[G.R. No. 112139.

January 31, 2000]

LAPANDAY
AGRICULTURAL
DEVELOPMENT
CORPORATION, petitioner,
vs.
THE
HONORABLE COURT OF APPEALS (Former Eighth Division) and COMMANDO SECURITY
SERVICE AGENCY, INC., respondents.
GONZAGA-REYES, J.:
The pertinent facts as found by the Court of Appeals are as follows:
"The evidence shows that in June 1986, plaintiff Commando Security Service Agency, Inc., and
defendant Lapanday Agricultural Development Corporation entered into a Guard Service Contract.
Plaintiff provided security guards in defendants banana plantation. The contract called for the
payment to a guard of P754.28 on a daily 8-hour basis and an additional P565.72 for a four hour
overtime while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis and P808.60 for
the 4-hour overtime.
Wage Orders increasing the minimum wage in 1983 were complied with by the defendant. On June
16, 1984, Wage Order No. 5 was promulgated directing an increase of P3.00 per day on the
minimum wage of workers in the private sector and a P5.00 increase on the ECOLA. This was
followed on November 1, 1984 by Wage Order No. 6 which further increased said minimum wage
by P3.00 on the ECOLA. Both Wage Orders contain the following provision:
"In the case of contract for construction projects and for security, janitorial and similar services, the
increase in the minimum wage and allowances rates of the workers shall be borne by the principal
or client of the construction/service contractor and the contracts shall be deemed amended
accordingly, subject to the provisions of Sec. 3 (b) of this order" (Sec. 6 and Sec. 9, Wage Orders
No. 5 and 6, respectively)."
Plaintiff demanded that its Guard Service Contract with defendant be upgraded in compliance with
Wage Order Nos. 5 and 6. Defendant refused. Their Contract expired on June 6, 1986 without the
rate adjustment called for Wage Order Nos. 5 and 6 being implemented. By the time of the filing of
plaintiffs Complaint, the rate adjustment payable by defendant amounted to P462,346.25.
Defendant opposed the Complaint by raising the following defenses: (1) the rate adjustment is the
obligation of the plaintiff as employer of the security guards; (2) assuming its liability, the sum it
should pay is less in amount; and (3) the Wage Orders violate the impairment clause of the
Constitution.
The trial court decided in favor of the plaintiff.
Petitioners motion for reconsideration was denied; [4] hence this petition where petitioner cites the
following grounds to support the instant petition for review:
"1. THE WAGE INCREASES PROVIDED FOR IN THE WAGE ORDERS WERE DUE TO THE GUARDS AND
NOT THE SECURITY AGENCY;
2. A SECURITY AGENCY WHO DID NOT PAY WAGE INCREASE TO ITS GUARDS IT HAD ALREADY
TERMINATED AND WITHOUT THEIR AUTHORIZATION CANNOT INSTITUTE AN ACTION TO RECOVER
SAID WAGE INCREASE FOR ITS BENEFIT;
3. IN THE ABSENCE OF BAD FAITH AND WITHOUT THE TRIAL COURT CORRECTLY ESTABLISHING THE
BASIS FOR ATTORNEYS FEES, THE SAME MAY NOT BE AWARDED.
4. THE NATIONAL LABOR RELATIONS (SIC) IS THE PROPER FORUM THAT HAS THE JURISDICTION TO
RESOLVE THE ISSUE OF WHETHER OR NOT THE PETITIONER IS LIABLE TO PAY THE PRIVATE

RESPONDENT THE WAGE AND ALLOWANCE INCREASES MANDATED UNDER WAGE ORDER NOS. 5
AND 6."[5]
Reiterating its position below, petitioner asserts that private respondent has no factual and legal
basis to collect the benefits under subject Wage Order Nos. 5 and 6 intended for the security
guards without the authorization of the security guards concerned. Inasmuch as the services of the
forty-two (42) security guards were already terminated at the time the complaint was filed on
August 15, 1988, private respondents complaint partakes of the nature of an action for recovery of
what was supposedly due the guards under said Wage Orders, amounts that they claim were never
paid by private respondent and therefore not collectible by the latter from the petitioner. Petitioner
also assails the award of attorneys fees in the amount of P115,585.31 or 25% of the total
adjustment claim of P462,341.25 for lack of basis and for being unconscionable.
Moreover, petitioner submits that it is the National Labor Relations Commission (NLRC) and not the
civil courts that has jurisdiction to resolve the issue involved in this case for it refers to the
enforcement of wage adjustment and other benefits due to private respondents security guards
mandated under Wage Order Nos. 5 and 6. Considering that the RTC has no jurisdiction, its decision
is without force and effect.[6]
On the other hand, private respondent contends that the basis of its action against petitionerappellant is the enforcement of the Guard Service Contract entered into by them, which is deemed
amended by Section 6 of Wage Order No. 5 and Section 9 of Wage Order No. 6; that pursuant to
their amended Guard Service Contract, the increases/adjustments in wages and ECOLA are due to
private respondent and not to the security guards who are not parties to the said contract. It is
therefore immaterial whether or not private respondent paid its security guards their wages as
adjusted by said Wage Orders and that since the forty-two (42) security guards are not parties to
the Guard Service Contract, there is no need for them to authorize the filing of, or be joined in, this
suit.
As regards the award to private respondent of the amount of P115,585.31 as attorneys fees,
private respondent maintains that there is enough evidence and/or basis for the grant thereof,
considering that the adamant attitude of the petitioner (in implementing the questioned Wage
Orders) compelled the herein private respondent, to litigate in court. Furthermore, since the legal
fee payable by private respondent to its counsel is essentially on contingent basis, the amount
of P115,583.31 granted by the trial court which is 25% of the total claim is not unconscionable.
As regards the jurisdiction of the RTC, private respondent alleges that the suit filed before the trial
court is for the purpose of securing the upgrading of the Guard Service Contract entered into by
herein petitioner and private respondent in June 1983. The enforcement of this written contract
does not fall under the jurisdiction of the NLRC because the money claims involved therein did not
arise from employer-employee relations between the parties and is intrinsically a civil dispute.
Thus, jurisdiction lies with the regular courts. Private respondent further contends that petitioner is
estopped or barred from raising the question of jurisdiction for the first time before the Supreme
Court after having voluntarily submitted to the jurisdiction of the regular courts below and having
lost its case therein.[7]
We resolve to grant the petition.
We resolve first the issue of jurisdiction. We agree with the respondent that the RTC has jurisdiction
over the subject matter of the present case. It is well settled in law and jurisprudence that where
no employer-employee relationship exists between the parties and no issue is involved which may
be resolved by reference to the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction. [8] In its complaint, private respondent
is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages
on account of petitioners alleged breach of its obligation under their Guard Service Contract. The
action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts.

