner is not an employee of Kasei 3. ordering respondents to reinstate complainant to her former position
Corporation. They alleged that petitioner was hired in 1995 as one of without loss of seniority rights and jointly and severally pay
its technical consultants on accounting matters and act concurrently as complainant her money claims in accordance with the following
Corporate Secretary. As technical consultant, petitioner performed her computation:
work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the a. Backwages 10/2001 – 07/2002 275,000.00
office any time she wanted. The company never interfered with her
work except that from time to time, the management would ask her (27,500 x 10 mos.)
opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services b. Salary Differentials (01/2001 – 09/2001) 22,500.00
were engaged through a Board Resolution designating her as technical
consultant. The money received by petitioner from the corporation was c. Housing Allowance (01/2001 – 07/2002) 57,000.00
her professional fee subject to the 10% expanded withholding tax on
professionals, and that she was not one of those reported to the BIR or d. Midyear Bonus 2001 27,500.00
SSS as one of the company’s employees. 12
e. 13th Month Pay 27,500.00
Petitioner’s designation as technical consultant depended solely upon
the will of management. As such, her consultancy may be terminated f. 10% share in the profits of Kasei
any time considering that her services were only temporary in nature
and dependent on the needs of the corporation. Corp. from 1996-2001 361,175.00

To prove that petitioner was not an employee of the corporation, g. Moral and exemplary damages 100,000.00
private respondents submitted a list of employees for the years 1999
and 2000 duly received by the BIR showing that petitioner was not h. 10% Attorney’s fees 87,076.50
among the employees reported to the BIR, as well as a list of payees
subject to expanded withholding tax which included petitioner. SSS P957,742.50
records were also submitted showing that petitioner’s latest employer
was Seiji Corporation. 13 If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would
The Labor Arbiter found that petitioner was illegally dismissed, thus: accrue up to actual payment of separation pay.

WHEREFORE, premises considered, judgment is hereby rendered as SO ORDERED. 14

follows:
On April 15, 2003, the NLRC affirmed with modification the Decision
1. finding complainant an employee of respondent corporation; of the Labor Arbiter, the dispositive portion of which reads:

2. declaring complainant’s dismissal as illegal; PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby
MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay determine which of the propositions espoused by the contending
computed at one month per year of service in addition to full parties is supported by substantial evidence. 17
backwages from October 2001 to July 31, 2002;
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there
2) The awards representing moral and exemplary damages and 10% has been no uniform test to determine the existence of an employer-
share in profit in the respective accounts of P100,000.00 and employee relation. Generally, courts have relied on the so-called right
P361,175.00 are deleted; of control test where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the
3) The award of 10% attorney’s fees shall be based on salary means to be used in reaching such end. In addition to the standard of
differential award only; right-of-control, the existing economic conditions prevailing between
the parties, like the inclusion of the employee in the payrolls, can help
4) The awards representing salary differentials, housing allowance, in determining the existence of an employer-employee relationship.
mid year bonus and 13th month pay are AFFIRMED.
However, in certain cases the control test is not sufficient to give a
SO ORDERED. 15 complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been
On appeal, the Court of Appeals reversed the NLRC decision, thus: held by the worker. There are instances when, aside from the
employer’s power to control the employee with respect to the means
WHEREFORE, the instant petition is hereby GRANTED. The and methods by which the work is to be accomplished, economic
decision of the National Labor Relations Commissions dated April 15, realities of the employment relations help provide a comprehensive
2003 is hereby REVERSED and SET ASIDE and a new one is hereby analysis of the true classification of the individual, whether as
rendered dismissing the complaint filed by private respondent against employee, independent contractor, corporate officer or some other
Kasei Corporation, et al. for constructive dismissal. capacity.

SO ORDERED. 16 The better approach would therefore be to adopt a two-tiered test

involving: (1) the putative employer’s power to control the employee
The appellate court denied petitioner’s motion for reconsideration, with respect to the means and methods by which the work is to be
hence, the present recourse. accomplished; and (2) the underlying economic realities of the activity
or relationship.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private This two-tiered test would provide us with a framework of analysis,
respondent Kasei Corporation; and if in the affirmative, (2) whether which would take into consideration the totality of circumstances
petitioner was illegally dismissed. surrounding the true nature of the relationship between the parties.
This is especially appropriate in this case where there is no written
Considering the conflicting findings by the Labor Arbiter and the agreement or terms of reference to base the relationship on; and due to
National Labor Relations Commission on one hand, and the Court of the complexity of the relationship based on the various positions and
Appeals on the other, there is a need to reexamine the records to responsibilities given to the worker over the period of the latter’s
employment.
The control test initially found application in the case of Viaña v. Al- Consultant. She reported for work regularly and served in various
Lagadan and Piga, 19 and lately in Leonardo v. Court of capacities as Accountant, Liaison Officer, Technical Consultant,
Appeals, 20 where we held that there is an employer-employee Acting Manager and Corporate Secretary, with substantially the same
relationship when the person for whom the services are performed job functions, that is, rendering accounting and tax services to the
reserves the right to control not only the end achieved but also the company and performing functions necessary and desirable for the
manner and means used to achieve that end. proper operation of the corporation such as securing business permits
and other licenses over an indefinite period of engagement.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in Under the broader economic reality test, the petitioner can likewise be
addition to the standard of right-of-control like the inclusion of the said to be an employee of respondent corporation because she had
employee in the payrolls, to give a clearer picture in determining the served the company for six years before her dismissal, receiving check
existence of an employer-employee relationship based on an analysis vouchers indicating her salaries/wages, benefits, 13th month pay,
of the totality of economic circumstances of the worker. bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When
Thus, the determination of the relationship between employer and petitioner was designated General Manager, respondent corporation
employee depends upon the circumstances of the whole economic made a report to the SSS signed by Irene Ballesteros. Petitioner’s
activity, 22 such as: (1) the extent to which the services performed are membership in the SSS as manifested by a copy of the SSS specimen
an integral part of the employer’s business; (2) the extent of the signature card which was signed by the President of Kasei Corporation
worker’s investment in equipment and facilities; (3) the nature and and the inclusion of her name in the on-line inquiry system of the SSS
degree of control exercised by the employer; (4) the worker’s evinces the existence of an employer-employee relationship between
opportunity for profit and loss; (5) the amount of initiative, skill, petitioner and respondent corporation. 27
judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the It is therefore apparent that petitioner is economically dependent on
relationship between the worker and the employer; and (7) the degree respondent corporation for her continued employment in the latter’s
of dependency of the worker upon the employer for his continued line of business.
employment in that line of business. 23
In Domasig v. National Labor Relations Commission, 28 we held that
The proper standard of economic dependence is whether the worker is in a business establishment, an identification card is provided not only
dependent on the alleged employer for his continued employment in as a security measure but mainly to identify the holder thereof as a
that line of business. 24 In the United States, the touchstone of bona fide employee of the firm that issues it. Together with the cash
economic reality in analyzing possible employment relationships for vouchers covering petitioner’s salaries for the months stated therein,
purposes of the Federal Labor Standards Act is dependency. 25 By these matters constitute substantial evidence adequate to support a
analogy, the benchmark of economic reality in analyzing possible conclusion that petitioner was an employee of private respondent.
employment relationships for purposes of the Labor Code ought to be
the economic dependence of the worker on his employer. We likewise ruled in Flores v. Nuestro 29 that a corporation who
registers its workers with the SSS is proof that the latter were the
By applying the control test, there is no doubt that petitioner is an former’s employees. The coverage of Social Security Law is
employee of Kasei Corporation because she was under the direct predicated on the existence of an employer-employee relationship.
control and supervision of Seiji Kamura, the corporation’s Technical
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 The corporation constructively dismissed petitioner when it reduced
has clearly established that petitioner never acted as Corporate her salary by P2,500 a month from January to September 2001. This
Secretary and that her designation as such was only for convenience. amounts to an illegal termination of employment, where the petitioner
The actual nature of petitioner’s job was as Kamura’s direct assistant is entitled to full backwages. Since the position of petitioner as
with the duty of acting as Liaison Officer in representing the company accountant is one of trust and confidence, and under the principle of
to secure construction permits, license to operate and other strained relations, petitioner is further entitled to separation pay, in lieu
requirements imposed by government agencies. Petitioner was never of reinstatement. 34
entrusted with corporate documents of the company, nor required to
attend the meeting of the corporation. She was never privy to the A diminution of pay is prejudicial to the employee and amounts to
preparation of any document for the corporation, although once in a constructive dismissal. Constructive dismissal is an involuntary
while she was required to sign prepared documentation for the resignation resulting in cessation of work resorted to when continued
company. 30 employment becomes impossible, unreasonable or unlikely; when
there is a demotion in rank or a diminution in pay; or when a clear
The second affidavit of Kamura dated March 7, 2002 which repudiated discrimination, insensibility or disdain by an employer becomes
the December 5, 2001 affidavit has been allegedly withdrawn by unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-
Kamura himself from the records of the case. 31 Regardless of this fact, Flores, 36 we ruled that where an employee ceases to work due to a
we are convinced that the allegations in the first affidavit are sufficient demotion of rank or a diminution of pay, an unreasonable situation
to establish that petitioner is an employee of Kasei Corporation. arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer.
Granting arguendo, that the second affidavit validly repudiated the Hence, her severance from the company was not of her own making
first one, courts do not generally look with favor on any retraction or and therefore amounted to an illegal termination of employment.
recanted testimony, for it could have been secured by considerations
other than to tell the truth and would make solemn trials a mockery In affording full protection to labor, this Court must ensure equal work
and place the investigation of the truth at the mercy of unscrupulous opportunities regardless of sex, race or creed. Even as we, in every
witnesses. 32 A recantation does not necessarily cancel an earlier case, attempt to carefully balance the fragile relationship between
declaration, but like any other testimony the same is subject to the test employees and employers, we are mindful of the fact that the policy of
of credibility and should be received with caution. 33 the law is to apply the Labor Code to a greater number of employees.
This would enable employees to avail of the benefits accorded to them
Based on the foregoing, there can be no other conclusion that by law, in line with the constitutional mandate giving maximum aid
petitioner is an employee of respondent Kasei Corporation. She was and protection to labor, promoting their welfare and reaffirming it as a
selected and engaged by the company for compensation, and is primary social economic force in furtherance of social justice and
economically dependent upon respondent for her continued national development.
employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a WHEREFORE, the petition is GRANTED. The Decision and
regular basis over an indefinite period of engagement. Respondent Resolution of the Court of Appeals dated October 29, 2004 and
corporation hired and engaged petitioner for compensation, with the October 7, 2005, respectively, in CA-G.R. SP No. 78515
power to dismiss her for cause. More importantly, respondent are ANNULLED and SET ASIDE. The Decision of the National
corporation had the power to control petitioner with the means and Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
methods by which the work is to be accomplished. No. 032766-02, is REINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina Francisco’s
full backwages from the time she was illegally terminated until the
date of finality of this decision, and separation pay representing one-
half month pay for every year of service, where a fraction of at least
six months shall be considered as one whole year.
G.R. No. L-37790 March 25, 1976 This CONTRACT, entered into by and between:

