AKLAN COLLEGE vs.

RODOLFO GUARINO Before the Court is a petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Aklan College, Incorporated (ACI) and Msgr. Adolfo P. Depra (Msgr. Depra) assailing the Decision[1] of the Court of Appeals (CA) dated March 9, 2001, and its Resolution[2] of April 5, 2002 in CA-G.R. SP No. 54035. The undisputed facts, as summarized by the CA, are as follows: Private respondent Guarino was first hired in 1972 as an instructor by petitioner College. In 1974, private respondent was appointed as Acting Dean of the Commerce and Secretarial Department. On November 26, 1990, he was again appointed by the petitioner as Acting Personnel Director, in addition to his duties as acting dean. His appointment as Acting Personnel Director was in a temporary basis and until it is revoked by the President or Rector of the College. (Annex A,Rollo, 32) A year after, private respondent went on leave for one year from November 4, 1991 up to November 4, 1992. On October 20, 1992, private respondent wrote the petitioner through its Rector informing the latter of his intention of reassuming his positions with the petitioner college. However, in petitioners response, it informed private respondent that he cannot anymore reassume his former position as Acting Dean of the Commerce and Secretarial Department because he is not qualified for the position. Then, on November 10, 1992, petitioner formally informed private respondent that the Board of Trustees of the petitioner college has decided not to allow him to reassume his position as Acting Dean for the reason that he has not qualified to continue holding the position and that the position of Acting Personnel director has already been filled up by a regular incumbent. Hence, on November 11, 1992, private respondent filed the instant case for illegal dismissal against petitioner with the office of the Department of Labor in Kalibo, Aklan.[3] On May 24, 1994, the Labor Arbiter (LA) handling the case rendered judgment dismissing the complaint for lack of merit. Rodolfo P. Guarino (respondent) filed an appeal with the National Labor Relations Commission (NLRC). On March 9, 1995, the NLRC rendered a Decision reversing the LA, with the following dispositive portion: WHEREFORE, the respondents are hereby ordered to pay the complainant separation pay for his discharge from the position of Dean of Commerce and Secretarial Science, equivalent to one month pay for every year of service, a fraction of six months being considered one year. The respondents are further ordered to reinstate the complainant in his position as personnel director with full backwages from the time his salaries were withheld from him until his actual reinstatement, and as instructor without backwages. The respondents are furthermore ordered to pay the complainant 10% of the monetary awards as attorneys fees. Other claims are hereby DISMISSED for lack of sufficient evidence. Complainant's monetary awards up to March 10, 1995 are (sic) P149,955.85 computed as follows: I Separation Pay as Dean P4,395.50 x 17 years II Backwages as Personnel Director (Nov. 10, 1992-March 10, 1995) P2,200 x 28 months Sub-total III 10% ATTORNEYS FEES Grand total -----P74,723.50

----------------

P61,600.00 P136, 323.50 P13,632.35 P149,955.85

SO ORDERED.[4] Aggrieved by the Decision of the NLRC, petitioners filed a special civil action for certiorari with the CA. On March 9, 2001, the CA rendered judgment denying the petition and affirming the assailed decision of the NLRC. [5] Petitioners Motion for Reconsideration was subsequently denied by the CA in its Resolution dated April 5, 2002.[6] Hence, herein petition with a sole Assignment of Error, to wit: THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE WELL-SETTLED DOCTRINE LAID DOWN IN LA SALETTE OF SANTIAGO, INC. v. NLRC, 195 SCRA 80 [1991] THAT NO EMPLOYEE ATTAINS A SECOND SECURITY OF TENURE TO AN ADMINISTRATIVE POSITION.[7] Petitioners contend that it is not a disputed fact that, during his employment with petitioner ACI, respondent held three concurrent positions: those of an instructor, Acting Dean of the Commerce Department and Acting Personnel Director; what petitioners refused to give back to respondent when he was sent a letter dated November 10, 1992 were his positions as Acting Dean and Acting Personnel Director; respondent was never stripped of his position as an instructor. Citing the case of La Salette of Santiago, Inc. v. National Labor Relations Commission ,[8] petitioners assert that while an employee attains security of tenure as a member of the teaching staff of a private educational institution from which he could only be removed for cause, he cannot always aspire for a second tenure in an administrative position and can, therefore, be stripped of this position by the appointing power without the latter being held responsible for illegal dismissal. Petitioners argue that when private respondent was not allowed to re-assume his former administrative positions as Acting Dean and Acting Personnel Director but was still considered as an instructor and was even prodded to resume his teaching responsibilities, he could not be considered as having been illegally dismissed. Petitioners further argue that there was no law or agreement which gave respondent additional tenure as dean; that his appointment as dean in a regular capacity was made dependent on his graduation with a degree of Master in Business Administration (MBA), as this is a requirement imposed by DECS Order No. 5, Series of 1990 as well as the Manual of Regulations for Private Schools; that petitioner was not able to finish his MBA which compelled petitioner ACI to withhold the position from him. Petitioners also aver that respondents appointment as Dean and Personnel Director was only in an acting but never in a regular capacity. Citing various rulings of this Court, petitioners contend that a bona fide appointment in an acting capacity is essentially temporary and revocable in character and the holder of such an appointment may be removed anytime even without hearing or cause. On the other hand, respondent argues that petitioners reliance on La Salette is misplaced, as the factual circumstances obtaining therein are materially different from those in the present case. Respondent contends that in La Salette, the complainant therein was appointed to various administrative positions for a definite or fixed term, while in the present case respondent was appointed as dean not for a fixed duration but for an indefinite period. In addition, respondent claims that by continuously serving as Dean of ACIs Commerce and Secretarial Department for more than 17 years, his assumption of the said office could not be considered as temporary. He claims that while he was not formally appointed as dean, he has acquired security of tenure as such pursuant to the provisions of Article 280 of the Labor Code.
[9]

The Court finds the petition meritorious. Respondents termination as Acting Personnel Director is valid. The factual milieu in La Salette is similar to the present case insofar as respondents position as Personnel Director is concerned. In La Salette, the respondent therein occupied different administrative positions in various capacities every so often and for a period not exceeding three years. For three years, she was the principal of La Salette Jones High School. For the next three years she worked as teacher and Subject Area Coordinator of a sister school, La Salette of Santiago. Thereafter, for seven years, she was employed as a full-time instructor in still another sister corporation, La Salette College; and for two years of that period, she served as the Head of the Department of Education and Liberal Arts. After which, for three years, she was assigned as Assistant Principal of the High School Department of La Salette of Santiago, concurrently with her work as part-time instructor in La SaletteCollege. For the last two years of her connection with the La Salette School System, she was designated as High School Principal of La Salette of Santiago. On this matter, the Court held as follows: What is immediately apparent from this second look at the material facts is that while Clarita Javiers work as teacher in the La Salette School System was more or less continuous, or was evidently intended to be on a permanent basis, her assignment in one administrative office or another-i.e., as high

school principal, subject area coordinator, head of a college department, assistant principal- was not. In these administrative posts, she served in a non-permanent capacity, either at the pleasure of the school or for a fixed term. She could not but have become aware of the pattern in her employment relationship with her employer, of the duality in the nature of her employment, particularly of the non-permanent character of her stints in the administrative positions to which she was designated. There was therefore no cause for her to believe that security of tenure could be obtained by her in any of the administrative positions she held at one time or another. On the contrary, the temporariness of her occupancy of those administrative offices must have become quite apparent to her, in light of the facts. x x x[10] In the present case, it is not disputed that respondent was appointed as Acting Personnel Director on November 26, 1990. He went on leave for one year from November 4, 1991 until November 4, 1992, after which he was no longer allowed to re-assume his administrative posts. Having assumed the position of Personnel Director in an acting capacity, respondent could not reasonably have expected that he had acquired security of tenure. Moreover, in La Salette, the respondents appointment to the various administrative positions she held were not even in an acting capacity. Yet this Court held that she never attained security of tenure with respect to these positions. In the present case,with all the more reason should respondent not expect that he has gained security of tenure, considering that his appointment was only in an acting capacity. This Court has held that an acting appointment is merely temporary, or one which is good until another appointment is made to take its place.[11] And if another person is appointed, the temporary appointee should step out and cannot even dispute the validity of his successors appointment. [12] The undisturbed unanimity of cases is that one who holds a temporary appointment has no fixed tenure of office; his employment can be terminated anytime at the pleasure of the appointing power without need to show that it is for cause. [13] Insofar as the principles governing permanent and temporary appointments are concerned, this Court finds ruling in the more recent case of Achacoso v. Macaraig[14] relevant and instructive. While Achacoso served as jurisprudential basis in cases involving the issue of security of tenure in career executive service positions in government, this Court finds the rules on permanent and temporary appointments enunciated therein applicable to present case. the the the the

This Court held in Achacoso that a permanent appointment can be issued only to a person who meets all the requirements for the position to which he is being appointed; a person who does not have the requisite qualifications for the position cannot be appointed to it in the first place or, only as an exception to the rule, may be appointed to it merely in an acting capacity in the absence of persons who are qualified; the purpose of an acting or temporary appointment is to prevent a hiatus in the discharge of official functions by authorizing a person to discharge the same pending the selection of a permanent or another appointee; the person named in an acting capacity accepts the position under the condition that he shall surrender the office once he is called upon to do so by the appointing authority. [15] Consistent with the rulings in La Salette, Achacoso and the other cases cited above, respondent could not have attained security of tenure with respect to his position as Personnel Director of ACI. His termination as such is valid. On the other hand, the factual circumstances are different with respect to respondents appointment as Acting Dean of ACIsCommerce Department. In the present case, respondent was allowed to occupy the position of Acting Dean for a continuous period of 17 years, more or less, beginning in 1974 until he went on leave on November 4, 1991. Unlike the private respondent in LaSalette, herein respondents term as acting dean remained uninterrupted. In fact, there was not even any showing that he was handed any re-appointment paper or made to sign a renewal contract regarding the said position. Nonetheless, the Court finds respondents termination as Acting Dean also valid for the following reasons: Petitioners assert that under DECS Order No. 5, Series of 1990, as well as Section 41 of the Manual of Regulations for Private Schools, the acquisition of a Masters degree has been made a requirement before a person can be appointed as Dean of an undergraduate program. Article IV (1) (1.2) of DECS Order No. 5, Series of 1990, provides for the following minimum qualifications for the position of chairman, dean or director of a schools accounting program, to wit: a. Holder of a CPA certificate issued by the Professional Regulation Commission;

b. Holder of at least a masters degree in business, accountancy, or business education; c. Teaching experience of at least three (3) years; d. The ability to lead and gain the confidence and respect of the faculty. However, the Court finds that petitioners erred in relying upon the above-quoted provisions of DECS Order No. 5, Series of 1990, as its basis in dismissing respondent as the Acting Dean of its Commerce Department, because the said Order specifically applies only to the position of chairman, dean or director of a schools Accounting Department. Moreover, petitioners failed to refute respondents contention in his Position Paper that the Department of Commerce to which he was assigned consists of many fields of study other than accounting. The Court also notes that the Manual being referred to by petitioners is the 1992 Manual of Regulations for Private Schools (8th Edition). The 1992 Manual took effect at the beginning of the summer session of 1993. [16] Prior to its effectivity, what was in force was the 1970 Manual of Regulations (7 th Edition). The alleged illegal dismissal of respondent took place on November 10, 1992. At the time of the dismissal, what was in effect was the 1970 Manual. Hence, it should have been the 1970 Manual, and not the 1992 Manual, that petitioners cited as their basis in dismissing respondent from his position as Acting Dean. In any case, it must be pointed out that like the 1992 Manual, the 1970 Manual requires that a Dean of an undergraduate program must have acquired an appropriate graduate degree. Paragraph 69 of the 1970 Manual provides: 69. Administrative and supervisory officials should have the following minimum qualifications, duly supported by credentials on file with the school. a. For principal of primary and/or intermediate schools, a holder of a Bachelor's degree in Elementary Education or equivalent with three years of successful teaching experience in the elementary grades. b. For principal of secondary schools, a holder of a Bachelor of Science in Education degree or equivalent with three years of successful teaching experience in the high school. c. College dean, a holder of an appropriate graduate degree with at least three years of successful college teaching experience. d. Dean of the Graduate School, a holder of an appropriately earned doctorate degree with at least three years of successful graduate school teaching experience. (emphasis supplied) Both the 1970 and 1992 Manuals were promulgated by the Department of Education, Culture and Sports (now, Department of Education) in the exercise of its rule-making power as provided for under Section 70[17] of Batas Pambansa Blg. 232, otherwise known as the Education Act of 1982. As such, these Manuals have the force and effect of law.[18] Since the 1970 Manual imposes minimum requirements that must be complied with before a person can be appointed as a college dean, petitioner ACI is duty-bound to comply with these requirements. Otherwise, it runs the risk of incurring administrative sanctions from DECS.[19] In the present case, the fact that respondent was retained as an acting dean for 17 years did not give him a vested right to occupy in a permanent capacity the position to which he was appointed. Neither do his long years of service confer upon him the requisite qualifications which he does not possess. Not being a masters degree holder, he was never and could never have been appointed in a permanent capacity, as he is not qualified under the law. Thus, pursuant to the 1970 Manual, respondents dismissal as acting dean of ACIs Commerce Department is valid. Respondents appointment as dean of petitioners Commerce Department was also in an acting capacity. Hence, the Court finds the rulings in La Salette and Achacoso, which were earlier discussed, applicable. The Court is not persuaded by respondents contention that petitioner ACI is estopped from assailing respondents qualification since it allowed the latter to continue occupying the position of acting dean for more than 17 years despite the said requirement being imposed by the DECS. In the present case, the employment of respondent as Acting Dean is contrary to the express provisions of the 1970 Manual. It is settled that estoppel cannot give validity to an act that is prohibited by law, or one that is against public

policy.[20] Neither can the defense of illegality be waived. [21] Hence, respondents appointment as Acting Dean can never be deemed validated byestoppel. Moreover, respondent cannot deny that he is aware of the fact that a masters degree in business administration is required of a person who is appointed to the position of ACIs Dean of Commerce. He never disputed petitioners' contention in their Answer/Position Paper[22] filed with the Labor Arbiter that he was indeed aware of this requirement. In fact, it was in his Memorandum-Proposal addressed to the Rector of ACI dated May 26, 1972[23] that respondent suggested that ACI grant him financial assistance so that he can go to graduate school and take up MBA. ACI acted favorably on his suggestion and awarded him a scholarship grant less than a month after the said Memorandum-Proposal was submitted. In addition, one of the conditions imposed by petitioners upon respondent in their Scholarship and Employment contract was for him to serve as Dean of its Commerce Department after he finished his MBA. Despite the opportunity given him, respondent still failed to obtain an MBA. Nonetheless, respondent was still allowed to retain his position as Acting Dean. Under the foregoing circumstances, especially in light of the requirements imposed by law, petitioners extension of respondents appointment can be considered simply as an act of grace on the part of the former and may not be interpreted as a change of status from temporary to permanent. If the intention of the petitioners was to make respondents appointment permanent, they would have done so by executing a different appointment paper considering the fact that the original appointment was of a temporary nature. Moreover, the provisions of Article 280 of the Labor Code are not applicable to the present case especially with respect to the issue of respondent's acquisition of security of tenure. It is settled that questions respecting a private school teachers entitlement to security of tenure are governed by the Manual of Regulations for Private Schools and not the Labor Code. Paragraph 75[24] of the 1970 Manual (now Section 93 [25] of the 1992 Manual) lays down the requisites before a teacher can be considered as having attained a permanent status and therefore entitled to security of tenure. In La Salette, the Court was clear in ruling that, unlike teachers (assistant instructors, instructors, assistant professors, associate professors, full professors) who aspire for and expect to acquire permanency, or security of tenure, in their employment as faculty members, teachers who are appointed as department heads or administrative officials (e.g., college or department secretaries, principals, directors, assistant deans, deans) do not normally, and should not expect to, acquire a second status of permanency or an additional or second security of tenure as such officer. In the instant case, it is not disputed that respondent was never removed from his position as instructor. He was only dismissed from his capacity as Acting Dean and Acting Personnel Director. As to respondents right to procedural due process, this Court has held that there is no need of a notice to the acting appointee or any form of hearing. [26] Such procedural requirements apply where the officer is removable only for cause.[27] This Court reiterates the rule that a bona fide appointment in an acting capacity is essentially temporary and revocable in character and the holder of such appointment may be removed anytime even without hearing or cause. [28] As to respondents entitlement to separation pay, the settled rule is that separation pay is the amount that an employee receives at the time of his severance from the service and is designed to provide the employee with the wherewithal during the period that he is seeking another employment. [29] In the present case, while respondent was no longer allowed to return to his positions as Acting Dean and Acting Personnel Director he was, nonetheless, retained as an instructor. Hence, he could not be deemed as separated from the service because his employment as instructor remains. On the other hand, if respondent chose to seek another employment as there is no showing in the present case that he returned to his position as instructor, petitioners should not be faulted and made to suffer the consequence of respondent's decision. In such a case he is deemed to have voluntarily resigned. Settled is the rule that an employee who voluntarily resigns from employment is not entitled to separation pay unless, however, there is a stipulation for payment of such in the employment contract or Collective Bargaining Agreement, or payment of the amount is sanctioned by established employer practice or policy. [30] There is no proof to show that the present case falls under any of the aboveenumerated exceptions. Hence, the Court finds no cogent reason to award him separation pay. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated March 9, 2001 in CAG.R. SP No. 54035, which affirmed the Decision of the National Labor Relations Commission, Fourth Division, Cebu City in NLRC Case No. V-0261-94 is REVERSED and SET ASIDE. The Labor Arbiter's Decision dated May 24, 1994 in RAB Case No. 0210-AKLAN-92 (06-11-700045-92), dismissing respondents complaint for lack of merit, is REINSTATED. No costs. SO ORDERED.

CIVIL SERVICECOMMISION vs. GREGORIO MAGNAYE The Civil Service Commission (CSC) assails in this petition for review on certiorari, [1] the February 20, 2008 Decision[2] and the June 11, 2008 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 85508. The CA reversed the July 20, 2004 Decision of the Civil Service Commission Regional Office No. IV (CSCRO-IV) and ordered the reinstatement of respondent Gregorio Magnaye, Jr. (Magnaye) with payment of backwages and other monetary benefits. THE FACTS In March 2001, Mayor Roman H. Rosales of Lemery, Batangas, appointed Magnaye as Utility Worker I at the Office of Economic Enterprise [Operation of Market] ( OEE). After a few days, Mayor Rosales detailed him to the Municipal Planning and Development Office. In the May elections of that year, Mayor Rosales was defeated by Raul L. Bendaa, who assumed office on June 30, 2001. Thereafter, Magnaye was returned to his original assignment at the OEE. On July 11, 2001, Bendaa also placed him on detail at the Municipal Planning and Development Office to assist in the implementation of a Survey on the Integrated Rural Accessibility Planning Project. On August 13, 2001, the new mayor served him a notice of termination from employment effective the following day for unsatisfactory conduct and want of capacity. Magnaye questioned his termination before the CSC head office on the ground that Mayor Bendaa was not in a position to effectively evaluate his performance because it was made less than one and one-half months after his (Mayor Bendaas) assumption to office. He added that his termination was without basis and was politically motivated. The CSC head office dismissed, without prejudice, Magnayes complaint because he failed to attach a certificate of non-forum shopping. Thereafter, Magnaye filed a complaint with the regional office of the Civil Service (CSCRO-IV). The CSCRO-IV dismissed Magnayes complaint for lack of merit. It upheld his dismissal from the service on the ground that Mayor Bendaas own assessment, together with the evaluation made by his supervisors, constituted sufficient and reasonable grounds for his termination. Magnaye sought recourse through a petition for review with the Court of Appeals, citing CSCRO-IVs alleged errors of fact and of law, non-observance of due process, and grave abuse of discretion amounting to lack or excess of jurisdiction. Adopting the stance of the Office of the Solicitor General, the CA ruled in Magnayes favor, mainly on the ground that he was denied due process since he was not informed of what constituted the alleged unsatisfactory conduct and want of capacity that led to his termination. It summarized the positions of the OSG as follows: On January 18, 2005, the Office of the Solicitor General (OSG) filed its manifestation and motion, in lieu of comment, praying that the assailed decision be set aside. The OSG argued that Petitioners termination was illegal. The notice of termination did not cite the specific instances indicating Petitioners alleged unsatisfactory conduct or want of capacity. It was only on July 29, 2003, or almost two years after Petitioners dismissal on August 13, 2001 that his former Department Heads, Engr. Magsino and Engr. Masongsong, submitted an assessment and evaluation report to Mayor Bendaa, which the latter belatedly solicited when the Petitioner appealed to the CSC Regional Office. Hence, the circumstances behind Petitioners dismissal became questionable. The OSG also found no evidence at the CSC Regional Office level that Petitioner was informed of his alleged poor performance. There was no evidence that Petitioner was furnished copies of 1) Mayor Bendaas letter, dated July 29, 2003, addressed to CSC Regional Office praying that Petitioners termination be sustained; and 2) the performance evaluation report, dated July 29, 2003, prepared by Engr. Magsino and Engr. Masongsong. The OSG claimed that Petitioner was denied due process because his dismissal took effect a day after he received the notice of termination. No hearing was conducted to give Petitioner the opportunity to refute the alleged causes of his dismissal. The OSG agreed with Petitioners claim that there was insufficient time for Mayor Bendaa to determine his fitness or unfitness for the position.[3] [Emphasis supplied] Thus, the fallo of the CA Decision[4] reads: WHEREFORE, the petition is Granted. The Civil Service Commission Regional Office No. 4s Decision, dated July 20, 2004 is hereby Set Aside. Accordingly, Petitioner is ORDERED REINSTATED with full payment of backwages and other monetary benefits. This case is hereby REMANDED to the Civil

Service Commission for reception of such evidence necessary for purposes of determining the amount of backwages and other monetary benefits to which Petitioner is entitled. SO ORDERED. THE ISSUES In this petition, the Civil Service Commission submits the following for our consideration: I. The dropping of respondent from the rolls of the local government unit of Lemery, Batangas was in accord with Civil Service Law, rules and jurisprudence. II. The respondent resorted to a wrong mode of appeal and violated the rule on exhaustion of administrative remedies and the corollary doctrine of primary jurisdiction. The principal issue, therefore, is whether or not the termination of Magnaye was in accordance with the pertinent laws and the rules. The eligibility of respondent Magnaye has not been put in issue. THE COURTS RULING The Court upholds the decision of the Court of Appeals. The CSC, in arguing that Magnayes termination was in accord with the Civil Service law, cited Section 4(a), Rule II of the 1998 CSC Omnibus Rules on Appointments and Other Personnel Actions which provides that: Sec. 4. Nature of appointment. The nature of appointment shall be as follows: a. Original refers to the initial entry into the career service of persons who meet all the requirements of the position. xxx It is understood that the first six months of the service following an original appointment will be probationary in nature and the appointee shall undergo a thorough character investigation. A probationer may be dropped from the service for unsatisfactory conduct or want of capacity anytime before the expiration of the probationary period. Provided that such action is appealable to the Commission. However, if no notice of termination for unsatisfactory conduct is given by the appointing authority to the employee before the expiration of the six-month probationary period, the appointment automatically becomes permanent. Under Civil Service rules, the first six months of service following a permanent appointment shall be probationary in nature, and the probationer may be dropped from the service for unsatisfactory conduct or want of capacity anytime before the expiration of the probationary period. [5] The CSC is of the position that a civil service employee does not enjoy security of tenure during his 6month probationary period. It submits that an employees security of tenure starts only after the probationary period. Specifically, it argued that an appointee under an original appointment cannot lawfully invoke right to security of tenure until after the expiration of such period and provided that the appointee has not been notified of the termination of service or found unsatisfactory conduct before the expiration of the same. [6] The CSC position is contrary to the Constitution and the Civil Service Law itself. Section 3 (2) Article 13 of the Constitution guarantees the rights of all workers not just in terms of self-organization, collective bargaining, peaceful concerted activities, the right to strike with qualifications, humane conditions of work and a living wage but also to security of tenure, and Section 2(3), Article IX-B is emphatic in saying that, "no officer or employee of the civil service shall be removed or suspended except for cause as provided by law." Consistently, Section 46 (a) of the Civil Service Law provides that no officer or employee in the Civil Service shall be suspended or dismissed except for cause as provided by law after due process.