While the resolution of the issue involves the application of labor laws, reference to the labor
code was only for the determination of the solidary liability of the petitioner to the respondent
where no employer-employee relation exists. Article 217 of the Labor Code as amended vests upon
the labor arbiters exclusive original jurisdiction only over the following:
[9]

1. Unfair labor practices;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral exemplary and other forms of damages arising from employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving legality
of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite;
[10]
and there is none in this case.
On the merits, the core issue involved in the present petition is whether or not petitioner is liable to
the private respondent for the wage adjustments provided under Wage Order Nos. 5 and 6 and for
attorneys fees.
Private respondent admits that there is no employer-employee relationship between it and the
petitioner. The private respondent is an independent/job contractor [11] who assigned security
guards at the petitioners premises for a stipulated amount per guard per month. The Contract of
Security Services expressly stipulated that the security guards are employees of the Agency and
not of the petitioner.[12] Articles 106 and 107 of the Labor Code provides the rule governing the
payment of wages of employees in the event that the contractor fails to pay such wages as follows:
"Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.
xxx
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project."
It will be seen from the above provisions that the principal (petitioner) and the contractor
(respondent) are jointly and severally liable to the employees for their wages. This Court held
in Eagle Security, Inc. vs. NLRC [13] and Spartan Security and Detective Agency, Inc. vs. NLRC [14] that

the joint and several liability of the contractor and the principal is mandated by the Labor Code to
assure compliance with the provisions therein including the minimum wage. The contractor is
made liable by virtue of his status as direct employer. The principal, on the other hand, is made the
indirect employer of the contractors employees to secure payment of their wages should the
contractor be unable to pay them. [15] Even in the absence of an employer-employee relationship,
the law itself establishes one between the principal and the employees of the agency for a limited
purpose i.e. in order to ensure that the employees are paid the wages due them. In the abovementioned cases, the solidary liability of the principal and contractor was held to apply to the
aforementioned Wage Order Nos. 5 and 6. [16] In ruling that under the Wage Orders, existing security
guard services contracts are amended to allow adjustment of the consideration in order to cover
payment of mandated increases, and that the principal is ultimately liable for the said increases,
this Court stated:
"The Wage Orders are explicit that payment of the increases are to be borne by the principal or
client. To be borne, however, does not mean that the principal, PTSI in this case, would directly pay
the security guards the wage and allowance increases because there is no privity of contract
between them. The security guards contractual relationship is with their immediate employer,
EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages [See
Article VII Sec. 3 of the Contract for Security Services, supra and Bautista vs. Inciong, G. R. No.
52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the
former availed of the security services provided by the latter. In return, the security agency collects
from its client payment for its security services. This payment covers the wages for the security
guards and also expenses for their supervision and training, the guards bonds, firearms with
ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary
for the maintenance of a security force.
Premises considered, the security guards immediate recourse for the payment of the increases is
with their direct employer, EAGLE. However, in order for the security agency to comply with the
new wage and allowance rates it has to pay the security guards, the Wage Orders made specific
provision to amend existing contracts for security services by allowing the adjustment of the
consideration paid by the principal to the security agency concerned. What the Wage Orders
require, therefore, is the amendment of the contracts as to the consideration to cover the service
contractors payment of the increases mandated. In the end, therefore, ultimate liability for the
payment of the increases rests with the principal.
In view of the foregoing, the security guards should claim the amount of the increases from EAGLE.
Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be
held solidarily liable with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an
adjustment from PTSI for an increase in consideration to cover the increases payable to the
security guards."[17]
It is clear also from the foregoing that it is only when contractor pays the increases mandated that
it can claim an adjustment from the principal to cover the increases payable to the security guards.
The conclusion that the right of the contractor (as principal debtor) to recover from the principal as
solidary co-debtor) arises only if he has paid the amounts for which both of them are jointly and
severally liable is in line with Article 1217 of the Civil Code which provides:
"Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may choose
which offer to accept.
He who made payment may claim from his codebtors only the share which corresponds to each,
with interest for the payment already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded. xxx"