MAFINCO TRADING CORPORATION, petitioner, The MAFINCO TRADING CORPORATION, a

vs. domestic corporation duly organized and existing under
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, the laws of the Philippines, doing business at Rm. 715
The NATIONAL LABOR RELATIONS COMMISSION Equitable Bank Bldg., Juan Luna St., Manila, under the
RODRIGO REPOMANTA and REY MORALDE, respondents. style MAFINCO represented in this act by its General
Manager, SALVADOR C. PICA, duly authorized for
Tanada, Sanchez, Tanada & Tanada for petitioner. the purpose and hereinafter referred to as MAFINCO,
and RODRIGO REPOMANTA, married/single, of legal
Jose T. Maghari for private respondents. age, and a resident of 70-D Bo. Potrero, MacArthur
Highway, Malabon, Rizal hereinafter referred to as
Solicitor General Estelito P. Mendoza for all other respondents. PEDDLER, WITNESSETH:

AQUINO, J.: WHEREAS, MAFINCO has been appointed as the

exclusive distributor of 'COSMOS' Soft Drink Products
Mafinco Trading Corporation (Mafinco for short) filed these special for and within the City of Manila;
civil actions of certiorari and prohibition in order to annul the decision
of the Secretary of Labor dated April 16, 1973. In that decision the WHEREAS, the PEDDLER is desirous of buying and
Secretary reversed an order of the old National Labor Relations selling in Manila the 'COSMOS' Soft Drink Products
Commission (NLRC) and held that the NLRC had jurisdiction over the handled by MAFINCO;
complaint lodged by the Federacion Obrera de la Industria Tabaquera
y Otros Trabajadores de Filipinas (FOITAF) against Mafinco for NOW THEREFORE, for and in consideration of the
having dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case foregoing premises and the covenants and conditions
No. LR-086). The voluminous record reveals the following facts: hereinafter set forth, the parties hereto has agreed as
follows:
Peddling contracts and their termination. — On April 30, 1968
Cosmos Aerated Water Factory, Inc., hereinafter called Cosmos, a firm 1. That in consideration of the competence of the PEDDLER and his
based at Malabon, Rizal, appointed Mafinco as its sole distributor of ability to promote mutual benefits for the parties hereto, MAFINCO
Cosmos soft drinks in Manila. On May 31, 1972 Rodrigo Repomanta shall provide the PEDDLER with a delivery truck with which the latter
and Mafinco executed a peddling contract whereby Repomanta agreed shall exclusively peddle the soft drinks of the former, under the terms
to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a set forth herein;
similar contract. The contracts were to remain in force for one year
unless sooner terminated by either party upon five days notice to the 2. The PEDDLER himself shall, carefully and in strict observance to
other.1 The contract with Repomanta reads as follows: traffic regulations, drive the truck furnished him by MAFINCO or
should he employ a driver or helpers such driver or helpers shall be his
PEDDLING CONTRACT employees under his direction and responsibility and not that of
MAFINCO, and their compensation including salaries, wages,
KNOW ALL MEN BY THESE PRESENTS: overtime pay, separation pay, bonus or other remuneration and
privileges shall be for the PEDDLER'S own account; The PEDDLER into between the parties; However, either of the parties may terminate
shall likewise bind himself to comply with the provisions of the Social the same upon five (5) days prior notice to the other;
Security Act and all the applicable labor laws in relation to his
employees; 10. Upon the. termination of this contract, unless the same is renewed,
the delivery truck and such other equipment furnished by MAFINCO
3. The PEDDLER shall be responsible for any damage to property, to the PEDDLER shall be returned by the latter in good order and
death or injuries to persons or damage to the truck used by him caused workable condition, ordinary wear and tear excepted, und shall
by his own acts or omission or that of his driver and helpers; promptly settle his outstanding account if any, with MAFINCO;

4. MAFINCO shall furnish the gasoline and oil to run the said truck in 11. To assure performance by the PEDDLER of his obligation to his
business trips, bear the cost of maintenance and repairs of the said employees under the Social Security Act, the applicable labor laws and
truck arising from ordinary wear and tear; for damages suffered by third persons, PEDDLER shall furnish a
performance bond of P1,000.00 in favor of MAFINCO from a
5. The PEDDLER shall secure at his own expense all necessary SURETY COMPANY acceptable to MAFINCO.
licenses and permits required by law or ordinance and shall bear any
and all expenses which may be incurred by him in the sales of the soft IN WITNESS WHEREOF, the parties hereto have
drink products covered by the contract; signed this instrument at the City of Manila,
Philippines, this May 31, 1972.
6. All purchases by the PEDDLER shall be charged to him at a price of
P2.52 per case of 24 bottles, ex-warehouse; PROVIDED, However, MAFINCO TRADING CORPORATION
that if the PEDDLER purchases a total of not less than 250 cases a
day, he shall be entitled further to a Peddler's Discount of P11.00; By:

7. Upon the execution of this contract, the PEDDLER shall give a cash (Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR
bond in the amount of P1,500.00 against which MAFINCO shall C. PICA
charge the PEDDLER with any unpaid account at the end of each day
or with any damage to the truck of other account which is properly Peddler General Manager
chargeable to the PEDDLER; within 30 days after the termination of
this contract, the cash bond, after deducting proper charges, shall be (Witnesses and notarial acknowledgment are omitted)
returned to the PEDDLER;
On December 7, 1972 Mafinco, pursuant to section 9 of the contract,
8. The PEDDLER shall liquidate and pay all his accounts to terminated the same. The notice to Repomanta reads as follows:
MAFINCO'S authorized representative at the end of each day, and his
failure to do so shall subject his cash bond at once to answer for any Dear Mr. Repomanta:
unliquidated accounts;
This has reference to the Peddling Contract you
9. This contract shall be effective up to May 31, 1973 and supersedes executed with the Mafinco Trading Corporation on May
any or all other previous contracts, if any, that may have been entered 31, 1972. Please be informed that in accordance with
 the provisions of paragraph 9 of the said peddling Notice of termination is herewith attach (sic).
contract, we are hereby serving notice of termination
thereof effective on December 12, 1972. We anticipate your due attention and assistance.

Yours truly, Respectfully yours,

(Sgd.) SALVADOR C. PICA (Signed by National Secretary of FOITAF)