Our Constitution, in using the expressions all workers and no officer or employee, puts no distinction between a probationary and a permanent or regular employee which means that both probationary and permanent employees enjoy security of tenure. Probationary employees enjoy security of tenure in the sense that during their probationary employment, they cannot be dismissed except for cause or for failure to qualify as regular employees. This was clearly stressed in the case of Land Bank of the Philippines v. Rowena Paden, [7] where it was written: To put the case in its proper perspective, we begin with a discussion on the respondent's right to security of tenure. Article IX (B), Section 2(3) of the 1987 Constitution expressly provides that "[n]o officer or employee of the civil service shall be removed or suspended except for cause provided by law." At the outset, we emphasize that the aforementioned constitutional provision does not distinguish between a regular employee and a probationary employee. In the recent case of Daza v. Lugo[8] we ruled that: The Constitution provides that "[N]o officer or employee of the civil service shall be removed or suspended except for cause provided by law." Sec. 26, par. 1, Chapter 5, Book V, Title I-A of the Revised Administrative Code of 1987 states: All such persons (appointees who meet all the requirements of the position) must serve a probationary period of six months following their original appointment and shall undergo a thorough character investigation in order to acquire permanent civil service status. A probationer may be dropped from the service for unsatisfactory conduct or want of capacity any time before the expiration of the probationary period; provided, that such action is appealable to the Commission. Thus, the services of respondent as a probationary employee may only be terminated for a just cause, that is, unsatisfactory conduct or want of capacity. The only difference between regular and probationary employees from the perspective of due process is that the latter's termination can be based on the wider ground of failure to comply with standards made known to them when they became probationary employees. The constitutional and statutory guarantee of security of tenure is extended to both those in the career and non-career service positions, and the cause under which an employee may be removed or suspended must naturally have some relation to the character or fitness of the officer or employee, for the discharge of the functions of his office, or expiration of the project for which the employment was extended. [9] Further, wellentrenched is the rule on security of tenure that such an appointment is issued and the moment the appointee assumes a position in the civil service under a completed appointment, he acquires a legal, not merely equitable right (to the position), which is protected not only by statute, but also by the Constitution [Article IX-B, Section 2, paragraph (3)] and cannot be taken away from him either by revocation of the appointment, or by removal, except for cause, and with previous notice and hearing.[10] While the CSC contends that a probationary employee does not enjoy security of tenure, its Omnibus Rules recognizes that such an employee cannot be terminated except for cause. Note that in the Omnibus Rules it cited,[11] a decision or order dropping a probationer from the service for unsatisfactory conduct or want of capacity anytime before the expiration of the probationary period is appealable to the Commission. This can only mean that a probationary employee cannot be fired at will. Notably, jurisprudence has it that the right to security of tenure is unavailing in certain instances. In Orcullo Jr. v. Civil Service Commission,[12] it was ruled that the right is not available to those employees whose appointments are contractual and co-terminus in nature. Such employment is characterized by a tenure which is limited to a period specified by law, or that which is coterminous with the appointing authority or subject to his pleasure, or which is limited to the duration of a particular project for which purpose employment was made. [13]In Amores M.D. v. Civil Service Commission,[14] it was held that a civil executive service appointee who meets all the requirements for the position, except only the appropriate civil service eligibility, holds the office in a temporary capacity and is, thus, not entitled to a security of tenure enjoyed by permanent appointees. Clearly, Magnayes appointment is entirely different from those situations. From the records, his appointment was never classified as co-terminus or contractual. Neither was his eligibility as a Utility Worker I challenged by anyone.

In support of its position that an appointee cannot lawfully invoke the right to a security of tenure during the probationary period, petitioner CSC banked on the case of Lucero v. Court of Appeals and Philippine National Bank. [15] This case is, however, not applicable because it refers to a private entity where the rules of employment are not exactly similar to those in the government service. Mayor Bendaa dismissed Magnaye for lack of capacity and unsatisfactory conduct. Section 26, paragraph 1, Chapter 5, Book V, Title I-A of the Revised Administrative Code of 1987 states: (1) Appointment through certification.An appointment through certification to a position in the civil service, except as herein otherwise provided, shall be issued to a person who has been selected from a list of qualified persons certified by the Commission from an appropriate register of eligibles, and who meets all the other requirements of the position. All such persons must serve a probationary period of six months following their original appointment and shall undergo a thorough character investigation in order to acquire permanent civil service status. A probationer may be dropped from the service for unsatisfactory conduct or want of capacity any time before the expiration of the probationary period: Provided that such action is appealable to the Commission. While unsatisfactory conduct and want of capacity are valid causes that may be invoked for dismissal from the service,[16] the CA observed that the Memorandum issued by Mayor Bendaa terminating Magnayes employment did not specify the acts constituting his want of capacity and unsatisfactory conduct. It merely stated that the character investigation conducted during his probationary period showed that his employment need not be necessary to be permanent in status.[17] Specifically, the notice of termination partly reads: You are hereby notified that your service as Utility Worker I, this municipality under six (6) month probationary period, is considered terminated for unsatisfactory conduct or want of capacity, effective August 14, 2001. You are further notified that after a thorough character investigation made during your such probationary period under my administration, your appointment for employment need not be necessary to be automatically permanent in status.[18] This notice indisputably lacks the details of Magnayes unsatisfactory conduct or want of capacity. Section VI, 2.2(b) of the Omnibus Guidelines on Appointments and other Personnel Actions (CSC Memorandum Circular No. 38, Series of 1993, as amended by CSC Memorandum Circular No. 12, Series of 1994), provides: 2.2. Unsatisfactory or Poor Performance b. An official who, for one evaluation period, is rated poor in performance, may be dropped from the rolls after due notice. Due notice shall mean that the officer or employee is informed in writing of the status of his performance not later than the fourth month of that rating period with sufficient warning that failure to improve his performance within the remaining period of the semester shall warrant his separation from the service. Such notice shall also contain sufficient information which shall enable the employee to prepare an explanation . [Emphasis and underscoring supplied] Magnaye asserts that no performance evaluation was made between March 2001 when he was hired by Mayor Rosales until August 14, 2001 when his services were terminated by Mayor Bendaa. [19] It was only on July 29, 2003, at Mayor Bendaas behest, that his two supervisors prepared and submitted the evaluation report after the CSCRO-IV directed him to file an answer to Magnayes appeal.[20] This has not been rebutted. It being not disputed, it was an error on the part of the CSCRO-IV to rely on such belated performance appraisal. Common sense dictates that the evaluation report, submitted only in 2003, could not have been the basis for Magnayes termination. Besides, Mayor Bendaas own assessment of Magnayes performance could not have served as a sufficient basis to dismiss him because said mayor was not his immediate superior and did not have daily contacts with him. Additionally, Mayor Bendaa terminated his employment less than one and one-half months after his assumption to office. This is clearly a short period within which to assess his performance. In the case of Miranda v. Carreon,[21] it was stated: The 1987 Constitution provides that no officer or employee of the civil service shall be removed or suspended except for cause provided by law. Under the Revised Administrative Code of 1987, a

government officer or employee may be removed from the service on two (2) grounds: (1) unsatisfactory conduct and (2) want of capacity. While the Code does not define and delineate the concepts of these two grounds, however, the Civil Service Law (Presidential Decree No. 807, as amended) provides specific grounds for dismissing a government officer or employee from the service. Among these grounds are inefficiency and incompetence in the performance of official duties. In the case at bar, respondents were dismissed on the ground of poor performance. Poor performance falls within the concept of inefficiency and incompetence in the performance of official duties which, as earlier mentioned, are grounds for dismissing a government official or employee from the service. But inefficiency or incompetence can only be determined after the passage of sufficient time, hence, the probationary period of six (6) months for the respondents. Indeed, to be able to gauge whether a subordinate is inefficient or incompetent requires enough time on the part of his immediate superior within which to observe his performance. This condition, however, was not observed in this case. The CSC is the central personnel agency of the government exercising quasi-judicial functions. [22] In cases filed before administrative or quasi-judicial bodies, a fact may be deemed established if it is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.[23] The standard of substantial evidence is satisfied when, on the basis of the evidence on record, there is reasonable ground to believe that the person terminated was evidently wanting in capacity and had unsatisfactory conduct. In this case, the evidence against Magnaye was woefully inadequate. Moreover, Magnaye was denied due process. We ruled in Tria v. Chairman Patricia Sto. Tomas[24] that the prohibition in Article IX (B) (2) (3) of the Constitution against dismissal of a civil service officer or employee "except for cause provided by law" is a guaranty of both procedural and substantive due process. Procedural due process requires that the dismissal comes only after notice and hearing, [25] while substantive due process requires that the dismissal be for cause.[26] Magnaye was denied procedural due process when he received his notice of termination only a day before he was dismissed from the service. Evidently, he was effectively deprived of the opportunity to defend himself from the charge that he lacked the capacity to do his work and that his conduct was unsatisfactory. As well, during his appeal to the CSCRO-IV, he was not furnished with the submissions of Mayor Bendaa that he could have opposed. He was also denied substantive due process because he was dismissed from the service without a valid cause for lack of any factual or legal basis for his want of capacity and unsatisfactory conduct. Thus, we reject petitioners argument that the CA erred when it acted upon the erroneous remedy availed of by respondent when he filed a petition for review considering that the assailed decision is not in the nature of awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions as prescribed under Rule 43 of the Rules of Court. While Sections 71 and 72 of Rule V (B) of the Uniform Rules on Administrative Cases in the Civil Service [27] provide for the remedy of an appeal from decisions of its regional offices to the Commission proper, Magnayes petition to the CA comes under the exceptions to the doctrine of exhaustion of administrative remedies. The CA correctly cited Republic v. Lacap,[28] where a violation of due process is listed to be among the noted exceptions to the rule. As discussed above, Magnayes dismissal was tainted with irregularity because the notice given to him comes short of the notice contemplated by law and jurisprudence. The CA correctly exercised jurisdiction over this case where standards of due process had been patently breached. Having been illegally dismissed, Magnaye should be reinstated to his former position without loss of seniority and paid backwages and other monetary benefits from the time of his dismissal up to the time of his reinstatement. In our decision in Civil Service Commission v. Gentallan, [29] we ruled that for reasons of justice and fairness, an illegally dismissed government employee who is later ordered reinstated is entitled to backwages and other monetary benefits from the time of his illegal dismissal until his reinstatement because he is considered as not having left his office. WHEREFORE, the petition is DENIED. The February 20, 2008 Decision of the Court of Appeals and its June 11, 2008 Resolution denying the motion for reconsideration in CA-G.R. No. SP No. 85508 are AFFIRMED. SO ORDERED.

PEZA vs. MERCADO Being assailed is the Court of Appeals 1) Decision [1] of December 14, 2005 which reversed [2] that of the Regional Trial Court (RTC) of Pasay City, Branch 108, 2) Amended Decision [3] dated March 31, 2006 by awarding back salaries to Gloria J. Mercado (respondent) computed from the time of her alleged dismissal until her reinstatement as Philippine Economic Zone Authority (PEZA) Deputy Director General for Policy and Planning, and 3) Resolution[4] of March 31, 2006 which denied petitioners motion for reconsideration of the December 14, 2005 Decision. The antecedent facts of the present controversy are as follows: Respondent was appointed as Group Manager for Policy and Planning of PEZA on September 16, 1998. Her appointment was temporary in nature. On May 16, 1999, respondent was promoted to the position of Deputy Director General for Policy and Planning. Her appointment indicated the same as on permanent basis, but with the following annotation: NO SECURITY OF TENURE UNLESS HE/SHE OBTAINS CESO OR CSEE ELIGIBILITY. CESO is the acronym for Career Executive Service Officer, while CSEE is the acronym for Career Service Executive Eligibility. On June 1, 2000, petitioner Lilia B. de Lima, in her capacity as PEZA Director General, by letter of even date, advised respondent of the termination of her appointment effective on the closing hours of the day. On even date, petitioner PEZA Board convened in an executive session and passed a Resolution appointing Wilhelm G. Ortaliz (Ortaliz), a CESO eligible, as Deputy Director General for Policy and Planning effective immediately. Respondent thereupon filed on June 7, 2000 with the RTC of Pasay City a petition for prohibition, quo warranto and damages with preliminary prohibitory /mandatory injunction and/or temporary restraining order against herein petitioners and Ortaliz, docketed as Civil Case No. 00-0172, questioning the June 1, 2000 PEZA Board Resolution appointing Ortaliz as Deputy Director General for Policy and Planning. In the main, respondent alleged in her complaint that her degree in Master in National Security Administration (MNSA) automatically conferred upon her Career Executive Service (CES) eligibility; that Republic Act No. (R.A.) 8748, which amended R.A. 7916 or the PEZA Charter, did away with the CES eligibility requirement for the position of Deputy Director General; and that the termination of her appointment was actuated with bad faith to entitle her to moral and exemplary damages. Petitioners countered that respondents MNSA degree at best merely granted her a CESO rank, not eligibility, and since she had not acquired CES eligibility, she had no security of tenure with respect to her position and could, therefore, be replaced at any time by Ortaliz who is a CES eligible. Respecting respondents contention that R.A. 8748 removed the CES eligibility requirement, petitioners asserted that based on the records of the deliberations on Senate Bill No. 1136 which eventually became R.A. 8748, the lawmakers never really intended to do away with the CES eligibility requirement for the position of Deputy Director General; and that assuming arguendo that that was the intention, R.A. 8748 took effect only on June 20, 1999 after the appointment of respondent on May 16, 1999. By Decision of December 4, 2001, the trial court dismissed respondents petition. It held that the passage of R.A. 8748 notwithstanding, the CES eligibility requirement for the position of Deputy Director General remains, in light of 1) the certification from the CES Board that respondent was not a CES eligible, 2) R.A. 7916 (AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), AND FOR OTHER PURPOSES) which provides that appointment to the three PEZA Deputy Director General positions requires CES eligibility, and 3) the Senate deliberations on the bill which eventually became R.A. 8748. The trial court further held that, contrary to respondents contention, her MNSA degree did not automatically confer on her CES eligibility for, under Executive Order No. 771(AMENDING EXECUTIVE ORDER NO. 696 GRANTING CAREER EXECUTIVE SERVICE OFFICER RANK TO GRADUATES OF THE NATIONAL DEFENSE COLLEGE OF THE PHILIPPINES AND OTHER RELATED PURPOSES), the recommendation of the Ministry or Agency concerned and the evaluation of the Career Executive Service Board (CESB) were still needed; and that absent these additional requirements, what was granted to MNSA degree holders was merely the salary corresponding to the CESO rank and not the rank itself.

The trial court went on to state that per CESB Resolution No. 204 dated December 21, 1998, MNSA graduates are deemed only to have passed the Management Aptitude Test Battery which is merely the first stage in the four-stage CES eligibility conferment process. The trial court, concluding that since respondent did not have the required eligibility for the position, held that her appointment was merely temporary and had no security of tenure thereto, and that, therefore, it was deemed to have expired upon the appointment of Ortaliz. The trial court denied respondents claim for damages, it finding that she failed to substantiate the same and, in any event, petitioners acted in accordance with law. Respondent appealed to the Court of Appeals, raising substantially the same arguments she raised before the trial court. As stated early on, the appellate court, by the assailed Decision of December 14, 2005, reversed the trial courts decision. It held that since respondent was promoted to the position of Deputy Director General for Policy and Planning on a permanent status, she cannot be summarily removed; and that respondents MNSA degree obtained on July 12, 1993 automatically conferred on her a CES eligibility pursuant to Executive Order No. 696, as amended by Executive Order No. 771. The appellate court went on to hold that even if respondent was not a CES eligible, she is still qualified for the position as the requirement under Sec. 11 of Republic Act No. 7916 that appointees to Deputy Director General positions must have career executive service eligibility is no longer found under Sec. 11 of Republic Act No. 8748. It ratiocinated that the deletion of such requirement indicated that the legislature intended to do away with the eligibility requirement. At all events, the appellate court held that respondent subsequently qualified to the position as she was conferred a CES eligibility by the Civil Service Commission in December 2000. Albeit the appellate court held that respondent was illegally removed from and ordered her reinstatement to her position, it did not find her entitled to damages as there was no proof that the termination of her services was tainted with bad faith on the part of petitioners. Thus, the appellate court disposed: WHEREFORE, premises considered, the appeal is GRANTED. The Decision dated 04 December 2001 of the Regional Trial Court of Pasay City, Branch 108 in Civil Case No. 00-172 is REVERSEDand SET ASIDE. PEZA Board Resolution No. 00-187 is declared NULL and VOID; appellee WILHELM G. ORTALIZ is OUSTED and altogether EXCLUDED from exercising, holding or occupying the position of PEZA Deputy Director General for Policy and Planning; and appellant GLORIA J. MERCADO is hereby REINSTATED to her position as PEZA Deputy Director General for Policy and Planning. Costs against appellees. SO ORDERED.[5] (emphasis in the original) Petitioners moved for reconsideration of the appellate courts decision. Respondent too moved for a partial motion for reconsideration of the decision. The appellate court, by the Amended Decision of March 31, 2006, acting on respondents motion for reconsideration, denied her claim for damages and attorneys fees but granted her claim for back salaries, computed from the time of her removal until her reinstatement to the position as PEZA Deputy Director General for Policy and Planning. By Resolution also dated March 31, 2006, the appellate court denied petitioners motion for reconsideration, hence, their present recourse, they raising the same defenses and arguments proffered during the proceedings before the trial and appellate courts. The petition is impressed with merit. Section 27 (1), of the Civil Service Law provides: (1) Permanent status. A permanent appointment shall be issued to a person who meets all the requirements for the position to which he is being appointed, including the appropriate eligibility prescribed, in accordance with the provisions of law, rules and standards promulgated in pursuance thereof. (emphasis and underscoring supplied)

In the CES under which the position of PEZA Deputy Director General for Policy and Planning is classified, the acquisition of security of tenure which presupposes a permanent appointment is governed by the Rules and Regulations promulgated by the CES Board. As the recent case of Amores vs. Civil Service Commission explains:[6] Security of tenure in the career executive service, which presupposes a permanent appointment, takes place upon passing the CES examinations administered by the CES Board. It is that which entitles the examinee to conferment of CES eligibility and the inclusion of his name in the roster of CES eligibles. Under the rules and regulations promulgated by the CES Board, conferment of the CES eligibility is done by the CES Board through a formal board resolution after an evaluation has been done of the examinees performance in the four stages of the CES eligibility examinations. Upon conferment of CES eligibility and compliance with the other requirements prescribed by the Board, an incumbent of a CES position may qualify for appointment to a CES rank. Appointment to a CES rank is made by the President upon the Boards recommendation. It is this process which completes the officials membership in the CES and confers on him security of tenure in the CES. Petitioner does not seem to have gone through this definitive process. (emphasis, italics and underscoring supplied) Clearly, for an examinee or an incumbent to be a member of the CES and be entitled to security of tenure, she/he must pass the CES examinations, be conferred CES eligibility, comply with the other requirements prescribed by the CES Board, and be appointed to a CES rank by the President. Admittedly, before and up to the time of the termination of her appointment, respondent did not go through the four stages of CES eligibility examinations. The appellate courts ruling that respondent became CES eligible upon earning the MNSA degree, purportedly in accordance with Executive Order No. 696, as amended by Executive Order No. 771, does not lie. The pertinent portions of Executive Order No. 696 issued on May 27, 1981 which granted CESO rank to graduates of the National Defense College of the Philippines read: xxxx WHEREAS, Article IV, Chapter I, Part III of the Integrated Reorganization Plan provides for a Career Executive Service to constitute a continuing pool of well-selected and development-oriented career administrators of the government; WHEREAS, the pre-qualification requirements for admission at NDCP as well as the training obtained there fully satisfy the training and pre-qualification requirements for appointment to the Career Executive Service; and xxxx NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by law, do hereby order that: Sec. 1. holders of the degree of Master of National Security Administration shall be given preference in promotion to existing vacant positions, as well as assignments to higher responsibility, particularly those involving policy formulation in their respective units, ministries, agencies, offices or entities. Sec. 2. Initially, NDCP graduates belonging to the government service shall be granted the rank of CESO III with corresponding compensation and other privileges in the Career Executive Service. x x x x (emphasis and underscoring supplied) Upon the other hand, the pertinent portions of Executive Order No. 771 issued more than eight months later or on February 4, 1982, which amended Executive Order No. 696, read: WHEREAS, Section 2 of the Executive Order No. 696 dated May 27, 1981, provides that graduates of the National Defense College of the Philippines belonging to the government service shall be granted the rank of CESO III with corresponding compensation and other privileges in the Career Executive Service; WHEREAS, graduates of the Career Executive Service Development Program who are equally deserving have not been extended the same or similar benefits; WHEREAS, the automatic grant of CESO Rank III with corresponding compensation and privileges to NDCP graduates has caused salary inequities in some agencies; and

WHEREAS, there is a need to harmonize the conferment of ranks, compensation and other benefits to graduates of both institutions or programs in order to maintain a high level or morale in the Career Executive Service. NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by law, do hereby order that: Sec. 1. Section 2 of Executive Order No. 696 is hereby amended, to read as follows: Sec. 2. Graduates of the National Defense College of the Philippines belonging to the civil service, and graduates of the Career Executive Service Development Program who have not yet been appointed to a CESO rank shall be granted initially CESO Rank, V, or higher, depending on the recommendation of the Ministry or Agency head concerned and the evaluation of the Career Executive Service Board, with corresponding compensation and other benefits. The Career Executive Service Board, in consultation with the National Defense College of the Philippines shall promulgate rules and regulations to implement this Order. x x x x (emphasis and underscoring supplied) Pursuant to this amendatory Executive Order, the CESB issued on December 21, 1998 Resolution No. 204, ACCREDITING THE MASTER OF NATIONAL SECURITY ADMINISTRATION (MNSA) DEGREE CONFERRED BY THE NATIONAL DEFENSE COLLEGE OF THE PHILIPPINES AND MASTER OF PUBLIC SAFETY ADMINISTRATION (MPSA) DEGREE CONFERRED BY THE PHILIPPINE PUBLIC SAFETY COLLEGE AS EQUIVALENT TO THE MANAGEMENT APTITUDE TEST BATTERY FOR POSSIBLE CONFERMENT OF CES ELIGIBILITY , the pertinent portions of which read: xxxx WHEREAS, the Board evaluated the curriculum and screening requirements of the two masteral programs and found these to approximate the rigid requirements and standards of the Management Aptitude Test Battery; NOW THEREFORE, be it RESOLVED as it is hereby RESOLVED that the Master of National Security Administration (MNSA) degree conferred by NDCP and the Master of Public Safety Administration (MPSA) degree conferred by PPSC be accredited as equivalent to passing the Management Aptitude Test Battery (MATB) and that graduates of both programs interested to acquire CES eligibility and CES rank be allowed to proceed to the second stage of the CES eligibility examination process which is the Assessment Center and the other stages of the examination thereafter in accordance with existing policies and regulations; PROVIDED, however, that all expenses that will be incurred in participating in the Assessment Center shall be shouldered by the agency and/or the graduates. RESOLVED FURTHER that MNSA and MPSA graduates who pass the three other stages of the CES eligibility examinations and are conferred CES eligibility and who are incumbents of CES positions may qualify for appointment to CES ranks; PROVIDED that they meet and comply with the other requirements prescribed by the CES Board and the Office of the President to qualify for rank appointment. (emphasis, italics and underscoring supplied) By respondents attainment of an MNSA degree, she was not conferred automatic CES eligibility. It was, as above-quoted portions of CESB Resolution No. 204 state, merely accredited as equivalent to passing the Management Aptitude Test Battery. For respondent to acquire CES eligibility and CES rank, she could proceed to the second stage of the eligibility examination process . . . and the other stages of the examination . . . in accordance with existing policies and regulations; and that if respondent as MNSA degree holder passed the three other stages of the CES eligibility examinations and is conferred CES eligibility, she could qualify for appointment to CES ranks, PROVIDED that she meets and complies with other requirements of the CES Board and the Office of the President to qualify for rank appointment. Since, it is admitted that respondent, who acquired an MNSA degree in 1993, had not undergone the second, third and fourth stages of the CES eligibility examinations prior to her appointment or during her incumbency as Deputy Director General up to the time her appointment was terminated, she was not a CES eligible, as indeed certified to by the CES Board. Not being a CES eligible, she had no security of tenure, hence, the termination by the PEZA Board on June 1, 2000 of her appointment, as well as the appointment in her stead of CES eligible by Ortaliz, were not illegal.