Pursuant to the above provision, the right of reimbursement from a co-debtor is recognized in favor
of the one who paid.
It will be seen that the liability of the petitioner to reimburse the respondent only arises if and when
respondent actually pays its employees the increases granted by Wage Order Nos. 5 and 6.
Payment, which means not only the delivery of money but also the performance, in any other
manner, of the obligation,[18] is the operative fact which will entitle either of the solidary debtors to
seek reimbursement for the share which corresponds to each of the debtors.
The records show that judgment was rendered by Labor Arbiter Newton R. Sancho holding both
petitioner and private respondent jointly and solidarily liable to the security guards in a
Decision[19] dated October 17, 1986 (NLRC Case No. 2849-MC-XI-86). [20] However, it is not disputed
that the private respondent has not actually paid the security guards the wage increases granted
under the Wage Orders in question. Neither is it alleged that there is an extant claim for such wage
adjustments from the security guards concerned, whose services have already been terminated by
the contractor. Accordingly, private respondent has no cause of action against petitioner to recover
the wage increases. Needless to stress, the increases in wages are intended for the benefit of the
laborers and the contractor may not assert a claim against the principal for salary wage
adjustments that it has not actually paid. Otherwise, as correctly put by the respondent, the
contractor would be unduly enriching itself by recovering wage increases, for its own benefit.
Finally, considering that the private respondent has no cause of action against the petitioner,
private respondent is not entitled to attorneys fees.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated May 24, 1993
is REVERSED and SET ASIDE. The complaint of private respondent COMMANDO SECURITY SERVICE
AGENCY, INC. is hereby DISMISSED.
[G.R. No. 122468. September 3, 1998] SENTINEL SECURITY AGENCY, INC., petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION, ADRIANO CABANO, JR., VERONICO C.
ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and MAXIMO ORTIZ, respondents.
PANGANIBAN, J.:
The transfer of an employee involves a lateral movement within the business or operation of the
employer, without demotion in rank, diminution of benefits or, worse, suspension of employment
even if temporary. The recall and transfer of security guards require reassignment to another post
and are not equivalent to their placement on floating status. Off-detailing security guards for a
reasonable period of six months is justified only in bona fide cases of suspension of operation,
business or undertaking.
The Facts

The undisputed factual backdrop is narrated by Respondent Commission as follows: [7]

The complainants were employees of Sentinel [Security Agency, Inc. hereafter referred to as the
Agency] since March 1, 1966 in the case of Veronico Zambo; October 27, 1975 in the case of
Helcias Arroyo; September 20, 1985 in the case of Adriano Cabano; February 1, 1990 in the case of
Maximo Ortiz; and Ortiz and November 1, 1967 in the case of Rustico Andoy. They were assigned to
render guard duty at the premises of [Philippine American Life Insurance Company] at Jones
Avenue, Cebu City. On December 16, 1993 Philippine American Life Insurance Company [the Client,
for brevity], through Carlos De Pano, Jr., sent notice to all concerned that the [Agency] was again
awarded the contract of [s]ecurity [s]ervices together with a request to replace all the security
guards in the companys offices at the cities of Cebu, Bacolod, Cagayan de Oro, Dipolog and
Ilagan. In compliance therewith, [the Agency] issued on January 12, 1994, a Relief and Transfer
Order replacing the complainants as guards [of the Client] and for then to be re-assigned [to] other
clients effective January 16, 1994. As ordered, the complainants reported but were never given

new assignments but instead they were told in the vernacular, gui-ilisa mo kay mga tigulang
naman mo which when translated means, you were replace[d] because you are already
old. Precisely, the complainants lost no time but filed the subject illegal dismissal cases on January
18, January 26 and February 4, 1994 and prayed for payment of separation pay and other labor
standard benefits.
[The Client and the Agency] maintained there was no dismissal on the part of the complainants,
constructive or otherwise, as they were protected by the contract of security services which allows
the recall of security guards from their assigned posts at the will of either party. It also advanced
that the complainants prematurely filed the subject cases without giving the [Agency] a chance to
give them some assignments.
On the part of [the Client], it averred further that there [was] no employer-employee relationship
between it and the complainants as the latter were merely assigned to its Cebu Branch under a job
contract; that [the Agency] ha[d] its own separate corporate personality apart from that of [the
Client]. Besides, it pointed out that the functions of the complainants in providing security services
to [the Clients] property [were] not necessary and desirable to the usual business or trade of [the
Client], as it could still operate and engage in its life insurance business without the security
guards. In fine, [the Client] maintains that the complainants have no cause of action against it.
Ruling of Respondent Commission

Respondent Commission ruled that the complainants were constructively dismissed, as the
recall of the complainants from their long time post[s] at [the premises of the Client] without any
good reason is a scheme to justify or camouflage illegal dismissal.
It ruled Superstar Security Agency, Inc. vs. National Labor Relations Commission [8] and A Prime
Security Services, Inc. vs. national Labor Relations Commission [9] were not applicable to the case at
bar. In the former, the security guard was placed on temporary off-detail due to his poor
performance and lack of elementary courtesy and tact, and to the cost-cutting program of the
agency. In the latter, the relief of the security guard was due to his sleeping while on duty and his
repeated refusal to resume work despite notice.
In the present case, the complainants case, the complainants were told by the Agency that
they lost their assignment at the Clients premises because they were already old, and not because
they had committed any infraction or irregularity. The NLRC applied RA 7641, [10] which gives
retirement benefits of one-half month pay per year of service to retirable employees, viz.:
xxx As stated earlier xxx, the complainants were in the service of [the Client] for nearly twenty (20)
years in the cases of Helcias Arroyo and for more than twenty (20) years in the cases of Veronico
Zambo and Rustico Andoy, which long years of service [appear] on record to be unblemished.The
complainants were then confronted with an impending sudden loss of earning for while the order of
[the Agency] to immediately report for reassignment momentarily gave them hope, there was in
fact no immediate reinstatement. While it could have been prudent for the complainants to wait,
they were set unstable and were actually threatened by the statement of the personnel in charge
of [the Agency] that they were already old, that was why they were replaced.
Against these glaring facts is the new Retirement Law, R.A. 7641 which took effect on January 7,
1993 giving retirement benefits of month pay per year of service to an employee upon reaching
retirement age to be paid by the employer, in this case at quiet a sizeable amount and in not so
long due time as some of the complainants were described as already old.
As complainants were illegally dismissed, the NLRC ruled that they were entitled to the twin
remedies of back wages for one (1) year from the time of their dismissal on January 15, 1994,
payable by both the Client and the Agency, and separation pay one-half month pay for every year

of service payable only by the Agency. Reinstatement was not granted due to the resulting
antipathy and resentment among the complainants, the Agency and the Client.
Hence, this petition.[11]
The Issues