General Manager Mafinco filed a motion to dismiss the complaint on the ground that the
NLRC had no jurisdiction because Repomanta and Moralde were not
Complaints of Repomanta and Moralde and NLRCs dismissal its employees but were independent contractors. It stressed that there
thereof. — Four days later or on December 11, 1972 Repomanta and was termination of the contract, not a dismissal of an employee. In
Moralde, through their union, the FOITAF, filed a complaint with the Repomanta's case, it pointed out that he was registered with the Social
NLRC, charging the general manager of Mafinco with having violated Security System as an employer who, as a peddler, paid premiums for
Presidential Decree No. 21, issued on October 14, 1972, which created his employees; that he secured the mayor's permit to do business and
the NLRC and which was intended "to promote industrial peace, the corresponding peddler's license and paid the privilege tax and that
maximize productivity and secure social justice for all". The brief he obtained workmen's compensation insurance for his own employees
complaint reads as follows: or helpers. It alleged that Moralde was in the same situation as
Repomanta.
Hon. Amado Gat Inciong, Chairman
Mafinco further alleged that the Bureau of Labor Relations denied the
National Labor Relations Commission application of peedlers for registration as a labor union because they
were not employees but employers in their own right of delivery
Phoenix Bldg., Intramuros, helpers (Decision dated January 4, 1966 by the Registrar of Labor
Organizations in Registration Proceeding No. 4, In the Matter of
Manila Cosmos Supervisors Association-PTGWO); that the Court of Industrial
Relations in Case No. 4399-ULP, Cosmos Supervisors' Association —
Sir: PTGWO vs. Manila Cosmos Aerated Water Factory, Inc., held in its
decision dated July 17, 1967 that the peddlers were not employees of
Pursuant to the Presidential Decree No. 21, Sections 2 Cosmos, and that the Court of Appeals held in Rapajon vs. Fong Kui
and 11, the FOITAF files a complaint against and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R, March
SALVADOR C. PICA, General Manager of 18, 1958 that the delivery helpers of the peddlers were not employees
MAFINCO TRADING CORP. located at Room 715, of Cosmos, a ruling which this Court refused to review (L-14072-
Equitable Bank Bldg., Juan Luna, Manila, for 74, Rapajon vs. Fung Kui, Resolution dated July 16, 1958).
terminating union officials (sic), Mr. Rodrigo
Refumanta and Mr. Rey Moralde, which is a violation The complaint was referred to a factfinder who in a lengthy report
of the above mentioned decree. dated January 22, 1973 found, after "exhaustively and impartially"
considering the contentions of the parties, that the peddlers were
employers or "independent businessmen', as held by the Court of
Industrial Relations and the Court of Appeals, and that that holding has Ruling upon this type of contracts, and the practices and
the force of res judicata. The factfinder recommended the dismissal of relationships that attended its implementation, the Court
the complaint. of Appeals, in CA-G.R. No. 19477-R, said that it did
not create a relationship of employer and employee;
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and that the peddlers under such contract were not
Ricardo O. Castro, adopted that recommendation in its order dated employees of the manufacturer or distributor, and
February 2, 1973. That order, which analyzes the peddling contract accordingly dismissed the complaints in the said case.
and reviews the court rulings on the matter, is quoted below: (The peddler-complainants in that case were claiming
overtime pay and damages, among others.) Elevated to
The question of whether peddling contracts of the kind the Supreme Court on review (G.R. Nos.
entered into between the parties give rise to an L-14072 to L-14074, 2 August 1958), the decision of
employer-employee relationship is not new. Nor are the the Court of Appeals was in effect affirmed, for the
contracts themselves of recent vintage. petition for review was dismissed by the Supreme Court
'for being factual and for lack of merit!
For at least twenty years respondent MAFINCO and its
predecessor and/or principal, the Manila-Cosmos The Court of Industrial Relations is of the same
Aerated Water Factory, have entered into contracts with persuasion. After inquiring extensively into
peddlers, under the terms of which the latter buy from substantially the same terms and conditions of peddling
the former at a special price, and sell in Manila, the contracts and the practices and relationships that went
former's soft drink products. The distributor provides into their implementation, the Court said in Case No.
the peddler with a delivery truck with the distributor 4399ULP that the peddlers of the Manila-Cosmos
answering for the cost of fuel and maintenance. If a Aerated Water Factory were not employees of the latter.
peddler buys a certain number of cases or more a day,
he is entitled to a fixed amount of peddler's discount. These precedents apply squarely to the case at hand.
The complainants here have not shown that their
The peddler himself drives the truck but if he engages a peddling contracts with the respondent differ in any
driver or helpers, the latter are his employees and he substantial degree from those that were at issue in the
assumes all the responsibilities of an employer in Court of Industrial Relations, the Court of Appeals and
relation to them. He also obtains at his own expense all the Supreme Court in the cases cited above. Indeed, a
licenses and permits required by law of salesmen. comparison between the contracts involved in those
cases and those in the instant litigation do not show any
The peddler clears his accounts with the distributor at difference that would warrant a different conclusion
the end of each day, and unpaid accounts are charged than that reached by those courts. If at all, the additional
against the cash deposit or bond which he gives the stipulations in the present contracts strengthen the
distributor upon the execution of the peddling contract. position that the complainant peddlers are independent
He answers for damages caused by him or his contractors or businessman, not employees of the
employees to third persons. respondent.
 Nor has there been shown any substantial change in the their own; (4) that their delivery trucks were provided
old practices of peddlers vis-a-vis the distributor or by the company; (5) that the use of the trucks were
manufacturer. The points raised by the complainants in 'exclusively' for peddling the products of the company;
their pleadings regarding these practices were (6) that they were required to observe regulations; (7)
extensively discussed by the CIR in the ULP case above that they were required to drive the trucks; (8) that the
referred to. company furnished the gasoline and oil to run the said
trucks in business trips; (9) that the company
We are not prepared to depart from this rule of long shouldered the cost of maintenance and repair of the
standing. It is the law of the case. said trucks arising from an ordinary wear and tear; (10)
that the company required them to secure the necessary
We therefore hold that the complainants in this case licenses and permits; (11) that the company prohibited
were not employees of MAFINCO and Presidential them from selling the company's products higher than
Decree No. 21 does not I apply to them. the fixed price of the company; and (12) that they and
their helpers were paid on commission basis.
Complainants' appeal and the Labor Secretary's decision that they
were employees of Mafinco. — Complainants Repomanta and Moralde The Secretary relied on this Court's ruling that a person who possesses
appealed to the Secretary of Labor. They argued that the NLRC erred no capital or money of his own to pay his obligations to his workers
(1) in holding that they were independent contractors and not but relies-entirely upon the contract price to be paid by the company,
employees; (2) in relying on the peddler's contract to determine the falls short of the requisites or conditions necessary for an independent
existence of employer-employee relationship; (3) in anchoring its contractor (Mansal vs. Gocheco Lumber Co., 96 Phil. 941).
decisions on precedents which have only persuasive force and which
did not rule squarely on the issue of employer-employee relationship, He observed that "behind the peddling cloak there was in fact
and (4) in dismissing their complaint. employee-employer relationship". He said:

As stated at the outset, the Secretary in his decision reversed al the While, generally, written employment contracts are
NLRC order. He ruled that Repomanta and Moralde were employees held sufficient in determining the nature of
of Mafinco and that, consequently, the NLRC had jurisdiction over employment, such contracts, however, cannot be always
their complaint. The Secretary directed the NLRC to hear the case on held conclusive where the actual circumstances of
the merits. employment indicate otherwise. For example, some
employers, in order to avoid or evade coverage of the
The Secretary found that the complainants "were driver-salesmen of Workmen's Compensation Act, enter into pseudo
the company, driving the trucks and distributing the products of the contracts with their employees who are named as
company" and that they were not independent contractors because they 'employers' or 'independent contractors'. Such 'written
had no capital of their own. That finding was based on the following contracts as distinguished from oral Agreements,
considerations: purporting to make persons independent contractors, no
matter how 'adroitly framed', can be carefully scanned
(1) That the contracts are Identical; (2) that the and the real relationship ascertained' (Glielmi vs.
complainants were originally plant drivers' of the Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe &
company; (3) that the complainants had no capital of Inton, Workmen's Compensation Act. p. 69).
 If the Peddling Contract were carefully scanned, the to conduct an in-depth study of the actual relationship existing
conclusion may be drawn that the contract is but a between the Cosmos Bottling Co. and its peddlers.
device and subterfuge to evade coverage under the
labor laws. There is more than meets the eye in item 2 The committee in its report dated September 17, 1973 arrived at the
of the Peddling Contract which required the peddlers to conclusion that the relationship actually existing between Cosmos and
do that which the law intends the employer to have Mafinco, on one hand, and the peddlers of Cosmos products, on the
done. other, is not one of employer and employee and "that the peddlers are
independent contractors".
In fact, such contracts, as the one in question,
exempting or tending to exempt the employers from The committee after a perusal of the record of NLRC Case No. LR-
their legal obligations to their workers are null and void 086 interviewed twenty peddlers, an officer of Cosmos and an officer
under Sec. 7 of the Workmen's Compensation Act, as of Mafinco. In the conduct of the interviews it 44 observed judicious
amended, which states: adherence to impartiality and openmindedness but with a modicum of
friendliness and much of informality". The report reads in part as
Any contract, regulation or device of any sort intended follows:
to exempt the employer from all or part of the liability
created by this Act shall be null and void. (1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital
importance to the mind of your committee is the fact that this
To rule otherwise would be to open the floodgate to Agreement entered into between Cosmos and the Peddlers has, as its
employers in this territory to evade liabilities to their prefatory statement but before the enumeration of its terms and
workers by simply letting contracts for the doing of conditions, the following:
their business. 'Such construction could not only narrow
the provisions of the Act, but would defeat its intent and That the Peddler has agreed to buy and sell the
purposes in their entirety. (Andoyo vs. Manila Railroad products of the MANUFACTURER under the following
Co., supra). conditions:

The motion for the reconsideration of the decision was denied by the Similarly, the 'Peddling Contract' entered into between
Secretary in his order of July 16,1973. Mafinco and the Peddlers. contains peculiarly Identical
wordings. viz:
The Committee's report that the peddlers are independent
contractors. — On July 25, 1973 Mafinco moved for the clarification WHEREAS, the PEDDLER is desirious of buying and
of the decision by inquiring whether the question of employee- selling in Manila the 'COSMOS' Soft Drink Products
employer relationship would be included in the hearing on the merits. handled by

Action on the said motion was deferred until the receipt of the report MAFINCO:
of the committee created to study the status of peddlers of Cosmos
products. On September 3, 1973- the Secretary directed the committee It is immediately clear from the beginning that the
composed of Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas relationship that the parties would want to establish
between them is one of buyer and seller of the Cosmos
Products. Moreover, this type of Agreement or Contract For its adjective interpretation, our Rules of Court
has its roots since some twenty (20) years earlier, with specifically provides: (Here parol evidence rule in see.
modifications only with respect to the factory price, the 7, Rule 130, Rules of Court is quoted)
amount of over prices or what the peddlers refer to as
commission, and the amount pertaining to the dealer's It must b restated at this point for purposes of emphasis
discount. which appear to vary depending upon the that the validity of the aforesaid Agreement or Contract
market demands. has not been seriously assailed by the parties. In fact,
their rallying cause was the Agreement or Contract
We are, however, tempted to argue, as did the Peddlers, itself. To strengthen these provisions of the Civil Code
that this Agreement or Contract might have been and the Rules of Court, stabilized jurisprudence have
contrived as a device to evade responsibilities imposed held that it is elementary rule of contract that the laws
upon Cosmos or Mafinco under our labor laws as well in force at the time the contract was made must govern
as under other national or municipal laws. Nevertheless, its interpretation and application; that the terms of the
a close reading thereof will show a flaw in this line of contract, where unambiguous, are conclusive, in the
insistence, when we consider that this type of absence of averment and proof of mistake, the question
Agreement or Contract has been substantially the same being, not what intention existed in the minds of the
since the beginning of this relationship. More than this, parties, but what intention is expressed by the language
it has withstood the test of time by pronouncements of used; that interpretation of an agreement does not
the CIR in ULP Case No. 4399, Cosmos Supervisors include its modifications or the creation of a new or
Association vs. Manila Cosmos Aerated Water Factory, different one; that Courts cannot make for the parties
Inc.' July 17, 1967; by judicial review of the Court of better agreements than they themselves have been
Appeals in CA-G.R. Nos. 19477-R, 19478-R and satisfied to make, or rewrite contracts because they
21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos operate harshly or inequitably as to one of the parties;
Aerated Water Factory, Inc.', promulgated on March and that there is no right to interpret an agreement as
18, 1958; and impliedly by resolution of the Supreme meaning something different from what the parties
Court in G.R. Nos. L-14072 to L-14074 when the Court intended as expressed by the language they saw fit to
of Appeals cases were appealed to that Tribunal. employ.