Respecting the contention that the promulgation of R.A. 8748 on June 1, 1999 removed the CES eligibility qualification for the position of Deputy Director General, hence, respondent, albeit not a CES-eligible, could only be terminated for cause, the same is untenable. The relevant portion of said law reads: Section 1. Chapter II, Section 11 of Republic Act No. 7916 is hereby amended to read as follows: Section 11. The Philippine Economic Zone Authority (PEZA) Board . There is hereby created a body corporate to be known as the Philippine Economic Zone Authority (PEZA) attached to the Department of Trade and Industry. The Board shall have a director general with the rank of department undersecretary who shall be appointed by the President. The director general shall be at least forty (40) years of age, of proven probity and integrity, and a degree holder in any of the following fields: economics, business, public administration, law, management or their equivalent, and with at least ten (10) years relevant working experience preferably in the field of management or public administration. The director general, shall be assisted by three (3) deputy directors general each for policy and planning, administration and operations, who shall be appointed by the PEZA Board, upon the recommendation of the director general. The deputy directors general shall be at least thirty-five (35) years old, with proven probity and integrity and a degree holder in any of the following fields: economics, business, public administration, law, management or their equivalent. (emphasis supplied) As correctly held by the trial court, removing the CES eligibility requirement for the Deputy Director General position could not have been the intention of the framers of the law. It bears noting that the position is a high-ranking one which requires specialized knowledge and experience in certain areas including law, economics, public administration and similar fields, hence, to remove it from the CES would be absurd. The Civil Service Commission CESB in fact has certified that the position requires the appropriate CES eligibility. It is settled that the construction given to a statute by an administrative agency charged with the interpretation and application of that statute is entitled to great respect and should be accorded great weight by the courts.[7] Respondents subsequent passing in late 2000 of the CES examinations did not retroact to consider her a CESO at the time her appointment was terminated on June 1, 2000. WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of December 14, 2005, Amended Decision of March 31, 2006 and Resolution of March 31, 2006 areREVERSED AND SET ASIDE. The December 4, 2001 Decision of the Regional Trial Court of Pasay City, Branch 108 is REINSTATED. SO ORDERED.

CIVIL SERVICE COMMISSION vs. NENITA JAVIER Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision [1] of the Court of Appeals (CA) dated September 29, 2005, as well as its Resolution of June 5, 2006, in CA-G.R. SP No. 88568, which set aside the resolutions and orders of the Civil Service Commission (CSC) invalidating the appointment of respondent as Corporate Secretary of the Board of Trustees of the Government Service and Insurance System (GSIS). The facts are undisputed. According to her service record,[2] respondent was first employed as Private Secretary in the GSIS, a government owned and controlled corporation (GOCC), on February 23, 1960, on a confidential status. On July 1, 1962, respondent was promoted to Tabulating Equipment Operator with permanent status. The permanent status stayed with respondent throughout her career. She spent her entire career with GSIS, earning several more promotions, until on December 16, 1986, she was appointed Corporate Secretary of the Board of Trustees of the corporation. On July 16, 2001, a month shy of her 64th birthday,[3] respondent opted for early retirement and received the corresponding monetary benefits.[4] On April 3, 2002, GSIS President Winston F. Garcia, with the approval of the Board of Trustees, reappointed respondent as Corporate Secretary, the same position she left and retired from barely a year earlier. Respondent was 64 years old at the time of her reappointment.[5] In its Resolution, the Board of Trustees classified her appointment as confidential in nature and the tenure of office is at the pleasure of the Board.[6] Petitioner alleges that respondent's reappointment on confidential status was meant to illegally extend her service and circumvent the laws on compulsory retirement.[7] This is because under Republic Act (R.A.) No. 8291, or the Government Service Insurance System Act of 1997, the compulsory retirement age for government employees is 65 years, thus: Sec. 13. x x x (b) Unless the service is extended by appropriate authorities, retirement shall be compulsory for an employee at sixty-five (65) years of age with at least fifteen (15) years of service: Provided, That if he has less than fifteen (15) years of service, he may be allowed to continue in the service in accordance with existing civil service rules and regulations. Under the civil service regulations, those who are in primarily confidential positions may serve even beyond the age of 65 years. Rule XIII of the Revised Omnibus Rules on Appointments and Other Personnel Actions, as amended, provides that: Sec. 12. (a) No person who has reached the compulsory retirement age of 65 years can be appointed to any position in the government, subject only to the exception provided under sub-section (b) hereof. xxxx b. A person who has already reached the compulsory retirement age of 65 can still be appointed to a coterminous/primarily confidential position in the government. A person appointed to a coterminous/primarily confidential position who reaches the age of 65 is considered automatically extended in the service until the expiry date of his/her appointment or until his/her services are earlier terminated.[8] It is for these obvious reasons that respondent's appointment was characterized as confidential by the GSIS. On October 10, 2002, petitioner issued Resolution No. 021314, invalidating the reappointment of respondent as Corporate Secretary, on the ground that the position is a permanent, career position and not primarily confidential.[9] On November 2, 2002, the CSC, in a letter of even date, through its Chairperson Karina Constantino-David, informed GSIS of CSC's invalidation of respondent's appointment, stating, thus: Records show that Ms. Javier was formerly appointed as Corporate Secretary in a Permanent capacity until her retirement in July 16, 2001. The Plantilla of Positions shows that said position is a career position. However, she was re-employed as Corporate Secretary, a position now declared as confidential by the Board of Trustees pursuant to Board Resolution No. 94 dated April 3, 2002.

Since the position was not declared primarily confidential by the Civil Service Commission or by any law, the appointment of Ms. Javier as Corporate Secretary is hereby invalidated.[10] Respondent and GSIS sought to reconsider the ruling of petitioner. CSC replied that the position of Corporate Secretary is a permanent (career) position, and not primarily confidential (non-career); thus, it was wrong to appoint respondent to this position since she no longer complies with eligibility requirements for a permanent career status. More importantly, as respondent by then has reached compulsory retirement at age 65, respondent was no longer qualified for a permanent career position.[11] With the denial of respondent's plea for reconsideration, she filed a Petition for Review with the Court of Appeals. On September 29, 2005, the CA rendered a Decision setting aside the resolution of petitioner invalidating respondent's appointment.[12] The CA ruled that in determining whether a position is primarily confidential or otherwise, the nature of its functions, duties and responsibilities must be looked into, and not just its formal classification. [13] Examining the functions, duties and responsibilities of the GSIS Corporate Secretary, the CA concluded that indeed, such a position is primarily confidential in nature. Petitioner filed a motion for reconsideration, which was denied by the CA on June 5, 2006. Hence, herein petition. The petition assails the CA Decision, contending that the position of Corporate Secretary is a career position and not primarily confidential in nature.[14] Further, it adds that the power to declare whether any position in government is primarily confidential, highly technical or policy determining rests solely in petitioner by virtue of its constitutional power as the central personnel agency of the government.[15] Respondent avers otherwise, maintaining that the position of Corporate Secretary is confidential in nature and that it is within the powers of the GSIS Board of Trustees to declare it so.[16] She argues that in determining the proper classification of a position, one should be guided by the nature of the office or position, and not by its formal designation.[17] Thus, the Court is confronted with the following issues: whether the courts may determine the proper classification of a position in government; and whether the position of corporate secretary in a GOCC is primarily confidential in nature. The Court's Ruling The courts may determine the proper classification of a position in government. Under Executive Order No. 292, or the Administrative Code of 1987, civil service positions are currently classified into either 1) career service and 2) non-career service positions.[18] Career positions are characterized by: (1) entrance based on merit and fitness to be determined as far as practicable by competitive examinations, or based on highly technical qualifications; (2) opportunity for advancement to higher career positions; and (3) security of tenure.[19] In addition, the Administrative Code, under its Book V, sub-classifies career positions according to appointment status, divided into: 1) permanent which is issued to a person who meets all the requirements for the positions to which he is being appointed, including the appropriate eligibility prescribed, in accordance with the provisions of law, rules and standards promulgated in pursuance thereof; and 2) temporary which is issued, in the absence of appropriate eligibles and when it becomes necessary in the public interest to fill a vacancy, to a person who meets all the requirements for the position to which he is being appointed except the appropriate civil service eligibility; provided, that such temporary appointment shall not exceed twelve months, and the appointee may be replaced sooner if a qualified civil service eligible becomes available.[20] Positions that do not fall under the career service are considered non-career positions, which are characterized by: (1) entrance on bases other than those of the usual tests of merit and fitness utilized for the career service; and (2) tenure which is limited to a period specified by law, or which is co-terminous with that of the appointing authority or subject to his pleasure, or which is limited to the duration of a particular project for which purpose employment was made.[21] Examples of positions in the non-career service enumerated in the Administrative Code are: Sec. 9. Non-Career Service. - x x x

The Non-Career Service shall include: (1) Elective officials and their personal or confidential staff; (2) Secretaries and other officials of Cabinet rank who hold their positions at the pleasure of the President and their personal or confidential staff(s); (3) Chairman and members of commissions and boards with fixed terms of office and their personal or confidential staff; (4) Contractual personnel or those whose employment in the government is in accordance with a special contract to undertake a specific work or job, requiring special or technical skills not available in the employing agency, to be accomplished within a specific period, which in no case shall exceed one year, and performs or accomplishes the specific work or job, under his own responsibility with a minimum of direction and supervision from the hiring agency; and (5) Emergency and seasonal personnel. (Emphasis supplied) A strict reading of the law reveals that primarily confidential positions fall under the non-career service. It is also clear that, unlike career positions, primarily confidential and other non-career positions do not have security of tenure. The tenure of a confidential employee is co-terminous with that of the appointing authority, or is at the latter's pleasure. However, the confidential employee may be appointed or remain in the position even beyond the compulsory retirement age of 65 years.[22] Stated differently, the instant petition raises the question of whether the position of corporate secretary in a GOCC, currently classified by the CSC as belonging to the permanent, career service, should be classified as primarily confidential, i.e., belonging to the non-career service. The current GSIS Board holds the affirmative view, which is ardently opposed by petitioner. Petitioner maintains that it alone can classify government positions, and that the determination it made earlier, classifying the position of GOCC corporate secretary as a permanent, career position, should be maintained. At present, there is no law enacted by the legislature that defines or sets definite criteria for determining primarily confidential positions in the civil service. Neither is there a law that gives an enumeration of positions classified as primarily confidential. What is available is only petitioner's own classification of civil service positions, as well as jurisprudence which describe or give examples of confidential positions in government. Thus, the corollary issue arises: should the Court be bound by a classification of a position as confidential already made by an agency or branch of government? Jurisprudence establishes that the Court is not bound by the classification of positions in the civil service made by the legislative or executive branches, or even by a constitutional body like the petitioner.[23] The Court is expected to make its own determination as to the nature of a particular position, such as whether it is a primarily confidential position or not, without being bound by prior classifications made by other bodies.[24] The findings of the other branches of government are merely considered initial and not conclusive to the Court. [25] Moreover, it is well-established that in case the findings of various agencies of government, such as the petitioner and the CA in the instant case, are in conflict, the Court must exercise its constitutional role as final arbiter of all justiciable controversies and disputes.[26] Piero v. Hechanova,[27] interpreting R.A. No. 2260, or the Civil Service Act of 1959, emphasized how the legislature refrained from declaring which positions in the bureaucracy are primarily confidential, policy determining or highly technical in nature, and declared that such a determination is better left to the judgment of the courts. The Court, with the ponencia of Justice J.B.L. Reyes, expounded, thus: The change from the original wording of the bill (expressly declared by law x x x to be policy determining, etc.) to that finally approved and enacted (or which are policy determining, etc. in nature) came about because of the observations of Senator Taada, that as originally worded the proposed bill gave Congress power to declare by fiat of law a certain position as primarily confidential or policy determining, which should not be the case. The Senator urged that since the Constitution speaks of positions which are primarily confidential, policy determining or highly technical in nature, it is not within the power of Congress to declare what positions are primarily confidential or policy determining. It is the nature alone of the position that determines whether it is policy determining or primarily confidential. Hence, the Senator further observed, the matter should be left to the proper implementation of the laws, depending upon the nature of the position to be filled, and if the position is highly confidential then the President and the Civil Service Commissioner must implement the law. To a question of Senator Tolentino, But in positions that involved both confidential matters and matters which are routine, x x x who is going to determine whether it is primarily confidential? Senator Taada replied:

SENATOR TAADA: Well. at the first instance, it is the appointing power that determines that: the nature of the position. In case of conflict then it is the Court that determines whether the position is primarily confidential or not. I remember a case that has been decided by the Supreme Court involving the position of a district engineer in Baguio, and there. precisely, the nature of the position was in issue. It was the Supreme Court that passed upon the nature of the position, and held that the President could not transfer the district engineer in Baguio against his consent. Senator Taada, therefore, proposed an amendment to section 5 of the bill, deleting the words to be and inserting in lieu thereof the words Positions which are by their nature policy determining, etc., and deleting the last words in nature. Subsequently, Senator Padilla presented an amendment to the Taada amendment by adopting the very words of the Constitution, i.e., those which are policy determining, primarily confidential and highly technical in nature. The Padilla amendment was adopted, and it was this last wording with which section 5 was passed and was enacted (Senate Journal, May 10, 1959, Vol. 11, No. 32, pp. 679-681). It is plain that, at least since the enactment of the 1959 Civil Service Act (R. A. 2260), it is the nature of the position which finally determines whether a position is primarily confidential, policy determining or highly technical. Executive pronouncements can be no more than initial determinations that are not conclusive in case of conflict. And it must be so, or else it would then lie within the discretion of title Chief Executive to deny to any officer, by executive fiat, the protection of section 4, Article XII, of the Constitution.[28] (Emphasis and underscoring supplied) This doctrine in Piero was reiterated in several succeeding cases.[29] Presently, it is still the rule that executive and legislative identification or classification of primarily confidential, policy-determining or highly technical positions in government is no more than mere declarations, and does not foreclose judicial review, especially in the event of conflict. Far from what is merely declared by executive or legislative fiat, it is the nature of the position which finally determines whether it is primarily confidential, policy determining or highly technical, and no department in government is better qualified to make such an ultimate finding than the judicial branch. Judicial review was also extended to determinations made by petitioner. In Grio v. Civil Service Commission,[30] the Court held: The fact that the position of respondent Arandela as provincial attorney has already been classified as one under the career service and certified as permanent by the Civil Service Commission cannot conceal or alter its highly confidential nature. As in Cadiente where the position of the city legal officer was duly attested as permanent by the Civil Service Commission before this Court declared that the same was primarily confidential, this Court holds that the position of respondent Arandela as the provincial attorney of Iloilo is also a primarily confidential position. To rule otherwise would be tantamount to classifying two positions with the same nature and functions in two incompatible categories.[31] The framers of the 1987 Constitution were of the same disposition. Section 2 (2) Article IX (B) of the Constitution provides that: Appointments in the civil service shall be made only according to merit and fitness to be determined, as far as practicable, and, except to positions which are policy-determining, primarily confidential, or highly technical, by competitive examination. The phrase in nature after the phrase policy-determining, primarily confidential, or highly technical was deleted from the 1987 Constitution.[32] However, the intent to lay in the courts the power to determine the nature of a position is evident in the following deliberation: MR. FOZ. Which department of government has the power or authority to determine whether a position is policydetermining or primarily confidential or highly technical? FR. BERNAS: The initial decision is made by the legislative body or by the executive department, but the final decision is done by the court. The Supreme Court has constantly held that whether or not a position is policy-determining, primarily confidential or highly technical, it is determined not by the title but by the nature of the task that is entrusted to it. For instance, we might have a case where a position is created requiring that the holder of that position should be a member of the Bar and the law classifies this position as highly technical. However, the Supreme Court has said before that a position which requires mere membership in the Bar is not a highly technical

position. Since the term 'highly technical' means something beyond the ordinary requirements of the profession, it is always a question of fact. MR. FOZ. Does not Commissioner Bernas agree that the general rule should be that the merit system or the competitive system should be upheld? FR. BERNAS. I agree that that it should be the general rule; that is why we are putting this as an exception. MR. FOZ. The declaration that certain positions are policy-determining, primarily confidential or highly technical has been the source of practices which amount to the spoils system. FR. BERNAS. The Supreme Court has always said that, but if the law of the administrative agency says that a position is primarily confidential when in fact it is not, we can always challenge that in court. It is not enough that the law calls it primarily confidential to make it such; it is the nature of the duties which makes a position primarily confidential. MR. FOZ. The effect of a declaration that a position is policy-determining, primarily confidential or highly technical as an exception is to take it away from the usual rules and provisions of the Civil Service Law and to place it in a class by itself so that it can avail itself of certain privileges not available to the ordinary run of government employees and officers. FR. BERNAS. As I have already said, this classification does not do away with the requirement of merit and fitness. All it says is that there are certain positions which should not be determined by competitive examination. For instance, I have just mentioned a position in the Atomic Energy Commission. Shall we require a physicist to undergo a competitive examination before appointment? Or a confidential secretary or any position in policydetermining administrative bodies, for that matter? There are other ways of determining merit and fitness than competitive examination. This is not a denial of the requirement of merit and fitness.[33] (Emphasis supplied) This explicit intent of the framers was recognized in Civil Service Commission v. Salas,[34] and Philippine Amusement and Gaming Corporation v. Rilloraza,[35] which leave no doubt that the question of whether the position of Corporate Secretary of GSIS is confidential in nature may be determined by the Court. The position of corporate secretary in a government owned and controlled corporation, currently classified as a permanent career position, is primarily confidential in nature. First, there is a need to examine how the term primarily confidential in nature is described in jurisprudence. According to Salas,
[36]

