1. G.R. No. 160506, June 6, 2011, JOEB M. ALIVIADO, ET AL. v. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC.;

Aliviado v. Procter & Gamble Philippines, Inc.G.R. No. 160506, 614 SCRA 563, March 9, 2010

FACTS: Petitioners worked as merchandisers of respondent

Procter & Gamble Philippines, Inc. (hereafter, P&G) from various dates, allegedly starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993.

Petitioners signed employment contracts with respondent Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS). They were employed for five months at time, assigned to different stations in supermarkets.

SAPS and Promm-Gem paid petitioners’ wages and imposed disciplinary measures on petitioners when warranted.

P&G entered into contracts with SAPS and Promm-Gem for the promotion of its products. It appears that petitioners were assigned to promote P&G’s products.

In December 1991, petitioners filed a complaint for regularization and other money claims against P&G. The complaint was later amended to include charges of illegal dismissal.

Labor Arbiter: Dismissed the complaint; there was no employer-employee relationship (EER) between

petitioners and P&G, as the former were employed by Promm-Gem and SAPS.

o Applied the four-fold test for EER:1. Selection and engagement;2. Payment of wages;3. Power of dismissal;4. Power of control.

o Declared Promm-Gem and SAPS legitimate job contractors.

Petitioners appealed to the NLRC. NLRC: Dismissed the appeal, affirmed the Labor

Arbiter’s Decision. Motion for reconsideration denied. Petitioners sought recourse with the Court of Appeals

via a petition for certiorari under Rule 65 of the Rules of Court.

CA: Denied the petition and affirmed the NLRC’s Decision with modification.

o P&G ordered to pay service incentive leave pay to petitioners.

o Petitioners’ motion for reconsideration was denied.

Hence, this petition for review by certiorari under Rule 45 of the Rules of Court.

ISSUES + RATIO:

Whether or not contracting out of a company’s core activities is allowed under the Labor Code and its Implementing Rules. YES.

To be sure, the Labor Code and its Implementing Rules do not prohibit job contracting. The law allows

contracting arrangements for the performance of specific jobs, works or services.

Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists where the “contractor” merely recruits, supplies or places workers to perform a job, work or service for a principal. Moreover, any of the following elements must concur:

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

o The contractor does not exercise the right to control over the performance of the work of the contractual employee.

Whether or not Promm-Gem is engaged in labor-only contracting. NO; it is a legitimate job contractor.

It has substantial capital, as shown by its financial statements.

o Authorized capital stock – P1 million.o Paid-in capital – P500,000.

It has substantial investments in the form of warehouses, office spaces, and vehicles.

Promm-Gem has other clients aside from P&G. Promm-Gem provided its workers with uniforms and

materials. The latter were considered regular employees.

Whether or not SAPS is engaged in labor-only contracting. YES.

It does not have substantial capital—its paid-in capital is only P31,250.

o Monthly payroll already totaled P44,561. Its contracts with P&G were for six-month periods. Its capital is not even sufficient for one month’s payroll.

o SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently.

Neither is there a showing of substantial investment in tools, equipment or other assets.

Furthermore, petitioners’ activities which consisted of merchandising and promotion of P&G products are directly related to the manufacturing business.

Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, the Court found that SAPS is engaged in “labor-only contracting.”

Whether or not an employer-employee relationship exists between P&G and petitioners. YES.

Where labor-only contracting exits, the law establishes an EER between the employer and the employees of the “contractor.”

Rationale: to prevent circumvention of labor laws. The petitioners recruited by SAPS are considered P&G

employees. The petitioners who worked under Promm-Gem are not, since the latter is a legitimate job contractor.

Whether or not petitioners (Promm-Gem employees) were illegally dismissed. YES.

Promm-Gem dismissed petitioners for “grave misconduct and breach of trust” after they sought regularization from P&G. Promm-Gem claimed that this “assailed the integrity of the company as a legitimate and independent promotion firm.”

To be a just cause for dismissal, misconduct (a) must be serious; (b) must relate to the performance of the employee’s duties; and (c) must show that the employee has become unfit to continue working for the employer.

o In the instant case, petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so.

o Thus, petitioners are guilty only of simple misconduct.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the employee by his employer.

o The erring employee must hold a position of responsibility or of trust and confidence. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for the employer.

o Here, the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem.

Whether or not petitioners (SAPS-P&G employees) were illegally dismissed. YES.

They were not afforded procedural due process (two notice rule). They were merely verbally informed of the termination of their services.

Petitioners were dismissed upon the initiation of P&G. When the latter did not renew its contract with SAPS, petitioners’ services were automatically terminated evidently because SAPS had no other clients.

Whether or not petitioners are entitled to the payment of damages, costs, and attorney’s fees. YES.

With regard to the employees of Promm-Gem, their dismissals were not attended with bad faith so as to warrant the award of moral and exemplary damages.

As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory barring of the

concerned petitioners from work, and from admission to the work place, after just a one-day verbal notice, and for no valid cause bellows oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages is called for.

P&G is also liable for attorney’s fees. Finally, all petitioners having been illegally dismissed,

they are entitled to reinstatement with backwages.

DISPOSITION: Petition granted. Case remanded to Labor Arbiter for computation of backwages and other benefits.

Aliviado v. Procter & Gamble Philippines, Inc.(Motion to refer the case to the Supreme Court en banc)

G.R. No. 160506, 650 SCRA 400, June 6, 2011

ISSUE + RATIO:

Whether or not the Court erred in ruling that SAPS is a labor-only contractor. NO.

P&G claims that the Court should have applied the four-fold test, specifically the “control test,” in determining whether SAPS is a legitimate job contractor or a labor-only contractor.

This is incorrect. The “control test” is only one of the ways to determine the existence of labor-only contracting.

Pertinently, Department Order No. 18-02 provides:

Section 5. Prohibition against labor-only contracting. — Labor only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and ANY of the following elements are present:

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

(ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis supplied)

In the case at bar, the Court already concluded that (1) SAPS merely recruited workers for P&G, (2) it did not have substantial capital or investment, and (3) the workers performed activities directly related to the business of the principal.

Hence, SAPS may be considered a labor-only contractor under D.O. 18-02, Sec. 5 (i).

In Coca-Cola Bottlers Phils., Inc. v. Agito, the Court ruled:

“The law clearly establishes an employer-employee relationship between the principal employer and the contractor’s employee upon a finding that the contractor is engaged in ‘labor-only’ contracting. Article 106 of the Labor Code categorically states: ‘There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer.’ Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that labor-only contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar.” (Emphasis supplied)

DISPOSITION: Judgment affirmed.

2. G.R. No. 184977, December 7, 2009 COCA-COLA BOTTLERS PHILIPPINES, INC. v. RICKY E. DELA CRUZ ET AL;

COCA COLA BOTTLERS INC v. DELA CRUZG.R. No. 184977CASE DIGEST

Where the contractors were merely suppliers of labor, the contracted personnel, engaged in component functions in the main business of the company under the latter’s supervision and control, cannot but be regular company employees.

FACTS:Respondents Dela Cruz et.al. filed complaints for regularization with money claims against Coca-Cola Bottlers. The respondents alleged they are route helpers who go from the Coca- Cola sales offices or plants to customer outlets, and doing such, their jobs are necessary and desirable in its main business. They further alleged that they worked under the control and supervision of the company’s supervisors who prepared their work schedules and assignments. They argued that the petitioner’s contracts of services with Peerless and Excellent are in the nature of “labor-only” contracts prohibited by law since Peerless and Excellent did not have sufficient capital or investment to provide services to the petitioner.

Coca-cola, the petitioner, contended that it entered into contracts of services with Peerless and Excellent Partners to provide allied services and that the contractors shall pay the salaries of all personnel assigned to the petitioner. It claimed that its main business is softdrinks manufacturing and the respondents’ tasks of sale and distribution are not part of the manufacturing process. The petitioner posited that there is no employer-employee relationship between the company and the respondents and the complaints should be dismissed for lack of jurisdiction.

The labor arbiter and the NLRC dismissed the case. CA reversed the decision and denied the motion for reconsideration. Thus this petition.

ISSUE: W/N Excellent and Peerless were independent labor contractors or “labor-only” contractors.

HELD:Article 106 which provides: Whenever, an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor shall be paid in accordance with the provisions of this Code. x x x There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the alter were directly employed by him.

The CA noted that both the contracts for Peerless and the Excellent show that their obligation was solely to provide the company with “the services of contractual employees,” and nothing more. Peerless and Excellent were mere suppliers of labor who had no sufficient capitalization and equipment to undertake sales and distribution of softdrinks as independent activities separate from the manufacture of softdrinks, and who

had no control and supervision over the contracted personnel. They are therefore labor-only contractors. Consequently, the contracted personnel, engaged in component functions in the main business of the company under the latter’s supervision and control, cannot but be regular company employees.

3. G.R. No. 125792, November 9, 1998, PAL v. NLRC

The Facts

The undisputed facts of this case, as summarized by the solicitor general, are as follows: 6

Sometime in 1977, PAL, a local air carrier, entered into a service agreement with STELLAR, a domestic corporation engaged, among others, in the business of job contracting janitorial services (PAL and STELLAR's Agreement, Annex "1" of PAL's Position Paper, Annex "F", id.).

