Labor Cases 1 PDF

8/13/2019 Labor Cases 1 PDF

1/36

1

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,vs.HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D. ACHACOSO, as Administrator of the

Philippine Overseas Employment Administration, respondents.

Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J .:

The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged principally in the recruitment ofFilipino workers, male and female, for overseas placement,"

1challenges the Constitutional validity of Department Order No. 1, Series

of 1988, of the Department of Labor and Employment, in the character of "GUIDELINES GOVERNING THE TEMPORARYSUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari andprohibition. Specifically, the measure is assailed for "discrimination against males or females;"

2that it "does not apply to all Filipino

workers but only to domestic helpers and females with similar skills;"3and that it is violative of the right to travel. It is held likewise to

be an invalid exercise of the lawmaking power, police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution, providing for worker participation "inpolicy and decision-making processes affecting their rights and benefits as may be provided by law."

4Department Order No. 1, it is

contended, was passed in the absence of prior consultations. It is claimed, finally, to be in violation of the Charter's non-impairmentclause, in addition to the "great and irreparable injury" that PASEI members face should the Order be further enforced.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and Administrator of the Philippine OverseasEmployment Administration, filed a Comment informing the Court that on March 8, 1988, the respondent Labor Secretary lifted thedeployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and Switzerland. *Insubmitting the validity of the challenged "guidelines," the Solicitor General invokes the police power of the Philippine State.

It is admitted that Department Order No. 1 is in the nature of a police power measure. The only question is whether or not it is validunder the Constitution.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation thatmay interfere with personal liberty or property in order to promote the general welfare."

5As defined, it consists of (1) an imposition of

restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but has been,purposely, veiled in general terms to underscore its all-comprehensive embrace.

"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enoughroom for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits."

6

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the Charter. Along with the taxing powerand eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental attribute of government that hasenabled it to perform the most vital functions of governance. Marshall, to whom the expression has been credited,

7refers to it

succinctly as the plenary power of the State "to govern its citizens."8

"The police power of the State ... is a power coextensive with self- protection, and it is not inaptly termed the "law of overwhelmingnecessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit all things hurtful to the comfort,safety, and welfare of society."

9

It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the conception that men in organizing thestate and imposing upon its government limitations to safeguard constitutional rights did not intend thereby to enable an individualcitizen or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to ensure communalpeace, safety, good order, and welfare."

10Significantly, the Bill of Rights itself does not purport to be an absolute guaranty of

individual rights and liberties "Even liberty itself, the greatest of all rights, is not unrestricted license to act according to one's will."11

Itis subject to the far more overriding demands and requirements of the greater number.

Notwithstanding its extensive sweep, police power is not without its own limitations. For all its awesome consequences, it may not beexercised arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to advancethe public good. Thus, when the power is used to further private interests at the expense of the citizenry, there is a clear misuse of thepower.

12

In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity.

13

In the absence of clear and convincing evidence to the contrary, thepresumption logically stands.

The petitioner has shown no satisfactory reason why the contested measure should be nullified. There is no question that DepartmentOrder No. 1 applies only to "female contract workers,"

14but it does not thereby make an undue discrimination between the sexes. It is

well-settled that "equality before the law" under the Constitution15

does not import a perfect Identity of rights among all men andwomen. It admits of classifications, provided that (1) such classifications rest on substantial distinctions; (2) they are germane to thepurposes of the law; (3) they are not confined to existing conditions; and (4) they apply equally to all members of the same class.

16


2/36

2

The Court is satisfied that the classification made-the preference for female workers rests on substantial distinctions.

As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our female labor force abroad, especiallydomestic servants, amid exploitative working conditions marked by, in not a few cases, physical and personal abuse. The sordi d talesof maltreatment suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by testimonies of returningworkers, are compelling motives for urgent Government action. As precisely the caretaker of Constitutional rights, the Court is calledupon to protect victims of exploitation. In fulfilling that duty, the Court sustains the Government's efforts.