Prior to the passage of the x x x Civil Service Act of 1959 (R.A. No. 2260), there were two recognized instances when a position may be considered primarily confidential: Firstly, when the President, upon recommendation of the Commissioner of Civil Service, has declared the position to be primarily confidential; and, secondly in the absence of such declaration, when by the nature of the functions of the office there exists "close intimacy" between the appointee and appointing power which insures freedom of intercourse without embarrassment or freedom from misgivings of betrayals of personal trust or confidential matters of state.[37] (Emphasis supplied) However, Salas declared that since the enactment of R.A. No. 2260 and Piero,[38] it is the nature of the position which finally determines whether a position is primarily confidential or not, without regard to existing executive or legislative pronouncements either way, since the latter will not bind the courts in case of conflict. A position that is primarily confidential in nature is defined as early as 1950 in De los Santos v. Mallare,[39] through the ponencia of Justice Pedro Tuason, to wit: x x x These positions (policy-determining, primarily confidential and highly technical positions), involve the highest degree of confidence, or are closely bound up with and dependent on other positions to which they are subordinate, or are temporary in nature. It may truly be said that the good of the service itself demands that appointments coming under this category be terminable at the will of the officer that makes them. xxxx Every appointment implies confidence, but much more than ordinary confidence is reposed in the occupant of a position that is primarily confidential. The latter phrase denotes not only confidence in the

aptitude of the appointee for the duties of the office but primarily close intimacy which insures freedom of [discussion, delegation and reporting] without embarrassment or freedom from misgivings of betrayals of personal trust or confidential matters of state. x x x[40] (Emphasis supplied) Since the definition in De los Santos came out, it has guided numerous other cases. [41] Thus, it still stands that a position is primarily confidential when by the nature of the functions of the office there exists close intimacy between the appointee and appointing power which insures freedom of intercourse without embarrassment or freedom from misgivings of betrayals of personal trust or confidential matters of state. In classifying a position as primarily confidential, its functions must not be routinary, ordinary and day to day in character.[42] A position is not necessarily confidential though the one in office may sometimes handle confidential matters or documents. [43] Only ordinary confidence is required for all positions in the bureaucracy. But, as held in De los Santos,[44] for someone holding a primarily confidential position, more than ordinary confidence is required. In Ingles v. Mutuc,[45] the Court, through Chief Justice Roberto Concepcion as ponente, stated: Indeed, physicians handle confidential matters. Judges, fiscals and court stenographers generally handle matters of similar nature. The Presiding and Associate Justices of the Court of Appeals sometimes investigate, by designation of the Supreme Court, administrative complaints against judges of first instance, which are confidential in nature. Officers of the Department of Justice, likewise, investigate charges against municipal judges. Assistant Solicitors in the Office of the Solicitor General often investigate malpractice charges against members of the Bar. All of these are confidential matters, but such fact does not warrant the conclusion that the office or position of all government physicians and all Judges, as well as the aforementioned assistant solicitors and officers of the Department of Justice are primarilyconfidential in character.[46] (Emphasis supplied) It is from De los Santos that the so-called proximity rule was derived. A position is considered to be primarily confidential when there is a primarily close intimacy between the appointing authority and the appointee, which ensures the highest degree of trust and unfettered communication and discussion on the most confidential of matters. [47] This means that where the position occupied is already remote from that of the appointing authority, the element of trust between them is no longer predominant. [48] On further interpretation in Grio, this was clarified to mean that a confidential nature would be limited to those positions not separated from the position of the appointing authority by an intervening public officer, or series of public officers, in the bureaucratic hierarchy.[49] Consequently, brought upon by their remoteness to the position of the appointing authority, the following were declared by the Court to be not primarily confidential positions: City Engineer;[50] Assistant Secretary to the Mayor;[51] members of the Customs Police Force or Port Patrol;[52] Special Assistant of the Governor of the Central Bank, Export Department;[53] Senior Executive Assistant, Clerk I and Supervising Clerk I and Stenographer in the Office of the President; [54] Management and Audit Analyst I of the Finance Ministry Intelligence Bureau;[55] Provincial Administrator;[56] Internal Security Staff of the Philippine Amusement and Gaming Corporation (PAGCOR);[57] Casino Operations Manager;[58] and Slot Machine Attendant.[59] All positions were declared to be not primarily confidential despite having been previously declared such either by their respective appointing authorities or the legislature. The following were declared in jurisprudence to be primarily confidential positions: Chief Legal Counsel of the Philippine National Bank;[60] Confidential Agent of the Office of the Auditor, GSIS;[61] Secretary of the Sangguniang Bayan;[62] Secretary to the City Mayor; [63] Senior Security and Security Guard in the Office of the Vice Mayor; [64] Secretary to the Board of a government corporation;[65] City Legal Counsel, City Legal Officer or City Attorney; [66] Provincial Attorney;[67] Private Secretary;[68] and Board Secretary II of the Philippine State College of Aeronautics.[69] In fine, a primarily confidential position is characterized by the close proximity of the positions of the appointer and appointee as well as the high degree of trust and confidence inherent in their relationship. Ineluctably therefore, the position of Corporate Secretary of GSIS, or any GOCC, for that matter, is a primarily confidential position. The position is clearly in close proximity and intimacy with the appointing power. It also calls for the highest degree of confidence between the appointer and appointee. In classifying the position of Corporate Secretary of GSIS as primarily confidential, the Court took into consideration the proximity rule together with the duties of the corporate secretary, enumerated as follows:[70] 1. No. 1146; 2. Undertakes research into past Board resolutions, policies, decisions, directives and other Board action, and relate these to present matters under Board consideration; Performs all duties, and exercises the power, as defined and enumerated in Section 4, Title IX, P.D.

3.

Analyzes and evaluates the impact, effects and relevance of matters under Board consideration on existing Board policies and provide the individual Board members with these information so as to guide or enlighten them in their Board decision; 4. Records, documents and reproduces in sufficient number all proceedings of Board meetings and disseminate relevant Board decisions/information to those units concerned; 5. Coordinates with all functional areas and units concerned and monitors the manner of implementation of approved Board resolutions, policies and directives; 6. Maintains a permanent, complete, systematic and secure compilation of all previous minutes of Board meetings, together with all their supporting documents; 7. Attends, testifies and produces in Court or in administrative bodies duly certified copies of Board resolutions, whenever required; 8. Undertakes the necessary physical preparations for scheduled Board meetings; 9. Pays honoraria of the members of the Board who attend Board meetings; 10. Takes custody of the corporate seal and safeguards against unauthorized use; and 11. Performs such other functions as the Board may direct and/or require. The nature of the duties and functions attached to the position points to its highly confidential character. [71] The secretary reports directly to the board of directors, without an intervening officer in between them.[72] In such an arrangement, the board expects from the secretary nothing less than the highest degree of honesty, integrity and loyalty, which is crucial to maintaining between them freedom of intercourse without embarrassment or freedom from misgivings or betrayals of personal trust or confidential matters of state.[73] The responsibilities of the corporate secretary are not merely clerical or routinary in nature. The work involves constant exposure to sensitive policy matters and confidential deliberations that are not always open to the public, as unscrupulous persons may use them to harm the corporation. Board members must have the highest confidence in the secretary to ensure that their honest sentiments are always and fully expressed, in the interest of the corporation. In this respect, the nature of the corporate secretary's work is akin to that of a personal secretary of a public official, a position long recognized to be primarily confidential in nature.[74] The only distinction is that the corporate secretary is secretary to the entire board, composed of a number of persons, but who essentially act as one body, while the private secretary works for only one person. However, the degree of confidence involved is essentially the same. Not only do the tasks listed point to sensitive and confidential acts that the corporate secretary must perform, they also include such other functions as the Board may direct and/or require, a clear indication of a closely intimate relationship that exists between the secretary and the board. In such a highly acquainted relation, great trust and confidence between appointer and appointee is required. The loss of such trust or confidence could easily result in the board's termination of the secretary's services and ending of his term. This is understandably justified, as the board could not be expected to function freely with a suspicious officer in its midst. It is for these same reasons that jurisprudence, as earlier cited, has consistently characterized personal or private secretaries, and board secretaries, as positions of a primarily confidential nature.[75] The CA did not err in declaring that the position of Corporate Secretary of GSIS is primarily confidential in nature and does not belong to the career service. The Court is aware that this decision has repercussions on the tenure of other corporate secretaries in various GOCCs. The officers likely assumed their positions on permanent career status, expecting protection for their tenure and appointments, but are now reclassified as primarily confidential appointees. Such concern is unfounded, however, since the statutes themselves do not classify the position of corporate secretary as permanent and career in nature. Moreover, there is no absolute guarantee that it will not be classified as confidential when a dispute arises. As earlier stated, the Court, by legal tradition, has the power to make a final determination as to which positions in government are primarily confidential or otherwise. In the light of the instant controversy, the Court's view is that the greater public interest is served if the position of a corporate secretary is classified as primarily confidential in nature. Moreover, it is a basic tenet in the country's constitutional system that public office is a public trust, [76] and that there is no vested right in public office, nor an absolute right to hold office. [77] No proprietary title attaches to a public office, as public service is not a property right.[78] Excepting constitutional offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in an office.[79] The rule is that offices in government, except those created by the constitution, may be abolished, altered, or created anytime by statute.[80] And any issues on the classification for a position in government may be brought to and determined by the courts.[81] WHEREFORE, premises considered, the Petition is DENIED. The Decision of the Court of Appeals dated September 29, 2005, in CA-G.R. SP No. 88568, as well as its Resolution of June 5, 2006 are hereby AFFIRMED in toto. SO ORDERED.

TENG vs. PAHAGAC Before this Court is a Petition for Review on Certiorari[1] filed by petitioners Albert Teng Fish Trading, its owner Albert Teng, and its manager Emilia Teng-Chua, to reverse and set aside the September 21, 2004 decision[2] and the September 1, 2005 resolution[3] of the Court of Appeals ( CA) in CA-G.R. SP No. 78783. The CA reversed the decision of the Voluntary Arbitrator (VA), National Conciliation and Mediation Board ( NCMB), Region IX, Zamboanga City, and declared that there exists an employer-employee relationship between Teng and respondents Hernan Badilles, Orlando Layese, Eddie Nipa, Alfredo Pahagac, and Roger Pahagac (collectively, respondent workers). It also found that Teng illegally dismissed the respondent workers from their employment. BACKGROUND FACTS Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats ( basnig), equipment, and other fishing paraphernalia. As owner of the business, Teng claims that he customarily enters into joint venture agreements with master fishermen (maestros) who are skilled and are experts in deep sea fishing; they take charge of the management of each fishing venture, including the hiring of the members of its complement. He avers that the maestros hired the respondent workers as checkers to determine the volume of the fish caught in every fishing voyage.[4] On February 20, 2003, the respondent workers filed a complaint for illegal dismissal against Albert Teng Fish Trading, Teng, and Chua before the NCMB, Region Branch No. IX,Zamboanga City. The respondent workers alleged that Teng hired them, without any written employment contract , to serve as his eyes and ears aboard the fishing boats; to classify the fish caught by baera; to report to Teng via radio communication the classes and volume of each catch; to receive instructions from him as to where and when to unload the catch; to prepare the list of the provisions requested by the maestro and the mechanic for his approval; and, to procure the items as approved by him. [5] They also claimed that they received regular monthly salaries, 13 th month pay, Christmas bonus, and incentives in the form of shares in the total volume of fish caught. They asserted that sometime in September 2002, Teng expressed his doubts on the correct volume of fish caught in every fishing voyage.[6] In December 2002, Teng informed them that their services had been terminated. In his defense, Teng maintained that he did not have any hand in hiring the respondent workers; the maestros, rather than he, invited them to join the venture. According to him, his role was clearly limited to the provision of the necessary capital, tools and equipment, consisting of basnig, gears, fuel, food, and other supplies.[8] The VA rendered a decision[9] in Tengs favor and declared that no employer-employee relationship existed between Teng and the respondent workers. The dispositive portion of the VAs May 30, 2003 decision reads: WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit. It follows also, that all other claims are likewise dismissed for lack of merit. [10] The respondent workers received the VAs decision on June 12, 2003.[11] They filed a motion for reconsideration, which was denied in an order dated June 27, 2003 and which they received on July 8, 2003.[12] The VA reasoned out that Section 6, Rule VII of the 1989 Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings (1989 Procedural Guidelines) does not provide the remedy of a motion for reconsideration to the party adversely affected by the VAs order or decision.[13] The order states: Under Executive Order No. 126, as amended by Executive Order No. 251, and in order to implement Article 260-262 (b) of the Labor Code, as amended by R.A. No. 6715, otherwise known as the Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings, inter alia: An award or the Decision of the Voluntary Arbitrators becomes final and executory after ten (10) calendar days from receipt of copies of the award or decision by the parties (Sec. 6, Rule VII). Moreover, the above-mentioned guidelines do not provide the remedy of a motion for reconsideration to the party adversely affected by the order or decision of voluntary arbitrators. [14] On July 21, 2003, the respondent-workers elevated the case to the CA. In its decision of September 21, 2004, the CA reversed the VAs decision after finding sufficient evidence showing the existence of employer-employee relationship:

WHEREFORE, premises considered, the petition is granted. The questioned decision of the Voluntary Arbitrator dated May 30, 2003 is hereby REVERSED and SET ASIDE by ordering private respondent to pay separation pay with backwages and other monetary benefits. For this purpose, the case is REMANDED to the Voluntary Arbitrator for the computation of petitioners backwages and other monetary benefits. No pronouncement as to costs. SO ORDERED.[15]
[16]

Teng moved to reconsider the CAs decision, but the CA denied the motion in its resolution of September 1, 2005. He, thereafter, filed the present Petition for Review on Certiorari under Rule 45 of the Rules of Court, claiming that: the VAs decision is not subject to a motion for reconsideration; and no employer-employee relationship existed between Teng and the respondent workers.

a. b.

Teng contends that the VAs decision is not subject to a motion for reconsideration in the absence of any specific provision allowing this recourse under Article 262-A of the Labor Code. [17] He cites the 1989 Procedural Guidelines , which, as the VA declared, does not provide the remedy of a motion for reconsideration. [18] He claims that after the lapse of 10 days from its receipt, the VAs decision becomes final and executory unless an appeal is taken. [19] He argues that when the respondent workers received the VAs decision on June 12, 2003,[20]they had 10 days, or until June 22, 2003, to file an appeal. As the respondent workers opted instead to move for reconsideration, the 10-day period to appeal continued to run; thus, the VAs decision had already become final and executory by the time they assailed it before the CA on July 21, 2003.[21] Teng further insists that the VA was correct in ruling that there was no employer-employee relationship between him and the respondent workers. What he entered into was a joint venture agreement with the maestros, where Tengs role was only to provide basnig, gears, nets, and other tools and equipment for every fishing voyage .[22] THE COURTS RULING We resolve to deny the petition for lack of merit. Article 262-A of the Labor Code does not prohibit the filing of a motion for reconsideration. On March 21, 1989, Republic Act No. 6715 took effect, amending, among others, Article 263 of the Labor Code which was originally worded as: Art. 263: Voluntary arbitration awards or decisions shall be final, unappealable, and executory. As amended, Article 263 is now Article 262-A, which states: Art. 262-A. The award or decision x x x shall contain the facts and the law on which it is based. It shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties. Notably, Article 262-A deleted the word unappealable from Article 263. The deliberate selection of the language in the amendatory act differing from that of the original act indicates that the legislature intended a change in the law, and the court should endeavor to give effect to such intent. [24] We recognized the intent of the change of phraseology in Imperial Textile Mills, Inc. v. Sampang,[25] where we ruled that: It is true that the present rule [Art. 262-A] makes the voluntary arbitration award final and executory after ten calendar days from receipt of the copy of the award or decision by the parties. Presumably, the decision may still be reconsidered by the Voluntary Arbitrator on the basis of a motion for reconsideration duly filed during that period.[26] In Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc., [27] we likewise ruled that the VAs decision may still be reconsidered on the basis of a motion for reconsideration seasonably filed within 10 days from receipt thereof. [28] The seasonable filing of a motion for reconsideration is a mandatory requirement to forestall the finality of such decision. [29] We further cited the 1989 Procedural Guidelines which implemented Article 262-A, viz:[30] Under Section 6, Rule VII of the same guidelines implementing Article 262-A of the Labor Code, this Decision, as a matter of course, would become final and executory after ten (10) calendar days from

receipt of copies of the decision by the parties x x x unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals under Rule 43 of the Rules of Court is filed within the same 10-day period. [31] These rulings fully establish that the absence of a categorical language in Article 262-A does not preclude the filing of a motion for reconsideration of the VAs decision within the 10-day period. Tengs allegation that the VAs decision had become final and executory by the time the respondent workers filed an appeal with the CA thus fails. We consequently rule that the respondent workers seasonably filed a motion for reconsideration of the VAs judgment, and the VA erred in denying the motion because no motion for reconsideration is allowed. The Court notes that despite our interpretation that Article 262-A does not preclude the filing of a motion for reconsideration of the VAs decision, a contrary provision can be found in Section 7, Rule XIX of the Department of Labors Department Order (DO) No. 40, series of 2003:[32] Rule XIX Section 7. Finality of Award/Decision. The decision, order, resolution or award of the voluntary arbitrator or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties and it shall not be subject of a motion for reconsideration. Presumably on the basis of DO 40-03, the 1989 Procedural Guidelines was revised in 2005 ( 2005 Procedural Guidelines), [33] whose pertinent provisions provide that: Rule VII DECISIONS Section 6. Finality of Decisions. The decision of the Voluntary Arbitrator shall be final and executory after ten (10) calendar days from receipt of the copy of the decision by the parties. Section 7. Motions for Reconsideration. The decision of the Voluntary Arbitrator is not subject of a Motion for Reconsideration. We are surprised that neither the VA nor Teng cited DO 40-03 and the 2005 Procedural Guidelines as authorities for their cause, considering that these were the governing rules while the case was pending and these directly and fully supported their theory. Had they done so, their reliance on the provisions would have nevertheless been unavailing for reasons we shall now discuss. In the exercise of its power to promulgate implementing rules and regulations, an implementing agency, such as the Department of Labor,[34] is restricted from going beyond the terms of the law it seeks to implement; it should neither modify nor improve the law. The agency formulating the rules and guidelines cannot exceed the statutory authority granted to it by the legislature.[35] By allowing a 10-day period, the obvious intent of Congress in amending Article 263 to Article 262-A is to provide an opportunity for the party adversely affected by the VAs decision to seek recourse via a motion for reconsideration or a petition for review under Rule 43 of the Rules of Court filed with the CA. Indeed, a motion for reconsideration is the more appropriate remedy in line with the doctrine of exhaustion of administrative remedies. For this reason, an appeal from administrative agencies to the CA via Rule 43 of the Rules of Court requires exhaustion of available remedies [36] as a condition precedent to a petition under that Rule. The requirement that administrative remedies be exhausted is based on the doctrine that in providing for a remedy before an administrative agency, every opportunity must be given to the agency to resolve the matter and to exhaust all opportunities for a resolution under the given remedy before bringing an action in, or resorting to, the courts of justice.[37] Where Congress has not clearly required exhaustion, sound judicial discretion governs, [38] guided by congressional intent.[39] By disallowing reconsideration of the VAs decision, Section 7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural Guidelines went directly against the legislative intent behind Article 262-A of the Labor Code. These rules deny the VA the chance to correct himself and compel the courts of justice to prematurely intervene with the action of an administrative agency entrusted with the adjudication of controversies coming under its special knowledge, training and specific field of expertise. In this era of clogged court dockets, the need for specialized administrative agencies with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or intricate

questions of facts, subject to judicial review, is indispensable. [41] In Industrial Enterprises, Inc. v. Court of Appeals ,[42] we ruled that relief must first be obtained in an administrative proceeding before a remedy will be supplied by the courts even though the matter is within the proper jurisdiction of a court. [43] There exists an employer-employee relationship between Teng and the respondent workers. We agree with the CAs finding that sufficient evidence exists indicating the existence of an employer-employee relationship between Teng and the respondent workers. While Teng alleged that it was the maestros who hired the respondent workers, it was his company that issued to the respondent workers identification cards ( IDs) bearing their names as employees and Tengs signature as the employer. Generally, in a business establishment, IDs are issued to identify the holder as a bona fide employee of the issuing entity. For the 13 years that the respondent workers worked for Teng, they received wages on a regular basis, in addition to their shares in the fish caught. [44] The worksheet showed that the respondent workers received uniform amounts within a given year, which amounts annually increased until the termination of their employment in 2002. [45] Tengs claim that the amounts received by the respondent workers are mere commissions is incredulous, as it would mean that the fish caught throughout the year is uniform and increases in number each year. More importantly, the element of control which we have ruled in a number of cases to be a strong indicator of the existence of an employer-employee relationship is present in this case. Teng not only owned the tools and equipment, he directed how the respondent workers were to perform their job as checkers; they, in fact, acted as Tengs eyes and ears in every fishing expedition. Teng cannot hide behind his argument that the respondent workers were hired by the maestros. To consider the respondent workers as employees of the maestros would mean that Teng committed impermissible labor-only contracting. As a policy, the Labor Code prohibits labor-only contracting: ART. 106. Contractor or Subcontractor The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor. 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. Section 5 of the DO No. 18-02,[46] which implements Article 106 of the Labor Code, 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 The contractor does not exercise the right to control over the performance of the work of the contractual employee.

(ii)

In the present case, the maestros did not have any substantial capital or investment. Teng admitted that he solely provided the capital and equipment, while the maestros supplied the workers. The power of control over the respondent workers was lodged not with the maestros but with Teng. As checkers, the respondent workers main tasks were to count and classify the fish caught and report them to Teng. They performed tasks that were necessary and desirable in Tengs fishing business. Taken together, these incidents confirm the existence of a labor-only contracting which is prohibited in our jurisdiction, as it is considered to be the employers attempt to evade obligations afforded by law to employees.

Accordingly, we hold that employer-employee ties exist between Teng and the respondent workers. A finding that the maestros are labor-only contractors is equivalent to a finding that an employer-employee relationship exists between Teng and the respondent workers. As regular employees, the respondent workers are entitled to all the benefits and rights appurtenant to regular employment. The dismissal of an employee, which the employer must validate, has a twofold requirement: one is substantive, the other is procedural. Not only must the dismissal be for a just or an authorized cause, as provided by law; the rudimentary requirements of due process the opportunity to be heard and to defend oneself must be observed as well.[48] The employer has the burden of proving that the dismissal was for a just cause; failure to show this, as in the present case, would necessarily mean that the dismissal was unjustified and, therefore, illegal. [49] The respondent workers allegation that Teng summarily dismissed them on suspicion that they were not reporting to him the correct volume of the fish caught in each fishing voyage was never denied by Teng. Unsubstantiated suspicion is not a just cause to terminate ones employment under Article 282 of the Labor Code. To allow an employer to dismiss an employee based on mere allegations and generalities would place the employee at the mercy of his employer, and would emasculate the right to security of tenure. [51] For his failure to comply with the Labor Codes substantive requirement on termination of employment, we declare that Teng illegally dismissed the respondent workers. WHEREFORE, we DENY the petition and AFFIRM the September 21, 2004 decision and the September 1, 2005 resolution of the Court of Appeals in CA-G.R. SP No. 78783. Costs against the petitioners. SO ORDERED.