Pursuant to their service agreement, which was impliedly renewed year after year, STELLAR hired workers to perform janitorial and maintenance services for PAL. Among those employed were [Complainants] Manuel Parenas, Daniel Gaco, Rodolfo Siaron, Alfredo C. Montilla, Romulo S. Castro, Elsa C. Castro,

Marcelo Paragas, Romulo Parane, Rafael Sanchez, Inocencio [Alcantara], Reynaldo Paraiso, Roberto Geronimo, Nomer E. Pescante, Benedicto Santos, Alberto Tomas, Bonifacio Bayeta, Jr., Danilo Rodriguez, Carleto dela Cruz, Rafael Bequio, Eduardo Sitjar, Ruben Tanseco, Teodoro K. Discaya, Ernesto Evardone, Arnulfo Lavilla, Glecerio Elabarin, Marcelino Caneda, Epifanio Galibo, Benjamin Gandelaria, Lino B. Dahohoy, Avelino Mullet, Jimmy M. Cordero, Ivanhoe Magino, Felix B. Catindoy, Ruben Daluz, Abenir Yara, Santiago Co[r]tez, Jr., Armando P. Lucido, Alberto Montilla, Renerio Capon, Leonardo Barrozo, Ireneo Frondozo, Dionesio Banares, Marcelo Marzon, Alfredo Sta. Maria, Bernardo Mamaril, Carlos Delloro, Aldon dela Torre and Florentino Pestido, who were assigned at PAL's various premises under the supervision of STELLAR's supervisors/foremen and timekeepers. The workers were also furnished by STELLAR with janitorial supplies, such as vacuum cleaner and polisher (Please see Manuel Parenas' Contract of Employment with STELLAR, Annex "1" of Annex "E",id.; STELLAR's Position Paper, pp. 2-5, supra; TSN, May 20, 1993, pp. 15-16 and 19-20).

On December 31, 1990, the service agreement between PAL and STELLAR expired. PAL then called for [the] bidding of its janitorial

requirements. This notwithstanding, STELLAR exerted efforts to maintain its janitorial contract with PAL which, in the meantime, allowed Manuel Parenas and others to work at the PAL's premises (STELLAR's Position Paper, pp. 2-5, supra, and Memorandum of Appeal, Annex "H", pp. 3-4, id.; Carlos Callanga's Affidavit, p. 2, pp. 156-160 Records; Annex "2" of STELLAR's Position Paper, supra; PAL's Memorandum of Appeal, p. 2, Annex "G", Petition).

Subsequently, in a letter dated October 31, 1990, PAL formally informed STELLAR that the service agreement would no longer be renewed effective November 16, 1991, since PAL's janitorial requirements were bidded to three other job contractors (Annex "2" of STELLAR's Position Paper,supra; PAL's Memorandum of Appeal, p. 2, supra).

Alleging that they were illegally dismissed, the aforenamed individual private respondents filed, from January to June 1992, five complaints against PAL and STELLAR for illegal dismissal and for payment of separation pay (Annexes "C", "C-1" to "C-19", id.).

The Ruling of Respondent Commission

In its Decision affirming the ruling of the labor arbiter, Respondent Commission held petitioner, as an indirect employer, jointly and severally liable with STELLAR for separation pay. First, the individual private respondent's work, although not directly related to the business of petitioner, was necessary and desirable for the maintenance of the petitioner's premises and airplanes. Second, the individual private respondents were retained for thirteen long years, despite the fact that the contract, which petitioner had entered into STELLAR in 1977, was only for one year.

On reconsideration, the NLRC modified its earlier Decision by absolving STELLAR of liability, thereby making PAL solely responsible for the award decreed by the labor arbiter. It held that, first, petitioner was the employer of the individual private respondents, for it engaged in labor-only contracting with STELLAR. This was shown by the failure of petitioner to refute the factual finding that it continued to employ the individual private respondents after the expiration of the service contract on December 31, 1990. Second, the individual private respondents' admission in their Complaint that they were employees of STELLAR was not conclusive, as the existence of an employer-employee relation was a question of law that could not be the subject of stipulation. Respondent Commission concluded that their dismissal was without just and valid cause. Because they were no longer seeking reinstatement, petitioner was liable for separation pay.

Hence, this petition. 7 When required by the Court to comment on behalf of Respondent Commission, the solicitor general manifested his disagreement with the assailed Decision and

Resolution. Thus, Respondent Commission, in compliance with the February 5, 1997 Resolution of this Court, 8 filed its own Comment.

The Issues

In its Memorandum, 9 petitioner imputes grave abuse of discretion to Respondent Commission in this wise: 10

(a) [I]n holding that the janitorial service agreement with STELLAR was a labor-only arrangement;

(b) [I]n holding that PAL continued with the services of the individual respondents after November 16, 1991, when the janitorial agreement with STELLAR expired; and

(c) [I]n holding PAL liable for payment of separation pay to the individual respondents.

The petition raises two main issues. First, whether the individual private respondents are regular employees of PAL.Second, whether petitioner is liable to them for separation pay. The resolution of the first issue involves a determination of (1) whether petitioner was a labor-only contractor; and (2) whether the individual private respondents became regular employees of PAL because they were allowed to continue working for petitioner after the expiration of the service contract.

The Court's Ruling

The petition is meritorious.

First Issue: No Employer-Employee RelationBetween Complainants and Petitioner

Janitorial Service Agreement IsNot Labor-Only Contacting

Prohibited labor-only contracting is defined in Article 106 of the Labor Code as follows:

Art. 106. Contractor or subcontractor. — . . .

xxx xxx xxx

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

This definition covers any person who undertakes to supply workers to an employer, where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, [machinery], work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. 11

On the other hand, permissible job contracting requires the following conditions:

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

(2) The contractor has substantial capital or investment in the form of tools, equipment, [machinery], work premises, and other materials which are necessary in the conduct of his business. 12

Applying the foregoing provisions to the present case, the Court finds no basis for holding that PAL engaged in labor-only contracting. The true nature of the individual private respondents' employment is evident from the service agreement between petitioner and STELLAR, which we reproduce hereunder:

1. The CONTRACTOR [STELLAR] undertakes to provide the following cleaning and janitorial maintenance services.

Daily Routine:

(a) Dusting and/or damp-wiping of other vertical and horizontal surfaces that require daily attention;

(b) Sweeping and mopping of floors;

(c) Polishing and spot-scrubbing of [illegible];

(d) Dusting, damp-wiping and polishing of

[furniture], counters, . . . and other office fixtures;

(e) Emptying and cleaning of ash trays;

(f) Cleaning and disinfecting of toilets and washrooms;

(g) Cleaning of inside windows, glasses, surfaces, [partitions], etc.;

(h) On-the-job supervision.

2. The CONTRACTOR shall provide sufficient personnel, equipments [sic], supplies, and materials to carry out the undertakings; specified in the preceding paragraph, except that water and electricity consumption shall be for the account of the OWNER. The CONTRACTOR expressly represents that to adequately and suitably comply with the undertakings under paragraph 1 of this

Agreement, the CONTRACTOR shall assign at least eight (8) employees, six (6) days a week except Legal Holidays, to the OWNER's premises to perform the work undertaken by the CONTRACTOR under this Agreement. To comply with such minimum requirements, the CONTRACTOR shall at all times be ready with relievers and/or replacements to ensure continuous and uninterrupted work in case of absences of each assigned employee.

(3) The equipment, materials and supplies to be used by the CONTRACTOR in connection with its aforesaid undertakings shall be of high quality and shall not cause any damage to OWNER's premises and properties or cause any injury or annoyance to the persons working or present in the premises. The OWNER shall place at the disposal of the CONTRACTOR a suitable storage space with lock and key for the safe-keeping of the cleaning equipment and materials which the . . . CONTRACTOR shall use in connection with its undertakings in . . . Agreement.

4. The CONTRACTOR warrants that the persons it shall employ to perform the work subject to this Agreement shall be honest, reliable, carefully screened, trained, cooperative, and in possession of health certificates and police clearances; they will be neat, presentable

in appearance, attired in identifying uniforms and provided with identification cards. The uniforms and identification cards shall be at the expense of the CONTRACTOR.

5. In consideration of the services to be rendered by the CONTRACTOR, the OWNER shall pay to the CONTRACTOR the sum of PESOS: THREE THOUSAND EIGHT HUNDRED FORTY (P3,840.00) per month in Philippine Currency, payable in two equal payments on the 15th and end of each month without necessity of demand. In the event that the minimum wage rate shall be increased by the operation of law, there shall be a corresponding automatic increase in the consideration of the contract price to be paid by the OWNER to the CONTRACTOR in consideration of the latter's services.

6. In case the OWNER shall require the CONTRACTOR to perform the work provided under paragraph 1 hereof in excess of eight hours on: (1) any regular working day, the OWNER shall pay the CONTRACTOR an additional amount to be computed in the following manner:

xxx xxx xxx

7. It is agreed that no authority has been conferred upon the CONTRACTOR by the OWNER to hire any person on behalf of the latter and that each person employed or hired by the CONTRACTOR in carrying out its part of this Agreement shall be paid by the CONTRACTOR, and that no such person employed or hired shall be deemed [an] employee or agent of the OWNER.

8. It is furthermore agreed that the CONTRACTOR shall select, engage and discharge its employees and shall have direct . . . control [of their] services. The CONTRACTOR shall likewise have absolute prerogative to determine the rate of wages or salaries of the employees.