The same, however, cannot be said of our male workers. In the first place, there is no evidence that, except perhaps for isol atedinstances, our men abroad have been afflicted with an Identical predicament. The petitioner has proffered no argument that theGovernment should act similarly with respect to male workers. The Court, of course, is not impressing some male chauvinistic notionthat men are superior to women. What the Court is saying is that it was largely a matter of evidence (that women domestic workers are

being ill-treated abroad in massive instances) and not upon some fanciful or arbitrary yardstick that the Government acted in this case.It is evidence capable indeed of unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say thesame thing as far as men are concerned. There is simply no evidence to justify such an inference. Suffice it to state, then, that insofaras classifications are concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this case isjustified.

As we have furthermore indicated, executive determinations are generally final on the Court. Under a republican regime, it is theexecutive branch that enforces policy. For their part, the courts decide, in the proper cases, whether that policy, or the manner bywhich it is implemented, agrees with the Constitution or the laws, but it is not for them to question its wisdom. As a co-equal body, the

judiciary has great respect for determinations of the Chief Executive or his subalterns, especially when the legislature itse lf hasspecifically given them enough room on how the law should be effectively enforced. In the case at bar, there is no gainsaying the fact,and the Court will deal with this at greater length shortly, that Department Order No. 1 implements the rule-making powers granted bythe Labor Code. But what should be noted is the fact that in spite of such a fiction of finality, the Court is on its own persuaded thatprevailing conditions indeed call for a deployment ban.

There is likewise no doubt that such a classification is germane to the purpose behind the measure. Unquestionably, it is the avowedobjective of Department Order No. 1 to "enhance the protection for Filipino female overseas workers"

17this Court has no quarrel that

in the midst of the terrible mistreatment Filipina workers have suffered abroad, a ban on deployment will be for their own good andwelfare.

The Order does not narrowly apply to existing conditions. Rather, i t is intended to apply indefinitely so long as those condi tions exist.This is clear from the Order itself ("Pending review of the administrative and legal measures, in the Philippines and in the hostcountries . . ."

18), meaning to say that should the authorities arrive at a means impressed with a greater degree of permanency, the

ban shall be lifted. As a stop-gap measure, it is possessed of a necessary malleability, depending on the circumstances of each case.Accordingly, it provides:

9. LIFTING OF SUSPENSION. The Secretary of Labor and Employment (DOLE) may, upon recommendation of the PhilippineOverseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers.19

The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas workers. That it does not apply to"all Filipina workers"

20is not an argument for unconstitutionality. Had the ban been given universal applicability, then it would have

been unreasonable and arbitrary. For obvious reasons, not all of them are similarly circumstanced. What the Constitution prohibits is

the singling out of a select person or group of persons within an existing class, to the prejudice of such a person or group or resultingin an unfair advantage to another person or group of persons. To apply the ban, say exclusively to workers deployed by A, but no t tothose recruited by B, would obviously clash with the equal protection clause of the Charter. It would be a classic case of what Chaserefers to as a law that "takes property from A and gives it to B."

21It would be an unlawful invasion of property rights and freedom of

contract and needless to state, an invalid act.22

(Fernando says: "Where the classification is based on such distinctions that make areal difference as infancy, sex, and stage of civilization of minority groups, the better rule, it would seem, is to recognize its validity onlyif the young, the women, and the cultural minorities are singled out for favorable treatment. There would be an element ofunreasonableness if on the contrary their status that calls for the law ministering to their needs is made the basis of discriminatorylegislation against them. If such be the case, it would be difficult to refute the assertion of denial of equal protection."

23In the case at

bar, the assailed Order clearly accords protection to certain women workers, and not the contrary.)

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment. From scattered provisions of the

Order, it is evident that such a total ban has hot been contemplated. We quote:

5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills defined herein to the following [sic]are authorized under these guidelines and are exempted from the suspension.

5.1 Hirings by immediate members of the family of Heads of State and Government;

5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and

5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations.