In their memoranda, the Agency poses this question:[12]

xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]
On the other hand, the Client raises the following issues:[13]
Whether xxx [the complainants] were illegally dismissed by their employer, Sentinel Security
Agency, Inc., and in holding petitioner to be equally liable therefor.
Whether xxx petitioner is jointly and severally liable with Sentinel Security Agency, Inc., in the
latters payment of backwages, 13th month pay and service incentive leave pay to its employees
xxx.
In sum, the resolution of these consolidated petitions hinges on (1) whether the complainants
were illegally dismissed, and (2) whether the Client is jointly and severally liable for their
thirteenth-month and service incentive leave pays.
The Courts Ruling

The petition is partly meritorious.

First Issue: Illegal Dismissal

The private respondents transfer, according to Respondent Commission, was affected to

circumvent the mandate of Republic Act 7641 (New Retirement Law), which by then had already
taken effect, in view of the fact that the complainants had worked for both the Client and the
Agency for 10 to 20 years and were nearing retirement age. With this premise, the NLRC concluded
that the guards were illegally dismissed. The complainants add that the findings of the Commission
match the remarks of the personnel manager of the Agency, Feliciano Marticion; that is, that they
were being replaced because they were already old. They insist that their service records are
unblemished; hence, they could not have been dismissed by reason of any just cause.
We agree that the security guards were illegally dismissed, but not for the reasons given by
the public respondent. The aforecited contentions of the NLRC are speculative and unsupported by
the evidence on record. As the solicitor general said in his Manifestation in Lieu of Comment, the
relief and transfer order was akin to placing private respondents on temporary off-detail.
Being sidelined temporarily is a standard stipulation in employment contracts, as the
availability of assignment for security guards is primarily dependent on the contracts entered into
by the agency with third parties. Most contracts for security services, as in this case, stipulate that
the client may request the replacement of the guards assigned to it. In security agency parlance,
being placed off detail or on floating status means waiting to be posted. [14] This circumstance is not
equivalent to dismissal, so long as such status does not continue beyond reasonable time. [15]
In the case at bar, the relief and transfer order per se did not sever the employment
relationship between the complainants and the Agency. Thus, despite the fact that complainants
were no longer assigned to the Client, Article 287 of the Labor Code, as amended by RA 7641, still
binds the Agency to provide them upon their reaching the retirement age of sixty to sixty-five

years retirement pay or whatever else was established in the collective bargaining agreement or in
any other applicable employment contract. On the other hand, the Client is not liable to the
complainants for their retirement pay because of the absence of an employer-employee
relationship between them.
However, the Agency claims that the complainants, after being placed off-detail, abandoned
their employ. The solicitor general, siding with the Agency and the labor arbiter, contends that
while abandonment of employment is inconsistent with the filing of a complaint for illegal
dismissal, such rule is not applicable where [the complainant] expressly rejects this relief and asks
for separation pay instead.
The Court disagrees. Abandonment, as a just and valid cause for termination, requires a
deliberate and unjustified refusal of an employee to resume his work, coupled with a clear absence
of any intention of returning to his or her work. [16] That complainants did not pray for reinstatement
is not sufficient proof of abandonment. A strong indication of the intention of complainants to
resume work is their allegation that on several dates they reported to the Agency for reassignment,
but were not given any. In fact, the contention of complainant is that the Agency constructively
dismissed them. Abandonment has recently been ruled to be incompatible with constructive
dismissal. We, thus, rule that complainants did not abandon their jobs. [17] We will now demonstrate
why we believe complainants were illegally dismissed.
In several cases, the Court has recognized the prerogative of management to transfer an
employee from one office to another within the same business establishment, as the exigency of
the business may require, provided that the said transfer does not result in a demotion in rank or a
diminution in salary, benefits and other privileges of the employee;[18] or is not unreasonable,
inconvenient or prejudicial to the latter;[19] or is not used as a subterfuge by the employer to rid
himself of an undesirable worker. [20]
A transfer means a movement (1) from one position to another of equivalent rank, level or
salary, without a break in the service; [21] and (2) from one office to another within the same
business establishment.[22] It is distinguished from a promotion in the sense that it involves a lateral
change as opposed to a scalar ascent.[23]
In this case, transfer of the complainants implied more than a relief from duty to give them
time to rest a mere changing of the guards. Rather, their transfer connoted a reshuffling or
exchange of their posts, or their reassignment to other posts, such that no security guard would be
without an assignment.
However, this legally recognized concept of transfer was not implemented. The agency hired
new security guards to replace the complainants, resulting in a lack of posts to which the
complainants could have been reassigned. Thus, it refused to reassign Complainant Andoy when he
reported for duty on February 2, 4 and 7, 1994; and merely told the other complainants on various
dates from January 25 to 27, 1994 that they were already too old to be posted anywhere.
The Agency now explains that since, under the law, the Agency is given a period of not more
than six months to retain the complainants on floating status, the complaint for illegal dismissal is
premature. This contention is incorrect.
A floating status requires the dire exigency of the employers bona fide suspension of
operation, business or undertaking. In security services, this happens when the clients that do not
renew their contracts with a security agency are more than those that do and the new ones that
the agency gets. However, in the case at bar, the Agency was awarded a new contract by the
Client. There was no surplus of security guards over available assignments. If there were, it was
because the Agency hired new security guards. Thus, there was no suspension of operation,
business or undertaking, bona fide or not, that would have justified placing the complainants off-