9. It is further agreed that the CONTRACTOR shall comply with all the requirements of laws, decrees, municipal ordinances, and regulations including but not limited to payment of State Insurance Fund, Medicare contributions, SSS contributions, and the Withholding Taxes of its employees.

10. This agreement shall be for a period of one (1) year from May 1, 1977 to April 30, 1978 and [illegible].

The foregoing agreement clearly indicates that an employee-employer relation existed between the individual private respondents and STELLAR, not PAL. The provisions of the agreement demonstrate that STELLAR possessed these earmarks of an employer: (1) the power of selection and engagement of employees (Stipulation Nos. 1, 4, 7 and 8), (2) the payment of wages (Stipulation Nos. 5, 6, 7 and 8), (3) the power of dismissal, and (4) the power to control the employee's conduct (Stipulation No. 8). 13

Aside from these stipulations in the service agreement, other pieces of evidence support the conclusion that STELLAR, not PAL, was the employer of the individual private respondents. A contract of employment 14 existed between STELLAR and the individual private respondents, proving that it was said corporation which hired them. It was also STELLAR which dismissed them, as evidenced by Complainant Parenas' termination letter, which was signed by Carlos P. Callanga, vice president for operations and comptroller ofSTELLAR. 15 Likewise, they worked under STELLAR's own supervisors, Rodel Pagsulingan, Napoleon Parungao and Renato Topacio. 16 STELLAR even had its own collective bargaining agreement with its employees, including the individual private respondents. 17 Moreover, PAL had no power of control and dismissal over them.

In fact, STELLAR claims that it falls under the definition of an independent job contractor. Thus, it alleges that it has sufficient capital in the form of tools and equipment, like vacuum cleaners and polishers, and substantial capitalization as proven by its financial statements. 18 Further, STELLAR has clients

other than petitioner, like San Miguel Corporation, Hongkong and Shanghai Bank, Eveready, Benguet Management Corporation and Japan Airlines. 19

All these circumstances establish that STELLAR undertook said contract on its account, under its own responsibility, according to its own manner and method, and free from the control and direction of the petitioner. Where the control of the principal is limited only to the result of the work, independent job contracting exists. 20 The janitorial service agreement between petitioner and STELLAR is definitely a case of permissible job contracting.

Extension of Service Contract isNot a Source of Employer-EmployeeRelation

Respondent NLRC found that petitioner was the individual private respondents' employer, based primarily on the continued engagement of the employees after the expiration of the service contract. It ruled: 21

Our taking cognizance of the fact that PAL, despite the expiration of its contract with Stellar on December 31, 1990 continued with the service of some of the complainants "as late as 1991", should have been enough notice for them to refute this fact come [the] . . . motion for reconsideration.

But again, perusing PAL's motion for reconsideration, we note that . . . it never refuted the finding below that it continued employing the complainants after its service contract with Stellar expired. We thus cannot but hold on to our view that PAL should be answerable to the separation pay awarded below not only for its engaging in a labor-only contract with Stellar but more importantly for its continued employment of complainants after its service contract with Stellar (the argued employer of complainants) expired.

In its Comment, 22 NLRC, citing Loadstar Shipping Co, Inc. v. Gallo, 23 defended its position on the ground that judicial review by this Court does not include appreciation of the evidence, but is confined only to issues of jurisdiction or grave abuse of discretion.

In trying to support this finding, the individual respondents presented, on the other hand, an entirely different theory — that petitioner, by allowing them to continue working after the expiration of the service agreement, because their successor — employer. In their Memorandum, 24 they argue:

. . . [T]he records and evidence show that the janitorial service contract between PAL and Stellar expired on December 31, 1990, and not on November 16, 1991 [as stated in the October 31, 1990 letter of the petitioner].

xxx xxx xxx

As a consequence of petitioner's letter and upon knowledge of the termination of [the] janitorial service contract, respondent Stellar formally notified each of the [complainants] that their individual employment contract likewise be terminated effective November 16, 1991. Furthermore, it has been expressly and uniformly stated in each of [complainants'] employment contract that their services would last upon the termination of the janitorial service contract between PAL and Stellar which was of course supposedly on December 31, 1990. By working up to the time of the final termination which is November 16, 1991, from December 31, 1990, private respondents became direct employees of PAL.

xxx xxx xxx

Petitioner's continued employment of [complainants] inspite of the expiration of the janitorial contract is an implied absorption to the point of making them its regular employees and making illegal their subsequent termination from service. . . . As held by the Supreme Court, employees absorbed by [a] successor employer enjoy the continuity of their employment status and their rights and privileges (International Container Terminal Services, Inc. vs. NLRC, G.R. N[o]. 982950-99, April 10, 1996, citing the

case of Sumandi vs. Leogardo, et al., G.R. N[o]. 67635, January 17, 1985). . . . . 25

Both contentions are untenable. First, while the issue of labor-only contracting may involve some factual considerations, the existence of an employer-employee relation is nonetheless a question of law. 26 Thus, it falls squarely within the ambit of this Court's judicial review. Second, individual private respondents' invocation of the successor-employer doctrine is not warranted. This doctrine involves a transfer of ownership of the business to a new employer. Where the change of ownership is in bad faith or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held liable for the transgressions of his or herpredecessor. 27 Petitioner, however did not become the successor-employer of the individual private respondents when the service contract expired. There was no transfer of the business of STELLAR in this particular case. The separate undertakings of petitioner and STELLAR continued even after the expiration of the service contract and the dismissal of individual private respondents.

Indeed, we agree with the solicitor general's explanation of this matter: 28

. . . What actually happened was that PAL and STELLAR impliedly renewed, as they had previously done before, their service agreement until PAL's janitorial requirements were bidded to other job contractors. This explains why the individual private respondents remained

working at PAL's premises even after December 31, 1990.

From the foregoing disquisition, it is evident that petitioner was engaged in permissible job contracting and that the individual private respondents, for the entire duration of their employ, were employees not of petitioner but of STELLAR. In legitimate job contracting, no employer-employee relation exists between the principal and the job contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of wages. 29 But in labor-only contracting, an employer-employee relation is created by law between the principal and the labor-only contractor's employees, such that the former is responsible to such employees, as if he or she had directly employed them. 30 Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis. 31

Second Issue:STELLAR Is Liable for Separation Pay

Short of expressly admitting to be the employer of the individual private respondents, STELLAR avers that the former were project employees, whose employment was coterminous with the service agreement, 32 as evidenced by the following stipulations in their contract: 33

1. The EMPLOYER hereby contracts the services of the EMPLOYEE to work as Janitor-

CPD at the project of the EMPLOYER with PAL.

2. It is expressly agreed and understood that the work of the EMPLOYEE shall last only during and shall in no case extend beyond the period fixed for the duration of the contract between the EMPLOYER and PAL covering the project to which the EMPLOYEE is assigned as specified in the second "WHEREAS" hereof. Upon the expiration of said contract the employment of the said employee is deemed automatically terminated without further notice.

In order to avoid liability for separation pay, STELLAR argues that it terminated the services of the individual private respondents for a just and valid cause: the completion of a specific project. Thus, they are not entitled to separation pay.

The Court is not convinced. The position of STELLAR that individual private respondents were its project employees is totally unfounded. A regular employee is distinguished from a project employee by the fact that the latter is employed to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged. 34 A "project" has reference to a particular job or undertaking that may or may not be within the regular or usual business of the employer. 35 In either case, the project must be distinct, separate and identifiable from the main business of the employer, and its duration must be determined or determinable.

In the case at bar, despite the protestations of STELLAR, the service agreement was not a project because its duration was not determined or determinable. While the service agreement may have had a specific term, STELLAR disregarded it, repeatedly renewed the service agreement, and continued hiring the individual private respondents for thirteen consecutive years. Had STELLAR won the bidding, the alleged "project" would have never ended. In any event, the aforesaid stipulations in the employment contract are not included in Articles 282 and 283 of the Labor Code as valid causes for the dismissal of employees.

Again, we must emphasize that the main business of STELLAR is the supply of manpower to perform janitorial services for its clients, and the individual private respondents were janitors engaged to perform activities that were necessary and desirable to STELLAR's enterprise. 36 In this case, we hold that the individual private respondents were STELLAR's regular employees, and there was no valid cause for their dismissal.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution are SET ASIDE insofar as they held PAL liable for separation pay. The July 13, 1994 Decision is however reinstated insofar as it ORDERED STELLAR liable for such award.

4. G.R. No. 119121 August 14, 1998, NPC v. CA

THIRD DIVISION

[G.R. No. 119121.  August 14, 1998]

NATIONAL POWER CORPORATION, petitioner, vs. COURT OF APPEALS, Fifteenth Division and PHESCO INCORPORATED, respondents.

DECISION

ROMERO, J.:

On July 22, 1979, a convoy of four (4) dump trucks owned by the National Power Corporation (NPC) left Marawi city bound for Iligan city.  Unfortunately, enroute to its destination, one of the trucks with plate no. RFT-9-6-673 driven by a certain Gavino Ilumba figured in a head-on-collision with a Toyota Tamaraw.  The incident resulted in the death of three (3) persons riding in the Toyota Tamaraw, as well as physical injuries to seventeen other passengers.