3/36

3

5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements or understanding.

xxx xxx xxx

7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing domestic helpers and/or workers ofsimilar skills shall be allowed to process with the POEA and leave for worksite only if they are returning to the same employer to finishan existing or partially served employment contract. Those workers returning to worksite to serve a new employer shall be covered bythe suspension and the provision of these guidelines.

xxx xxx xxx

9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment (DOLE) may, upon recommendation of the PhilippineOverseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers.24

xxx xxx xxx

The consequence the deployment ban has on the right to travel does not impair the right. The right to travel is subject, among otherthings, to the requirements of "public safety," "as may be provided by law."

25Department Order No. 1 is a valid implementation of the

Labor Code, in particular, its basic policy to "afford protection to labor,"26

pursuant to the respondent Department of Labor's rule-making authority vested in it by the Labor Code.

27The petitioner assumes that it is unreasonable simply because of its impact on the

right to travel, but as we have stated, the right itself is not absolute. The disputed Order is a valid qualification thereto.

Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of legislative power. It is true thatpolice power is the domain of the legislature, but it does not mean that such an authority may not be lawfully delegated. As we havementioned, the Labor Code itself vests the Department of Labor and Employment with rulemaking powers in the enforcementwhereof.

28

The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and decision-making processes affectingtheir rights and benefits"

29is not well-taken. The right granted by this provision, again, must submit to the demands and necessities of

the State's power of regulation.

The Constitution declares that:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employmentand equality of employment opportunities for all.

30

"Protection to labor" does not signify the promotion of employment alone. What concerns the Constitution more paramountly is thatsuch an employment be above all, decent, just, and humane. It is bad enough that the country has to send its sons and daughters tostrange lands because it cannot satisfy their employment needs at home. Under these circumstances, the Government is duty-bound

to insure that our toiling expatriates have adequate protection, personally and economically, while away from home. In this case, theGovernment has evidence, an evidence the petitioner cannot seriously dispute, of the lack or inadequacy of such protection, a nd aspart of its duty, it has precisely ordered an indefinite ban on deployment.

The Court finds furthermore that the Government has not indiscriminately made use of its authority. It is not contested that i t has in factremoved the prohibition with respect to certain countries as manifested by the Solicitor General.

The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier purposes targetted by theGovernment.

31Freedom of contract and enterprise, like all other freedoms, is not free from restrictions, more so in this jurisdiction,

where laissez fairehas never been fully accepted as a controlling economic way of life.

This Court understands the grave implications the questioned Order has on the business of recruitment. The concern of the

Government, however, is not necessarily to maintain profits of business firms. In the ordinary sequence of events, it is prof its thatsuffer as a result of Government regulation. The interest of the State is to provide a decent living to its citizens. The Government hasconvinced the Court in this case that this is its intent. We do not find the impugned Order to be tainted with a grave abuse of discretionto warrant the extraordinary relief prayed for.

WHEREFORE, the petition is DISMISSED. No costs.


4/36

4

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,vs.THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J .:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and betweenMrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of thesecond part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of thefirst part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herselfsolidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch off ice was opened,the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in onthe efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla wa sconnected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Serviceconsidered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. datedDec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc.,Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then locatedat the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Officepremises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of factappellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporatesecretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla,he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant LinaSevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appelleeswith a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack ofinterest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an orderdated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstatedcounterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quoordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment oferrors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'SCOMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEETOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT

THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROMDENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN ASAGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O.SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANTLINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS

GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant.


5/36

5

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWSwith offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS wasone of a joint business venture appellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediatelycolumnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service,Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly

from her own social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St.,she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment ofthe monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate officelocated at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with saidbusiness at the Trade & Commerce Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of thebusiness of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by theairline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an officesecretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp.15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3%split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearanc e'ssake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony ofappellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and assuch was designated manager.

1

xxx xxx xxx

The trial court2

held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the truelessee, it was within its prerogative to terminate the lease and padlock the premises.