detail and making them wait for a period of six months. If indeed they were merely transferred,
there would have been no need to make them wait for six months.
The only logical conclusion from the foregoing discussion is that the Agency illegally dismissed
the complainants. Hence, as a necessary consequence, the complainants are entitled to
reinstatement and back wages.[24] However, reinstatement is no longer feasible in this case. The
Agency cannot reassign them to the Client, as the former has recruited new security guards; the
complainants, on the other hand, refuse to accept other assignments. Verily, complainants do not
pray for reinstatement; in fact, they refused to be reinstated. Such refusal is indicative of strained
relations.[25] Thus, separation pay is awarded in lieu of reinstatement. [26]
Second Issue:

Clients Liability

The Client did not, as it could not, illegally dismiss the complainants. Thus, it should not be
held liable for separation pay and back wages. But even if the Client is not responsible for the
illegal dismissal of the complainants, it is jointly and severally liable with the Agency for the
complainants service incentive leave pay. In Rosewood Processing, Inc. vs. National Labor Relations
Commission,[27] the Court explained that, notwithstanding the service contract between the client
and the security agency, the two are solidarily liable for the proper wages prescribed by the Labor
Code, pursuant to Article 106, 107 and 109 thereof, which we quote hereunder:
ART. 106. Contractor or subcontractor.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, if any, shall be paid in accordance with the provisions of this Code.
Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly
and severally liable with the contractor for the workers wages, in the same manner and extent that
it is liable to its direct employees. This liability of the Client covers the payment of the service
incentive leave pay of the complainants during the time they were posted at the Cebu branch of
the Client. As service had been rendered, the liability accrued, even if the complainants were
eventually transferred or reassigned.
The service incentive leave is expressly granted by these pertinent provisions of the Labor
Code:
ART. 95. Right to service incentive leave.(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor after considering the viability or financial condition of such
establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration
or any court [or] admnistrative action.
Under the Implementing Rules and Regulations of the Labor Code, an unused service incentive
leave is commutable to its money equivalent, viz.:
Sec. 5. Treatment of Banefit. - The service incentive leave shall be commutable to its money
equivalent if not used or exhausted at the end of the year.

The award of the thirteenth-month pay is deleted in view of the evidence presented by the
Agency that such claim has already been paid to the complainants. Obviously then, the award of
such benefit in the dispositive portion of the assailed Decision is merely an oversight, considering
that Respondent Commission itself deleted it from the main body of the said Decision.
WHEREFORE, the petition is DISMISSED and the assailed Decision and Resolution are
hereby AFFIRMED, but the award of the thirteenth-month pay is DELETED. Costs against
petitioners.
OSM

SHIPPING PHILIPPINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION (Third Division) and FERMIN F. GUERRERO, respondents.

PANGANIBAN, J.:
The Rules of Court do not require that all supporting papers and documents accompanying a
petition for certiorari should be duplicate originals or certified true copies. Furthermore, unilateral
decisions to alter the use of a vessel from overseas service to coastwise shipping will not affect the
validity of an existing employment contract validly executed. Workers should not be prejudiced by
actions done solely by employers without the formers consent or participation.
The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, seeking to
set aside the February 11, 1999 and the March 26, 1999 Resolutions of the Court of Appeals (CA) in
CA-GR SP No. 50667. The assailed Resolutions dismissed a Petition filed in the CA, challenging an
adverse ruling of the National Labor Relations Commission (NLRC). The first Resolution disposed as
follows:
We resolve to OUTRIGHTLY DISMISS the petition.[2]
The second Resolution[3] denied petitioners Motion for Reconsideration.
On the other hand, the NLRC Decision disposed in this wise:
WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED in that
respondents OSM Shipping Phils. Inc. and its principal, Philippine Carrier Shipping Agency Services
Co. are jointly and severally ordered to pay complainant the sum of ELEVEN THOUSAND THREE
HUNDRED FIFTY NINE and 65/100 [US dollars] (US$11,359.65) or its peso equivalent at the time of
payment representing complainants unpaid salaries, accrued fixed overtime pay, allowance,
vacation leave pay and termination pay.[4]
The Facts
This case originated from a Complaint filed by Fermin F. Guerrero against OSM Shipping
Philippines, Inc.; and its principal, Philippine Carrier Shipping Agency Services Co. The Complaint
was for illegal dismissal and non-payment of salaries, overtime pay and vacation pay. The facts are
summarized in the NLRC Decision as follows:
[Private respondent] was hired by [Petitioner] OSM for and in behalf of its principal, Phil Carrier
Shipping Agency Services Co. (PC-SLC) to board its vessel M/V [Princess] Hoa as a Master Mariner
for a contract period of ten (10) months. Under the said contract, his basic monthly salary
isUS$1,070.00, US$220.00 allowance, US$321.00 fixed overtime, US$89 vacation leave pay per
month for x x x 44 hours f] work per week. He boarded the vessel on July 21, 1994 and complied
faithfully with the duties assigned to him.