But the more basic and indeed forceful ratiocination in xxx xxx xxx
favor of the validity of the Agreement or Contract
which covenants that the relationship between the (1) The selection and engagement of the employees.-Nothing in the
Peddlers and Cosmos or Mafinco is one of buyer and Agreement to Peddler Soft Drinks in the case of Cosmos and in the
seller of the Cosmos Products on the part of the Peddling Contract in the case of Mafinco, will reveal and we cannot
Peddlers, and, therefore, one of an independent logically infer therefrom, that the Peddlers were engaged as employees
contractorship, finds substantive support in our Civil of Cosmos or Mafinco. The selection of the Peddlers who will buy and
Code which provides: (here arts. 1370 and 1374 of the sell Cosmos products is left entirely between the parties; it is not the
Civil Code regarding interpretation of contracts are sole prerogative of either one of the parties. There must be meeting of
quoted). the minds in order to consummate the Agreement or Contract and no
evidence of coercion or imposition of the will of one over the other is
evident or apparent from the Peddlers' or Managements' interviews had (1) The rate of wages payable;
by the members of your Committee. This test, therefore, cannot be
invoked by the Peddlers in their attempt at presenting arguments to the (2) The method of calculation of wages;
effect that they are employees of Cosmos or Mafinco. Upon the other
hand, the Agreement or Contract itself provides that the Peddlers can (3) The periodicity of wage payment; the day, the hour and pIace of
hire helpers and drivers under their direction and responsibility, and to payment; and
whom they shall be liable for payment of 'salaries, wages, overtime
pay, separation pay, bonus and other remuneration and privileges.' As (4) Any change with respect to any of the foregoing items.
a matter of fact, drivers were employed by Mrs. Victoria Ariz and M.
Fong Kui, who are peddlers in their own right. This evidently shows To the Committee's mind, all these requirements have
the discretion granted the peddlers to hire employees of their own. not been shown to exist in the relationship between the
Peddlers and the Cosmos or Mafinco. If it were true that
(2) The payment of wages. — On the basis of the clear terms of the the Pedders' 'dealer's discount' is in the nature of wages,
Agreement or Contract, no mention is made of the wages of the then they must be notifed fully of the wage conditions.
Peddlers; neither can an inference be made that any salary or wage is Moreover, such 'wages' must be paid to them
given to Peddlers. In the interviews, however, with the Peddlers, they periodically at least once every two weeks or twice a
vehemently take the position that the 'dealer's discount' which was month. (See Par. (h) of See. 10 of Act No. 602, as
given to them at the rate of Pll.50 in excess of 200 cases of Cosmos amended). The absence of such notification to the
products they sell a day, constitutes their 'wages'. The term 'wages' as Peddlers and the lack of periodicity of such payment in
defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as the manner and procedure contemplated in the
amended) is as follows: Minimum Wage Law destroy, quiet evidently, their
allegation that the 'dealer's discount' was their 'wage'.
(g) 'Wage' paid to any employee shall mean the remuneration or Take note that the 'dealer's discount' was given only
earnings, however designated, capable of being expressed in terms of about a week after the end of the month, and from the
money whether fixed or ascertained on a time, task, piece, commission evidence submitted by Cosmos, it appears clearly that
basis, or other method of calculating the same, which is payable by an the 'dealer's discount' varies from month to month.
employer to an under a written or unwritten contract of employement Thus, the earnings of Mr. Salvador Abonales, who is a
for work done or to be done or for services rendered or to be rendered, Peddler, from January to August, 1973, amounted to
and includes the fair and reasonable value, as determined by the P12,520.70, while that of Mr. Alberto S. Garcia, for the
Secretary of Labor, of board, lodging, or other facilities customarily same period, amounted to P13,633.42, and 4 their
furnished by the employer to the employee. ... earnings every month vary decisively. This factor
defeats factually the insistence of the Peddlers that they
Section 10 (k) of the same law provides as follows: are employees of Cosmos or Mafinco.

(k) Notification of wage conditions. — It shall be the duty of every Upon the other hand, the Peddlers' declarations reveal
employer to notify his employees at the time of hiring of the wage that the wages of their helpers are taken from the
conditions under which they are employed, which shall include the overprice or what is ordinarily termed as 'commission'
following particulars: of ten centavos (P0.10) per case that they get-a factor
which indicates that they are themselves employers of
 their helpers. In addition, the Peddlers are reported as firing, we is a prerogative of the Peddlers and not of
Employers of these helpers with the Social Security Cosmos or Mafinco.
System, and that they also purchase workmen's
compensation policies in their names as Employers of (4) The power to control the employee's conduct. — From the
their own helpers for purposes of workmen's interviews had by your Committee with both the Peddlers and the
compensation insurance of their liabilities, which are all representatives of Cosmos and Mafinco, we gather that the following
in accordance with the terms and conditions of the findings on the power of control are substantially correct:
Agreement or Contract and indicative of an attribute of
one who is an independent merchant. (a) That the delivery trucks assigned to the Peddlers are
available to them early in the morning and are free to
(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and get them, which they usually do between 5:30 A.M. to
Rey Moralde vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, 6:30 A.M. There was no compulsion on the part of the
which served as one of our bases for this study, the complainants Peddlers to report for work at that time, as in fact, they
therein appear to have complained before the National Labor Relations did not sign any time record. The practice of getting the
Commission for being allegedly illegally dismissed or that their delivery trucks early in the morning is more beneficial
services were terminated without cause. A search of the alleged to the Peddlers than to Cosmos or Mafinco since they
dismissal however shows that the Identical letters both dated can finish the peddling of Cosmos products much
December 7, 1972 addressed to the said complainants were not earlier and spend the rest of the day at their own
actually what complainants pictured them to be, but the termination of pleasure. The signing of the 'logbooks' is both pertinent
the peddling in accordance with paragraph 9 of said Contract. and necessary since the trucks used in the delivery of
Cosmos products are owned by Cosmos or Mafinco and
xxx xxx xxx are simply utilized by Peddlers as a measure of
convenience and for advertising purposes. But peddlers
Thus, complainants' services were not terminated, only are not precluded from getting trucks of their own
their Peddling Contracts with Mafinco were. The power should they so desire.
of dismissal is not lodged with either Mafinco or
Cosmos, for based on the Agreement or Contract none (b) That liaison officers (supervisors) are assigned by
whatsoever exists. Certainly, to attribute a power of Cosmos or Mafinco in definite areas routes or zones,
dismissal to Cosmos or Mafinco where none exists is not so much of supervision over Peddlers, since their
careless imprudence and a height of inaccuracy. This areas, routes or zones were already agreed upon or pre-
power of dismissal by Cosmos or Mafinco is not arranged among them through the Cosmos Peddlers
countenanced in the Agreement or Contract. Association, Inc. of which all Peddlers are members, as
principally for market analysis since soft drinks selling
There is, however, an allegation by the Peddlers that the is a highly competitive business, and also to inquire or
hiring and firing of the helpers ultimately rest on check on sales, and the result of which, report is made
Cosmos or Mafinco. This allegation nevertheless, is direct to the Office of Cosmos or Mafinco.
controverted by Cosmos and Mafinco. Nonetheless, we
checked the basic document — the Agreement or (c) That the use of the uniform does not seem to be an
Contract — and we find that the hiring and, impliedly imposition by management of Cosmos or Mafinco upon
the Peddlers, but a voluntary arrangement among the As to the aspect of employer-employee relation,
Peddlers themselves. For, from the documents therefore, between Cosmos or Mafinco and the
submitted to this Committee, it appears that the Cosmos Peddlers, your Committee does not have sufficient basis
Peddlers Association, in a meeting held on August 5, to reasonably sustain the stand of the Peddlers that there
1967, adopted a resolution to 'always wear their is such relationship.
uniform while in the performance of their sales work,'
and in their meeting on January 25, 1969, it adopted (c) Attributes of an independent contractor. — As a
another resolution penalizing Peddlers who failed to countercheck, as it were, to the issue of employer-
wear their uniform in the amount of P2.00 per violation. employee relationship your committee has taken the
Certainly, the resolutions of the Cosmos Peddlers task of testing such relationship against the attributes of
Association, an independent association of Peddlers and an independent contractor which, from the interviews
duly registered with the Securities and Exchange and documents submitted by the parties, appear to
Commission, and possessing an entirely distinct exists on the part of the Peddlers. The earlier case of
existence, cannot be taken as impositions from Cosmos Andoyo vs. Manila Railroad Co., G.R. No. 34722,
or Mafinco. promulgated on March 28, 1932, furnishes us the
definition of an 'independent contractor.' Our Supreme
(d) That the matter of turning in of sales of collection Court of pre-war composition, ruled:
which, if found short, is charged against the Peddler's
cash bond, is to the mind of the Committee, giving An independent contractor is one who exercises
effect to the valid terms and conditions of the independent employment and contracts to do a piece of
Agreement or Contract, and also an ordinary business work according to his own methods and without being
practice which necessarily requires liquidation of the subject to control of his employer except as to the resuIt
day's accounts. We do not see any evidence of control of thework. A person who has no capital or money of
on the part of Cosmos or Mafinco over the activities, his own to pay his laborers or to comply with his
including the sales, of the Cosmos products by the obligations to them, who files no bond to answer for the
Peddlers themselves who are, apparently, left to their fulfillment of his contract with his employer, falls short
own choices of routes, areas or zones as pre-arranged, of the requisites or conditions necessary to classify him
with no definite, much less supervised, time schedule. as independent contractor.