On June 10, 1980, the heirs of the victims filed a complaint for damages against National Power Corporation (NPC) and PHESCO Incorporated (PHESCO) before the then Court of First Instance of Lanao del Norte, Marawi City.  When defendant PHESCO filed its answer to the complaint it contended that it was not the owner of the dump truck which collided with the Toyota Tamaraw but NPC.  Moreover, it asserted that it was merely a contractor of NPC with the main duty of supplying  workers and technicians for the latter’s projects.  On the other hand, NPC denied any liability and countered that the driver of the dump truck was the employee of PHESCO.

After trial on the merits, the trial court rendered a decision dated July 25, 1988 absolving NPC of any liability.  The dispositive portion reads:

“Consequently, in view of the foregoing consideration, judgment is hereby rendered ordering PHESCO, Inc. and Gavino Ilumba upon receipt hereof:

1.  To pay jointly and severally the plaintiffs thru the Dansalan College the sum of P954,154.55 representing the actual or compensatory damages incurred by the plaintiffs; and

2.  To pay the sum of P50,000.00 representing Attorney’s fees.

SO ORDERED.”

Dissatisfied, PHESCO appealed to the Court of Appeals, which on November 10, 1994 reversed the trial court’s judgment.  We quote the pertinent portion of the decision:

“A ‘labor only’ contractor is considered merely as an agent of the employer (Deferia vs. National Labor Relations Commission, 194 SCRA 525).  A finding that a contractor is a ‘labor only’ contractor is equivalent to a finding that there is an employer-employee relationship between the owner of the project and the employees of the ‘labor only’ contractor (Industrial Timer Corporation vs. National Labor Relations Commission, 202 SCRA 465).  So, even if Phesco hired driver Gavino Ilumba, as Phesco is admittedly a ‘labor only’ contractor of Napocor, the statute itself establishes an employer-employee relationship between the employer

(Napocor) and the employee (driver Ilumba) of the labor only contractor (Phesco).  (Ecal vs. National Labor Relations Commission, 195 SCRA 224).

Consequently, we hold Phesco not liable for the tort of driver Gavino Ilumba, as there was no employment relationship between Phesco and driver Gavino Ilumba.  Under Article 2180 of the Civil Code, to hold the employer liable for torts committed by his employees within the scope of their assigned task, there must exist an employer-employee relationship. (Martin vs. Court of Appeals, 205 SCRA 591).

WHEREFORE, we REVERSE the appealed decision.  In lieu thereof, the Court renders judgment sentencing defendant National Power Corporation to pay plaintiffs the sum of P174,889.20 plus P20,000.00 as attorney’s fees and costs.

SO ORDERED.”

Chagrined by the sudden turnaround, NPC filed a motion for reconsideration of said decision which was, however, denied on February 9, 1995.[1] Hence, this petition.

The principal query to be resolved is, as between NPC and PHESCO, who is the employer of Ilumba, driver of the dumptruck which figured in the accident and which should, therefore, would be liable for damages to the victims.  Specifically, NPC assigns the sole error that:

“THE COURT OF APPEALS DECISION FINDING THAT PETITIONER NPC AS THE EMPLOYER OF THE DRIVER

GAVINO ILUMBA, AND CONSEQUENTLY, SENTENCING IT TO PAY THE ACTUAL AND COMPENSATORY DAMAGES SUSTAINED BY COMPLAINANTS, IS NOT IN ACCORD WITH THE LAW OR WITH THE APPLICABLE RULINGS OF THIS HONORABLE COURT.”[2]

As earlier stated, NPC denies that the driver of the dump truck was its employee.  It alleges that it did not have the power of selection and dismissal nor the power of control over Ilumba.[3] PHESCO, meanwhile, argues that it merely acted as a “recruiter” of the necessary workers for and in behalf of NPC.[4]

Before we decide who is the employer of Ilumba, it is evidently necessary to ascertain the contractual relationship between NPC and PHESCO.  Was the relationship one of employer and job (independent) contractor or one of employer and “labor only” contractor?

Job (independent) contracting is present if the following conditions are met:  (a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business.[5] Absent these requisites, what exists is a “labor only” contract under which the person acting as contractor is considered

merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him.[6] Taking into consideration the above distinction and the provisions of the “Memorandum of Understanding” entered into by PHESCO and NPC, we are convinced that PHESCO was engaged in “labor only” contracting.

It must be noted that under the Memorandum, NPC had mandate to approve the “critical path network and rate of expenditure to be undertaken by PHESCO.[7] Likewise, the manning schedule and pay scale of the workers hired by PHESCO were subject to confirmation by NPC.[8] Then too, it cannot be ignored that if PHESCO enters into any sub-contract or lease, again NPC’s concurrence is needed.[9] Another consideration is that even in the procurement of tools and equipment that will be used by PHESCO, NPC’s favorable recommendation is still necessary before these tools and equipment can be purchased.[10] Notably, it is NPC that will provide the money or funding that will be used by PHESCO to undertake the project.[11] Furthermore, it must be emphasized that the project being undertaken by PHESCO, i.e., construction of power energy facilities, is related to NPC’s principal business of power generation.  In sum, NPC’s control over PHESCO in matters concerning the performance of the latter’s work is evident.  It is enough that NPC has the right to wield such power to be considered as the employer.[12]

Under this factual milieu, there is no doubt that PHESCO was engaged in “labor-only” contracting vis-à-vis NPC and as such, it is considered merely an agent of the latter.  In labor-only contracting, an employer-employee relationship between

the principal employer and the employees of the “labor-only” contractor is created.  Accordingly, the principal employer is responsible to the employees of the “labor-only” contractor as if such employees had been directly employed by the principal employer.[13] Since PHESCO is only a “labor-only” contractor, the workers it supplied to NPC, including the driver of the ill-fated truck, should be considered as employees of NPC.[14] After all, it is axiomatic that any person (the principal employer) who enters into an agreement with a job contractor, either for the performance of a specified work or for the supply of manpower, assumes responsibility over the employees of the latter.[15]

However, NPC maintains that even assuming that a “labor only” contract exists between it and PHESCO, its liability will not extend to third persons who are injured due to the tortious acts of the employee of the “labor-only” contractor.[16] Stated otherwise, its liability shall only be limited to violations of the Labor Code and not quasi-delicts.

To bolster its position, NPC cites Section 9(b), Rule VII, Book III of the Omnibus Rules Implementing the Labor Code which reads:

“(b)          Labor only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.”

In other words, NPC posits the theory that its liability is limited only to compliance with the substantive labor

provisions on working conditions, rest periods, and wages and shall not extend to liabilities suffered by third parties, viz.:

“Consequently, the responsibilities of the employer contemplated in a ‘labor only’ contract, should, consistent with the terms expressed in the rule, be restricted ‘to the workers.’ The same can not be expanded to cover liabilities for damages to third persons resulting from the employees’ tortious acts under Article 2180 of the Civil Code.”[17]

The reliance is misplaced.  It bears stressing that the action was premised on the recovery of damages as a result of quasi-delict against both NPC and PHESCO, hence, it is the Civil Code and not the Labor Code which is the applicable law in resolving this case.

To be sure, the pronouncement of this Court in Filamer Christian Institute v. IAC,[18] is most instructive:

“The present case does not deal with a labor dispute on conditions of employment between an alleged employee and an alleged employer.  It invokes a claim brought by one for damages for injury caused by the patently negligent acts of a person, against both doer-employee and his employer.  Hence, the reliance on the implementing rule on labor to disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced.  An implementing rule on labor cannot be used by an employer as a shield to avoid liability under the substantive provisions of the Civil Code.”

Corollarily from the above doctrine, the ruling in Cuison v. Norton & Harrison Co.,[19] finds applicability in the instant case, viz.:

“It is well to repeat that under the civil law an employer is only liable for the negligence of his employees in the discharge of their respective duties.  The defense of independent contractor would be a valid one in the Philippines just as it would be in the United States.  Here Ora was a contractor, but it does not necessarily follow that he was an independent contractor.  The reason for this distinction is that the employer retained  the power of directing and controlling the work.  The chauffeur and the two persons on the truck were the employees of Ora, the contractor, but Ora, the contractor, was an employee of Norton & Harrison Co., charged with the duty of directing the loading and transportation of the lumber.  And it was the negligence in loading the lumber and the use of  minors on the truck which caused the death of the unfortunate boy.  On the facts  and the law, Ora was not an independent contractor, but was the servant of the defendant, and for his negligence defendant was responsible.”

Given the above considerations, it is apparent that Article 2180 of the Civil Code and not the Labor Code will determine the liability of NPC in a civil suit for damages instituted by an injured person for any negligent act of the employees of the “labor only” contractor.  This is consistent with the ruling that a finding that a contractor was a “labor-only” contractor is equivalent to a finding that an employer-employee relationship existed between the owner (principal contractor) and the “labor-only” contractor, including the latter’s workers.[20]

With respect to the liability of NPC as the direct employer, Article 2180 of the Civil Code explicitly provides:

“Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.”

In this regard, NPC’s liability is direct, primary and solidary with PHESCO and the driver.[21] Of course, NPC, if the judgment for damages is satisfied by it, shall have recourse against PHESCO and the driver who committed the negligence which gave rise to the action.[22]

Finally, NPC, even if it truly believed that it was not the employer of the driver, could still have disclaimed any liability had it raised the defense of due diligence in the selection or supervision of PHESCO and Ilumba.[23] However, for some reason or another, NPC did not invoke said defense.  Hence, by opting not to present any evidence that  it exercised due diligence in the supervision of the activities of PHESCO and Ilumba, NPC has foreclosed its right to interpose the same on appeal in conformity with the rule that points of law, theories, issues of facts and arguments not raised in the proceedings below cannot be ventilated for the first time on appeal.[24] Consequently, its liability stands.