MASONIC CONTRACTORS vs. MADJOS This is a petition for review on certiorari assailing the July 18, 2008 Decision [1] of the Court of Appeals (CA), as well as its October 23, 2008 Resolution,[2] in CA-G.R. SP No. 101023. The CA, in its assailed decision and resolution, reversed and set aside the Decision[3] promulgated by the National Labor Relations Commission (NLRC) on February 6, 2007, as well as the December 16, 2004 Decision[4] of the Labor Arbiter (LA), rendered in favor of herein petitioners. First, the facts:

Respondents Magdalena Madjos, Zenaida Tiamzon and Carmelita Rapadas were employed sometime in 1991 as all-around laborers (driver/sweeper/ taga-libing/grass-cutter) by Masonic Contractor, Inc. (MCI). Each of them received an initial daily wage of P165.00 and were required to report for work from 7:00 a.m. to 4:00 p.m. Three years thereafter, MCI increased their wages by P15.00 per day[5] but not without earning the ire of Melvin Balais, president of MCI.[6] Sometime in 2004, Balais told Madjos, Tiamzon and Rapadas, along with nine (9) other employees, to take a twoday leave. When they reported for work two days thereafter, they were barred from entering the work premises and were informed that they had already been replaced by other workers .[7] This prompted Madjos and her coworkers to file a complaint against herein petitioners for illegal dismissal and for non-payment of overtime pay, holiday pay, 13th month pay, and damages. In their Position Paper dated April 12, 2004, [8] respondents averred that they were regular employees of MCI who were summarily dismissed from their jobs contrary to the substantive and procedural requirements of law. Petitioners, for their part, denied being the direct employer of respondents. Essentially, they argued that MCI had maintenance contracts with different memorial park companies and that, over the years, they had engaged the services of a certain Luz Malibiran to provide them with the necessary manpower depending on MCIs volume of work. [10] On December 16, 2004, LA Aliman Mangandog rendered a Decision, [11] dismissing the complaint for lack of merit. The LA ratiocinated that Madjos, Tiamzon and Rapadas failed to present any evidence to prove that MCI had control over the means and methods in the performance of their work. The LA gave more credence to Malibirans affidavit, pertinent portions of which read: 1. Ako at ang mga nagsumbong sa SSS laban sa Masonic Contractors, Inc., komokontrata lamang ng mga gawaing (sic) ng nasabing kompanya sa loob ng Loyola Memorial Park at ang aming mga ginawa ay binabayaran ng buo na siya naman naming pinagpaparti- partihan. 2. Ako at ang mga nagsumbong sa SSS, sa kadahilanang alam naming na (sic) hindi kami empleyado ng kahit sinumang kompanya o pagawaan ay nag-usap-usap at nagkasundo na kami na mismo sa aming sarili ang magpalista sa SSS at magbayad ng kontribusyon kung gusto naming na (sic) magkaroon ng benepisyo pagdating ng panahon. 3. Alam naming lahat na kami ay hindi empleyado ng Masonic Contractors[,] Inc., kung kaya alam naming (sic) na ang nasabing kompanya ay walang pananagutan na kami ay ipalista sa SSS bilang empleyado. 4. Ang mga nagsumbong sa SSS ay umalis at umayaw na lang ng walang paalam kung kaya kaming mga natira ay napilitang maghanap ng ibang makakasama sa pangongontrata. Ang aming pangongontrata sa Masonic Contractors[,] Inc. ay isang pakiusap lamang sa nasabing kompanya upang kami ay magkaroon ng sariling pinagkakakitaan upang matugunan ang aming pang-araw-araw na pangangailangan. 5. Ang salaysay na ito ay aking ginawa para patunayan ang mga nakasaaad dito ay pawang totoo at upang malaman ng tang[g]apan ng SSS na walang pagkukulang ang Masonic Contractors[,] Inc.
[13]

On appeal, the NLRC affirmed the LAs ruling. Respondents motion for reconsideration was, likewise, denied. On review, the CA reversed the findings of the NLRC and the LA. The CA reasoned that the NLRC erroneously imposed upon the three complainants the burden of proving that they were employees, when it was the employer and/or the contractor which should have been tasked with the onus to prove that it had substantial capital, investment, tools, etc. to disprove the allegation that it was engaged in labor-only contracting. [14] In contrast to the NLRCs ruling, the CA found that an employer-employee relationship existed between herein petitioners and respondents, and that the latter were illegally terminated from their work. The dispositive portion of the July 18, 2008 Decision of the CA states: WHEREFORE, the petition is GRANTED. The assailed dispositions are ANNULLED and SET ASIDE. Masonic Contractor, Inc. is ORDERED to reinstate Petitioners Magdalena Madjos, Carmelita

Rapadas, and Zenaida Tiamzon or, in the event that reinstatement is no longer feasible, to pay each of them separation pay. Masonic Contractor, Inc. is also DIRECTED to pay the Petitioners full backwages and other monetary benefits computed from the time of their dismissal up to the time of actual reinstatement or up to the finality of this decision, if reinstatement is not possible. No costs. SO ORDERED.[15] Petitioners now come to this Court via a Rule 45 petition, contending that the CA committed a reversible error in finding that they were engaged in labor-only contracting and for holding them liable for respondents dismissal. Central to the disposition of the case is a determination of whether respondents are employees of MCI. We answer in the affirmative. In Brotherhood Labor Unity Movement of the Philippines v. Hon. Zamora, the Court explained: In determining the existence of an employer-employee relationship, the elements that are generally considered are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee with respect to the means and methods by which the work is to be accomplished. It is the so-called control test that is the most important element. [16] The existence of an employer-employee relationship is a question of fact which should be supported by substantial evidence.[17] Petitioners defense that they merely contracted the services of respondents through Malibiran fails to persuade us. The facts of this case show that respondents have been under the employ of MCI as early as 1991. They were hired not to perform a specific job or undertaking. Instead, they were employed as all-around laborers doing varied and intermittent jobs, such as those of drivers, sweepers, gardeners, and even undertakers or tagalibing, until they were arbitrarily terminated by MCI in 2004. Their wages were paid directly by MCI, as evidenced by the latters payroll summary,[18] belying its self-serving and unsupported contention that it paid directly to Malibiran for respondents services. Respondents had identification cards or gate passes issued not by Malibiran, but by MCI,[19] and were required to wear uniforms bearing MCIs emblem or logo when they reported for work.[20] It is common practice for companies to provide identification cards to individuals not only as a security measure, but more importantly to identify the bearers thereof as bona fide employees of the firm or institution that issued them.[21] The provision of company-issued identification cards and uniforms to respondents, aside from their inclusion in MCIs summary payroll, indubitably constitutes substantial evidence sufficient to support only one conclusion: that respondents were indeed employees of MCI . Moreover, as correctly observed by the CA, petitioners failed to show that it was Malibiran who exercised control over the means and methods of the work assigned to respondents. Interestingly, Malibirans affidavit is silent on the aspect of control over respondents means and methods of work. Rather than categorically stating that she was the one who directly employed respondents to render work for MCI, Malibiran merely implies that, like respondents, she was just a co-worker. Malibirans statement that the work for MCI was merely in the nature of accommodation to help respondents earn a living, in effect, impliedly admits the fact that she did not have the capacity to engage in the independent job-contracting business, and that, therefore, she was not respondents employer. With the issue of respondents employment resolved, we then declare that respondents were illegally terminated when petitioners summarily dismissed them from work without any valid reason for doing so and without observing procedural due process. We thus affirm the CAs finding that petitioners are liable for their unwarranted action against respondents. Lastly, petitioners did not even make an effort to deny or refute respondents claim that they were not paid their overtime pay, holiday pay and 13 th month pay. By their silence, petitioners are deemed to have admitted the same. [22] Section 11 of Rule 8 of the Rules of Court, which supplements the NLRC Rules, provides that an allegation not specifically denied is deemed admitted .[23] Accordingly, petitioners should comply with their statutory obligations to respondents. WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The assailed July 18, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 101023 and its October 23, 2008 Resolution are hereby AFFIRMED.

Petitioners are further ordered to pay respondents their unpaid overtime pay, holiday pay and 13 th month pay to be computed by the Labor Arbiter, and to bear the costs of this suit. SO ORDERED.

SAN MIGUEL CORPORATION vs. VICENTE SEMILLANO This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing (i) the February 19, 2004 Decision[1] of the Court of Appeals in CA-G.R. SP. No. 75209 which reversed and set aside the February 28, 2002 and September 27, 2002 Resolutions of the National Labor Relations Commission in NLRC Case No. V-000588-98; and (ii) its May 28, 2004 Resolution[2] denying petitioners motion for the reconsideration thereof. The facts of the case, as found by the Court of Appeals, [3] are as follows:

It appears that AMPCO hired the services of Vicente et al. [Vicente Semillano, Nelson Mondejar, Jovito Remada and Alex Hawod,[4] respondents herein] on different dates in December of 1991 and 1994. All of them were assigned to work in SMCs Bottling Plant situated at Brgy. Granada Sta. Fe, Bacolod City, in order to perform the following tasks: segregating bottles, removing dirt therefrom, filing them in designated places, loading and unloading the bottles to and from the delivery trucks, and performing other tasks as may be ordered by SMCs officers. [They] were required to work inside the premises of SMC using [SMCs] equipment. They rendered service with SMC for more than 6 months . Subsequently, SMC entered into a Contract of Services [5] with AMPCO designating the latter as the employer of Vicente, et al. As a result, Vicente et al. failed to claim the rights and benefits ordinarily accorded a regular employee of SMC. In fact, they were not paid their 13 th month pay. On June 6, 1995, they were not allowed to enter the premises of SMC. The project manager of AMPCO, Merlyn Polidario, told them to wait for further instructions from the SMCs supervisor. Vicente et al. waited for one month, unfortunately, they never heard a word from SMC. Consequently, Vicente et al., as complainants, filed on July 17, 1995 a COMPLAINT FOR ILLEGAL DISMISSAL with the Labor Arbiter against AMPCO, Merlyn V. Polidario, SMC and Rufino I. Yatar [SMC Plant Manager], as respondents. Complainants alleged that they were fillers of SMC Bottling Plant assigned to perform activities necessary and desirable in the usual business of SMC. They claim that they were under the control and supervision of SMC personnel and have worked for more than 6 months in the company. As such, they assert that they are regular employees of SMC. However, SMC utilized AMPCO making it appear that the latter was their employer, so that SMC may evade the responsibility of paying the benefits due them under the law. Finally, complainants contend that AMPCO and SMC failed to give their 13th month pay and that they were prevented from entering the SMCs premises. Hence, complainants contend that they were illegally dismissed from service. On the other hand, respondent SMC raised the defense that it is not the employer of the complainants. According to SMC, AMPCO is their employer because the latter is an independent contractor. Also SMC alleged that it was AMPCO that directly paid their salaries and remitted their contributions to the SSS. Finally, SMC assails the jurisdiction of the Labor Arbiter contending that the instant dispute is intra-cooperative in nature falling within the jurisdiction of the Arbitration Committee of the Cooperative Development Authority. On April 30, 1998, the Labor Arbiter (LA) rendered his decision.[6] The dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered declaring herein complainants as regular employees of San Miguel Corporation and the latter is ordered: 1. To reinstate complainants to their previous or equivalent positions without loss of seniority rights with payment of full backwages from the time of their illegal dismissal up to the time of their actual reinstatement; and 2. To pay complainants counsel attorneys fees 10% of the total award or P36,625.76.

Per our computation complainants Vicente Semillano, Nelson Mondejar and Jovito Remada are entitled to the amount of P122,085.88 each as full backwages covering the periodJune 6, 1995 up to April 30, 1998. SO ORDERED.[7] Accordingly, respondents filed a motion for partial execution of the decision of the Labor Arbiter praying for their immediate reinstatement.[8] Petitioner San Miguel Corporation (SMC) filed its Opposition to the motion.[9] The LA, however, rendered no ruling thereon.[10] Petitioner appealed the LA Decision to the NLRC. Initially, the NLRC Fourth Division affirmed with modifications the findings of the LA as follows: WHEREFORE, premises considered, the appeals of respondents AMPCO and SMC are denied for lack of merit and the decision appealed from is affirmed with a modification in the following: a. Respondent SMC to pay complainants their backwages from June 6, 1995 up to and until July 22, 1998; b. Respondent SMC to pay complainants their accrued salaries and allowances from July 23, 1998 up to the present; and

c.

Respondent SMC to pay complainants ten percent (10%) of the total award as attorneys fees.

Complainants, to restate, are regular employees of San Miguel Corporation and the latter is ordered to reinstate complainants to their former position as pilers/segregators. Petitioner SMC moved for a reconsideration of the foregoing decision. In a Resolution dated February 28, 2002, the NLRC acted on the motion and reversed its earlier ruling. It absolved petitioner from liability and instead held AMPCO, as employer of respondents, liable to pay for respondents backwages, accrued salaries, allowances, and attorneys fees. In holding that AMPCO was an independent contractor, NLRC was of the view that the law only required substantial capital or investment. Since AMPCO had substantial capital of nearly one (1) million then it qualified as an independent contractor. The NLRC added that even under the control test, AMPCO would be the real employer of the respondents, since it had assumed the entire charge and control of respondents services. Hence, an employer-employee relationship existed between AMPCO and the respondents. Respondents timely filed their motion for reconsideration of the NLRC resolution but it was denied. [11] Feeling aggrieved over the turnaround by the NLRC, the respondents filed a petition for review on certiorari under Rule 65 with the Court of Appeals (CA), which favorably acted on it. In overturning the commissions ruling, the Court of Appeals ironically applied the same control test that the NLRC used to resolve the issue of who the actual employer was. The CA, however, found that petitioner SMC wielded (i) the power of control over respondent, as SMC personnel supervised respondents performance of loading and unloading of beer bottles, and (ii) the power of dismissal, as respondents were refused entry by SMC to its premises and were instructed by the AMPCO manager to wait for further instructions from the SMCs supervisor. The CA added that AMPCO was a labor-only contractor since a capital of nearly one million pesos was insufficient for it to qualify as an independent contractor. Thus, the decretal portion reads: WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Resolutions dated February 28, 2002 and September 27, 2002 both issued by the public respondent National Labor Relations Commission in the case docketed as RAB CASE NO. 06-07-10298-95 are hereby SET ASIDE and a new one entered reinstating its original Decision dated June 30, 2000, which affirmed with modification the decision of the Labor Arbiter dated April 30, 1998. No pronouncement as to costs. SO ORDERED. SMC filed a motion for reconsideration but it was denied by the CA in its May 28, 2004 Resolution. [12] Hence, this petition for review on certiorari. Petitioner SMC argues that the CA wrongly assumed that it exercised power of control over the respondents just because they performed their work within SMCs premises. In advocacy of its claim that AMPCO is an independent contractor, petitioner relies on the provisions of the service contract between petitioner and AMPCO, wherein the latter undertook to provide the materials, tools and equipment to accomplish the services contracted out by petitioner. The same contract provides that AMPCO shall have exclusive discretion in the selection, engagement and discharge of its employees/personnel or otherwise in the direction and control thereof. Petitioner also adds that AMPCO determines the wages of its employees/personnel who shall be within its full control. Petitioner further argues that respondents action is essentially one for regularization (as employees of SMC) which is nowhere recognized or allowed by law. Lastly, petitioner contends that the case involves an intra-cooperative dispute, which is within the original and exclusive jurisdiction of the Arbitration Committee of the Cooperative and, thereafter, the Cooperative Development Authority. In its Comment,[13] respondent AMPCO essentially advanced the same arguments in support of its claim as a legitimate job contractor. The only issue that needs to be resolved is whether or not AMPCO is a legitimate job contractor. A claim that an action for regularization has no legal basis and is violative of petitioners constitutional and statutory rights is, therefore, dependent upon the resolution of the issue posed above. The petition fails.

Generally, the findings of fact made by the Labor Arbiter and the NLRC, as the specialized agencies presumed to have the expertise on matters within their respective fields, are accorded much respect and even finality, when supported by ample evidence[14] and affirmed by the CA. The fact that the NLRC, in its subsequent resolution, reversed its original decision does not render the foregoing inapplicable where the resolution itself is not supported by substantial evidence. Department of Labor and Employment (DOLE) Department Order No. 10, Series of 1997, defines job contracting and labor-only contracting as follows: Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met: (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, machineries, work premises, and other materials which are necessary in the conduct of his business. Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in laboronly contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (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. (c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers. Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing Articles 106 to 109 of the Labor Code further provides that: Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job work or service contracted out. (emphasis supplied)

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. The test to determine the existence of independent contractorship is whether or not the one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work .[15]

The existence of an independent and permissible contractor relationship is generally established by the following criteria: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of payment .[16] Although there may be indications of an independent contractor arrangement between petitioner and AMPCO, the most determinant of factors exists which indicate otherwise. Petitioners averment that AMPCO had total assets amounting to P932,599.22 and income of P2,777,603.46 in 1994 was squarely debunked by the LA. Thus: Furthermore, there are no pieces of evidence that AMPCO has substantial capital or investment. An examination in its Statement of Income and Changes in Undivided Savings show that its income for the year 1994 was P2,777,603.46 while its operating expenses for said year is P2,718,315.33 or a net income of P59,288.13 for the year 1994; that its cash on hand for 1994 is P22,154.80. In fact, the NLRC in its original decision likewise stated as follows: In contrast, AMPCOs main business activity is trading, maintaining a store catering to members and the public. Its job contracting with SMC is only a minor activity or sideline. The component of AMPCOs substantial capital are in fact invested and used in the trading business. This is palpably shown in the sizable amount of its accounts receivables amounting to more than P.6M out of its members capital of only P.47M in 1994. Neither did petitioner prove that AMPCO had substantial equipment, tools, machineries, and supplies actually and directly used by it in the performance or completion of the segregation and piling job. In fact, as correctly pointed out by the NLRC in its original decision, there is nothing in AMPCOs list [17] of fixed assets, machineries, tools, and equipment which it could have used, actually and directly, in the performance or completion of its contracted job, work or service with petitioner. For said reason, there can be no other logical conclusion but that the tools and equipment utilized by respondents are owned by petitioner SMC. It is likewise noteworthy that neither petitioner nor AMPCO has shown that the latter had clients other than petitioner. Therefore, AMPCO has no independent business. In connection therewith, DOLE Department Order No. 10 also states that an independent 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, and 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. This embodies what has long been jurisprudentially recognized as the control test[18] to determine the existence of employer-employee relationship. In the case at bench, petitioner faults the CA for holding that the respondents were under the control of petitioner whenever they performed the task of loading in the delivery trucks and unloading from them. It, however, fails to show how AMPCO took entire charge, control and supervision of the work and service agreed upon. AMPCOs Comment on the Petition is likewise utterly silent on this point. Notably, both petitioner and AMPCO chose to ignore the uniform finding of the LA, NLRC (in its original decision) and the CA that one of the assigned jobs of respondents was to perform other acts as may be ordered by SMCs officers. Significantly, AMPCO, opted not to challenge the original decision of the NLRC that found it a mere labor-only contractor. Moreover, the Court is not convinced that AMPCO wielded exclusive discretion in the discharge of respondents. As the CA correctly pointed out, Merlyn Polidario, AMPCOs project manager, even told respondents to wait for further instructions from the SMCs supervisor after they were prevented from entering petitioner SMCs premises. Based on the foregoing, no other logical conclusion can be reached than that it was petitioner, not AMPCO, who wielded power of control. Despite the fact that the service contracts [20] contain stipulations which are earmarks of independent contractorship, they do not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the character of AMPCOs business, that is, whether as labor-only contractor, or job contractor. AMPCOs character should be measured in terms of, and determined by, the criteria set by statute. [21] At a closer look, AMPCOs actual status and participation regarding respondents employment clearly belie the contents of the written service contract. Petitioner cannot rely either on AMPCOs Certificate of Registration as an Independent Contractor issued by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such status. The fact of registration simply

prevents the legal presumption of being a mere labor-only contractor from arising. [22] In distinguishing between permissible job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.[23] Petitioner also argues that among the permissible contracting arrangements include work or services not directly related or not integral to the main business or operation of the principal including work related to manufacturing processes of manufacturing establishments.[24] The Court is not persuaded. The evidence is clear that respondents performed activities which were directly related to petitioners main line of business. Petitioner is primarily engaged in manufacturing and marketing of beer products, and respondents work of segregating and cleaning bottles is unarguably an important part of its manufacturing and marketing process. Lastly, petitioner claims that the present case is outside the jurisdiction of the labor tribunals because respondent Vicente Semillano is a member of AMPCO, not SMC. Precisely, he has joined the others in filing this complaint because it is his position that petitioner SMC is his true employer and liable for all his claims under the Labor Code. Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-only contractor, for all the rightful claims of respondents. Under this set-up, AMPCO, as the "labor-only" contractor, is deemed an agent of the principal (SMC). The law makes the principal responsible over the employees of the "labor-only" contractor as if the principal itself directly hired the employees.[25] WHEREFORE, the petition is DENIED. The February 19, 2004 Decision of the Court of Appeals, reversing the decision of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED. SO ORDERED.

MATLING INDUSTRIAL vs. RICARDO COROS This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer was a regular employee or a corporate officer unravels the conundrum. In the case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate. In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 2002 [1] and the resolution dated April 2, 2003, [2] both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and

Commercial Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission , whereby by the Court of Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC) to the effect that the LA had jurisdiction because the respondent was not a corporate officer of petitioner Matling Industrial and Commercial Corporation (Matling). Antecedents After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.[3] The petitioners moved to dismiss the complaint,[4] raising the ground, among others, that the complaint pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate inasmuch as the respondent was a member of Matlings Board of Directors aside from being its Vice-President for Finance and Administration prior to his termination. The respondent opposed the petitioners motion to dismiss,[5] insisting that his status as a member of Matlings Board of Directors was doubtful, considering that he had not been formally elected as such; that he did not own a single share of stock in Matling, considering that he had been made to sign in blank an undated indorsement of the certificate of stock he had been given in 1992; that Matling had taken back and retained the certificate of stock in its custody; and that even assuming that he had been a Director of Matling, he had been removed as the Vice President for Finance and Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000 showed. On October 16, 2000, the LA granted the petitioners motion to dismiss,[6] ruling that the respondent was a corporate officer because he was occupying the position of Vice President for Finance and Administration and at the same time was a Member of the Board of Directors of Matling ; and that, consequently, his removal was a corporate act of Matling and the controversy resulting from such removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential Decree No. 902. Ruling of the NLRC The respondent appealed to the NLRC,[7] urging that: I THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS. II THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF JURISDICTION. On March 13, 2001, the NLRC set aside the dismissal , concluding that the respondents complaint for illegal dismissal was properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue of his position in Matling, albeit high ranking and managerial, not being among the positions listed in Matlings Constitution and By-Laws.[8] The NLRC disposed thuswise: WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at bench does not involve any intra-corporate matter. Hence, jurisdiction to hear and act on said case is vested with the Labor Arbiter, not the SEC, considering that the position of Vice-President for Finance and Administration being held by complainant-appellant is not listed as among respondent's corporate officers. Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Arbiter below could act on the case at bench, hear both parties, receive their respective evidence and position papers fully observing the requirements of due process, and resolve the same with reasonable dispatch. SO ORDERED. The petitioners sought reconsideration,[9] reiterating that the respondent, being a member of the Board of Directors, was a corporate officer whose removal was not within the LAs jurisdiction.

The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine copies of Matlings Amended Articles of Incorporation and By Laws to prove that the President of Matling was thereby granted full power to create new offices and appoint the officers thereto, and the minutes of special meeting held on June 7, 1999 by Matlings Board of Directors to prove that the respondent was, indeed, a Member of the Board of Directors. [10] Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for reconsideration.[11] Ruling of the CA The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the correct decision of the LA. In its assailed decision promulgated on September 13, 2002,[12] the CA dismissed the petition for certiorari, explaining: For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate officer, the position must, if not listed in the by-laws, have been created by the corporation's board of directors, and the occupant thereof appointed or elected by the same board of directors or stockholders. This is the implication of the ruling in Tabang v. National Labor Relations Commission, which reads: The president, vice president, secretary and treasurer are commonly regarded as the principal or executive officers of a corporation, and modern corporation statutes usually designate them as the officers of the corporation. However, other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary. It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an 'employee' usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission and De Rossi v. National Labor Relations Commission. The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not created by the corporations board of directors but only by its president or executive vice-president pursuant to the by-laws of the corporation. Moreover, Coros appointment to said position was not made through any act of the board of directors or stockholders of the corporation. Consequently, the position to which Coros was appointed and later on removed from, is not a corporate office despite its nomenclature, but an ordinary office in the corporation. Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter. WHEREFORE, the petition for certiorari is hereby DISMISSED. SO ORDERED. The CA denied the petitioners motion for reconsideration on April 2, 2003.[13] Issue Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a stockholder/member of the Matlings Board of Directors as well as its Vice President for Finance and Administration; and that the CA consequently erred in holding that the LA had jurisdiction. The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue determines whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal.