(e) That in the matter of reprimand or discipline which These requisites and conditions were reiterated in the
the peddlers attempt to project when they failed to postwar cases of Philippine Manufacturing Co., Inc. vs.
report for work, your Committee found no substantial Geronimo, G. R. No. L-6968, promulgated on
evidence on this point. The evidence shows that the November 29, 1954, and Koppel (Phil.), Inc. vs.
peddlers are free to choose their time. Obviously, any Darlucio et, al., G.R. No. L-14903, promulgated on
absence that they may incur means so much reduction August. 29, 1960. Analyzing the definition of
from their earnings. Thus, if their attention is 'independent contractor', the following may be gathered
incidentally called on this matter it is for the observance from the relationship between the Peddlers, on the one
of their agreements which is present in any contractual hand, and Cosmos or Mafinco, on the other:
relations.
(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Again, to the mind of your Committee, the amount of
Mafinco, the latter furnishing the delivery truck, but the former sell the Performance Bond is not so relevant and material as
Cosmos products according to their own methods, subject to the pre- to the purpose for which the same is executed- which is
arranged routes, areas and zones, and go back to the Company to assure performance of the Peddlers' obligations as
compound to return the delivery truck and to make accounting of the employer of his helpers. This is an attribute of an
day's sales collection at any time in the morning or in the afternoon. independent contractor to which the Peddlers are bound
Essentially, control, if at all, extends only as to observance of traffic under the Agreement or Contract.
regulations which is inherent in ownership of the delivery truck by
Cosmos or Mafinco and the end result which is the liquidation of the (4) Peddlers are doing business for themselves since
sales collection. Control over the details of the Peddlers' sales they took out licenses in the City of Manila, and have
activities seems to be farfetched in this case. paid their corresponding professional or occupation tax
to the Bureau of Internal Avenue. This fact strengthens
(2) Capital or money of the Peddlers to pay their own helpers is the Committee findings that the peddlers are carrying
evidently within their prerogative, although it appears that the wages on a business as independent merchants.
of helpers are uniform at P6.00 per trip. But can we safely say that the
cash bond of Pl,500.00 by the Peddlers constitute their capital? For The Secretary in his resolution of October 18, 1973 ignored the
big-time businessmen, this small amount may not be considered committee's conclusion. He clarified that the NLRC should determine
capital, but when it is taken as a 'deposit on consignment' since the whether the two complainants were illegally dismissed and that the
same answers for any deficiencies that the Peddlers may incur during jurisdictional issue should not be taken up anymore.
the day's sales collection, then it can be taken to mean 'capital' within
its signification that it allocates to every day business dealing. The The instant petition; the issue and the ruling thereon. — Mafinco filed
amount of capital, to us, is immaterial; it is the purpose for which the the instant actions on November 14, 1973. It prayed for a declaration
same is deposited that is most significant. that the Secretary of Labor and the NLRC had no jurisdiction to
entertain the complaints of Repomanta and Moralde; that the
(3) The Peddlers are required under the Agreement to Peddler Soft Secretary's decision should be set aside, and that the NLRC and the
Drinks and Peddling Contract to put up not only the cash bond of Secretary be enjoined from further proceeding in NLRC Case No. LR-
P1,500.00, but also a performance bond of P1,000.00 as embodied in 086.
said Agreement to Peddler Soft Drinks as follows:
Parenthetically, it should be noted that under section 5 of Presidential
(4) To assure performance by the PEDDLER of his obligation to his Decree No. 21 the Secretary's decision "is appealable" to the President
employees under the Social Security Act, the applicable labor laws, of the Philippines (Nation Multi Service Labor Union vs. Agcaoili, L-
and for damages suffered by third persons PEDDLER shall furnish a 39741, May 30, 1975, 64 SCRA 274). However, under section 22 of
performance bond of P1,000.00 in favor of the MANUFACTURER the old NLRC regulations, an appeal to the President should be made
from a surety Company acceptable to the MANUFACTURER. And, in only "in national interest cases".
case Performance Bond within 30 days from the date of signing of this
Contract, such failure shall be sufficient ground for the On the other hand, judicial review of the decision of an administrative
MANUFACTURER to suspend the business relationship with the agency or official exercising quasi-judicial functions is proper in cases
Peddler until the Peddler complies with this provision. of lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative action or resolution is "corrupt,
arbitrary or capricious (San Miguel Corporation vs. Secretary of Presidential Decree No. 21 and the rules and regulations adopted
Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of thereunder (Art. 290. See Sec. 5, P.D. No. 626).
Customs vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General, L-
21352, November 29, 1966, 18 SCRA 877, 891). The issue is whether the dismissal of Repomanta and Moralde was
within the jurisdiction of the old NLRC. If, as held by the old NLRC, it
After the parties had submitted their illuminating memoranda, Mafinco had no jurisdiction over their complaint because they were not
filed a motion in this Court for the dismissal of the complaint in the employees of Mafinco but independent contractors, then the Secretary
defunct NLRC on three grounds, to wit: (1) that the NLRC had no of Labor had no jurisdiction to remand the case to the NLRC for a
jurisdiction over the case because Repomanta and Moralde had not hearing on the merits of the complaint.
sought reinstatement or backwages; (2) that the employer's failure to
secure written clearance from the Secretary of Labor before dismissing Hence, the crucial issue is whether Repomanta and Moralde were
an employee might constitute a crime punishable under article 327 of employees of Mafinco under the peddling contract already quoted. Is
the Labor Code and not mere contempt, as contemplated in section 10 the contract an employment contract or a contract to sell or distribute
of Presidential Decree No. 21, and (3) that the contempt provisions of Cosmos products?
that decree were abrogated by the Labor Code.
The question of whether an employer-employee relationship exists in a
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. certain situation has bedevilled the courts. Businessmen, with the aid
Ines-Melale Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 of lawyers, have tried to avoid the bringing about of an employer-
SCRA 771, where it was held that the regular court, not the NLRC, has employee relationship in some of their enterprises because that
jurisdiction over an employee's action for damages against his juridical relation spawns obligations connected with workmen's
employer's act of demoting him. compensation, social security, medicare, minimum wage, termination
pay and unionism.
Respondent Repomanta and Moralde opposed that motion to dismiss.
They Pointed out that, inasmuch as their complaint is pending in the Presidential Decree No. 21 provides:
new NLRC, this Court cannot dismiss it. They also observed that
article 327 was eliminated from the Labor Code which, as amended by SEC. 2. The Commission shall have original and
Presidential Decrees Nos. 570-A, 626 and 643, contains only 292 exclusive jurisdiction over the following:
articles. Article 327 was superseded by article 278 of the amended
Code. 1) All matters involving employee-employer relations including all
disputes and grievances which may otherwise lead to strikes and
The truth is that Mafinco's motion merely adduced additional grounds lockouts under Republic Act No. 875;
to support its stand that the Secretary of Labor had no jurisdiction over
the complaint of Repomanta and Moralde. xxx xxx xxx

This case was not rendered moot by the Labor Code. Although the SEC. 10. The President of the Philippines, on
Code abolished the old NLRC (Art. 289), it created a new NLRC (Art. recommendation of the Commission and the Secretary
213) and provided that cases pending before the old NLRC should be of Labor, may order the arrest and detention of any
transferred to, and processed by, the corresponding labor relations person held in contempt by the Commission for non-
division or the new NLRC and should be decided in accordance with compliance and defiance of any subpoena, order or
 decision duly issued by the Commission in accordance In a certiorari and prohibition case, like the instant case, only legal
with this Decree and its implementing rules and issues affecting the jurisdiction of the tribunal, board or officer
regulations and for any violation of the provisions of involved may be resolved on the basis of undisputed facts. Sections 1,
this Decree. 2 and 3, Rule 65 of the Rules of Court require that in the verified
petition for certiorari, mandamus and prohibition the petitioner should
SEC. 11. No employer may shut down his allege "facts with certainty".
establishment or dismiss or terminate the services of
regular employees with at least one year of service In this case the facts have become uncertain. Controversial evidentiary
without the written clearance of the Secretary of , facts have been alleged. What is certain and indubitable is that a
Labor. notarized peddling contract was executed.

The Solicitor General, as counsel for the old NLRC and the Secretary This Court is not a trier of facts. It would be difficult, if not
of Labor, argues that the question of whether Repomanta and Morale anomalous, to decide the jurisdictional issue on the basis of the parties'
are independent contractors or employees is factual in character and contradictory factual submissions. The record has become voluminous
cannot be resolved by merely construing the peddling contracts; that because of their efforts to persuade this Court to accept their
other relevant facts aliunde or dehors the said contracts should be discordant factual statements.
taken into account, and that the contracts were a part of an "intricate
network of devices (of Mafinco and Cosmos) developed. and perfected Pro hac vice the issue of whether Repomanta and Moralde were
through the years to conceal the true nature of their relationship to employees of Mafinco or were independent contractors should be
their sales agents". resolved mainly in the light of their peddling contracts. A different
approach would lead this Court astray into the field of factual
Repomanta and Moralde contend that their peddling contracts were controversy where its legal pronouncements would not rest on solid
terminated because of their activities in organizing a union among the grounds.
peddlers. Annexed to their memorandum is a joint affidavit of sixty-
three sales agents of Cosmos products who described therein the A restatement of the provisions of the peddling contract is necessary in
nature of their work, the organization of their union and the dismissal order to find out whether under that instrument Repomanta and
of Repomanta and Moralde. Annexed to their answer is Resolution No. Moralde were independent contractors or mere employees of Mafinco.
921 of the Social Security Commission dated November 16, 1972 in
SSS Case No. 602 wherein it was held that peddlers and their helpers Under the peddling contract, Mafinco would provide the peddler with
were employees of Cosmos. a delivery truck to be used in the distribution of Cosmos soft drinks
(Par. 1). Should the peddler employ a driver and helpers, he would be
Like the Solicitor General, Repomanta and Moralde harp on the responsible for their compensation and social security contributions
argument that the peddling contracts were a scheme to camouflage an and he should comply with applicable labor laws "in relation to his
employer-employee relationship and thus evade the coverage of labor employees" (Par. 2).
laws.
The peddler would be responsible for any damage to persons or
The parties in their pleadings and memoranda injected conflicting property or to the truck caused by his own acts or omissions or those
factual allegations to support their diametrically opposite contentions. of his driver and helpers (Par. 3). Mafinco would bear the cost of
From the factual angle, the case has become highly controversial. gasoline and maintenance of the truck (Par. 4). The peddler would
secure at his own expense the necessary licenses and permits and bear "In determining the existence of employer-employee relationship, the
the expenses to be incurred in the sale of Cosmos products (Par. 5). following elements are generally considered, namely: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
The soft drinks would be charged to the peddler at P2.52 per case of 24 power of dismissal; and (4) the power to control the employees'
bottles, ex-warehouse. Should he purchase at least 250 cases a day, he conduct-although the latter is the most important element" (Viana vs.
would be entitled to a peddler's discount of eleven pesos (Par. 6). The Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).
peddler would post a cash bond in the sum of P1,500 to answer for his
obligations to Mafinco (Par. 7) and another cash bond of P1,000 to On the other hand, an independent contractor is "one who exercises
answer for his obligations to his employees (Par. 11). He should independent employment and contracts to do a piece of work
liquidate his accounts at the end of each day (Par. 8). The contract according to his own methods and without being subject to control of
would be effective up to May 31, 1973. Either party might terminate it his employer except as to the result of the work" (Mansal vs. P.P.
upon five days' prior notice to the other (Par. 9). Gocheco Lumber Co., supra).