WHEREFORE, in view of the foregoing, the assailed decision of the Court of Appeals dated November 10, 1994 and its accompanying resolution dated February 9, 1995 are AFFIRMED without prejudice to the right of NPC to demand

from PHESCO and Ilumba reimbursement of the damages it would be adjudged to pay to complainants.    No costs. 

SO ORDERED.

Narvasa, CJ., (Chairman), Kapunan and Purisima JJ. concur.

5. Guico vs. Quisumbing 298 SCRA 666

SECOND DIVISION

[G.R. No. 131750.  November 16, 1998]

FRANCISCO GUICO, JR., doing business under the name and style of COPYLANDIA SERVICES & TRADING, petitioner, vs. THE HON. SECRETARY OF LABOR & EMPLOYMENT LEONARDO A. QUISUMBING, THE OFFICE OF REGIONAL DIRECTOR OF REGION I, DEP'T OF LABOR & EMPLOYMENT, ROSALINA CARRERA, ET. AL., respondents.

D E C I S I O N

PUNO, J.:

This is a petition for certiorari seeking review of two (2) Orders[1] issued by the respondent Secretary of Labor and Employment dismissing petitioner's appeal.

The case started when the Office of the Regional Director, Department of Labor and Employment (DOLE), Region I, San Fernando, La Union, received a letter-complaint dated April 25, 1995, requesting for an investigation of petitioner's establishment, Copylandia Services & Trading, for violation of labor standards laws. Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly authorized representative under Article 128 of the Labor Code, as amended, inspections were conducted at Copylandia's outlets on April 27 and May 2, 1995. The inspections yielded the following violations involving twenty-one (21) employees who are copier operators: (1) underpayment of wages; (2) underpayment of 13th month pay; and (3) no service incentive leave with pay.[2]

The first hearing of the case was held on June 14, 1995, where petitioner was represented by Joseph Botea, Officer-in-Charge of the Dagupan City outlets, while the 21 employees were represented by Leilani Barrozo, Gemma Gales, Majestina Raymundo and Laureta Clauna. It was established that a copier operator was receiving a daily salary ranging from P35.00 to P60.00 plus commission of P20.00 per P500.00 worth of photocopying. There was also incentive pay of P20.00 per P250.00 worth of photocopying in excess of the first P500.00.[3]

On July 13, 1995, petitioner's representative submitted a Joint Affidavit signed and executed by the 21 employees

expressing their disinterest in prosecuting the case and their waiver and release of petitioner from his liabilities arising from non-payment and underpayment of their salaries and other benefits. Individually signed documents dated December 21, 1994, purporting to be the employees' Receipt, Waiver and Quitclaim were also submitted.[4]

In the investigation conducted by Hearing Officer Adonis Peralta on July 21, 1995, the 21 employees claimed that they signed the Joint Affidavit for fear of losing their jobs. They added that their daily salary was increased to P92.00 effective July 1, 1995, but the incentive and commission schemes were discontinued. They alleged that they did not waive the unpaid benefits due to them.[5]

On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order[6] favorable to the 21 employees. First, he ruled that the purported Receipt, Waiver and Quitclaim dated December 21 and 22, 1994, could not cause the dismissal of the labor standards case against the petitioner since the same were executed before the filing of the said case. Moreover, the employees repudiated said waiver and quitclaim. Second, he held that despite the salary increase granted by the petitioner, the daily salary of the employees was still below the minimum daily wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that the removal of the commission and incentive schemes during the pendency of the case violated the prohibition against elimination or diminution of benefits under Article 100 of the Labor Code, as amended. The dispositive portion of the Order states:

"WHEREFORE, premises considered and pursuant to the Rules on the Disposition of Labor Standards Cases in the Regional Offices issued by the Secretary of Labor and Employment on 16 September 1987,  respondent Copylandia Services and Trading thru its owner/manager Mr. Francisco Guico, is hereby ORDERED to pay the employees the amount of ONE MILLION EIGHTY ONE THOUSAND SEVEN HUNDRED FIFTY SIX PESOS AND SEVENTY CENTAVOS (P1,081,756.70) representing their backwages, distributed as follows:

1.         Rosalina Carrera        - P68,010.912.         Joanna Ventura                  -   28,568.103.         Mercelita Paredes       -   68,010.914.         Aida Licuanan           -   68,010.915.         Gemma Gales            -   68,010.916.         Clotilda Zarata          -   27,808.337.         Consolacion Miguel    -   65,708.288.         Gemma Macalalay      -   68,010.919.         Wandy Aquino          -   19,559.5810.       Laureta Clauna          -   68,010.9111.       Josephine Valdez        -   27,808.3312.       Leilani Berrozo                  -   27,808.3313.       Majestina Raymundo   -   68,010.9114.       Theresa Rosario                 -   68,010.9115.       Edelyn Maramba        -   68,010.9116.       Yolly Dimabayao       -   40,380.6017.       Vilma Calaguin          -   68,010.91

18.       Maila Balolong          -   40,380.6019.       Clarissa Villena          -   27,808.3320.       Maryann Galinato      -   68,010.91

21.       Desiree Cabasag         -     27,808.33

  Total                                P1,081,756.70

and to submit proof of payment to this Office within seven (7) days from receipt hereof.  Otherwise, a Writ of Execution will be issued to enforce this Order.

"SO ORDERED."[7]

Petitioner received a copy of the Order on November 10, 1995.  On November 15, 1995, petitioner filed a Notice of Appeal.[8] The next day, he filed a Memorandum of Appeal accompanied by a Motion to Reduce Amount of Appeal Bond and a Manifestation of an Appeal Bond.

In his appeal memorandum,[9] petitioner questioned the jurisdiction of the Regional Director citing Article 129 of the Labor Code, as amended,[10] and Section 1, Rule IX of the Implementing Rules of Republic Act No. 6715.[11] He argued that the Regional Director has no jurisdiction over the complaint of the 21 employees since their individual monetary claims exceed the P5,000.00 limit.  He alleged that the Regional Director should have indorsed the case to the Labor Arbiter for proper adjudication and for a more formal proceeding where there is ample opportunity for him to present evidence to contest the claims of the employees.  He further alleged that the Regional Director erred in computing the

monetary award since it was done without regard to the actual number of days and time worked by the employees.  He also faulted the Regional Director for not giving credence to the Receipt, Waiver and Quitclaim of the employees.

In the Motion to Reduce Amount of Appeal Bond,[12] petitioner claimed he was having difficulty in raising the monetary award which he denounced as exorbitant.  Pending resolution of the motion, he posted an appeal bond in the amount of P105,000.00 insisting that the jurisdiction of the Regional Director is limited to claims of P5,000.00 per employee and there were 21 employees involved in the case.

On November 22, 1995, petitioner also filed a request to hold in abeyance any action relative to the case for a possible amicable settlement with the employees.[13]

On January 10, 1996, District Labor Officer Adonis Peralta forwarded a Report showing that the petitioner and most of the 21 employees had reached a compromise agreement.  The Release, Waiver and Quitclaim was signed by the following employees and show the following amounts they received, viz:

1. Aida Licuanan           - P3,000.002. Clarissa Villena          -   3,000.003. Gemma Gales            -   3,000.004. Desiree Cabansag       -   3,000.005. Clotilda Zarata          -   3,000.006. Consolacion Miguel    -   5,000.007. Josephine Valdez        -   3,000.008. Maryann Galinato      -   5,000.009. Theresa Rosario                 -   3,000.00

10.Yolly Dimabayao       -   3,000.0011.Vilma Calaguin          -   3,000.0012.Gemma Macalalay      -   3,000.0013.Edelyn Maramba       -   5,000.0014.Charito Gonzales       -   3,000.0015.Joanna Ventura                  -   3,000.00

Four (4) employees did not sign in the compromise agreement.  They insisted that they be paid what is due to them according to the Order of the Regional Director in the total amount of P231,841.06.  They were Laureta Clauna, Majestina Raymundo, Leilani Barrozo and Rosalina Carrera.[14]

In a letter[15] dated February 23, 1996, the Regional Director informed petitioner that he could not give due course to his appeal since the appeal bond of P105,000.00 fell short of the amount due to the 4 employees who did not participate in the settlement of the case.  In the same letter, he directed petitioner to post, within ten (10) days from receipt of the letter, the amount ofP126,841.06 or the difference between the monetary award due to the 4 employees and the appeal bond previously posted.

On March 13, 1996, petitioner filed a Motion for Reconsideration to Reduce Amount of Appeal Bond.[16] He manifested that he has closed down his business operations due to severe financial losses and implored the Regional Director to accept the appeal bond already filed for reasons of justice and equity.

In an Order dated December 3, 1996, the respondent Secretary denied the foregoing Motion for Reconsideration on the ground that the directive from the Regional Director to post

an additional surety bond is contained in a "mere letter" which cannot be the proper subject for a Motion for Reconsideration and/or Appeal before his office.  He added that for failure of the petitioner to post the correct amount of surety or cash bond, his appeal was not perfected following Article 128 (b) of the Labor Code, as amended.  Despite the non-perfection of the appeal, respondent Secretary looked into the Receipt, Waiver and Quitclaim signed by the employees and rejected it on the ground that the consideration was unconscionably inadequate.  He ruled, nonetheless, that the amount received by the said employees should be deducted from the judgment award and the difference should be paid by the petitioner.