[Private respondent] alleged that from the start of his work with M/V Princess Hoa, he was not paid
any compensation at all and was forced to disembark the vessel sometime in January 1995
because he cannot even buy his basic personal necessities. For almost seven (7) months, i.e. from
July 1994 to January 1995, despite the services he rendered, no compensation or remuneration was
ever paid to him. Hence, this case for illegal dismissal, [non-payment] of salaries, overtime pay and
vacation pay.
[Petitioner] OSM, for its part, alleged that on July 26, 1994, Concorde Pacific, an American company
which owns M/V Princess Hoa, then a foreign registered vessel, appointed x x x Philippine Carrier
Shipping Agency Services Co. (PC-SASCO) as ship manager particularly to negotiate, transact and
deal with any third persons, entities or corporations in the planning of crewing selection or
determination of qualifications of Filipino Seamen. On the same date, [Petitioner] OSM entered into
a Crew Agreement with x x x PC-SASCO for the purpose of processing the documents of crew
members of M/V Princess Hoa. The initial plan of the [s]hip-owner was to use the vessel in the
overseas trade, particularly the East Asian Growth Area. Thereafter, the contract of [private
respondent] was processed before the POEA on September 20, 1994.
OSM alleged further that the shipowner changed its plans on the use of the vessel. Instead of using
it for overseas trade, it decided to use it in the coastwise trade, thus, the crewmembers hired never
left the Philippines and were merely used by the shipowner in the coastwise trade. Considering that
the M/V Princess Hoa was a foreign registered vessel and could not be used in the coastwise trade,
the shipowner converted the vessel to Philippine registry on September 28, 1994 by way of
bareboat chartering it out to another entity named Philippine Carrier Shipping Lines Co. (PCSLC). To
do this, the shipowner through Conrado V. Tendido had to terminate its management agreement
with x x x PC-SASCO on September 28, 1994 by a letter of termination dated September 20, 1994.
In the same letter of termination, the ship owner stated that it has bareboat chartered out the
vessel to said [PCSLC] and converted it into Philippine registry. Consequently, x x x PC-SASCO
terminated its crew agreement with OSM in a letter dated December 5, 1994. Because of the
bareboat charter of the vessel to PCSLC and its subsequent conversion to Philippine registry and
use in coastwise trade as well as to the termination of the management agreement and crew
agency agreement, a termination of contract ensued whereby PCSLC, the bareboat charterer,
became the disponent owner/employer of the crew.
As a disponent owner/employer, PCSLC is now responsible for the payment of complainants wages.
x x x. [5]
Labor Arbiter (LA) Manuel R. Caday rendered a Decision [6] in favor of Private Respondent
Guerrero. Petitioner and its principal, Philippine Carrier Shipping Agency Services, Co. (PC-SASCO),
were ordered to jointly and severally pay Guerrero his unpaid salaries and allowances, accrued
fixed overtime pay, vacation leave pay and termination pay. The Decision held that there was a
constructive dismissal of private respondent, since he had not been paid his salary for seven
months. It also dismissed petitioners contention that there was a novation of the employment
contract.
On appeal, the NLRC (Third Division) affirmed the LAs Decision, with a modification as to the
amount of liability. On January 28, 1999, petitioner filed with the CA a Petition [7] to set aside the
NLRC judgment. The petition was dismissed, because petitioner had allegedly failed to comply with
the requirements of Section 3 of Rule 46 of the Rules of Court. Specifically, petitioner had attached
to its Petition, not a duplicate original or a certified true copy of the LAs Decision, but a mere
machine copy thereof. Further, it had not indicated the actual address of Private Respondent
Fermin F. Guerrero.[8]
Hence, this Petition.[9]
The Issues

In its Memorandum, petitioner raises the following issues for the Courts consideration:
1. Did not the Court of Appeals err in interpreting and applying the 1997 Rules when it required as
attachment to the Petition for Certiorari the duplicate original of another Decision which is not-the
subject of the said Petition?
2. Did not the Court of Appeals err in interpreting and applying the 1997 Rules when it disregarded
the subsequent compliance made by petitioner?
3. Did not the Court of Appeals err in interpreting and applying the 1997 Rules when it did not
consider the Notice to private respondent Guerrero through his counsel as Notice to Guerrero
himself?[10]
The foregoing issues all refer to the question of whether, procedurally, petitioner has complied
with Section 3 of Rule 46 of the Rules of Court. Additionally and in the interest of speedy justice,
this Court will also resolve the substantive issue brought before the CA: did the NLRC commit grave
abuse of discretion in ruling in favor of private respondent?
The Courts Ruling
While petitioner is procedurally correct, the case should nonetheless be decided on the merits
in favor of private respondent.
Procedural Issue:
Petitioner puts at issue the proper interpretation of Section 3 of Rule 46 of the Rules of Court.
Specifically, was petitioner required to attach a certified true copy of the LAs Decision to its
Petition for Certiorari challenging the NLRC judgment?
[11]

Section 3 of Rule 46 does not require that all supporting papers and documents accompanying
a petition be duplicate originals or certified true copies. Even under Rule 65 on certiorari and
prohibition, petitions need to be accompanied only by duplicate originals or certified true copies of
the questioned judgment, order or resolution. Other relevant documents and pleadings attached to
it may be mere machine copies thereof. [12] Numerous decisions issued by this Court emphasize that
in appeals under Rule 45 and in original civil actions for certiorari under Rule 65 in relation to Rules
46 and 56, what is required to be certified is the copy of the questioned judgment, final order or
resolution.[13] Since the LAs Decision was not the questioned ruling, it did not have to be certified.
What had to be certified was the NLRC Decision. And indeed it was.
As to the alleged missing address of private respondent, the indication by petitioner that
Guerrero could be served with process care of his counsel was substantial compliance with the
Rules.
This Court has held that the sending of pleadings to a party is not required, provided that the
party is represented by counsel. [14] This rule is founded on considerations of fair play, inasmuch as
an attorney of record is engaged precisely because a party does not feel competent to deal with
the intricacies of law and procedure. [15] Both jurisprudence[16] and the basics of procedure [17] provide
that when a party has appeared through counsel, service is to be made upon the latter, unless the
court specifically orders that it be upon the party.
We also note that from the inception of the case at the LAs office, all pleadings addressed to
private respondent had always been sent to his counsel, Atty. Danilo G. Macalino. Note that private
respondent, who was employed as a seaman, was often out of his home. The service of pleadings
and other court processes upon him personally would have been futile, as he would not have been
around to receive them.