We hold that under their peddling contracts Repomanta and Moralde Among the factors to be considered are whether the
were not employees of Mafinco but were independent contractors as contractor is carrying on an independent business;
found by the NLRC and its fact-finder and by the committee appointed whether the work is part of the employer's general
by the Secretary of Labor to look into the status of Cosmos and business; the nature and extent of the work; the skill
Mafinco peddlers. They were distributors of Cosmos soft drinks with required; the term and duration of the relationship; the
their own capital and employees. Ordinarily, an employee or a mere right to assign the performance of the work to another;
peddler does not execute a formal contract of employment. He is the power to terminate the relationship; the existence of
simply hired and he works under the direction and control of the a contract for the performance of a specified piece of
employer. work; the control and supervision of the work; the
employer's powers and duties with respect to the hiring,
Repomanta and Moralde voluntarily executed with Mafinco formal firing, and payment of the contractor's servants; the
peddling contracts which indicate the manner in which they would sell control of the premises; the duty to supply the premises,
Cosmos soft drinks. That Circumstance signifies that they were acting tools, appliances, material and labor; and the mode,
as independent businessmen. They were to sign or not to sign that manner, and terms of payment. (56 C.J.S. 46).
contract. If they did not want to sell Cosmos products under the
conditions defined in that contract; they were free to reject it. Those tests to determine the existence of an employer-employee
relationship or whether the person doing a particular work for another
But having signed it, they were bound by its stipulations and the is an independent contractor cannot be satisfactorily applied in the
consequences thereof under existing labor laws. One such stipulation instant case. It should be obvious by now that the instant case is a
is the right of the parties to terminate the contract upon five days' prior penumbral, sui generis case lying on the shadowy borderline that
notice (Par. 9). Whether the termination in this case was an separates an employee from an independent contractor.
unwarranted dismissal of an employee, as contended by Repomanta
and Moralde, is a point that cannot be resolved without submission of In determining whether the relationship is that of employer and
evidence. Using the contract itself as the sole criterion, the termination employee or whether one is an independent contractor, "each case
should perforce be characterized as simply the exercise of a right must be determined on its own facts and all the features of the
freely stipulated upon by the parties. relationship are to be considered" (56 C.J.S. 45). We are convinced
that on the basis of the peddling contract, no employer-employee
relationship was created. Hence, the old NLRC had no jurisdiction
over the termination of the peddling contract.

However, this ruling is without prejudice to the right of Repomanta

and Moralde and the other peddlers to sue in the proper Court of First
Instance and to ask for a reformation of the instrument evidencing the
contract or for its annulment or to secure a declaration that,
disregarding the peddling contract, the actual juridical relationship
between them and Mafinco or Cosmos is that of employer and
employee. In that action a fulldress trial may be held and the parties
may introduce the evidence necessary to sustain their respective
contentions.

Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and

Cosmos had acted oppressively towards their peddlers, as
contemplated in article 1701 of the Civil Code, then they should file
the proper action for damages in the regular courts. Where there is a
right, there is a remedy (Ubi jus, ubi remedium).

WHEREFORE, the decision, order and resolution of the Secretary of

Labor in NLRC Case No. LR-086 dated April 16, July 16 and October
18, 1973, respectively, are set aside and the order of the NLRC dated
February 2, 1973, dismissing the case for lack of jurisdiction, is
affirmed. No costs.
G.R. No. L-69870 November 29, 1988 Personnel Clerk until she became Chief of Property and Records, on
10 March 1980. 1
NATIONAL SERVICE CORPORATION (NASECO) AND
ARTURO L. PEREZ, petitioners, Sometime before 7 November 1983, Credo was administratively
vs. charged by Sisinio S. Lloren, Manager of Finance and Special Project
THE HONORABLE THIRD DIVISION, NATIONAL LABOR and Evaluation Department of NASECO, stemming from her non-
RELATIONS COMMISSION, MINISTRY OF LABOR AND compliance with Lloren's memorandum, dated 11 October 1983,
EMPLOYMENT, MANILA AND EUGENIA C. regarding certain entry procedures in the company's Statement of
CREDO, respondents. Billings Adjustment. Said charges alleged that Credo "did not comply
with Lloren's instructions to place some corrections/additional remarks
G.R. No. 70295 November 29,1988 in the Statement of Billings Adjustment; and when [Credo] was called
by Lloren to his office to explain further the said instructions, [Credo]
EUGENIA C. CREDO, petitioner, showed resentment and behaved in a scandalous manner by shouting
vs. and uttering remarks of disrespect in the presence of her co-
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL employees." 2
SERVICES CORPORATION AND ARTURO L.
PEREZ, respondents. On 7 November 1983, Credo was called to meet Arturo L. Perez, then
Acting General Manager of NASECO, to explain her side before Perez
The Chief Legal Counsel for respondents NASECO and Arturo L. and NASECO's Committee on Personnel Affairs in connection with
Perez. the administrative charges filed against her. After said meeting, on the
same date, Credo was placed on "Forced Leave" status for 1 5 days,
Melchor R. Flores for petitioner Eugenia C. Credo. effective 8 November 1983. 3

Before the expiration of said 15-day leave, or on 18 November 1983,

Credo filed a complaint, docketed as Case No. 114944-83, with the
PADILLA, J.: Arbitration Branch, National Capital Region, Ministry of Labor and
Employment, Manila, against NASECO for placing her on forced
Consolidated special civil actions for certiorari seeking to review the leave, without due process. 4
decision * of the Third Division, National Labor Relations
Commission in Case No. 11-4944-83 dated 28 November 1984 and its Likewise, while Credo was on forced leave, or on 22 November 1983,
resolution dated 16 January 1985 denying motions for reconsideration NASECO's Committee on Personnel Affairs deliberated and evaluated
of said decision. a number of past acts of misconduct or infractions attributed to
her. 5 As a result of this deliberation, said committee resolved:
Eugenia C. Credo was an employee of the National Service
Corporation (NASECO), a domestic corporation which provides 1. That, respondent [Credo] committed the following
security guards as well as messengerial, janitorial and other similar offenses in the Code of Discipline, viz:
manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18 OFFENSE vs. Company Interest & Policies
July 1975. Through the years, she was promoted to Clerk Typist, then
 No. 3 — Any discourteous act to customer, officer and Case No. 11-4944-83, alleging absence of just or authorized cause for
employee of client company or officer of the her dismissal and lack of opportunity to be heard. 10
Corporation.
After both parties had submitted their respective position papers,
OFFENSE vs. Public Moral affidavits and other documentary evidence in support of their claims
and defenses, on 9 May 1984, the labor arbiter rendered a decision: 1)
No. 7 — Exhibit marked discourtesy in the course of dismissing Credo's complaint, and 2) directing NASECO to pay Credo
official duties or use of profane or insulting language to separation pay equivalent to one half month's pay for every year of
any superior officer. service.11

OFFENSE vs. Authority Both parties appealed to respondent National Labor Relations
Commission (NLRC) which, on 28 November 1984, rendered a
No. 3 — Failure to comply with any lawful order or any decision: 1) directing NASECO to reinstate Credo to her former
instructions of a superior officer. position, or substantially equivalent position, with six (6) months'
backwages and without loss of seniority rights and other privileges
2. That, Management has already given due appertaining thereto, and 2) dismissing Credo's claim for attorney's
consideration to respondent's [Credo] scandalous fees, moral and exemplary damages. As a consequence, both parties
actuations for several times in the past. Records also filed their respective motions for reconsideration, 12 which the NLRC
show that she was reprimanded for some offense and denied in a resolution of 16 January 1985. 13
did not question it. Management at this juncture, has
already met its maximum tolerance point so it has Hence, the present recourse by both parties. In G.R. No. 68970,
decided to put an end to respondent's [Credo] being an petitioners challenge as grave abuse of discretion the dispositive
undesirable employee. 6 portion of the 28 November 1984 decision which ordered Credo's
reinstatement with backwages. 14 Petitioners contend that in arriving at
The committee recommended Credo's termination, with forfeiture of said questioned order, the NLRC acted with grave abuse of discretion
benefits. 7 in finding that: 1) petitioners violated the requirements mandated by
law on termination, 2) petitioners failed in the burden of proving that
On 1 December 1983, Credo was called age to the office of Perez to be the termination of Credo was for a valid or authorized cause, 3) the
informed that she was being charged with certain offenses. Notably, alleged infractions committed by Credo were not proven or, even if
these offenses were those which NASECO's Committee on Personnel proved, could be considered to have been condoned by petitioners, and
Affairs already resolved, on 22 November 1983 to have been 4) the termination of Credo was not for a valid or authorized cause. 15
committed by Credo.
On the other hand, in G.R. No. 70295, petitioner Credo challenges as
In Perez's office, and in the presence of NASECO's Committee on grave abuse of discretion the dispositive portion of the 28 November
Personnel Affairs, Credo was made to explain her side in connection 1984 decision which dismissed her claim for attorney's fees, moral and
with the charges filed against her; however, due to her failure to do exemplary damages and limited her right to backwages to only six (6)
so, 8 she was handed a Notice of Termination, dated 24 November months. 16
1983, and made effective 1 December 1983. 9 Hence, on 6 December
1983, Credo filed a supplemental complaint for illegal dismissal in
As guidelines for employers in the exercise of their power to dismiss chance to explain her side" of the charges filed against her, this chance
employees for just causes, the law provides that: was given so perfunctorily, thus rendering illusory Credo's right to
security of tenure. That Credo was not given ample opportunity to be
Section 2. Notice of dismissal. — Any employer who heard and to defend herself is evident from the fact that the compliance
seeks to dismiss a worker shall furnish him a written with the injunction to apprise her of the charges filed against her and to
notice stating the particular acts or omission afford her a chance to prepare for her defense was dispensed in only a
constituting the grounds for his dismissal. day. This is not effective compliance with the legal requirements
aforementioned.
xxx xxx xxx
The fact also that the Notice of Termination of Credo's employment
Section 5. Answer and Hearing. — The worker may (or the decision to dismiss her) was dated 24 November 1983 and
answer the allegations stated against him in the notice made effective 1 December 1983 shows that NASECO was already
of dismissal within a reasonable period from receipt of bent on terminating her services when she was informed on 1
such notice. The employer shall afford the worker December 1983 of the charges against her, and that any hearing which
ample opportunity to be heard and to defend himself NASECO thought of affording her after 24 November 1983 would
with the assistance of his representative, if he so merely be pro forma or an exercise in futility.
desires.
Besides, Credo's mere non-compliance with Lorens memorandum
Section 6. Decision to dismiss. — The employer shall regarding the entry procedures in the company's Statement of Billings
immediately notify a worker in writing of a decision to Adjustment did not warrant the severe penalty of dismissal of the
dismiss him stating clearly the reasons therefor. 17 NLRC correctly held that:

These guidelines mandate that the employer furnish an employee ... on the charge of gross discourtesy, the CPA found in
sought to be dismissed two (2) written notices of dismissal before a its Report, dated 22 November 1983 that, "In the
termination of employment can be legally effected. These are the process of her testimony/explanations she again
notice which apprises the employee of the particular acts or omissions exhibited a conduct unbecoming in front of NASECO
for which his dismissal is sought and the subsequent notice which Officers and argued to Mr. S. S. Lloren in a sarcastic
informs the employee of the employer's decision to dismiss him. and discourteous manner, notwithstanding, the fact that
she was inside the office of the Acctg. General
Likewise, a reading of the guidelines in consonance with the express Manager." Let it be noted, however, that the Report did
provisions of law on protection to labor 18 (which encompasses the not even describe how the so called "conduct
right to security of tenure) and the broader dictates of procedural due unbecoming" or "discourteous manner" was done by
process necessarily mandate that notice of the employer's decision to complainant. Anent the "sarcastic" argument of
dismiss an employee, with reasons therefor, can only be issued after complainant, the purported transcript 19 of the meeting
the employer has afforded the employee concerned ample opportunity held on 7 November 1983 does not indicate any
to be heard and to defend himself. sarcasm on the part of complainant. At the most,
complainant may have sounded insistent or emphatic
In the case at bar, NASECO did not comply with these guidelines in about her work being more complete than the work of
effecting Credo's dismissal. Although she was apprised and "given the
 Ms. de Castro, yet, the complaining officer signed the Auditor "in front of his subordinates displaying arrogance and unruly
work of Ms. de Castro and did not sign hers. behavior" in 1980, or when she allegedly shouted at NASECO's
Internal Control Consultant in 1981. 25 But then, in sharp contrast to
As to the charge of insubordination, it may be NASECO's penchant for ignoring the aforesaid acts of misconduct,
conceded, albeit unclear, that complainant failed to when Credo committed frequent tardiness in August and September
place same corrections/additional remarks in the 1983, she was reprimanded. 26
Statement of Billings Adjustments as instructed.
However, under the circumstances obtaining, where Even if the allegations of improper conduct (discourtesy to superiors)
complainant strongly felt that she was being were satisfactorily proven, NASECO's condonation thereof is gleaned
discriminated against by her superior in relation to other from the fact that on 4 October 1983, Credo was given a salary
employees, we are of the considered view and so hold, adjustment for having performed in the job "at least
that a reprimand would have sufficed for the infraction, [satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as
but certainly not termination from services. 20 regards job performance, particularly in terms of quality of work,
quantity of work, dependability, cooperation, resourcefulness and
As this Court has ruled: attendance.

... where a penalty less punitive would suffice, whatever Considering that the acts or omissions for which Credo's employment
missteps may be committed by labor ought not to be was sought to be legally terminated were insufficiently proved, as to
visited with a consequence so severe. It is not only justify dismissal, reinstatement is proper. For "absent the reason which
because of the law's concern for the working man. gave rise to [the employee's] separation from employment, there is no
There is, in addition, his family to consider. intention on the part of the employer to dismiss the employee
Unemployment brings untold hardships and sorrows on concerned." 29 And, as a result of having been wrongfully dismissed,
those dependent on the wage-earner. 21 Credo is entitled to three (3) years of backwages without deduction
and qualification. 30
Of course, in justifying Credo's termination of employment, NASECO
claims as additional lawful causes for dismissal Credo's previous and However, while Credo's dismissal was effected without procedural
repeated acts of insubordination, discourtesy and sarcasm towards her fairness, an award of exemplary damages in her favor can only be
superior officers, alleged to have been committed from 1980 to July justified if her dismissal was effected in a wanton, fraudulent,
1983. 22 oppressive or malevolent manner. 31 A judicious examination of the
record manifests no such conduct on the part of management.
If such acts of misconduct were indeed committed by Credo, they are However, in view of the attendant circumstances in the case, i.e., lack
deemed to have been condoned by NASECO. For instance, sometime of due process in effecting her dismissal, it is reasonable to award her
in 1980, when Credo allegedly "reacted in a scandalous manner and moral damages. And, for having been compelled to litigate because of
raised her voice" in a discussion with NASECO's Acting head of the the unlawful actuations of NASECO, a reasonable award for attorney's
Personnel Administration 23 no disciplinary measure was taken or fees in her favor is in order.
meted against her. Nor was she even reprimanded when she allegedly
talked 'in a shouting or yelling manner" with the Acting Manager of In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued
NASECO's Building Maintenance and Services Department in that the NLRC has no jurisdiction to order Credo's reinstatement.
1980 24 or when she allegedly "shouted" at NASECO's Corporate NASECO claims that, as a government corporation (by virtue of its
being a subsidiary of the National Investment and Development Thus, the situations sought to be avoided by the 1973 Constitution and
Corporation (NIDC), a subsidiary wholly owned by the Philippine expressed by the Court in the National Housing . Corporation case in
National Bank (PNB), which in turn is a government owned the following manner —
corporation), the terms and conditions of employment of its employees
are governed by the Civil Service Law, rules and regulations. In The infirmity of the respondents' position lies in its
support of this argument, NASECO cites National Housing permitting a circumvention or emasculation of Section
Corporation vs. JUCO, 33 where this Court held that "There should no 1, Article XII-B of the constitution. It would be possible
longer be any question at this time that employees of government- for a regular ministry of government to create a host of
owned or controlled corporations are governed by the civil service law subsidiary corporations under the Corporation Code
and civil service rifles and regulations." funded by a willing legislature. A government-owned
corporation could create several subsidiary
It would appear that, in the interest of justice, the holding in said case corporations. These subsidiary corporations would
should not be given retroactive effect, that is, to cases that arose before enjoy the best of two worlds. Their officials and
its promulgation on 17 January 1985. To do otherwise would be employees would be privileged individuals, free from
oppressive to Credo and other employees similarly situated, because the strict accountability required by the Civil Service
under the same 1973 Constitution ,but prior to the ruling in National Decree and the regulations of the Commission on
Housing Corporation vs. Juco, this Court had recognized the Audit. Their incomes would not be subject to the
applicability of the Labor Code to, and the authority of the NLRC to competitive restrains of the open market nor to the
exercise jurisdiction over, disputes involving terms and conditions of terms and conditions of civil service employment.
employment in government owned or controlled corporations, among Conceivably, all government-owned or controlled
them, the National Service Corporation (NASECO).<äre||anº•1àw> 34 corporations could be created, no longer by special
charters, but through incorporations under the general
Furthermore, in the matter of coverage by the civil service of law. The Constitutional amendment including such
government-owned or controlled corporations, the 1987 Constitution corporations in the embrace of the civil service would
starkly varies from the 1973 Constitution, upon which National cease to have application. Certainly, such a situation
Housing Corporation vs. Juco is based. Under the 1973 Constitution, cannot be allowed to exist. 37
it was provided that:
appear relegated to relative insignificance by the 1987 Constitutional
The civil service embraces every branch, agency, provision that the Civil Service embraces government-owned or
subdivision, and instrumentality of the Government, controlled corporations with original charter; and, therefore, by clear
including every government-owned or controlled implication, the Civil Service does not include government-owned or
corporation. ... 35 controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general
On the other hand, the 1987 Constitution provides that: corporation law.

The civil service embraces all branches, subdivisions, The proceedings in the 1986 Constitutional Commission also shed
instrumentalities, and agencies of the Government, light on the Constitutional intent and meaning in the use of the phrase
including government-owned or controlled corporations "with original charter." Thus
with original charter. 36 (Emphasis supplied)
 THE PRESIDING OFFICER (Mr. covered because the provision says
Trenas) Commissioner Romulo is "including government-owned or
recognized. controlled corporations."

MR. ROMULO. I beg the indulgence of MR. FOZ. The Philippine Airlines was
the Committee. I was reading the wrong established as a private corporation.
provision. Later on, the government, through the
GSIS, acquired the controlling stocks. Is
I refer to Section 1, subparagraph I which reads: that not the correct situation?