On December 26, 1996, petitioner filed a Motion for Reconsideration.  On February 13, 1997, he filed a Motion to Admit Additional Bond and posted the amount of P126,841.06 in compliance with the order of the Regional Director in his letter dated February 13, 1996.[17]

On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration.  He ruled that the Regional Director has jurisdiction over the case citing Article 128 (b) of the Labor Code, as amended.  He pointed out that Republic Act No. 7730 repealed the jurisdictional limitations imposed by Article 129 on the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly authorized representatives.  In addition, he held that petitioner is now estopped from questioning the computation made by the Regional Director as a result of the compromise agreement he entered into with the employees.  Lastly, he reiterated his ruling that the Receipt, Waiver and Quitclaim signed by the employees was not valid.

Petitioner is now before this Court raising the following issues:

I

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when he set aside the Release and Quitclaim executed by the seventeen (sic) complainants before the Office of the Regional Director when Public Respondent himself ruled that the Appeal of the Petitioner was not perfected and, therefore, Public Respondent did not acquire jurisdiction over the case.

II

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when in complete disregard of Article 227 of the Labor Code, Public Respondent set aside and nullified the Release and Quitclaim executed by the seventeen (sic) complainants.

III

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when he affirmed the Order of the Regional Director who, in complete disregard of the due process requirements of law, computed the monetary award given to the private respondents without notice to petitioner and without benefit of hearing.

IV

Whether or not petitioner is deemed estopped from appealing the decision of the Regional Director when it (sic) entered into a compromise settlement with complainants/private respondents.

The threshold issues that need to be settled in this case are: (1) whether or not the Regional Director has jurisdiction over the instant labor standards case, and (2) whether or not petitioner perfected his appeal.

With regard to the issue of jurisdiction, petitioner alleged that the Regional Director has no jurisdiction over the instant case since the individual monetary claims of the 21 employees exceedP5,000.00.  He further argued that following Article 129 of the Labor Code, as amended, and Section 1, Rule IX of the Implementing Rules of Republic Act No. 6715, the jurisdiction over this case belongs to the Labor Arbiter, and the Regional Director should have indorsed it to the appropriate regional branch of the National Labor Relations Commission (NLRC).  On the other hand, the respondent Secretary held that the jurisdictional limitation imposed by Article 129 on his visitorial and enforcement power under Article 128 (b) of the Labor Code, as amended, has been repealed by Republic Act No. 7730.[18]  He pointed out that the amendment "[n]otwithstanding the provisions of Article 129 and 217 of the Labor Code to the contrary" erased all doubts as to the amendatory nature of the new law, and in effect, overturned this Court's ruling in the case of Servando's Inc. v. Secretary of Labor and Employment.[19]

We sustain the jurisdiction of the respondent Secretary.  As the respondent correctly pointed out, this Court's

ruling in Servando --- that the visitorial power of the Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised where the individual claim exceeds P5,000.00, can no longer be applied in view of the enactment of R.A. No. 7730 amending Article 128 (b) of the Labor Code, viz:

Article 128 (b) - Notwithstanding the provisions of Articles 129 and 217 of this Code to the Contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of the Code and other labor legislation based on the findings of the labor employment and enforcement officers or industrial safety engineers made in the course of inspection.  The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter.  In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in order appealed from. (Italics supplied.)

The records of the House of Representatives[20] show that Congressmen Alberto S. Veloso and Eriberto V. Loreto sponsored the law.  In his sponsorship speech, Congressman Veloso categorically declared that "this bill seeks to do away with the jurisdictional limitations imposed through said ruling (referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment."[21]  Petitioner's reliance on Servando is thus untenable.

The next issue is whether petitioner was able to perfect his appeal to the Secretary of Labor and Employment.  Article 128 (b) of the Labor Code clearly provides that the appeal bond must be "in the amount equivalent to the monetary award in the order appealed from."  The records show that petitioner failed to post the required amount of the appeal bond.  His appeal was therefore not perfected.

IN VIEW WHEREOF, the petition for certiorari is dismissed.  No pronouncement as to costs.

SO ORDERED.

Melo (Acting Chairman) and Mendoza, JJ., concur.Martinez, J., on leave.

6. Batongbuhay Goldmines vs. De La Serna 312 SCRA 22

THIRD DIVISION

[G.R. No. 86963.  August 6, 1999]

BATONG BUHAY GOLD MINES, INC., petitioner, vs. HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS*  IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS PTY. LTD.,respondents.

R E S O L U T I O N

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a Prayer for Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to annul three orders issued by respondent  Undersecretary Dionisio dela Serna of the Department of Labor and Employment, dated September 16, 1988, December 14, 1988 and February 13, 1989, respectively.

The Order of September 16, 1988 stated the facts as follows:

"xxx on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O. Reyes and 1,247 others filed a

complaint against Batong Buhay Gold Mines, Inc. for: (1) Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984, inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for the period 16 June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-payment of their salaries for the period 16 March 1986 to the present; (4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the salaries of employees who were placed on forced leaves since November, 1985 to the present, if this is not feasible, the affected employees be awarded corresponding separation pay.

On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.

On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.

On 27 February 1987, the complainants filed a Motion for the issuance of an inspection authority.

xxx

On 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the following recommendations:

‘WHEREFORE, premises considered, this case is hereby submitted with the recommendation that an Order of Compliance be issued directing respondent Batong Buhay

Gold Mines Inc. to pay complainants’ Elsie Rosalina Ty, et al. FOUR MILLION EIGHT HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY CENTAVOS (P4,818,746.40) by way of  unpaid salaries of workers from March 16, 1987 to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and 1986, and upaid (sic) vacation/sick/compensatory leave benefits.’

On 31 July 1987, the Regional Director[1] adopted the recommendation of the LSWOs and issued an order directing the respondent to pay the complainants the sum of P4,818,746.40 representing their unpaid 13th month pay for 1985 and 1986, wage and ECOLA differentials under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and vacation/sick leave benefits for 1984, 1985 and 1986.

On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of execution and appointment of special sheriff.

xxx

On 21 August 1987, the Regional Director issued an Order directing the respondent to put up a cash or surety bond otherwise a writ of execution will be issued.

xxx

When the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of execution by the complainants, the Regional Director, on 14 September 1987 issued a writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing him to do the following:

‘You are to collect the above-stated amount from the respondent and deposit the same with Cashier of this Office for appropriate disposition to herein complainants under the supervision of the office of the Director.  Otherwise, you are to execute this writ by attaching the goods and chattels of the respondent not exempt from execution or in case of insufficiency thereof against the real or immovable property of the respondent.’

The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized three (3) units of Peterbuilt trucks and then sold the same by public auction.  Various materials and motor vehicles were also seized on different dates and sold at public auction by said sheriff.

xxx xxx                              xxx

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted this Office to issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos from enforcing the writ of execution. xxx“[2]

BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent Undersecretary

Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the case.

On September 16, 1988, the public respondent issued the first challenged Order upholding the jurisdiction of the Regional Director and annulling all the auction sales conducted by Special Sheriff John Ramos.  The decretal portion of the said Order ruled:

“WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital Region, is hereby AFFIRMED.  Accordingly, the writ of execution dated 14 September 1987 issued in connection thereto is hereby declared VALID.

However, the public auction sales conducted by special sheriff John Ramos pursuant to the writ of execution dated 14 September 1987 on 24 September 2, 20, 23, and 29 October 1987 are all hereby declared NULL AND VOID.  Furthermore, the personal properties sold and the proceeds thereof which have been turned over to the complainants thru their legal counsel are hereby ordered returned to the custody of the respondent and the buyers respectively.

SO ORDERED.”[3]

On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied.

On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting attention to a Deed of Sale

executed in its favor by Fidel Bermudez, the highest bidder in the auction sale conducted on October 29, 1987.

On December 2, 1988, another Motion for Intervention was filed, this time by Salter Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd.

The two Motions for Intervention were granted in the second questioned order dated December 14, 1988, directing the exclusion from annulment of the properties sold at the October 29, 1987 auction sale and claimed by the intervenors, including one cluster of junk mining machineries, equipment and supplies, and disposing thus:

“WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors MFT and Salter are hereby granted.  Correspondingly, this Office’s Order dated 16 September 1988 is hereby modified to exclude from annulment “the one lot of junk mining machineries, equipment and supplies as-is-where-is” sold by Sheriff John C. Ramos in the auction sale of 29 October 1987.

xxx xxx                              xxx”

Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the respondent employees but to no avail.  The same were likewise denied in the third assailed Order dated February 13, 1989.

Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or excess of jurisdiction to the public respondent in issuing the three Orders under attack.

The questioned Orders aforementioned have given rise to the issues: (1) whether the Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2) whether or not the auction sales conducted by the said Special Sheriff are valid.

Anent the first issue, an affirmative ruling is indicated. The Regional Director has jurisdiction over the BBGMI employees who are the complainants in Case Number NCR-LSED-CI-2047-87.