This Court has repeatedly held that while courts should meticulously observe the Rules, they
should not be overly strict about procedural lapses that do not impair the proper administration of
justice.[18] Rather, procedural rules should be liberally construed to secure the just, speedy and
inexpensive disposition of every action and proceeding. [19]
Substantive Issue:
Liability of Petitioner for Unpaid Salaries
It is worthwhile to note that what is involved in this case is the recovery of unpaid salaries and
other monetary benefits. The Court is mindful of the plight of private respondent and, indeed, of
workers in general who are seeking to recover wages that are being unlawfully withheld from them.
Such recovery should not be needlessly delayed at the expense of their survival. This case is now
on its ninth year since its inception at the LAs office. Its remand to the CA will only unduly delay its
disposition. In the interest of substantial justice, [20] this Court will decide the case on the merits
based upon the records of the case, particularly those relating to the OSM Shipping Philippines
Petition before the CA.
On behalf of its principal, PC-SASCO, petitioner does not deny hiring Private Respondent
Guerrero as master mariner. However, it argues that since he was not deployed overseas, his
employment contract became ineffective, because its object was allegedly absent. Petitioner
contends that using the vessel in coastwise trade and subsequently chartering it to another
principal had the effect of novating the employment contract. We are not persuaded.
As approved by the Philippine Overseas Employment Agency (POEA), petitioner was the
legitimate manning agent of PC-SASCO. [21] As such, it was allowed to select, recruit, hire and deploy
seamen on board the vessel M/V Princess Hoa, which was managed by its principal, PC-SASCO. [22] It
was in this capacity that petitioner hired private respondent as master mariner. They then
executed and agreed upon an employment contract.
An employment contract, like any other contract, is perfected at the moment (1) the parties
come to agree upon its terms; and (2) concur in the essential elements thereof: (a) consent of the
contracting parties, (b) object certain which is the subject matter of the contract and (c) cause of
the obligation.[23] Based on the perfected contract, Private Respondent Guerrero complied with his
obligations thereunder and rendered his services on board the vessel. Contrary to petitioners
contention, the contract had an object, which was the rendition of service by private respondent on
board the vessel. The non-deployment of the ship overseas did not affect the validity of the
perfected employment contract. After all, the decision to use the vessel for coastwise shipping was
made by petitioner only and did not bear the written conformity of private respondent. A contract
cannot be novated by the will of only one party. [24] The claim of petitioner that it processed the
contract of private respondent with the POEA only after he had started working is also without
merit. Petitioner cannot use its own misfeasance to defeat his claim.
Petitioner, as manning agent, is jointly and severally liable with its principal, [25] PC-SASCO, for
private respondents claim. This conclusion is in accordance with Section 1 of Rule II of the POEA
Rules and Regulations.[26] Joint and solidary liability is meant to assure aggrieved workers of
immediate and sufficient payment of what is due them. [27] The fact that petitioner and its principal
have already terminated their agency agreement does not relieve the former of its liability. The
reason for this ruling was given by this Court in Catan National Labor Relations Commission,
[28]
which we reproduce in part as follows:
This must be so, because the obligations covenanted in the [manning] agreement between the
local agent and its foreign principal are not coterminus with the term of such agreement so that if
either or both of the parties decide to end the agreement, the responsibilities of such parties
towards the contracted employees under the agreement do not at all end, but the same extends
up to and until the expiration of the, employment contracts of the employees recruited and

employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the
very purpose for which the law governing the employment of workers for foreign jobs abroad was
enacted.[29]
WHEREFORE, the assailed Resolutions are hereby SET ASIDE, and the September 10, 1998
NLRC Decision REINSTATED and AFFIRMED. Costs against petitioner.