3It likewise found the petitioner, Lina Sevilla, to

be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer.4The respondent

Court of Appeal5rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:

I

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT"THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OFTHE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND

WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKINGINCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE

PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THEAPPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OFDAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OFLAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYINGAPPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS ANDCOUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACTNOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THECIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEALAPPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD


6/36

6

SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKEDUNILATERALLY BY TOURIST WORLD SERVICE INC.

6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist W orld Service,Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of thepremises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latt er to therelief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist

World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office ofthe appellee Tourist World Service, Inc.

7Tourist 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 w ith theprivate respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of jointventure, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service,"the Rule ofLaw enjoined Tourist World Service and Canilao from taking the law into their own hands,

8in reference to the padlocking now

questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that therelation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try thecase, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant tostatutes then in force.

9

In this jurisdiction, there has been no uniform test to determine the 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 services are performed reserves a right to control not onlythe end to be achieved but also the means to be used in reaching such end."

10 Subsequently, however, we have considered, in

addition to the standard of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of theemployee in the payrolls, in determining the existence of an employer-employee relationship.

11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc.,either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of leasecovering the Tourist Worlds Ermita office, she had bound herself in solidumas and for rental payments, an arrangement that would belike claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease as one ofmere guaranty,

12that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part

with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties mustbe bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein

appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. LinaSevilla.

13Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the

means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airlinebookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned

compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said,

employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, thatthe parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize theexistence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to

stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which thebusiness was run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers orpartners, in which each party has an equal proprietary interest in the capital or property contributed

15and where each party exercises

equal rights in the conduct of the business.16

furthermore, the parties did not hold themselves out as partners, and the building itselfwas embellished with the electric sign "Tourist World Service, Inc.

17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist WorldService, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agentrenders services "in representation or on behalf of another.

18In the case at bar, Sevilla solicited airline fares, but she did so for and on

behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions.And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of thebusiness undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the tieshad contemplated a principal agent relationship, rather than a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the pa rties,cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual i nterest, ofthe agent and the principal.

19It appears that Lina Sevilla is a bona fidetravel agent herself, and as such, she had acquired an interest

in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarilyliable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations.Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the verysubject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of theprincipal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.


7/36

7

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents.Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist WorldService, Inc. disconnected the telephone lines at the branch office.

20Yet, what cannot be denied is the fact that Tourist World Service,

Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, ithad clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World

Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to itsactual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired apersonal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger tothat contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). Shecould not be ousted from possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, ina bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged businesslosses to justify the closure '21but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, letalone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such aninformation (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing theoffice of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch officeproperties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, withou t noticeto her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondentCanilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. "

22It is strange indeed that Tourist

World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. wouldnot pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could nothave been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completelyits business operations, and in the process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty onher part. It is offensive, in any event, to elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc.,should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where thedefendant acted ... in bad faith.

23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen

conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in

relation to Article 2219 (10) thereof

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or pub lic policyshall 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 Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages,25

and P5,000.00 asnominal

26and/or temperate

27damages, to be just, fair, and reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondentCourt of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, areORDERED jointly and severally to indemnify the petitioner, Lina 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, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.


8/36

8

ANGELINA FRANCISCO, Petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFINLIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review on certiorariunder Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution ofthe Court of Appeals dated October 29, 2004

1and October 7, 2005,

2respectively, in CA-G.R. SP No. 78515 dismissing the complaint

for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of theNational Labor Relations Commission (NLRC) dated April 15, 2003,

3in NLRC NCR CA No. 032766-02 which affirmed with

modification the decision of the Labor Arbiter dated July 31, 2002, 4in NLRC-NCR Case No. 30-10-0-489-01, finding that private

respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and CorporateSecretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to theCity of Makati to secure business permits, construction permits and other licenses for the initial operation of the company.

5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend anyboard meeting nor required to do so. She never prepared any legal document and never represented the company as its CorporateSecretary. However, on some occasions, she was prevailed upon to sign documentation for the company.

6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As ActingManager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; representthe company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System(SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which isowned and operated by Kasei Corporation.

7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plusP3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.