The subject labor standards case of the petition arose from the visitorial and enforcement powers by the Regional Director of Department of Labor and Employment (DOLE).  Labor standards refers to the minimum requirements prescribed by existing laws, rules and regulations relating to wages, hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety and health standards.[4] Labor standards cases are governed by Article 128(b) of the Labor Code.

The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor standards case.

As can be gleaned from the records on hand, subject labor standards case was filed on February 5, 1987 at which time Article 128 (b) read as follows[5]:

Art. 128 ( b) Visitorial and enforcement powers -

“(b)  The Minister of Labor or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.”

Petitioner theorizes that the Regional Director is without jurisdiction over subject case, placing reliance on the ruling in Zambales Base Inc. vs. Minister of Labor[6]and Oreshoot Mining Company vs. Arellano.[7]

Respondent Undersecretary Dionision C. Dela Serna, on the other hand, upheld the jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to quote:

“Considering therefore that there still exists an employer-employee relationship between the parties; that the case involves violations of the labor standard provisions of the labor code; that the issues therein could be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection; and, if only to give meaning and not render nugatory and meaningless the visitorial and enforcement powers of the Secretary of Labor and Employment as provided by Article 128(b) of the Labor Code,

as amended by Section 2 of Executive Order No. 111 which states:

‘The provisions of article 217 of this code to the contrary notwithstanding and in cases where the relationship of employer-employee still exists, the Minister of Labor and Employment or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provision of this Code based on the findings of the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.’

We agree with the complainants that the regional office a quo has jurisdiction to hear and decide the instant labor standard case.

xxx xxx                              xxx”[8]

The Court agrees with the public respondent.  In the case of Maternity Children’s Hospital vs Secretary of Labor (174 SCRA 632), the Court in upholding the jurisdiction of the Regional Director over the complaint on underpayment of wages and ECOLAs filed on May 23, 1986, by the employees of Maternity Children’s Hospital, held:

“This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as amended by E.O. 111.

xxx xxx                              xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Director’s authority over money claims was unclear.  The complaint in the present case was filed on May 23, 1986 when E.O. 111 was not yet in effect.  xxx      xxx

We believe, however , that even in the absence of E.O. 111 , Regional Directors already had enforcement powers over money claims, effective under P.D. 850, issued on December 16, 1975, which transferred labor standards cases from the arbitration system to the enforcement system.“

In the aforecited case, the Court in reinforcing its conclusion that Regional Director has jurisdiction over labor standards cases, treated E.O. 111 as a curative statute, ruling as follows:

“E.O. No. 111 was issued on December 24, 1986 or three(3) months after the promulgation of the Secretary of Labor’s decision upholding private respondents’ salary differentials and ECOLAs on September 24, 1986.  The amendment of the visitorial and enforcement powers of the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested money claims in cases where an employer-employee relationship still exists.  This intention must be given weight and entitled to

great respect.  As held in Progressive Worker’s Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:

.’xx  The interpretation by officers of laws which are entrusted to their administration is entitled to great respect.  We see no reason to detract from this rudimentary rule in administrative law, particularly when later events have proved said interpretation to be in accord with the legislative intent.  xx’

The proceedings before the Regional Director must, perforce be upheld on the basis of Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order ‘to be considered in the nature of a curative statute with retrospective application.’ (Progressive Workers’ Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al. G.R.No. l-47629, may 28,1979, 90 SCRA 331).

With regard to the petitioner’s reliance on the cases of Zambales Base, Inc. vs. Minister of Labor (supra) and Oreshoot Mining Company vs. Arellano, (supra), this is misplaced.  In the case of Zambales Base, Inc., the court has already ruled that:

“xxx, in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs. Minister of Labor is no longer good law. (Emphasis supplied)  Executive Order No. 111 is in the character of a curative law, that is to say, it was intended to remedy a defect that, in the opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise of her

lawmaking powers under the Freedom Constitution) had attached to the provision under the amendment.

xxx xxx                              xxx”[9]

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally dismissed employees.  As the employer-employee relationship has already ceased and reinstatement is sought, jurisdiction necessarily falls under the Labor Arbiter.  Petitioner should not have used this to support its theory as this petition involves labor standards cases and not monetary claims of illegally dismissed employees.

The Court would have ruled differently had the petitioner shown that subject labor standards case is within the purview of the exception clause in Article 128 (b) of the Labor Code.  Said provision requires the concurrence of the following elements in order to divest the Regional Director or his representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.[10]

Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds.  In fact, in its Motion for Reconsideration of the Order of the Regional Director dated August 20, 1987, the grounds which petitioner raised were the following:

“1.  This Honorable Office has no jurisdiction to hear this case and its Order of 31 October 1987 is therefore null and void;

2.  Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent, the complaint should have been directed also against the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent Omnibus Motion to declare void the Writ of Execution for lack of jurisdiction and the Oppositions it filed on the Motions for Intervention questioning the legal personality of the intervenors, questions as to the amounts complained of by the employees or absence of violation of labor standards laws were never raised.  Raising lack of jurisdiction in a Motion to Dismiss is not the contest contemplated by the exception clause under Article 128(b) of the Labor Code which would take the case out of the jurisdiction of the Regional Director and bring it before the Labor Arbiter.

The only instance when there was a semblance of raising the aforestated grounds, was when they filed an Appeal Memorandum dated January 14, 1988, before the respondent undersecretary. In the said Appeal Memorandum, petitioner comes up with the defense that the Regional Director was without jurisdiction, as employer-employee relationship was absent, since petitioner had ceased doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related documents.  The officers of the petitioner alleged

that the company is presently under receivership of the Development Bank of the Philippines.[11] In lieu of this, the Regional Director had ordered that a summary investigation be conducted.[12] Despite proper notices, the petitioner refused to appear before the Regional Director.  To give it another chance, an order to file its position paper was issued to substantiate its defenses.  Notwithstanding all these opportunities to be heard, petitioner chose not to avail of such.

As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA 111):

“xxx  Under Art. 128(a) of the Labor Code, the Secretary of Labor or his duly authorized representatives, such as the Regional Directors, has visitorial powers which authorize him to inspect the records nd premises of an employer at any time of the day or night whenever work is being undertaken therein, to question any employee and investigate any fact, condition or matter, and to determine violations of labor laws, wage orders or rules and regulations.  If the employer refuses to attend the inspection or conference or to submit any record, such as payrolls and daily time records, he will be deemed to have waived his right to present evidence.” (emphasis supplied)

Petitioner’s refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises of their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right to contest the claims of the employees.  This Court had occasion to hold there is no violation of due process where the Regional Director merely required the submission of position papers and resolved the

case summarily thereafter.[13] Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases provides:

Section 14.  Failure to Appear -  Where the employer or the complainant fails or refuses to appear during the investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the hearing officer may recommend to the Regional Director the issuance of a compliance order based on the evidence at hand or an order of dismissal of the complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor standards case and it is in keeping with the law that “the worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the Department of Labor exists to insure its expeditious delivery to him free of charge.“[14]

Thus, their claim of closure for business, among other things, are factual issues which cannot be brought here for the first time.  As petitioner refused to participate in the proceedings below where it could have ventilated the appropriate defenses, to do so in this petition is unavailing.  The reason for this is that factual issues are not proper subjects of a special civil action for certiorarito the Supreme Court.[15]

It is therefore abundantly clear that at the time of the filing of the claims of petitioner’s employees, the Regional Director was already exercising visitorial and enforcement powers.

Regional Director’s visitorial and enforcement powers under Art. 128 (b) has undergone series of amendments which the Court feels to be worth mentioning.

Confusion was engendered by the promulgation of the decision in the case of Servando’s Inc. vs. Secretary of Labor and Employment and the Regional Director, Region VI, Department of Labor and Employment.[16] In the said case, the Regional Director took cognizance of the labor standards cases of the employees of Servando’s Inc., but this Court held that:

“In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering Corp. vs. Sec. Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of the Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees money claims, including those cases which the labor Arbiters had previously exercised jurisdiction. However, in a subsequent modificatory resolution in the Briad Agro Case, dated 9 November 1989, the Court modified its original decision in view of the enactment of RA 6715, and upheld the power of the Regional Directors to adjudicate money claims subject to the conditions set forth in Section 2 of said law (RA 6715).

The power then of the Regional Director (under the present state of law) to adjudicate employees money claims is subject to the concurrence of all the requisites provided under Sec. 2 of RA 6715, to wit:

(a)  the claim is represented by an employer or person employed in domestic or household service, or househelper;

(b)  the claim arises from employer-employee relationship;

(c)  the claimant does not seek reinstatement; and

(d)  the aggregate money claim of each employee or househelper does not exceed P5,000.

xxx  xxx                              xxx”[17]

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to include labor standards cases under Article 128 (b) and no longer limited to ordinary monetary claims under Article 129.

In fact, in the Motion for Reconsideration[18] presented by the private respondents in the Servando case, the court applied more squarely the P5,000 limit to the visitorial and enforcement power of the Regional Director, to wit:

“To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor laws as including the power to hear and decide cases involving employee’s claims for wages, arising from employer-employee relations, even if the amount of said claims exceed P5,000 for each employee, would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article 129 of the Labor Code which, as above-pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and decide such employees’ claims, regardless of amount, can

be heard and determined by the Secretary of Labor under his visitorial power.  This does not, however, appear to be the legislative intent.”