Ruling The appeal fails. I The Law on Jurisdiction in Dismissal Cases As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows: Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 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 the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the 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. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989). Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intracorporate or partnership relations between and among stockholders, members, or associates, or between any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; and between such corporation, partnership, or association and the State insofar as the controversy concerns their individual franchise or right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or manager of such corporation, partnership, or association.[14] Such controversy, among others, is known as an intra-corporate dispute. Effective on August 8, 2000, upon the passage of Republic Act No. 8799,[15] otherwise known as The Securities Regulation Code, the SECs jurisdiction over all intra-corporate disputes was transferred to the RTC , pursuant to Section 5.2 of RA No. 8799, to wit: 5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final

resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. Considering that the respondents complaint for illegal dismissal was commenced on August 10, 2000, it might come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a corporate, not a regular, officer of Matling. II Was the Respondents Position of Vice President for Administration and Finance a Corporate Office? We must first resolve whether or not the respondents position as Vice President for Finance and Administration was a corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799. The petitioners contend that the position of Vice President for Finance and Administration was a corporate office, having been created by Matlings President pursuant to By-Law No. V, as amended, [16] to wit: BY LAW NO. V Officers The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized by the Board of Directors; shall have full power to hire and discharge any or all employees of the corporation; shall have full power to create new offices and to appoint the officers thereto as he may deem proper and necessary in the operations of the corporation and as the progress of the business and welfare of the corporation may demand ; shall make reports to the directors and stockholders and perform all such other duties and functions as are incident to his office or are properly required of him by the Board of Directors. In case of the absence or disability of the President, the Executive Vice President shall have the power to exercise his functions. The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices was delegated by Matlings Board of Directors to its President through By-Law No. V , as amended; and that any office the President created, like the position of the respondent, was as valid and effective a creation as that made by the Board of Directors , making the office a corporate office. In justification, they cite Tabang v. National Labor Relations Commission,[17] which held that other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional officers as may be necessary. The respondent counters that Matlings By-Laws did not list his position as Vice President for Finance and Administration as one of the corporate offices ; that Matlings By-Law No. III listed only four corporate officers, namely: President, Executive Vice President, Secretary, and Treasurer; [18] that the corporate offices contemplated in the phrase and such other officers as may be provided for in the by-laws found in Section 25 of the Corporation Code should be clearly and expressly stated in the By-Laws ; that the fact that Matlings By-Law No. III dealt with Directors & Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between the officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary or noncorporate officers; and that the officer, to be considered as a corporate officer, must be elected by the Board of Directors or the stockholders, for the President could only appoint an employee to a position pursuant to By-Law No. V. We agree with respondent. Section 25 of the Corporation Code provides: Section 25. Corporate officers, quorum.-- Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings. Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to make a position a corporate office. Guerrea v. Lezama,[19] the first ruling on the matter, held that the only officers of a corporation were those given that character either by the Corporation Code or by the By-Laws; the rest of the corporate officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc. v. King:[20] An office is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee occupies no office and generally is employed not by the action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner's general manager, not by the board of directors of petitioner. It was also Malonzo who determined the compensation package of respondent. Thus, respondent was an employee, not a corporate officer. The CA was therefore correct in ruling that jurisdiction over the case was properly with the NLRC, not the SEC (now the RTC). This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the corporate officers are the President, Secretary, Treasurer and such other officers as may be provided for in the By-Laws. Accordingly, the corporate officers in the context of PD No. 902-A are exclusively those who are given that character either by the Corporation Code or by the corporations By-Laws. A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an enabling clause on the creation of just any corporate officer position. It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code, adopted a similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993,[21] to wit: Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers enumerated in the by-laws are the exclusive Officers of the corporation and the Board has no power to create other Offices without amending first the corporate Bylaws. However, the Board may create appointive positions other than the positions of corporate Officers, but the persons occupying such positions are not considered as corporate officers within the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of the corporate Officers, except those functions lawfully delegated to them. Their functions and duties are to be determined by the Board of Directors/Trustees. Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate officers. Verily, the power to elect the corporate officers was a discretionary power that the law exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or agents. [22] The office of Vice President for Finance and Administration created by Matlings President pursuant to By Law No. V was an ordinary, not a corporate, office. To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-Law No. V merely allowed Matlings President to create non-corporate offices to be occupied by ordinary employees of Matling. Such powers were incidental to the Presidents duties as the executive head of Matling to assist him in the daily operations of the business.

The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also considered corporate offices, was plainly obiter dictum due to the position subject of the controversy being mentioned in the By-Laws. Thus, the Court held therein that the position was a corporate office, and that the determination of the rights and liabilities arising from the ouster from the position was an intra-corporate controversy within the SECs jurisdiction. In Nacpil v. Intercontinental Broadcasting Corporation, [23] which may be the more appropriate ruling, the position subject of the controversy was not expressly mentioned in the By-Laws, but was created pursuant to a By-Law enabling provision authorizing the Board of Directors to create other offices that the Board of Directors might see fit to create. The Court held there that the position was a corporate office, relying on the obiter dictum in Tabang. Considering that the observations earlier made herein show unassailable, Tabang and Nacpil should no longer be controlling. that the soundness of their dicta is not

III Did Respondents Status as Director and Stockholder Automatically Convert his Dismissal into an Intra-Corporate Dispute? Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio v. National Labor Relations Commission [24] and Ongkingko v. National Labor Relations Commission, [25] the NLRC had no jurisdiction over his complaint, considering that any case for illegal dismissal brought by a stockholder/officer against the corporation was an intra-corporate matter that must fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A. The petitioners insistence is bereft of basis. To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were undeniably corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact that both of them had been duly elected by the respective Boards of Directors. But the herein respondents position of Vice President for Finance and Administration was not expressly mentioned in the By-Laws; neither was the position of Vice President for Finance and Administration created by Matlings Board of Directors. Lastly, the President, not the Board of Directors, appointed him. True it is that the Court pronounced in Tabang as follows: Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations. [26] However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason, justice, and fair play. In order to determine whether a dispute constitutes an intra-corporate controversy or not, the Court considers two elements instead, namely: ( a) the status or relationship of the parties; and ( b) the nature of the question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:[27] The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over the dispute on the SEC to the exclusion of regular courts. The statement made in one case that the rule admits of no exceptions or distinctions is not that absolute. The better policy in determining which body has jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy. Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment owned by a corporation of which he is a stockholder, there should be no question that a complaint for his ejectment for non-payment of rentals would still come under the jurisdiction of the regular courts and not of the SEC. By the same token, if one person injures another in a vehicular accident, the complaint for damages filed by the victim will not come under the jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the same corporation. A contrary interpretation would dissipate the powers of the regular courts and distort the meaning and intent of PD No. 902-A.

In another case, Mainland Construction Co., Inc. v. Movilla ,[28] the Court reiterated these determinants thuswise: In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of the following relationships: a) between the corporation, partnership or association and the public; b) between the corporation, partnership or association and its stockholders, partners, members or officers; c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, partners or associates themselves. The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is the subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers. [29] The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend on the nature of the services performed, but on the manner of creation of the office. In the respondents case, he was supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding his appointment to office must be fully considered to determine whether the dismissal constituted an intra-corporate controversy or a labor termination dispute. We must also consider whether his status as Director and stockholder had any relation at all to his appointment and subsequent dismissal as Vice President for Finance and Administration. Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of his being a stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had been employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but steady, as the following sequence indicates: 1966 Bookkeeper 1968 Senior Accountant 1969 Chief Accountant 1972 Office Supervisor 1973 Assistant Treasurer 1978 Special Assistant for Finance 1980 Assistant Comptroller 1983 Finance and Administrative Manager 1985 Asst. Vice President for Finance and Administration 1987 to April 17, 2000 Vice President for Finance and Administration Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice President for Finance and Administration in 1987 was by virtue of the length of quality service he had rendered as an employee of Matling. His subsequent acquisition of the status of Director/stockholder had no relation to his promotion . Besides, his status of Director/stockholder was unaffected by his dismissal from employment as Vice President for Finance and Administration. In Prudential Bank and Trust Company v. Reyes, [30] a case involving a lady bank manager who had risen from the ranks but was dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the NLRC, because she was deemed a regular employee of the bank. The Court observed thus:

It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she rose to become supervisor. Then in 1982, she was appointed Assistant VicePresident which she occupied until her illegal dismissal on July 19, 1991. The banks contention that she merely holds an elective position and that in effect she is not a regular employee is belied by the nature of her work and her length of service with the Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her employment in 1991. As Assistant Vice President of the Foreign Department of the Bank, she is tasked, among others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters covering the same. It has been stated that the primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. Additionally, an employee is regular because of the nature of work and the length of service, not because of the mode or even the reason for hiring them. As Assistant Vice-President of the Foreign Department of the Bank she performs tasks integral to the operations of the bank and her length of service with the bank totaling 28 years speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her services may be terminated only for a just or authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored to the very end to establish loss of trust and confidence and serious misconduct on the part of private respondent but, as will be discussed later, to no avail. WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals. Costs of suit to be paid by the petitioners. SO ORDERED.

RENATO REAL vs. SANGU PHILIPPINES INC. The perennial question of whether a complaint for illegal dismissal is intra-corporate and thus beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in this case. This Petition for Review on Certiorari assails the Decision[1] dated June 28, 2005 of the Court of Appeals (CA) in CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed before it. Factual Antecedents

Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a corporation engaged in the business of providing manpower for general services, like janitors, janitresses and other maintenance personnel, to various clients. In 2001, petitioner, together with 29 others who were either janitors, janitresses, leadmen and maintenance men, all employed by respondent corporation, filed their respective Complaints[2] for illegal dismissal against the latter and respondent Kiichi Abe, the corporations VicePresident and General Manager. These complaints were later on consolidated. With regard to petitioner, he was removed from his position as Manager through Board Resolution 2001-03 [3] adopted by respondent corporations Board of Directors. Petitioner complained that he was neither notified of the Board Meeting during which said board resolution was passed nor formally charged with any infraction. He just received from respondents a letter[4] dated March 26, 2001 stating that he has been terminated from service effective March 25, 2001 for the following reasons: (1) continuous absences at his post at Ogino Philippines Inc. for several months which was detrimental to the corporations operation; (2) loss of trust and confidence; and, (3) to cut down operational expenses to reduce further losses being experienced by respondent corporation. Respondents, on the other hand, refuted petitioners claim of illegal dismissal by alleging that after petitioner was appointed Manager, he committed gross acts of misconduct detrimental to the company since 2000. According to them, petitioner would almost always absent himself from work without informing the corporation of his whereabouts and that he would come to the office only to collect his salaries. As he was almost always absent, petitioner neglected to supervise the employees resulting in complaints from various clients about employees performance. In one instance, petitioner together with a few others, while apparently drunk, went to the premises of one of respondents clients, Epson Precision (Phils.) Inc., and engaged in a heated argument with the employees therein. Because of this, respondent Abe allegedly received a complaint from Epsons Personnel Manager concerning petitioners conduct. Respondents likewise averred that petitioner established a company engaged in the same business as respondent corporations and even submitted proposals for janitorial services to two of the latters clients. Because of all these, the Board of Directors of respondent corporation met on March 24, 2001 and adopted Board Resolution No. 2001-03 removing petitioner as Manager. Petitioner was thereafter informed of his removal through a letter dated March 26, 2001 which he, however, refused to receive. Further, in what respondents believed to be an act of retaliation, petitioner allegedly encouraged the employees who had been placed in the manpower pool to file a complaint for illegal dismissal against respondents. Worse, he later incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc. and Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together with other employees also barricaded the premises of respondent corporation. Such acts respondents posited constitute just cause for petitioners dismissal and that same was validly effected. Rulings of the Labor Arbiter and the National Labor Relations Commission The Labor Arbiter in a Decision [5] dated June 5, 2003 declared petitioner and his co-complainants as having been illegally dismissed and ordered respondents to reinstate complainants to their former positions without loss of seniority rights and other privileges and to pay their full backwages from the time of their dismissal until actually reinstated and furthermore, to pay them attorneys fees. The Labor Arbiter found no convincing proof of the causes for which petitioner was terminated and noted that there was complete absence of due process in the manner of his termination. Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised therein as one of the issues the lack of jurisdiction of the Labor Arbiter over petitioners complaint. Respondents claimed that petitioner is both a stockholder and a corporate officer of respondent corporation, hence, his action against respondents is an intracorporate controversy over which the Labor Arbiter has no jurisdiction. The NLRC found such contention of respondents to be meritorious. Aside from petitioners own admission in the pleadings that he is a stockholder and at the same time occupying a managerial position, the NLRC also gave weight to the corporations General Information Sheet[6] (GIS) dated October 27, 1999 listing petitioner as one of its stockholders, consequently his termination had to be effected through a board resolution. These, the NLRC opined, clearly established petitioners status as a stockholder and as a corporate officer and hence, his action against respondent corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. As to the other complainants, the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed decision of the Labor Arbiter in a Decision [7] dated February 13, 2004, the dispositive portion of which reads: WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003 is hereby MODIFIED. Accordingly, judgment is hereby rendered DISMISSING the complaint of Renato Real for lack of jurisdiction. As to the rest of the complainants, they are hereby ordered to immediately report back to work but without the payment of backwages. All other claims against respondents including attorneys fees are DISMISSED for lack of merit.

SO ORDERED. Still joined by his co-complainants, petitioner brought the case to the CA by way of petition for certiorari. Ruling of the Court of Appeals Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to lack or excess of jurisdiction in declaring him a corporate officer and in holding that his action against respondents is an intra-corporate controversy and thus beyond the jurisdiction of the Labor Arbiter. While admitting that he is indeed a stockholder of respondent corporation, petitioner nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He posited that his being a stockholder and his being a managerial employee do not ipso facto confer upon him the status of a corporate officer. To support this contention, petitioner called the CAs attention to the same GIS relied upon by the NLRC when it declared him to be a corporate officer. He pointed out that although said information sheet clearly indicates that he is a stockholder of respondent corporation, he is not an officer thereof as shown by the entry N/A or not applicable opposite his name in the officer column. Said column requires that the particular position be indicated if the person is an officer and if not, the entry N/A. Petitioner further argued that the fact that his dismissal was effected through a board resolution does not likewise mean that he is a corporate officer. Otherwise, all that an employer has to do in order to avoid compliance with the requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee through a board resolution. Moreover, he insisted that his action for illegal dismissal is not an intra-corporate controversy as same stemmed from employee-employer relationship which is well within the jurisdiction of the Labor Arbiter. This can be deduced and is bolstered by the last paragraph of the termination letter sent to him by respondents stating that he is entitled to benefits under the Labor Code, to wit: In this connection (his dismissal) you are entitled to separation pay and other benefits provided for under the Labor Code of the Philippines.[8] In contrast, respondents stood firm that the action against them is an intra-corporate controversy. It cited Tabang v. National Labor Relations Commission[9] wherein this Court declared that an intra-corporate controversy is one which arises between a stockholder and the corporation; that [t]here is no distinction, qualification, nor any exemption whatsoever; and that it is broad and covers all kinds of controversies between stockholders and corporations. In view of this ruling and since petitioner is undisputedly a stockholder of the corporation, respondents contended that the action instituted by petitioner against them is an intra-corporate controversy cognizable only by the appropriate regional trial court. Hence, the NLRC correctly dismissed petitioners complaint for lack of jurisdiction. In the assailed Decision[10] dated June 28, 2005, the CA sided with respondents and affirmed the NLRCs finding that aside from being a stockholder of respondent corporation, petitioner is also a corporate officer thereof and consequently, his complaint is an intra-corporate controversy over which the labor arbiter has no jurisdiction. Said court opined that if it was true that petitioner is a mere employee, the respondent corporation would not have called a board meeting to pass a resolution for petitioners dismissal considering that it was very tedious for the Board of Directors to convene and to adopt a resolution every time they decide to dismiss their managerial employees. To support its finding, the CA likewise cited Tabang. As to petitioners co-complainants, the CA likewise affirmed the NLRCS finding that they were never dismissed from the service. The dispositive portion of the CA Decision reads: WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision and resolution of the public respondent National Labor Relations Commission in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-056618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01-B/10-6833-01-B, STANDS. SO ORDERED. Now alone but still undeterred, petitioner elevated the case to us through this Petition for Review on Certiorari. The Parties Arguments Petitioner continues to insist that he is not a corporate officer. He argues that a corporate officer is one who holds an elective position as provided in the Articles of Incorporation or one who is appointed to such other positions by the Board of Directors as specifically authorized by its By-Laws. And, since he was neither elected nor is there any showing that he was appointed by the Board of Directors to his position as Manager, petitioner maintains that he is not a corporate officer contrary to the findings of the NLRC and the CA.

Petitioner likewise contends that his complaint for illegal dismissal against respondents is not an intra-corporate controversy. He avers that for an action or suit between a stockholder and a corporation to be considered an intra-corporate controversy, same must arise from intra-corporate relations, i.e., an action involving the status of a stockholder as such. He believes that his action against the respondents does not arise from intra-corporate relations but rather from employer-employee relations. This, according to him, was even impliedly recognized by respondents as shown by the earlier quoted portion of the termination letter they sent to him. For their part, respondents posit that what petitioner is essentially assailing before this Court is the finding of the NLRC and the CA that he is a corporate officer of respondent corporation. To the respondents, the question of whether petitioner is a corporate officer is a question of fact which, as held in a long line of jurisprudence, cannot be the subject of review under this Petition for Review on Certiorari. At any rate, respondents insist that petitioner who is undisputedly a stockholder of respondent corporation is likewise a corporate officer and that his action against them is an intra-corporate dispute beyond the jurisdiction of the labor tribunals. To support this, they cited several jurisprudence such as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission, [11] Philippine School of Business Administration v. Leano,[12] Fortune Cement Corporation v. National Labor Relations Commission[13] and again, Tabang v. National Labor Relations Commission.[14] Moreover, in an attempt to demolish petitioners claim that the present controversy concerns employer-employee relations, respondents enumerated the following facts and circumstances: (1) Petitioner was an incorporator, stockholder and manager of respondent company; (2) As an incorporator, he was one of only seven incorporators of respondent corporation and one of only four Filipino members of the Board of Directors; (3) As stockholder, he has One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) common shares held by Filipino stockholders, with a par-value of One Hundred Thousand Pesos (P100,000.00); (4) His appointment as manager was by virtue of Section 1, Article IV of respondent corporations By-Laws; (5) As manager, he had direct management and authority over all of respondent corporations skilled employees; (6) Petitioner has shown himself to be an incompetent manager, unable to properly supervise the employees and even causing friction with the corporations clients by engaging in unruly behavior while in clients premises; (7) As if his incompetence was not enough, in a blatant and palpable act of disloyalty, he established another company engaged in the same line of business as respondent corporation; (8) Because of these acts of incompetence and disloyalty, respondent corporation through a Resolution adopted by its Board of Directors was finally constrained to remove petitioner as Manager and declare his office vacant; (9) After his removal, petitioner urged the employees under him to stage an unlawful strike by leading them to believe that they have been illegally dismissed from employment. [15] Apparently, respondents intended to show from this enumeration that petitioners removal pertains to his relationship with respondent corporation, that is, his utter failure to advance its interest and the prejudice caused by his acts of disloyalty. For this reason, respondents see the action against them not as a case between an employer and an employee as what petitioner alleges, but one by an officer and at same time a major stockholder seeking to be reinstated to his former office against the corporation that declared his position vacant. Finally, respondents state that the fact that petitioner is being given benefits under the Labor Code as stated in his termination letter does not mean that they are recognizing the employer-employee relations between them. They explain that the benefits provided under the Labor Code were merely made by respondent corporation as the basis in determining petitioners compensation package and that same are merely part of the perquisites of petitioners office as a director and manager. It does not and it cannot change the intra-corporate nature of the controversy. Hence, respondents pray that this petition be dismissed for lack of merit. Issues From the foregoing and as earlier mentioned, the core issue to be resolved in this case is whether petitioners complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the Labor Arbiter. Our Ruling Two-tier test in determining the existence of intra-corporate controversy Respondents strongly rely on this Courts pronouncement in the 1997 case of Tabang v. National Labor Relations Commission, to wit: [A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification nor any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.[16]