8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared

resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, t hedesignated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and thatpetitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters .

9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reductionof P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earningwell. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the companycashier but she was advised that the company was not earning well.

10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longerconnected with the company.

11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before thelabor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 asone of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitionerperformed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record andshe came to the office any time she wanted. The company never interfered with her work except that from time to time, themanagement would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure ofselection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. Themoney received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax onprofessionals, and that she was not one of those reported to the BIR or SSS as one of the companys employees.

12

Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list ofpayees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitionerslatest employer was Seiji Corporation.

13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:
http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt1http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt1http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt1http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt2http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt2http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt2http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt3http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt3http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt3http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt4http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt4http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt4http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt5http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt5http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt5http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt6http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt6http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt6http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt7http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt7http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt7http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt8http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt8http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt8http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt9http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt9http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt9http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt10http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt10http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt10http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt11http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt11http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt11http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt12http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt12http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt12http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt12http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt11http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt10http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt9http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt8http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt7http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt6http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt5http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt4http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt3http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt2http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt1


9/36

9

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally paycomplainant her money claims in accordance with the following computation:

a. Backwages 10/200107/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/200109/2001) 22,500.00

c. Housing Allowance (01/200107/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorneys fees87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages thatwould accrue up to actual payment of separation pay.

SO ORDERED.14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to fullbackwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 andP361,175.00 are deleted;

3) The award of 10% attorneys fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED.15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15,2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondentagainst Kasei Corporation, et al. for constructive dismissal.

SO ORDERED.16

The appellate court denied petitioners motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner andprivate respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court ofAppeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contendingparties is supported by substantial evidence.

17
http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt14http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt14http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt14http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt15http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt15http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt15http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt16http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt16http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt16http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt17http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt17http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt17http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt17http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt16http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt15http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt14


10/36

10

We held in Sevilla v. Court of Appeals18

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

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to

the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from theemployers power to control the employee with respect to the means and methods by which the work is to be accomplished, economicrealities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether asemployee, independent contractor, corporate officer or some other capacity.

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

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstancessurrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no writtenagreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the variouspositions and responsibilities given to the worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,19and lately in Leonardo v. Court ofAppeals,

20where we held that there is an employer-employee relationship when the person for whom the services are performed

reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,21

we observed the need to consider the existing economic conditions prevailing between the parties, inaddition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining theexistence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economicactivity,

22such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of th e

workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workersopportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimedindependent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degreeof dependency of the worker upon the employer for his continued employment in that line of business.

23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continuedemployment in that line of business.

24In the United States, the touchstone of economic reality in analyzing possible employment

relationships for purposes of the Federal Labor Standards Act is dependency. 25

By analogy, the benchmark of economic reality inanalyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker onhis employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the directcontrol and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and served i n variouscapacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the samejob functions, that is, rendering accounting and tax services to the company and performing functions necessary and desira ble for theproper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because shehad served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13thmonth pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18,2000.

26When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene

Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed bythe President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of anemployer-employee relationship between petitioner and respondent corporation.

27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in thelatters line of business.

In Domasig v. National Labor Relations Commission,28

we held that in a business establishment, an identification card is provided notonly as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with thecash vouchers covering petitioners salaries for the months stated therein, the se matters constitute substantial evidence adequate to

support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro29

that a corporation who registers its workers with the SSS is proof that the latter were theformers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as CorporateSecretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras di rectassistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate andother requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor
http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt18http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt18http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt18http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt19http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt19http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt19http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt20http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt20http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt20http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt21http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt21http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt21http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt22http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt22http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt22http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt23http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt23http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt23http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt24http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt24http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt24http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt25http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt25http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt26http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt26http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt26http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt27http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt27http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt27http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt28http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt28http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt28http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt29http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt29http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt29http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt29http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt28http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt27http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt26http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt25http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt24http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt23http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt22http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt21http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt20http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt19http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt18


11/36

11

required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation,although once in a while she was required to sign prepared documentation for the company.