But prevailing law and jurisprudence rendered the Servando ruling inapplicable.  In the recent case of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment Leonardo A. Quisumbing, GR # 131750, promulgated on November 16, 1998, this Court upheld the jurisdiction of the Regional Director notwithstanding the fact that the amounts awarded exceeded P5,000.

Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary and his representatives reads:

“Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection.  The Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

xxx xxx                              xxx”  (emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the Regional Director has jurisdiction over the present labor standards case.

Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when the action was commenced, unless a subsequent statute provides for its retroactive application, as when it is a curative legislation.[19]

Curative statutes are intended to supply defects, abridge superfluities in existing laws and curb certain evils.  They are intended to enable persons to carry into effect that which they have designed and intended, but has failed of expected legal consequence by reason of some statutory disability or irregularity in their own action.  They make valid that which, before the enactment of the statute, was invalid.[20]

In arriving at this conclusion, the case of Briad Agro Development vs. De la Cerna[21] comes to the fore.  In the said case, RA 6715 was held to be a curative statute.  There, the Court ruled that RA 6715 is deemed a curative statute and should be applied to pending cases.  The rationale of the ruling of the Court was that prior to RA 6715, Article 217 as amended by E.O. 111, created a scenario where the Labor Arbiter and the Regional Director of DOLE had overlapping jurisdiction over money claims.  Such a situation was viewed as a defect in the law so that when RA 6715 was passed, it was treated or interpreted by the Court as a rectification of the infirmity of the law, and therefore curative in nature, with retroactive application.

Parenthetically, the same rationale applies in treating RA 7730 as a curative statute.  Explicit in its title[22] is the legislative intent to rectify the error brought about by this Court’s ruling that RA 6715 covers even labor standards cases where the amounts to be awarded by the Regional Director exceed P5,000 as provided for under RA 6715.  Congressional records relative to Republic Act 7730 reveal that, “this bill seeks to do away with the jurisdictional limitations imposed thru said ruling (referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment.”[23]

All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730 to the case under consideration is proper.

Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in issuing the Order dated September 16, 1988.

The second issue for resolution is the validity of the auction sales conducted by Special Sheriff Ramos.  It bears stressing that the writ of execution issued by the Regional Director led to the several auction sales conducted on September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987 and October 30, 1987.

In the first Order of public respondent, the five (5) auction sales were declared null and void.  As the public respondent put it, “the scandalously low price for which the personal properties of the respondent were sold leads us to no other recourse but to invalidate the auction sales conducted by the special sheriff.”[24]

In the September 16, 1988 Order[25] of public respondent, the personal properties and corresponding prices for which they were sold were as follows:

“Personal properties sold on September 24, 1987:

1.  One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No. 139155-P not running condition.

2.  One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No. 6A410235, truck with Engine No. (Truck 4) not running condition.

3.  One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No. 139163-P Truck No. 4 not running condition.

Proceeds of Sale ............P178,000.00

Personal Properties Sold on October 2, 1987:

1.  One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No. 1391539-P.

2.  One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No. 139149.

3.  One (1) unit payloader (caterpillar with Engine No. (not visible) 966.

4.  One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and one (1) Lot of scrap irons impounded inside the Batong Buhay Compound, Calanan, Kalinga Apayao.

5.  One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.

Proceeds of Sale....P228,750.00

Personal Properties Sold on October 23, 1987:

1.  One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No. 81400500227, Plate No. BAT 353, burned, damage not running condition, type of body jeep motor not visible.

2.  Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis Nos. not visible.

3.  One (1) Unit Layland, burned, damaged and Motor No. not visible.

4.  Two (units) air compressor, burned, damaged and one (1) generator.

5.  One (1) Unit Loader Michigan 50, damaged and burned, and

6.  One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale...........P98,000.00

Properties sold on October 29, 1987:

1.  One (1) lot of scrap construction materials

2.  One (1) lot of scrap mining machineries equipments and supplies.

3.  One (1) lot of junk machineries, equipments and supplies.

Proceeds of  Sale............P1,699,999.99

Personal Properties Sold on October 20, 1987 *

1.  One (1) lot of scrap construction materials

2.  One (1) lot of scrap mining machineries, equipments and supplies

Proceeds of Sale...........P2,185,000.00

Total Proceeds Sale....  P4,389,749.99

to satisfy the judgment award in the amount of P4,818,746.00.”

As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies are not to be disturbed absent any showing of grave abuse of discretion tainting the same.  But in the case under scrutiny, there was grave abuse of discretion when the public respondent, without any evidentiary support, adjudged such prices as “scandalously low”.  He merely relied on the self-serving assertion by the petitioner that

the value of the auctioned properties was more than the price bid.  Obviously, this ratiocination did not suffice to set aside the auction sales.

The presumption of regularity in the performance of official function is applicable here.  Conformably, any party alleging irregularity vitiating auction sales must come forward with clear and convincing proof.

Furthermore, it is a well-settled principle that:

“Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale where the sale is regular, proper and legal in other respects, the parties stand on an equal footing, there are no confidential relation between them, there is no element of fraud, unfairness, or oppression, and there is no misconduct, accident, mistake or surprise connected with, and tending to cause, the inadequacy.”[26]

Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of price, the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

But, this is not to declare the questioned auction sales as valid.  The same are null and void since on the properties of petitioner involved was constituted a mortgage between petitioner and the Development Bank of the Philippines, as shown by the:

(a)  Deed of Mortgage dated December 28,1973;

(b)  Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;

(c)  Amendment to Joint Mortgage dated October 18, 1976.

(d)  Confirmation of Mortgage dated March 27,1979; and

(e)  Additional Joint First Mortgage dated March 31, 1981.[27]

The aforementioned documents were executed between the petitioner and Development Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioner’s employees.  The properties having been mortgaged to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known as the “The 1986 Revised Charter of the Development Bank of the Philippines,” which exempts the properties of petitioner mortgaged to DBP from attachment or execution sales.  Section 14 of E.O. 81, reads:

“Sec. 14.  Exemption from Attachment.  The provisions of any law to the contrary notwithstanding, securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall not be subject to attachment, execution or any other court process, nor shall they be included in the property of insolvent persons or institutions, unless all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection of expenses, and other charges, subject to the provisions of paragraph (e) of Sec. 9 of this Charter.”

In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the Asset Privatization Trust, to the Office of the Clerk of Court of the Supreme Court, certified that the petitioner is covered by Proclamation No. 50 issued on December 8, 1986 by President Corazon C. Aquino.

Quoted hereunder are the pertinent portions of the said letter:[28]

RE:  BBGMI vs. Hon. dela Serna, GR No. 86963

Supreme Court Certiorari

SIR:

xxx     xxx       xxx

xxx  all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50 dated December 8, 1986 of her Excellency, President Corazon C. Aquino.  All the said assets of BBGMI are covered by real and chattel mortgages executed in favor of the Philippine National Bank (‘PNB’), the Development Bank of the Philippines (‘DBP’) and the National Investment and Development Corporation (‘NIDC’).

xxx xxx                              xxx

Section 14, Executive Order No. 81:

xxx xxx                              xxx

Pursuant to the above-quoted provision of law, you are hereby warned that all the assets (real and personal /chattel) of BBGMI are exempted from writs of execution, attachment, or any other lien or court processes.  The Government, through APT, shall initiate any administrative measures and remedies against you for any violation of the vested rights of PNB, DBP and APT.

xxx xxx                              xxx

(sgd)                           

JOSE C. SISON

The exemption referred to in the aforecited letter is one of the circumstances contemplated by Rule 39 of the Revised Rules of Court, to wit:

“Sec. 13. Property exempt from execution. -  Except as otherwise expressly provided by law, the following properties, and no other, shall be exempt from execution:

xxx xxx                              xxx

(m) Properties specially exempted by law.

xxx xxx                              xxx”

Private respondents contend that even if subject properties were mortgaged to DBP (now under Asset Privatization Trust), Article 110[29] of the Labor Code, as amended by RA 6715, applies just the same.  According to them, the said provision of law grants preference to money claims of workers over and above all credits of the petitioner.  This contention is untenable.  In the case ofDBP vs. NLRC,[30] the Supreme Court held that the workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or liquidation proceedings of the employer’s business.  What is more, it does not disregard the preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification, concurrence and preference of credits.

We now come to the issue with respect to the second Order, dated December 14, 1988, which declared as valid the auction sale conducted on October 29, 1987 by Special Sheriff John Ramos. Public respondent had no authority to validate the said auction sale on the ground that the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired legal title over subject properties.

It is well to remember that the said properties were transferred to the intervenors, when Fidel Bermudez, the highest bidder at the auction sale, sold the properties to MFT Corporation which, in turn, sold the same properties to Salter Holdings Pty., Ltd.  Public respondent opined that the contract of sale between the intervenors and the highest bidder should be respected as these sales took place during the interregnum after the auction sale was conducted on October 29, 1987 and

before the issuance of the first disputed Order declaring all the auction sales null and void.

On this issue, the Court rules otherwise.

As regards personal properties, the general rule is that title, like a stream, cannot rise higher than its source.[31] Consequently, a seller without title cannot transfer a title better than what he holds.  MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of a void auction sale over properties exempt from execution.  Such being the case, the subsequent sale made by him (Fidel Bermudez) is incapable of vesting title or ownership in the vendee.

The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December 14, 1988 of Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE.  The Order of September 16, 1988, upholding the jurisdiction of the Regional Director, is AFFIRMED.  No pronouncement as to costs.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.