In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of respondent corporation. It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla[17] a better policy in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,[18] or similarly, whether they are intra-corporate or not, viz: The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court[19]). The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court [20]) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours) And, while Tabang was promulgated later than Mainland Construction Co., Inc., the better policy enunciated in the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142,[21] to wit: Intra-Corporate Controversy A review of relevant jurisprudence shows a development in the Courts approach in classifying what constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows: a) b) between the corporation, partnership or association and the public; between the corporation, partnership or association and its stockholders, partners, members or officers; c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, partners or associates themselves. The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test. However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute. Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists. The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals: To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. [Citations omitted.] Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies. What then is the nature of petitioners Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case. No intra-corporate relationship between the parties As earlier stated, petitioners status as a stockholder and director of respondent corporation is not disputed. What the parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioners dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation so as to establish the intra-corporate relationship between the parties. And albeit respondents claim that the determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon in this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is not the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned. Petitioner negates his status as a corporate officer by pointing out that although he was removed as Manager through a board resolution, he was never elected to said position nor was he appointed thereto by the Board of Directors. While the By-Laws of respondent corporation provides that the Board may from time to time appoint such officers as it may deem necessary or proper, he avers that respondents failed to present any board resolution that he was appointed pursuant to said By-Laws. He instead alleges that he was hired as Manager of respondent corporation solely by respondent Abe. For these reasons, petitioner claims to be a mere employee of respondent corporation rather than as a corporate officer. We find merit in petitioners contention. Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporations by-laws. There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vicepresident, cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the corporations bylaws.[22] Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of respondent corporations ByLaws which provides: ARTICLE IV OFFICER Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize by electing the President, Vice-President, the Secretary at said meeting. The Board, may from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary at the same time. We have however examined the records of this case and we find nothing to prove that petitioners appointment was made pursuant to the above-quoted provision of respondent corporations By-Laws. No copy of board resolution appointing petitioner as Manager or any other document showing that he was appointed to said position by action of the board was submitted by

respondents. What we found instead were mere allegations of respondents in their various pleadings [24] that petitioner was appointed as Manager of respondent corporation and nothing more. The Court has stressed time and again that allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.[25] It also does not escape our attention that respondents made the following conflicting allegations in their Memorandum on Appeal[26] filed before the NLRC which cast doubt on petitioners status as a corporate officer, to wit: 24. Complainant-appellee Renato Real was appointed as the manager of respondent-appellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi, Ibaraki-ken Japan. He was staying in Japan as an illegal alien for the past eleven (11) years. He had a problem with his family here in the Philippines which prompted him to surrender himself to Japans Bureau of Immigration and was deported back to the Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one of respondentappellant Sangus Board of Directors, if complainant-appellee Renato Real could work as one of its employees here in the Philippines because he had been blacklisted at Japans Immigration Office and could no longer go back to Japan. And so it was arranged that he would serve as respondent-appellant Sangus manager, receiving a salary of P25,000.00. As such, he was tasked to oversee the operations of the company. x x x (Emphasis ours) As earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As such, his position was reposed with full trust and confidence. While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporations By-Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that [a]n office is created by the charter of the corporation and the officer is elected (or appointed) by the directors or stockholders. [27] Clearly here, respondents failed to prove that petitioner was appointed by the board of directors. Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is no intra-corporate relationship between the parties insofar as petitioners complaint for illegal dismissal is concerned and that same does not satisfy the relationship test. Present controversy does not relate to intra-corporate dispute We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents loss of trust and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, moral damages and attorneys fees. From these, it is not difficult to see that the reasons given by respondents for dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his being a director or stockholder. For one, petitioners continuous absences in his post in Ogino relates to his performance as Manager. Second, respondents loss of trust and confidence in petitioner stemmed from his alleged acts of establishing a company engaged in the same line of business as respondent corporations and submitting proposals to the latters clients while he was still serving as its Manager. While we note that respondents also claim these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is a mere afterthought on their part to make it appear that the present case involves an element of intracorporate controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager. [28] It was only after respondents invoked the Labor Arbiters lack of jurisdiction over petitioners complaint in the Supplemental Memorandum of Appeal[29] filed before the NLRC that respondents started considering said acts as such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of termination of employment which is a labor controversy and not an intracorporate dispute. In sum, we hold that petitioners complaint likewise does not satisfy the nature of controversy test. h With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioners complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to Section 217[30] of the Labor Code. We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement Corporation v. National Labor Relations Commission[31] involves a member of the board of directors and at the same time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of Executive Vice-President because of loss of trust

and confidence. On the other hand, Philippine School of Business Administration v. Leano[32] and Pearson & George v. National Labor Relations Commission[33] both concern a complaint for illegal dismissal by corporate officers who were not re-elected to their respective corporate positions. The Court declared all these cases as involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now the RTC)[34] over them precisely because they all relate to corporate officers and their removal or nonreelection to their respective corporate positions. Said cases are by no means similar to the present case because as discussed earlier, petitioner here is not a corporate officer. With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed petitioners complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case to the NLRC and directs it to properly dispose of the case on the merits. However, when there is enough basis on which a proper evaluation of the merits of petitioners case may be had, the Court may dispense with the time-consuming procedure of remand in order to prevent further delays in the disposition of the case.[35] It is already an accepted rule of procedure for us to strive to settle the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the ends of justice instead of remanding the case to the lower court for further proceedings.[36] We have gone over the records before us and we are convinced that we can now altogether resolve the issue of the validity of petitioners dismissal and hence, we shall proceed to do so. Petitioners dismissal not in accordance with law In an illegal dismissal case, the onus probandi rests on the employer to prove that [the] dismissal of an employee is for a valid cause.[37] Here, as correctly observed by the Labor Arbiter, respondents failed to produce any convincing proof to support the grounds for which they terminated petitioner. Respondents contend that petitioner has been absent for several months, yet they failed to present any proof that petitioner was indeed absent for such a long time. Also, the fact that petitioner was still able to collect his salaries after his alleged absences casts doubts on the truthfulness of such charge. Respondents likewise allege that petitioner engaged in a heated argument with the employees of Epson, one of respondents clients. But just like in the charge of absenteeism, there is no showing that an investigation on the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we have reviewed the records of this case and we agree with the Labor Arbiter that under the circumstances, said charges are not sufficient bases for petitioners termination. As to the charge of breach of trust allegedly committed by petitioner when he established a new company engaged in the same line of business as respondent corporations and submitted proposals to two of the latters clients while he was still a Manager, we again observe that these are mere allegations without sufficient proof. To reiterate, allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.[38] Moreover, petitioners dismissal was effected without due process of law. The twin requirements of notice and hearing constitute the essential elements of due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employers decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality. [39] Since in this case, petitioners dismissal was effected through a board resolution and all that petitioner received was a letter informing him of the boards decision to terminate him, the abovementioned procedure was clearly not complied with. All told, we agree with the findings of the Labor Arbiter that petitioner has been illegally dismissed. And, as an illegally dismissed employee is entitled to the two reliefs of backwages and reinstatement,[40] we affirm the Labor Arbiters judgment ordering petitioners reinstatement to his former position without loss of seniority rights and other privileges and awarding backwages from the time of his dismissal until actually reinstated. Considering that petitioner has to secure the services of counsel to protect his interest and necessarily has to incur expenses, we likewise affirm the award of attorneys fees which is equivalent to 10% of the total backwages that respondents must pay petitioner in accordance with this Decision. WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the Court of Appeals insofar as it affirmed the National Labor Relations Commissions dismissal of petitioners complaint for lack of jurisdiction, is hereby REVERSED and SET ASIDE. The June 5, 2003 Decision of the Labor Arbiter with respect to petitioner Renato Real is AFFIRMED and this case is ordered REMANDED to the National Labor Relations Commission for the computation of petitioners backwages and attorneys fees in accordance with this Decision. SO ORDERED.

PROFESSIONAL SERVICES INC. vs. COURT OF APPEALS With prior leave of court,[1] petitioner Professional Services, Inc. (PSI) filed a second motion for reconsideration[2] urging referral thereof to the Court en banc and seeking modification of the decision dated January 31, 2007 and resolution dated February 11, 2008 which affirmed its vicarious and direct liability for damages to respondents Enrique Agana and the heirs of Natividad Agana (Aganas). Manila Medical Services, Inc. (MMSI),[3] Asian Hospital, Inc. (AHI),[4] and Private Hospital Association of the Philippines (PHAP)[5] all sought to intervene in these cases invoking the common ground that, unless modified, the assailed decision and resolution will jeopardize the financial viability of private hospitals and jack up the cost of health care.

The Special First Division of the Court granted the motions for intervention of MMSI, AHI and PHAP (hereafter intervenors),[6] and referred en consulta to the Court en banc the motion for prior leave of court and the second motion for reconsideration of PSI.[7] Due to paramount public interest, the Court en banc accepted the referral[8] and heard the parties on oral arguments on one particular issue: whether a hospital may be held liable for the negligence of physicians-consultants allowed to practice in its premises.[9] To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique Agana and Natividad Agana (later substituted by her heirs), in a complaint[10] for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96, for the injuries suffered by Natividad when Dr. Ampil and Dr. Fuentes neglected to remove from her body two gauzes [11] which were used in the surgery they performed on her on April 11, 1984 at the Medical City General Hospital. PSI was impleaded as owner, operator and manager of the hospital. In a decision[12] dated March 17, 1993, the RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for damages.[13] On appeal, the Court of Appeals (CA), absolved Dr. Fuentes but affirmed the liability of Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement from Dr. Ampil. [14] On petition for review, this Court, in its January 31, 2007 decision, affirmed the CA decision.[15] PSI filed a motion for reconsideration[16] but the Court denied it in a resolution dated February 11, 2008.[17] The Court premised the direct liability of PSI to the Aganas on the following facts and law: First, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated in the December 29, 1999 decision in Ramos v. Court of Appeals[18] that for purposes of allocating responsibility in medical negligence cases, an employer-employee relationship exists between hospitals and their consultants.[19] Although the Court in Ramos later issued a Resolution dated April 11, 2002 [20] reversing its earlier finding on the existence of an employment relationship between hospital and doctor, a similar reversal was not warranted in the present case because the defense raised by PSI consisted of a mere general denial of control or responsibility over the actions of Dr. Ampil.[21] Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public impression that he was its agent.[22] Enrique testified that it was on account of Dr. Ampil's accreditation with PSI that he conferred with said doctor about his wife's (Natividad's) condition. [23] After his meeting with Dr. Ampil, Enrique asked Natividad to personally consult Dr. Ampil.[24] In effect, when Enrique and Natividad engaged the services of Dr. Ampil, at the back of their minds was that the latter was a staff member of a prestigious hospital. Thus, under the doctrine of apparent authority applied in Nogales, et al. v. Capitol Medical Center, et al.,[25] PSI was liable for the negligence of Dr. Ampil. Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to provide comprehensive medical services to Natividad Agana, to exercise reasonable care to protect her from harm, [26] to oversee or supervise all persons who practiced medicine within its walls, and to take active steps in fixing any form of negligence committed within its premises. [27] PSI committed a serious breach of its corporate duty when it failed to conduct an immediate investigation into the reported missing gauzes. [28] PSI is now asking this Court to reconsider the foregoing rulings for these reasons: I The declaration in the 31 January 2007 Decision vis-a-vis the 11 February 2009 Resolution that the ruling in Ramos vs. Court of Appeals (G.R. No. 134354, December 29, 1999) that an employer-employee relations exists between hospital and their consultants stays should be set aside for being inconsistent with or contrary to the import of the resolution granting the hospital's motion for reconsideration in Ramos vs. Court of Appeals (G.R. No. 134354, April 11, 2002), which is applicable to PSI since the Aganas failed to prove an employer-employee relationship between PSI and Dr. Ampil and PSI proved that it has no control over Dr. Ampil. In fact, the trial court has found that there is no employer-employee relationship in this case and that the doctor's are independent contractors. II

Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did not primarily and specifically look to the Medical City Hospital (PSI) for medical care and support; otherwise stated, respondents Aganas did not select Medical City Hospital (PSI) to provide medical care because of any apparent authority of Dr. Miguel Ampil as its agent since the latter was chosen primarily and specifically based on his qualifications and being friend and neighbor. III PSI cannot be liable under doctrine of corporate negligence since the proximate cause of Mrs. Agana's injury was the negligence of Dr. Ampil, which is an element of the principle of corporate negligence.[29] In their respective memoranda, intervenors raise parallel arguments that the Court's ruling on the existence of an employer-employee relationship between private hospitals and consultants will force a drastic and complex alteration in the long-established and currently prevailing relationships among patient, physician and hospital, with burdensome operational and financial consequences and adverse effects on all three parties.
[30]

The Aganas comment that the arguments of PSI need no longer be entertained for they have all been traversed in the assailed decision and resolution.[31] After gathering its thoughts on the issues, this Court holds that PSI is liable to the Aganas, not under the principle of respondeat superior for lack of evidence of an employment relationship with Dr. Ampil but under the principle of ostensible agency for the negligence of Dr. Ampil and, pro hac vice, under the principle of corporate negligence for its failure to perform its duties as a hospital. While in theory a hospital as a juridical entity cannot practice medicine, [32] in reality it utilizes doctors, surgeons and medical practitioners in the conduct of its business of facilitating medical and surgical treatment. [33] Within that reality, three legal relationships crisscross: (1) between the hospital and the doctor practicing within its premises; (2) between the hospital and the patient being treated or examined within its premises and (3) between the patient and the doctor. The exact nature of each relationship determines the basis and extent of the liability of the hospital for the negligence of the doctor. Where an employment relationship exists, the hospital may be held vicariously liable under Article 2176 in relation to Article 2180 of the Civil Code or the principle of respondeat superior. Even when no employment relationship exists but it is shown that the hospital holds out to the patient that the doctor is its agent, the hospital may still be vicariously liable under Article 2176 in relation to Article 1431 [36] and Article 1869[37] of the Civil Code or the principle of apparent authority.[38] Moreover, regardless of its relationship with the doctor, the hospital may be held directly liable to the patient for its own negligence or failure to follow established standard of conduct to which it should conform as a corporation.[39] This Court still employs the control test to determine the existence of an employer-employee relationship between hospital and doctor. In Calamba Medical Center, Inc. v. National Labor Relations Commission, et al. [40] it held: Under the "control test", an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task. As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of administrative sanctions. That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating room, or any department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no operations can be undertaken in those areas. For control test to apply, it is not essential for the employer to actually supervise the performance of duties of the employee, it being enough that it has the right to wield the power. Even in its December 29, 1999 decision[41] and April 11, 2002 resolution[42] in Ramos, the Court found the control test decisive.

In the present case, it appears to have escaped the Court's attention that both the RTC and the CA found no employment relationship between PSI and Dr. Ampil, and that the Aganas did not question such finding. In its March 17, 1993 decision, the RTC found that defendant doctors were not employees of PSI in its hospital, they being merely consultants without any employer-employee relationship and in the capacity of independent contractors. [43] The Aganas never questioned such finding. PSI, Dr. Ampil and Dr. Fuentes appealed [44] from the RTC decision but only on the issues of negligence, agency and corporate liability. In its September 6, 1996 decision, the CA mistakenly referred to PSI and Dr. Ampil as employeremployee, but it was clear in its discussion on the matter that it viewed their relationship as one of mere apparent agency.
[45]

The Aganas appealed from the CA decision, but only to question the exoneration of Dr. Fuentes. [46] PSI also appealed from the CA decision, and it was then that the issue of employment, though long settled, was unwittingly resurrected. In fine, as there was no dispute over the RTC finding that PSI and Dr. Ampil had no employer-employee relationship, such finding became final and conclusive even to this Court. [47]There was no reason for PSI to have raised it as an issue in its petition. Thus, whatever discussion on the matter that may have ensued was purely academic. Nonetheless, to allay the anxiety of the intervenors, the Court holds that, in this particular instance, the concurrent finding of the RTC and the CA that PSI was not the employer of Dr. Ampil is correct. Control as a determinative factor in testing the employer-employee relationship between doctor and hospital under which the hospital could be held vicariously liable to a patient in medical negligence cases is a requisite fact to be established by preponderance of evidence. Here, there was insufficient evidence that PSI exercised the power of control or wielded such power over the means and the details of the specific process by which Dr. Ampil applied his skills in the treatment of Natividad. Consequently, PSI cannot be held vicariously liable for the negligence of Dr. Ampil under the principle of respondeat superior. There is, however, ample evidence that the hospital (PSI) held out to the patient (Natividad) [48] that the doctor (Dr. Ampil) was its agent. Present are the two factors that determine apparent authority: first, the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent; and second, the patients reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.[49] Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding the condition of his wife; that after the meeting and as advised by Dr. Ampil, he asked [his] wife to go to Medical City to be examined by [Dr. Ampil]; and that the next day, April 3, he told his daughter to take her mother to Dr. Ampil.[50] This timeline indicates that it was Enrique who actually made the decision on whom Natividad should consult and where, and that the latter merely acceded to it. It explains the testimony of Natividad that she consulted Dr. Ampil at the instigation of her daughter. [51] Moreover, when asked what impelled him to choose Dr. Ampil, Enrique testified: Atty. Agcaoili: On that particular occasion, April 2, 1984, what was your reason for choosing Dr. Ampil to contact with in connection with your wife's illness? A. First, before that, I have known him to be a specialist on that part of the body as a surgeon, second, I have known him to be a staff member of the Medical City which is a prominent and known hospital. And third, because he is a neighbor, I expect more than the usual medical service to be given to us, than his ordinary patients.[52] Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced by the impression that Dr. Ampil was a staff member of Medical City GeneralHospital, and that said hospital was well known and prominent. Enrique looked upon Dr. Ampil not as independent of but as integrally related to Medical City. PSI's acts tended to confirm and reinforce, rather than negate, Enrique's view. It is of record that PSI required a consent for hospital care[53] to be signed preparatory to the surgery of Natividad. The form reads: Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General Hospital to perform such diagnostic procedures and to administer such

medications and treatments as may be deemed necessary or advisable by the physicians of this hospital for and during the confinement of xxx. (emphasis supplied) By such statement, PSI virtually reinforced the public impression that Dr. Ampil was a physician of its hospital, rather than one independently practicing in it ; that the medications and treatments he prescribed were necessary and desirable; and that the hospital staff was prepared to carry them out. PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation was not the exclusive basis of the Aganas decision to have Natividad treated in Medical City General Hospital, meaning that, had Dr. Ampil been affiliated with another hospital, he would still have been chosen by the Aganas as Natividad's surgeon.[54] The Court cannot speculate on what could have been behind the Aganas decision but would rather adhere strictly to the fact that, under the circumstances at that time, Enrique decided to consult Dr. Ampil for he believed him to be a staff member of a prominent and known hospital. After his meeting with Dr. Ampil, Enrique advised his wife Natividad to go to theMedical City General Hospital to be examined by said doctor, and the hospital acted in a way that fortified Enrique's belief. This Court must therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr. Ampil as its ostensible agent. Moving on to the next issue, the Court notes that PSI made the following admission in its Motion for Reconsideration: 51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic] is not liable for Dr. Ampil's acts during the operation. Considering further that Dr. Ampil was personally engaged as a doctor by Mrs. Agana, it is incumbent upon Dr. Ampil, as Captain of the Ship, and as the Agana's doctor to advise her on what to do with her situation vis-a-vis the two missing gauzes. In addition to noting the missing gauzes, regular check-ups were made and no signs of complications were exhibited during her stay at the hospital, which could have alerted petitioner PSI's hospital to render and provide post-operation services to and tread on Dr. Ampil's role as the doctor of Mrs. Agana. The absence of negligence of PSI from the patient's admission up to her discharge is borne by the finding of facts in this case. Likewise evident therefrom is the absence of any complaint from Mrs. Agana after her discharge from the hospital which had she brought to the hospital's attention, could have alerted petitioner PSI to act accordingly and bring the matter to Dr. Ampil's attention. But this was not the case. Ms. Agana complained ONLY to Drs. Ampil and Fuentes, not the hospital. How then could PSI possibly do something to fix the negligence committed by Dr. Ampil when it was not informed about it at all .
[55]

PSI reiterated its admission when it stated that had Natividad Agana informed the hospital of her discomfort and pain, the hospital would have been obliged to act on it.[56] The significance of the foregoing statements is critical. First, they constitute judicial admission by PSI that while it had no power to control the means or method by which Dr. Ampil conducted the surgery on Natividad Agana, it had the power to review or cause the review of what may have irregularly transpired within its walls strictly for the purpose of determining whether some form of negligence may have attended any procedure done inside its premises, with the ultimate end of protecting its patients. Second, it is a judicial admission that, by virtue of the nature of its business as well as its prominence[57] in the hospital industry, it assumed a duty to tread on the captain of the ship role of any doctor rendering services within its premises for the purpose of ensuring the safety of the patients availing themselves of its services and facilities. Third, by such admission, PSI defined the standards of its corporate conduct under the circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even after her operation to ensure her safety as a patient; (b) that its corporate duty was not limited to having its nursing staff note or record the two missing gauzes and (c) that its corporate duty extended to determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his negligence. And finally, by such admission, PSI barred itself from arguing in its second motion for reconsideration that the concept of corporate responsibility was not yet in existence at the time Natividad underwent treatment;

[58]

and that if it had any corporate responsibility, the same was limited to reporting the missing gauzes and did not include taking an active step in fixing the negligence committed. [59] An admission made in the pleading cannot be controverted by the party making such admission and is conclusive as to him, and all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether or not objection is interposed by a party. [60] Given the standard of conduct that PSI defined for itself, the next relevant inquiry is whether the hospital measured up to it. PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the personal responsibility of informing Natividad about the two missing gauzes .[61] Dr. Ricardo Jocson, who was part of the group of doctors that attended to Natividad, testified that toward the end of the surgery, their group talked about the missing gauzes but Dr. Ampil assured them that he would personally notify the patient about it. [62] Furthermore, PSI claimed that there was no reason for it to act on the report on the two missing gauzes because Natividad Agana showed no signs of complications. She did not even inform the hospital about her discomfort. [63] The excuses proffered by PSI are totally unacceptable. To begin with, PSI could not simply wave off the problem and nonchalantly delegate to Dr. Ampil the duty to review what transpired during the operation. The purpose of such review would have been to pinpoint when, how and by whom two surgical gauzes were mislaid so that necessary remedial measures could be taken to avert any jeopardy to Natividads recovery. Certainly, PSI could not have expected that purpose to be achieved by merely hoping that the person likely to have mislaid the gauzes might be able to retrace his own steps. By its own standard of corporate conduct, PSI's duty to initiate the review was non-delegable. While Dr. Ampil may have had the primary responsibility of notifying Natividad about the missing gauzes, PSI imposed upon itself the separate and independent responsibility of initiating the inquiry into the missing gauzes. The purpose of the first would have been to apprise Natividad of what transpired during her surgery, while the purpose of the second would have been to pinpoint any lapse in procedure that led to the gauze count discrepancy, so as to prevent a recurrence thereof and to determine corrective measures that would ensure the safety of Natividad. That Dr. Ampil negligently failed to notify Natividad did not release PSI from its self-imposed separate responsibility. Corollary to its non-delegable undertaking to review potential incidents of negligence committed within its premises, PSI had the duty to take notice of medical records prepared by its own staff and submitted to its custody, especially when these bear earmarks of a surgery gone awry. Thus, the record taken during the operation of Natividad which reported a gauze count discrepancy should have given PSI sufficient reason to initiate a review. It should not have waited for Natividad to complain. As it happened, PSI took no heed of the record of operation and consequently did not initiate a review of what transpired during Natividads operation. Rather, it shirked its responsibility and passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to Natividad herself to complain before it took any meaningful step. By its inaction, therefore, PSI failed its own standard of hospital care. It committed corporate negligence. It should be borne in mind that the corporate negligence ascribed to PSI is different from the medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of the doctor-consultant practicing within its premises in relation to the patient; hence, the failure of PSI to fulfill its duties as a hospital corporation gave rise to a direct liability to the Aganas distinct from that of Dr. Ampil. All this notwithstanding, we make it clear that PSIs hospital liability based on ostensible agency and corporate negligence applies only to this case, pro hac vice. It is not intended to set a precedent and should not serve as a basis to hold hospitals liable for every form of negligence of their doctors-consultants under any and all circumstances. The ruling is unique to this case, for the liability of PSI arose from an implied agency with Dr. Ampil and an admitted corporate duty to Natividad.[64] Other circumstances peculiar to this case warrant this ruling, [65] not the least of which being that the agony wrought upon the Aganas has gone on for 26 long years, with Natividad coming to the end of her days racked in pain and agony. Such wretchedness could have been avoided had PSI simply done what was logical: heed the report of a guaze count discrepancy, initiate a review of what went wrong and take corrective measures to ensure the safety of Nativad. Rather, for 26 years, PSI hemmed and hawed at every turn, disowning any such responsibility to its patient. Meanwhile, the options left to the Aganas have all but dwindled, for the status of Dr. Ampil can no longer be ascertained.[66]

Therefore, taking all the equities of this case into consideration, this Court believes P15 million would be a fair and reasonable liability of PSI, subject to 12% p.a. interest from the finality of this resolution to full satisfaction. WHEREFORE, the second motion for reconsideration is DENIED and the motions for intervention are NOTED. Professional Services, Inc. is ORDERED pro hac vice to pay Natividad (substituted by her children Marcelino Agana III, Enrique Agana, Jr., Emma Agana-Andaya, Jesus Agana and Raymund Agana) and Enrique Agana the total amount of P15 million, subject to 12% p.a. interest from the finality of this resolution to full satisfaction. No further pleadings by any party shall be entertained in this case. Let the long-delayed entry of judgment be made in this case upon receipt by all concerned parties of this resolution. SO ORDERED.