The Civil Service embraces all branches, subdivisions, MR. ROMULO. That is true as
instrumentalities, and agencies of the government, Commissioner Ople is about to explain.
including government-owned or controlled There was apparently a Supreme Court
corporations. decision that destroyed that distinction
between a government-owned
My query: Is Philippine Airlines covered by this corporation created under the
provision? MR. FOZ. Will the Commissioner please Corporation Law and a government-
state his previous question? owned corporation created by its own
charter.
MR. ROMULO. The phrase on line 4 of
Section 1, subparagraph 1, under the MR. FOZ. Yes, we recall the Supreme
Civil Service Commission, says: Court decision in the case of NHA vs.
"including government-owned or Juco to the effect that all government
controlled corporations.' Does that corporations irrespective of the manner
include a corporation, like the Philippine of creation, whether by special charter or
Airlines which is government-owned or by the private Corporation Law, are
controlled? deemed to be covered by the civil
service because of the wide-embracing
MR. FOZ. I would like to throw a definition made in this section of the
question to the Commissioner. Is the existing 1973 Constitution. But we recall
Philippine Airlines controlled by the the response to the question of
government in the sense that the Commissioner Ople that our intendment
majority of stocks are owned by the in this provision is just to give a general
government? description of the civil service. We are
not here to make any declaration as to
MR. ROMULO. It is owned by the whether employees of government-
GSIS. So, this is what we might call a owned or controlled corporations are
tertiary corporation. The GSIS is owned barred from the operation of laws, such
by the government. Would this be as the Labor Code of the Philippines.
MR. ROMULO. Yes. original charters, such as the GSIS, were
covered by the Civil Service Law and
MR. OPLE. May I be recognized, Mr. corporations spun off from the GSIS,
Presiding Officer, since my name has which we called second generation
been mentioned by both sides. corporations functioning as private
subsidiaries, were covered by the Labor
MR. ROMULO. I yield part of my time. Code. Samples of such second
generation corporations were the
THE PRESIDING OFFICER Philippine Airlines, the Manila
(Mr.Trenas). Commissioner Ople is
recognized. Hotel and the Hyatt. And that demarcation worked very
well. In fact, all of these companies I have mentioned as
MR. OPLE. In connection with the examples, except for the Manila Hotel, had collective
coverage of the Civil Service Law in bargaining agreements. In the Philippine Airlines, there
Section 1 (1), may I volunteer some were, in fact, three collective bargaining agreements;
information that may be helpful both to one, for the ground people or the PALIA one, for the
the interpellator and to the Committee. flight attendants or the PASAC and one for the pilots of
Following the proclamation of martial the ALPAC How then could a corporation like that be
law on September 21, 1972, this issue of covered by the Civil Service law? But, as the Chairman
the coverage of the Labor Code of the of the Committee pointed out, the Supreme Court
Philippines and of the Civil Service Law decision in the case of NHA vs. Juco unrobed the whole
almost immediately arose. I am, in thing. Accordingly, the Philippine Airlines, the Manila
particular, referring to the period Hotel and the Hyatt are now considered under that
following the coming into force and decision covered by the Civil Service Law. I also recall
effect of the Constitution of 1973, where that in the emergency meeting of the Cabinet convened
the Article on the Civil Service was for this purpose at the initiative of the Chairman of the
supposed to take immediate force and Reorganization Commission, Armand Fabella, they
effect. In the case of LUZTEVECO, agreed to allow the CBA's to lapse before applying the
there was a strike at the time. This was a full force and effect of the Supreme Court decision. So,
government-controlled and government- we were in the awkward situation when the new
owned corporation. I think it was owned government took over. I can agree with Commissioner
by the PNOC with just the minuscule Romulo when he said that this is a problem which I am
private shares left. So, the Secretary of not exactly sure we should address in the deliberations
Justice at that time, Secretary Abad on the Civil Service Law or whether we should be
Santos, and myself sat down, and the content with what the Chairman said that Section 1 (1)
result of that meeting was an opinion of of the Article on the Civil Service is just a general
the Secretary of Justice which 9 became description of the coverage of the Civil Service and no
binding immediately on the government more.
that government corporations with
Thank you, Mr. Presiding Officer. this is just a general description and we
are not making any declaration
MR. ROMULO. Mr. Presiding Officer, whatsoever.
for the moment, I would be satisfied if
the Committee puts on records that it is MR. MONSOD. Perhaps if
not their intent by this provision and the Commissioner Romulo would like a
phrase "including government-owned or definitive understanding of the coverage
controlled corporations" to cover such and the Gentleman wants to exclude
companies as the Philippine Airlines. government-owned or controlled
corporations like Philippine Airlines,
MR. FOZ. Personally, that is my view. then the recourse is to offer an
As a matter of fact, when this draft was amendment as to the coverage, if the
made, my proposal was really to Commissioner does not accept the
eliminate, to drop from the provision, the explanation that there could be a
phrase "including government- owned or distinction of the rules, including salaries
controlled corporations." and emoluments.

MR. ROMULO. Would the Committee MR. ROMULO. So as not to delay the
indicate that is the intent of this proceedings, I will reserve my right to
provision? submit such an amendment.

MR. MONSOD. Mr. Presiding Officer, I xxx xxx xxx

do not think the Committee can make
such a statement in the face of an THE PRESIDING OFFICE (Mr. Trenas)
absolute exclusion of government-owned Commissioner Romulo is recognized.
or controlled corporations. However, this
does not preclude the Civil Service Law MR. ROMULO. On page 2, line 5, I
to prescribe different rules and suggest the following amendment after
procedures, including emoluments for "corporations": Add a comma (,) and the
employees of proprietary corporations, phrase EXCEPT THOSE EXERCISING
taking into consideration the nature of PROPRIETARY FUNCTIONS.
their operations. So, it is a general
coverage but it does not preclude a THE PRESIDING OFFICER (Mr.
distinction of the rules between the two Trenas). What does the Committee say?
types of enterprises.
SUSPENSION OF SESSION
MR. FOZ. In other words, it is
something that should be left to the MR. MONSOD. May we have a
legislature to decide. As I said before, suspension of the session?
 THE PRESIDING OFFICER (Mr. MR. FOZ. And not under the general
Trenas). The session is suspended. corporation law.

It was 7:16 p.m. MR. ROMULO. That is correct. Mr.

Presiding Officer.
RESUMPTION OF SESSION
MR. FOZ. With that understanding and
At 7:21 p.m., the session was resumed. clarification, the Committee accepts the
amendment.
THE PRESIDING OFFICER (Mr. Trenas). The session
is resumed. MR. NATIVIDAD. Mr. Presiding
officer, so those created by the general
Commissioner Romulo is recognized. corporation law are out.

MR. ROMULO. Mr. Presiding Officer, I am amending MR. ROMULO. That is correct: 38
my original proposed amendment to now read as
follows: "including government-owned or controlled On the premise that it is the 1987 Constitution that governs the instant
corporations WITH ORIGINAL CHARTERS." The case because it is the Constitution in place at the time of decision
purpose of this amendment is to indicate that thereof, the NLRC has jurisdiction to accord relief to the parties. As an
government corporations such as the GSIS and SSS, admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the
which have original charters, fall within the ambit of NASECO is a government-owned or controlled corporation without
the civil service. However, corporations which are original charter.
subsidiaries of these chartered agencies such as the
Philippine Airlines, Manila Hotel and Hyatt are Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice
excluded from the coverage of the civil service. Perfecto in his concurring opinion in Gomez vs. Government Insurance
Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also
THE PRESIDING OFFICER (Mr. published in 78 Phil. 221) on the effectivity of the principle of social
Trenas). What does the Committee say? justice embodied in the 1935 Constitution, said:

MR. FOZ. Just one question, Mr. Certainly, this principle of social justice in our
Presiding Officer. By the term "original Constitution as generously conceived and so tersely
charters," what exactly do we mean? phrased, was not included in the fundamental law as a
mere popular gesture. It was meant to (be) a vital,
MR. ROMULO. We mean that they articulate, compelling principle of public policy. It
were created by law, by an act of should be observed in the interpretation not only of
Congress, or by special law. future legislation, but also of all laws already existing
on November 15, 1935. It was intended to change the
spirit of our laws, present and future. Thus, all the laws
which on the great historic event when the
 Commonwealth of the Philippines was born, were Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin,
susceptible of two interpretations strict or liberal, Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ.,
against or in favor of social justice, now have to be concur.
construed broadly in order to promote and achieve
social justice. This may seem novel to our friends, the Narvasa, J., is on leave.
advocates of legalism but it is the only way to give life
and significance to the above-quoted principle of the Gutierrez, Jr., J., in the result.
Constitution. If it was not designed to apply to these
existing laws, then it would be necessary to wait for
generations until all our codes and all our statutes shall
have been completely charred by removing every
provision inimical to social justice, before the policy of
social justice can become really effective. That would Separate Opinions
be an absurd conclusion. It is more reasonable to hold
that this constitutional principle applies to all legislation
in force on November 15, 1935, and all laws thereafter
passed. CRUZ, J., concurring:

WHEREFORE, in view of the foregoing, the challenged decision of While concurring with Mr. Justice Padilla's well-researched ponencia,
the NLRC is AFFIRMED with modifications. Petitioners in G.R. No. I have to express once again my disappointment over still another
69870, who are the private respondents in G.R. No. 70295, are ordered avoidable ambiguity in the 1987 Constitution.
to: 1) reinstate Eugenia C. Credo to her former position at the time of
her termination, or if such reinstatement is not possible, to place her in It is clear now from the debates of the Constitutional Commission that
a substantially equivalent position, with three (3) years backwages, the government-owned or controlled corporations included in the Civil
from 1 December 1983, without qualification or deduction, and Service are those with legislative charters. Excluded are its
without loss of seniority rights and other privileges appertaining subsidiaries organized under the Corporation Code.
thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral damages
and P5,000.00 for attorney's fees. If that was the intention, the logical thing, I should imagine, would
have been to simply say so. This would have avoided the suggestion
If reinstatement in any event is no longer possible because of that there are corporations with duplicate charters as distinguished
supervening events, petitioners in G.R. No. 69870, who are the private from those with original charters.
respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo,
in addition to her backwages and damages as above described, All charters are original regardless of source unless they are amended.
separation pay equivalent to one-half month's salary for every year of That is the acceptable distinction. Under the provision, however, the
service, to be computed on her monthly salary at the time of her charter is still and always original even if amended as long it was
termination on 1 December 1983. granted by the legislature.

SO ORDERED.
It would have been clearer, I think, to say "including government
owned or controlled corporations with legislative charters." Why this
thought did not occur to the Constitutional Commission places one
again in needless puzzlement.

Separate Opinions

CRUZ, J., concurring:

While concurring with Mr. Justice Padilla's well-researched ponencia,

I have to express once again my disappointment over still another
avoidable ambiguity in the 1987 Constitution.

It is clear now from the debates of the Constitutional Commission that

the government-owned or controlled corporations included in the Civil
Service are those with legislative charters. Excluded are its
subsidiaries organized under the Corporation Code.

If that was the intention, the logical thing, I should imagine, would
have been to simply say so. This would have avoided the suggestion
that there are corporations with duplicate charters as distinguished
from those with original charters.

All charters are original regardless of source unless they are amended.
That is the acceptable distinction. Under the provision, however, the
charter is still and always original even if amended as long it was
granted by the legislature.

It would have been clearer, I think, to say "including government

owned or controlled corporations with legislative charters." Why this
thought did not occur to the Constitutional Commission places one
again in needless puzzlement.