30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawnby Kamura himself from the records of the case.

31Regardless of this fact, we are convinced that the allegations in the first affidavit

are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction orrecanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trial s amockery and place the investigation of the truth at the mercy of unscrupulous witnesses.

32A recantation does not necessarily cancel

an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution .33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She wasselected and engaged by the company for compensation, and is economically dependent upon respondent for her continuedemployment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporationon a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensat ion,with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the meansand methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001.This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioneras accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further enti tled to separationpay, in lieu of reinstatement.

34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntaryresignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely;when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employerbecomes unbearable to an employee.

35In Globe Telecom, Inc. v. Florendo-Flores,

36we ruled that where an employee ceases to

work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse workingenvironment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the companywas not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, inevery case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that thepolicy of 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 by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfareand reaffirming it as a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLEDand SET ASIDE. The Decision of the National Labor RelationsCommission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case is REMANDEDto the Labor Arbiter forthe recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until the date of finalityof this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six monthsshall be considered as one whole year.

SO ORDERED.
http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt30http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt30http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt30http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt31http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt31http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt31http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt32http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt32http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt32http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt33http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt33http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt33http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt34http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt34http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt34http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt35http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt35http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt35http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt36http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt36http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt36http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt36http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt35http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt34http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt33http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt32http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt31http://www.lawphil.net/judjuris/juri2006/aug2006/gr_170087_2006.html#fnt30


12/36

12

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners,vs.NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and

Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members,JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N.VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA,MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA

ANGELES, respondents.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails the decision ofrespondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino

(SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision of the LaborArbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to reinstatethe dismissed workers and (b) the existence of employer-employee relationship and granting respondent workers by reason thereof

their various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as tailors,

seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria Angeles and LeonilaSerafina who are paid on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesosprovided they report for work before 9:30 a.m. everyday.

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday and during peakperiods even on Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint

docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g)benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5.

1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador Rivera, a salesmanof petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobelloreplied that the same was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied thedesign of petitioner Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and Zapata deniedownership of the same. Consequently a memorandum was issued to each of them to explain on or before February 4, 1985 why noaction should be taken against them for accepting a job order which is prejudicial and in direct competition with the business of thecompany.

2Both respondents allegedly did not submit their explanation and did not report for work.

3Hence, they were dismissed by

petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85on February 5, 1985.

4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal dismissal andordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions without loss of seniorityrights, with full backwages from July 4, 1985 up to actual reinstatement. The charge of unfair labor practice is dismissed for lack ofmerit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage law is herebyordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave pay and the 13thMonth Pay. In view thereof, the economic analyst of the Commission is directed to compute the monetary awards due eachcomplainant based on the available records of the respondents retroactive as of three years prior to the filing of the instant case.

SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 aff irmed said decision but limite d thebackwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year.

6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:


13/36


14/36

14

who has not himself appealed cannot obtain from the appellate court-, any affirmative relief other than the ones granted in the decisionof the court below. "

14

As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance. This is ap parent fromthe provision defining the employees entitled to said allowance, thus: "... All workers in the private sector, regardless of their position,designation or status, and irrespective of the method by which their wages are paid. "

15

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations Implementing

P.D. No. 851 which provides:

Section 3. Employers covered. The Decree shall apply to all employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount forperforming a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned. (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled toservice incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time

consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations,Book III, Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, ImplementingRegulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show that a violation of theemployer's rules has been committed and the evidence of such transgression, the copied barong tagalog, was in the possession ofPelobello who pointed to Zapata as the owner. When required by their employer to explain in a memorandum issued to each of them,they not only failed to do so but instead went on AWOL (absence without official leave), waited for the period to explain to expire andfor petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissedbecause of union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private respondents,their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiableground for termination of employment by the employer expressly provided for in Article 283(a) of the Labor Code as well as a clearindication of guilt for the commission of acts inimical to the interests of the employer, another justifiable ground for dismissal under thesame Article of the Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an

employee whose continuance in the service is inimical to the employer's interest.