MANILA ELECTRIC V. BENAMIRA

463 SCRA 331 Labor Law Labor Standards Indirect Employer Labor Only Agency
Rogelio Benamira et al were security guards who worked for PSI (Peoples Security, Inc.). PSI was
the security agency contracted by MERALCO (Manila Electric Company). The contract between PSI
and MERALCO expired. MERALCO subsequently contracted ASDAI (Armed Security and Detective
Agency, Inc.) as its new security agency. ASDAI absorbed Benamira et al upon MERALCOs advice.
After two years, the contract between ASDAI and MERALCO expired. MERALCO subsequently
contracted AFSISI (Advance Forces Security and Investigation Services, Inc.). AFSISI did not
schedule any work for Benamira et al. It was interpreted as a constructive dismissal. Benamira
sued MERALO, ASDAI, and AFSISI.
The Labor Arbiter ruled that ASDAI should reinstate Benamira et al and that MERALCO is solidarily
liable. No liability for AFSISI. NLRC affirmed LA. The CA reversed the lower courts. The CA ruled that
the employer is actually MERALCO.
ISSUE: Whether or not MERALCO is the employer of the fired security guards.
HELD: No. Under the contract between ASDAI and MERALCO, it can be seen that ASDAI is indeed
the employer of the guards. Applying the 4 Fold Test: ASDAI employed the guards when it absorbed
them from PSI. ASDAI provided the salaries of the guards (MERALCO merely pays ASDAI for
providing the guards). ASDAI has control over the guards because they are being inspected
(MERALCO has the right to conduct its own inspection as per contract with ASDAI only). ASDAI has
the power to terminate the guards, as when they did not provide any tours or schedules to them.
Further, the services offered by the guards is not necessary to the principal business of MERALCO
which is to provide electricity.
AFSISI is not the employer of the guards as well (as claimed by the guards) because AFSISI never
absorbed them nor was there any evidence showing otherwise.
These security agencies are not Labor Only agencies (unlike HR agencies) because they have their
own equipments, machineries and in general they carry their own business.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner, vs. THE
HON. COURT OF APPEALS, and RAIMUND DIEHL, respondents.
Labor Law; National Labor Relations Commission; Court has responded in the negative when
queried on whether or not a civil court may interfere by injunction with the execution of a final and
executory judgment of the National Labor Relations Commission.In Pucan v. Bengzon and in
Guimoc v. Rosales, the Court has thus responded in the negative when queried on whether or not a
civil court may interfere by injunction with the execution of a final and executory judgment of the
NLRC.
Same; Same; Levy; Indemnity bond that must be posted up by the prevailing party should be in a
sum not less than the value of the property levied.The Manual (second paragraph of Section 1 of
Rule VI) requires that the indemnity bond that must be posted up by the prevailing party should be
in a sum not less than the value of the property levied.
Same; Same; Same; In case of disagreement on the value of the property levied, the matter shall
be determined by the Labor Arbiter.The Manual provides that in case of disagreement on the
value of the property levied, the matter shall be determined by the Labor Arbiter. Not only did
PHILGUARANTEE promptly challenge the integrity of the bond submitted by Diehl but it also did
question the amount of the bond. Since the difference is substantial, it should have behooved the
Labor Arbiter to take more than just a passing glance on the claim of PHILGUARANTEE.

On 13 May 1988, private respondent Raimund Diehl, a resident alien, lodged a complaint for illegal
dismissal against the Philippine German Wire Mesh Reinforcing Corporation ("FILFORCE") with the
National Labor Relations Commission ("NLRC") (docketed NLRC-NCR Case No. 00-05-021-88).
Parenthetically, five (5) years earlier, or on 28 July 1983, FILFORCE had mortgaged its plant and
other property located at EPZA, Mariveles, Bataan, in favor of herein petitioner Philippine Export
and Foreign Loan Guarantee Corporation ("PHILGUARANTEE"), a government owned and controlled
corporation, to secure a guarantee which the latter executed in favor of Kuwait Asia Bank, E.C.,
over fifty one percent (51%) of the US$1,357,600.00 loan which had been extended to FILFORCE by
the bank. The mortgage in PHILGUARANTEE's favor was duly registered, on 29 July 1983, with the
Register of Deeds of Bataan.
On 21 December 1990, a judgment favorable to respondent Diehl was rendered by Labor Arbiter
Edilberto J. Pangan; it read:
WHEREFORE, respondents Philippine German Wire Mesh Reinforcing Corporation, J. Roberto C.
Delgado and Basilio Sison are hereby ordered to pay complainant Raimund Diehl the amount of
US$41,624.64 or its equivalent in Philippine Pesos, and P35,212.00.
On 03 May 1991, PHILGUARANTEE received a copy of an "Urgent Ex-Parte Motion for the Issuance
of an Alias Writ of Execution" from Diehl where he alleged that of the then total monetary award of
One Million Three Hundred Twenty Thousand Seven Hundred Seventy Two Pesos and 11/100
(P1,320,772.11), only Seven Hundred Seventy Six Thousand Pesos (P776,000.00) worth of property
belonging to FILFORCE was levied and sold at public auction, thus leaving a deficiency of Five
Hundred Forty Four Thousand Seven Hundred Seventy Two Pesos & 11/100 (P544,772.11). Labor
Arbiter Pangan again acted favorably on Diehl's ex-parte motion; on 06 May 1991, he issued an
alias writ of execution directing the Deputy Sheriff to further collect the sum of P544,772.11. 4
On 15 May 1991, PHILGUARANTEE went to the Regional Trial Court of Makati and there filed a
complaint for "Annulment of Sale, Recovery of Possession and Injunction with Urgent Prayer for the
Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining Order and/or Status Quo
Order" (docketed as Civil Case No. 91-1360). Two days later, or on 17 May 1991, a temporary
restraining order was issued and a hearing for the reception of evidence in support of the prayer
for the issuance of a writ of preliminary injunction was set by the trial court.
PHILGUARANTEE is before this Court solely on the contention that the appellate court has erred in
holding that the court a quo did not have jurisdiction over the case.
The appellate court did not commit error.
The question of whether or not the trial court below was in any good position to take cognizance
over the complaint filed by PHILGUARANTEE and to issue an injunctive relief depended, in turn, on
whether or not the acts complained of arose out of, or were connected or interwoven with, cases
falling under the exclusive jurisdiction of the Labor Arbiter or the NLRC. 6 While, ostensibly, the
complaint filed with the trial court was for the annulment of sale, recovery of possession and
injunction, in essence, however, the action challenged the legal propriety of the execution sale, as
well as the acts performed by the Labor Arbiter and the Deputy Sheriff in the conduct thereof, and
the subsequent issuance of an alias writ of execution. In reality, petitioner's action to annul the
execution sale was a motion to quash the writ of execution on a case aptly within the jurisdiction of
the Labor Arbiter. The case brought before the trial court, being a matter growing out of the labor
dispute decided by the Labor Arbiter, clearly fell outside the competence of the trial court.
Another reason that militates against the trial court's assumption of jurisdiction over the case is
Article 254 of the Labor Code which states:
Art. 254.
Injunction prohibited. No temporary or permanent injunction or restraining order
in any case involving or growing out of labor disputes shall be issued by any court or other entity,
except as otherwise provided in Articles 218 and 264 of this Code.