16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to their version andfound their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant Manager who wasinvestigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:

No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to hisemployer, regard for his employer's rules, and appreciation of the dignity and responsibility of his office, has so plainly and completelybeen bared.

That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and proper. That incontroversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreementsand writings should be resolved in the former's favor, is not an unreasonable or unfair rule. But that disregard of the employer's ownrights and interests can be justified by that concern and solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC,157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.17

More importantly,while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed thatevery labor dispute will automatically be decided in favor of labor.

18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an employee for just andvalid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause i n accordancewith the norms of due process.

19

There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously insist on the

existence of employer-employee relationship, because of the supervision and control of their employer over them, were the very ones

who exhibited their lack of respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor Arbiter datedJune 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR CaseNo. 2-428-85 is dismissed for lack of factual and legal bases. Award of service incentive leave pay to private respondents is deleted.


15/36

15

ARSENIO T. MENDIOLA,petitioner,vs.COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/orCELLMARK AB,respondents.

D E C I S I O N

PUNO, J.:

On appeal are the Decision1and Resolution

2of the Court of Appeals, dated January 30, 2003 and July 30, 2003, respectively, in CA-

G.R. SP No. 71028, affirming the ruling3of the National Labor Relations Commission (NLRC), which in turn set aside the July 30,

2001 Decision4of the labor arbiter. The labor arbiter declared illegal the dismissal of petitioner from employment and awarded

separation pay, moral and exemplary damages, and attorney's fees.

The facts are as follows:

Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California,USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with principal

office in Gothenburg, Sweden.

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.),Inc."

5with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already approved by the

Securities and Exchange Commission [SEC] on the said date."6The Side Agreement outlines the business relationship of the parties

with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office in the Philippines, tobe known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's base salary and the overhead expenditures of thecompany shall be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50equity by ATM and Pacfor-usa.

On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to transact business in the Philippinesunder the name of Pacfor or Pacfor Phils.

7In its application, private respondent Pacfor proposed to establish its representative office

in the Philippines with the purpose of monitoring and coordinating the market activities for paper products. It also designated petitioneras its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting

the corporation.8

In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the RepresentativeOffice Known as Pacific Forest Resources (Philippines),"

9where the salary of petitioner was increased to $78,000 per annum. Both

agreements show that the operational expenses will be borne by the representative office and funded by all parties "as equalpartners," while the profits and commissions will be shared among them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of PacforPhils.

10Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-owner of Pacfor Phils.

because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a'theoretical company' with the purpose of dividing the income 50-50."

11Petitioner presumably knew of this arrangement from the start,

having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in thePhilippines to save on taxes.

12

Petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have beenbetter off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp .

13Had he known that no joint

venture existed, he would not have allowed Pacfor to take the profitable business of his own company, ATM MarketingCorp.

14Petitioner raised other issues, such as the rentals of office furniture, salary of the employees, company car, as well as

commissions allegedly due him. The issues were not resolved, hence, in October 2000, petitioner wrote Pacfor-USA demandingpayment of unpaid commissions and office furniture and equipment rentals, amounting to more than one million dollars .

15

On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers, documents, files,records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils .

16On December

18, 2000, private respondent Pacfor also required petitioner to remit more than three hundred thousand-peso Christmas giveawayfund for clients of Pacfor Phils.

17Lastly, private respondent Pacfor withdrew all its offers of settlement and ordered petitioner to

transfer title and turn over to it possession of the service car.18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils. In its letter to

Intercontinental Paper Industries, Inc., dated November 21, 2000, private respondent Pacfor stated:

Until further notice, please course all inquiries and communications for Pacific Forest Resources (Philippines) to:

Pacific Forest Resources200 Tamal Plaza, Suite 200Corte Madera, CA, USA 94925(415) 927 1700 phone(415) 381 4358 fax
http://www.lawphil.net/judjuris/juri2006/jul2006/gr_159333_2006.html#fnt

Documents

Labor Cases 1 PDF