PEOPLES BROADCASTING vs. SECRETARY OF DOLE The present controversy concerns a matter of first impression, requiring as it does the determination of the demarcation line between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his duly authorized representatives, on the one hand, and the jurisdiction of the National Labor Relations Commission, on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed between the parties. I. The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855. [1]

The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City.[2] On the basis of the complaint, the DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report Form,[3] the Labor Inspector wrote under the heading Findings/Recommendations non-diminution of benefits and Note: Respondent deny employer-employee relationship with the complainant- see Notice of Inspection results. In the Notice of Inspection Results[4] also bearing the date 23 September 2003, the Labor Inspector made the following notations: Management representative informed that complainant is a drama talent hired on a per drama participation basis hence no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies of cash vouchers, billing statement, employments of specific undertaking (a contract between the talent director & the complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures into another contract w/ other broadcasting industries. On the other hand, complainant Juezans alleged violation of non-diminution of benefits is computed as follows: @ P 2,000/15 days + 1.5 mos = P 6,000 (August 1/03 to Sept 15/03) Note: Recommend for summary investigation or whatever action deem proper. [5] Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected by petitioner; thus, summary investigations were conducted, with the parties eventually ordered to submit their respective position papers.[6] In his Order dated 27 February 2004,[7] DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money claims amounting to P203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to the documents offered by respondent without examining the originals, but at the same time he missed or failed to consider petitioners evidence. Petitioners motion for reconsideration was denied. [8] On appeal to the DOLE Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank Deposit.[9] Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor arbiter because respondents claim exceeded P5,000.00. The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic Act No. 7730.[10] Petitioner sought reconsideration of the decision but its motion was denied. [11] Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE Secretary, has jurisdiction over respondents claim, in view of Articles 217 and 128 of the Labor Code. [12] It adds that the Court of Appeals committed grave abuse of discretion when it dismissed petitioners appeal without delving on the issues raised therein, particularly the claim that no employer-employee relationship had ever existed between petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law available to it. On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act No. 7730, which removes the jurisdiction of the Secretary of Labor and Employment or his duly authorized

representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor Code, regarding the confinement of jurisdiction based on the amount of claims. [13] Respondent also claims that petitioner was not denied due process since even when the case was with the Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by the propriety of the Court of Appeals ruling that there exists an employer-employee relationship between him and petitioner. Finally, respondent argues that the instant petition for certiorari is a wrong mode of appeal considering that petitioner had earlier filed a Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals; petitioner, instead, should have filed a Petition for Review.[14] II. The significance of this case may be reduced to one simple questiondoes the Secretary of Labor have the power to determine the existence of an employer-employee relationship? To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It 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. (emphasis supplied) The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only in cases when the relationship of employer-employee still exists. It also underscores the avowed objective underlying the grant of power to the DOLE which is to give effect to the labor standard provision of this Code and other labor legislation. Of course, a persons entitlement to labor standard benefits under the labor laws presupposes the existence of employeremployee relationship in the first place. The clause in cases where the relationship of employer-employee still exists signifies that the employeremployee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLEs power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed. The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases[15] issued by the DOLE Secretary. It reads: Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee relationship actually exists. Where employeremployee relationship no longer exists by reason of the fact that it has already been severed, claims for payment of monetary benefits fall within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be ascertained that employer-employee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC). In the recent case of Bay Haven, Inc. v. Abuan,[16] this Court recognized the first situation and accordingly ruled that a complainants allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor Code.[17] In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view of the termination of the employer-employee relationship. The same procedure has to be followed in the second situation since it is the NLRC that has jurisdiction in view of the absence of employer-employee relationship between the evidentiary parties from the start.

Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and implications of an employer-employee relationship demand that the level of scrutiny should be far above the cursory and the mechanical. While documents, particularly documents found in the employers office are the primary source materials, what may prove decisive are factors related to the history of the employers business operations, its current state as well as accepted contemporary practices in the industry. More often than not, the question of employer-employee relationship becomes a battle of evidence, the determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body that is the NLRC. It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely preliminary, incidental and collateral to the DOLEs primary function of enforcing labor standards provisions. The determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause in cases where the relationship of employer-employee still exists in Art. 128 (b). Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1) Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law? The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire. The approach suggested by the dissent is frowned upon by common law. To wit: [I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior court. [18] A more liberal interpretative mode, pragmatic or functional analysis, has also emerged in ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls within or outside that function, rather than making the provision itself the determining centerpiece of the analysis. [19] Yet even under this more expansive approach, the dissent fails. A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was granted visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual existence of an employer-employee relationship affects the complexion of the putative findings that the Secretary of Labor may determine, since employees are entitled to a different set of rights under the Labor Code from the employer as opposed to nonemployees. Among these differentiated rights are those accorded by the labor standards provisions of the Labor Code, which the Secretary of Labor is mandated to enforce. If there is no employer-employee relationship in the first place, the duty of the employer to adhere to those labor standards with respect to the non-employees is questionable. This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of visitorial and enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition of the statutory limitations thereon. A mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The Secretary of Labor would not have been precluded from exercising the powers under Article 128 (b) over petitioner if another person with better-grounded claim of employment than that which respondent had. Respondent, especially if he were an

employee, could have very well enjoined other employees to complain with the DOLE, and, at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its aegis. Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor Inspector during the inspection as well as submitted during the proceedings before the Regional Director puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on the part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims. Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot be relied upon as proof of employer-employee relationship. III. Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Directors 27 February 2004 Order. A careful study of the case reveals that the said Order, which found respondent as an employee of petitioner and directed the payment of respondents money claims, is not supported by substantial evidence, and was even made in disregard of the evidence on record. It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasijudicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be considered in the course of inspection does not apply. It applies only to issues other than the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent of denial of substantive due process. As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasijudicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings should be supported by substantial evidence from which the said tribunals can make its own independent evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the tribunals conclusion.[20] In the same manner, this Court will not hesitate to set aside the labor tribunals findings of fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error of law.[21] At the onset, it is the Courts considered view that the existence of employer- employee relationship could have been easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at the records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had noted petitioners manifestation and documents in the Notice of Inspection Results, it is clear that he did not give much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings evidencing payment to the alleged real employer of respondent, letter-contracts denominated as Employment for a Specific Undertaking, prima facie negate the existence of employer-employee relationship, the labor inspector could have exerted a bit more effort and looked into petitioners payroll, for example, or its roll of employees, or interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given access to employers records and premises at any time of day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations pursuant thereto. [22] Despite these far-reaching powers of labor regulation officers, records reveal that no additional efforts were exerted in the course of the inspection. The Court further examined the records and discovered to its dismay that even the Regional Director turned a blind eye to the evidence presented by petitioner and relied instead on the self-serving claims of respondent. In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate of P60.00 per script, earning an average of P15,0000.00 per month, payable on a semi-monthly basis. He added that the payment of wages was delayed; that he was not given any service incentive leave or its monetary commutation, or his 13 th month pay; and that he was not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the number of radio programs of which respondent was a talent/spinner was reduced, resulting in the reduction of his monthly income from P15,000.00 to only P4,000.00, an amount he could barely live on. Anent the claim of petitioner that no employeremployee relationship ever existed, respondent argued that that he was hired by petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and its agents, and it was petitioner who had the power to dismiss him from his employment.[23] In support of his position paper, respondent attached a photocopy of an identification

card purportedly issued by petitioner, bearing respondents picture and name with the designation Spinner; at the back of the I.D., the following is written: This certifies that the card holder is a duly Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES THE NO.1 Radio Network in the Country ***BASTA RADYO BOMBO***[24] Respondent likewise included a Certification which reads: This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the present. Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (P15,000.00) PESOS. This certification is issued upon the request of the above stated name to substantiate loan requirement. Given this 18th day of April 2000, Cebu City , Philippines. (signed) GREMAN B. SOLANTE Station Manager On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached as annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as letters of employment captioned Employment for a Specific Undertaking, wherein respondent was appointed by different drama directors as spinner/narrator for specific radio programs. [25] In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of employer-employee relationshipa token paragraphand proceeded to a detailed recitation of respondents allegations. The documents introduced by petitioner in its position paper and even those presented during the inspection were not given an iota of credibility. Instead, full recognition and acceptance was accorded to the claims of respondentfrom the hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged evidence. In fact, the findings are anchored almost verbatim on the self-serving allegations of respondent. Furthermore, respondents pieces of evidencethe identification card and the certification issued by petitioners Greman Solante are not even determinative of an employer-employee relationship. The certification, issued upon the request of respondent, specifically stated that MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu), it is not therefore crystal clear that complainant is a station employee rather than a program employee hence entitled to all the benefits appurtenant thereto, [26] as found by the DOLE Regional Director. Respondent should be bound by his own evidence. Moreover, the classification as to whether one is a station employee and program employee, as lifted from Policy Instruction No. 40, [27] dividing the workers in the broadcast industry into only two groups is not binding on this Court, especially when the classification has no basis either in law or in fact.[28] Even the identification card purportedly issued by petitioner is not proof of employer-employee relationship since it only identified respondent as an Authorized Representative of Bombo Radyo, and not as an employee. The phrase gains significance when compared vis a vis the following notation in the sample identification cards presented by petitioner in its motion for reconsideration: 1. 2. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo Radio Philippines. This ID must be worn at all times within Bombo Radyo Philippines premises for proper identification and security. Furthermore, this is the property of Bombo Radyo Philippines and must be surrendered upon separation from the company. HUMAN RESOURCE DEPARMENT (Signed) JENALIN D. PALER HRD HEAD Respondent tried to address the discrepancy between his identification card and the standard identification cards issued by petitioner to its employees by arguing that what he annexed to his position paper

was the old identification card issued to him by petitioner. He then presented a photocopy of another old identification card, this time purportedly issued to one of the employees who was issued the new identification card presented by petitioner.[29] Respondents argument does not convince. If it were true that he is an employee of petitioner, he would have been issued a new identification card similar to the ones presented by petitioner, and he should have presented a copy of such new identification card. His failure to show a new identification card merely demonstrates that what he has is only his Media ID, which does not constitute proof of his employment with petitioner. It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of employer-employee relationship. Substantial evidence, which is the quantum of proof required in labor cases, is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.[30] No particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. [31] Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects.[32] In the instant case, save for respondents self-serving allegations and self-defeating evidence, there is no substantial basis to warrant the Regional Directors finding that respondent is an employee of petitioner. Interestingly, the Order of the Secretary of Labor denying petitioners appeal dated 27 January 2005, as well as the decision of the Court of Appeals dismissing the petition for certiorari, are silent on the issue of the existence of an employer-employee relationship, which further suggests that no real and proper determination the existence of such relationship was ever made by these tribunals. Even the dissent skirted away from the issue of the existence of employer-employee relationship and conveniently ignored the dearth of evidence presented by respondent. Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand that something more should have been proffered. [33] Had there been other proofs of employment, such as respondents inclusion in petitioners payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore, committed grievous error in ordering petitioner to answer for respondents claims. Moreover, with the conclusion that no employer-employee relationship has ever existed between petitioner and respondent, it is crystal-clear that the DOLE Regional Director had no jurisdiction over respondents complaint. Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate all the subsequent orders they issued. IV. The records show that petitioners appeal was denied because it had allegedly failed to post a cash or surety bond. What it attached instead to its appeal was the Letter Agreement[34] executed by petitioner and its bank, the cash voucher,[35] and the Deed of Assignment of Bank Deposits.[36] According to the DOLE, these documents do not constitute the cash or surety bond contemplated by law; thus, it is as if no cash or surety bond was posted when it filed its appeal. The Court does not agree. The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last paragraph of Art. 128 (b) of the Labor Code, which reads: 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 the order appealed from. (emphasis supplied) While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. [37] Thus, in some cases, the bond requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness and/or good faith by posting a partial bond during the reglementary period. [38]

A review of the documents submitted by petitioner is called for to determine whether they should have been admitted as or in lieu of the surety or cash bond to sustain the appeal and serve the ends of substantial justice. The Deed of Assignment reads: DEED OF ASSIGNMENT OF BANK DEPOSIT WITH SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLES BROADCASTING SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending appeal. That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLES BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City. It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the Plaintiff-Appellee/ Department of Labor and Employment Regional Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office. FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit will be for the account holder. IN WITNESS WHEREOF, I have hereunto affixed my signature this 18 th day if June, 2004, in the City of Cebu, Philippines. PEOPLES BROADCASTING SERVICES, INC. By: (Signed) GREMAN B. SOLANTE Station Manager As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,[39] and a Cash Voucher issued by petitioner showing the amount of P203,726.30 deposited at the said bank. Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the documents petitioner did assign, as cash bond for the monetary award in favor of respondent in LSED Case NO. RO700-2003-CI-09, the amount of P203,726.30 covered by petitioners PSD Account No. 010-8-00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement. The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently affirmed. [40] The Deed of Assignment in the instant case, like a cash or surety bond, serves the same purpose. First, the Deed of Assignment

constitutes not just a partial amount, but rather the entire award in the appealed Order. Second, it is clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not of petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by the same office after it had issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioners willingness to pay the judgment amount. The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova v. Keysas Boutique,[41] wherein this Court found that such bank certification did not come close to the cash or surety bond required by law. The bank certification in Cordova merely stated that the employer maintains a depository account with a balance of P23,008.19, and that the certification was issued upon the depositors request for whatever legal purposes it may serve. There was no indication that the said deposit was made specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the bank certification had not in any way ensured that the award would be paid should the appeal fail. Neither was the appellee in the case prevented from making withdrawals from the savings account. Finally, the amount deposited was measly compared to the total monetary award in the judgment. [42] V. Another question of technicality was posed against the instant petition in the hope that it would not be given due course. Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant petition must be dismissed. Once more, the Court is not convinced. A petition for certiorari is the proper remedy when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any plain speedy, and adequate remedy at law. There is grave abuse of discretion when respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.[43] Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as indeed the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a general proposition, that the availability of an appeal does not foreclose recourse to the extraordinary remedies, such as certiorari and prohibition, where appeal is not adequate or equally beneficial, speedy and sufficient, as where the orders of the trial court were issued in excess of or without jurisdiction, or there is need to promptly relieve the aggrieved party from the injurious effects of the acts of an inferior court or tribunal, e.g., the court has authorized execution of the judgment. [44] This Court has even recognized that a recourse to certiorari is proper not only where there is a clear deprivation of petitioners fundamental right to due process, but so also where other special circumstances warrant immediate and more direct action. [45] In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy, [46] and if it is shown that the refusal to allow a Rule 65 petition would result in the infliction of an injustice on a party by a judgment that evidently was rendered whimsically and capriciously, ignoring and disregarding uncontroverted facts and familiar legal principles without any valid cause whatsoever. [47] It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari proceedings. The Court has not too infrequently given due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations would warrant such a recourse. [49] Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or adequate remedy, in view of the importance of the issues raised therein.[50] The rules were also relaxed by the Court after considering the public interest involved in the case; [51] when public welfare and the advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued are null and void; or when the questioned order amounts to an oppressive exercise of judicial authority. [52]
[48]

The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals , 107 SCRA 504, 524, the exercise once more of our exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as in x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: x x The Rules have been drafted with the primary objective of enhancing fair trials and expediting justice. As a corollary, if their applications and operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified. [53] The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as evidence by respondent. To make matters worse, DOLE denied petitioners appeal based solely on petitioners alleged failure to file a cash or surety bond, without any discussion on the merits of the case. Since the

petition for certiorari before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE were supported by the evidence presented. It appears, however, that the Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy.[54] The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the NLRCs jurisdiction and the DOLEs prerogative but also the procedure when the case involves the fundamental challenge on the DOLEs prerogative based on lack of employer-employee relationship. As exhaustively discussed here, the DOLEs prerogative hinges on the existence of employer-employee relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates private respondent has never been petitioners employee. But the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition on a technicality would deprive the Court of the opportunity to resolve the novel controversy. WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner isDISMISSED. SO ORDERED.

VICTOR METEORO vs. CREATIVE CREATURES INC. Assailed in this petition for review on certiorari are the Court of Appeals Decision [1] dated May 31, 2005 and Resolution[2] dated January 27, 2006 in CA-G.R. SP No. 76942. The facts of the case are as follows: Respondent is a domestic corporation engaged in the business of producing, providing, or procuring the production of set designs and set construction services for television exhibitions, concerts, theatrical performances, motion pictures and the like. It primarily caters to the production design requirements of ABS-CBN Broadcasting Corporation in Metro Manila and nationwide.[3] On the other hand, petitioners were hired by respondent on various dates as artists, carpenters and welders. They were tasked to design, create, assemble, set-up and dismantle props, and provide sound effects to respondents various TV programs and movies.[4]

Sometime in February and March 1999, petitioners filed their respective complaints for non-payment of night shift differential pay, overtime pay, holiday pay, 13 th month pay, premium pay for Sundays and/or rest days, service incentive leave pay, paternity leave pay, educational assistance, rice benefits, and illegal and/or unauthorized deductions from salaries against respondent, before the Department of Labor and Employment (DOLE), National Capital Region (NCR). Their complaints were consolidated and docketed as NCR00-9902-IS-011. [5] After the inspection conducted at respondents premises, the labor inspector noted that the records were not made available at the time of the inspection; that respondent claimed that petitioners were contractual employees and/or independent talent workers; and that petitioners were required to punch their cards. [6] In its position paper, respondent argued that the DOLE-NCR had no jurisdiction over the complaint of the petitioners because of the absence of an employer-employee relationship. It added that petitioners were free-lance individuals, performing special services with skills and expertise inherently exclusive to them like actors, actresses, directors, producers, and script writers, such that they were treated as special types of workers. [7] Petitioners, on the other hand, averred that they were employees of respondent, as the elements of an employeremployee relationship existed. Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal against petitioner, with prayer for payment of overtime pay, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13 th month pay and attorneys fees before the National Labor Relations Commission (NLRC). The case was docketed as NLRC-NCR Case No. 00-04-04459-9.[8] On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued an Order [9] directing respondent to pay petitioners the total amount of P2,694,709.00. The dispositive portion of the Order reads as follows: WHEREFORE, premises considered, this Office finds merit in the complaint. Accordingly, Respondent Creative Creatures, Inc. and/or Mr. Edmond Ty, is hereby ordered to pay thirty three (33) Complainants, within ten (10) days from receipt hereof, the total amount of TWO MILLION SIX HUNDRED NINETY FOUR THOUSAND SEVEN HUNDRED NINE PESOS (P2,694,709.00) representing unpaid 13th month pay, vacation and sick leave benefits, regular holiday pay, rest day and holiday premiums, overtime pay, educational allowance, and rice allowance presented as follows: xxxx Failure to pay Complainants within the given period will constrain this Office to issue a WRIT OF EXECUTION for the immediate enforcement of this order. SO ORDERED.[10] The Regional Director sustained petitioners claim on the existence of an employer-employee relationship using the determinants set forth by the Labor Code, specifically, the elements of control and supervision, power of dismissal, payment of wages, and the selection and engagement of employees. He added that since the petitioners had worked for more than one year doing the same routine work, they were regular employees with respect to the activity in which they were employed. Lastly, he upheld the DOLE-NCRs jurisdiction to hear and determine cases in violation of labor standards law.[11] On appeal, then DOLE Secretary Patricia A. Sto. Tomas affirmed the findings of the DOLE Regional Director. [12] In upholding the jurisdiction of the DOLE-NCR, she explained that the Secretary of Labor or his duly authorized representative is allowed to use his visitorial and enforcement powers to give effect to labor legislation, regardless of the amount involved, pursuant to Article 128 of the Labor Code, as amended by Republic Act (R.A.) No. 7730. For failure to obtain a favorable decision, respondent elevated the matter to the Court of Appeals in CA-G.R. SP No. 76942. On May 31, 2005, the appellate court rendered the assailed decision, the dispositive portion of which reads: WHEREFORE, premises considered, the instant petition is GRANTED. For lack of jurisdiction, the Orders dated October 18, 2002 and February 5, 2003, issued by respondent Secretary are hereby declared NULL and VOID. However, in view of the filing of a similar case before the NLRC, referral of the instant case to the NLRC for appropriate determination is no longer necessary. SO ORDERED.[13]

While recognizing the visitorial and enforcement powers of the Regional Director and his jurisdiction to entertain money claims, the appellate court noted that Article 128 of the Labor Code provides an instance when he (Regional Director) may be divested of jurisdiction. The CA pointed out that respondent had consistently disputed the existence of employer-employee relationship, thereby placing the case beyond the jurisdiction of the Regional Director. Petitioners now come before this Court in this petition for review on certiorari raising the lone issue of: Whether or not the Court of Appeals committed an error when it ruled that the instant case falls within the exception clause of Article 128 (b) of the Labor Code, as amended, and in annulling and setting aside the Orders of the Secretary of Labor which affirmed the Order of the Regional Director of DOLENCR awarding the claims of the petitioners for benefits under the Labor Standards laws, namely, 13th month benefit, overtime pay, night shift differentials, premium on rest days, vacation and sick leave and other benefits accorded to employees of the responden[t] in the exercise of its visitorial powers pursuant to Article 128 (b) of the Labor Code as amended. [14] In fine, we are tasked to determine which body/tribunal has jurisdiction over petitioners money claims --- the DOLE Secretary or his duly authorized representative, or the NLRC. We sustain the appellate courts conclusion that the instant case falls within the exclusive jurisdiction of the NLRC. The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have jurisdiction to enforce compliance with labor standards laws under the broad visitorial and enforcement powers conferred by Article 128 of the Labor Code, and expanded by Republic Act (R.A.) No. 7730, [15] to wit:[16] Art. 128. Visitorial and Enforcement Power (a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to employers records and premises at anytime of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto. (b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee relation 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 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. xxxx As it is now worded, and as consistently held in a number of cases, [17] the visitorial and enforcement powers of the Secretary, exercised through his representatives, encompass compliance with all labor standards laws and other labor legislation, regardless of the amount of the claims filed by workers. It is well to note that the Regional Directors visitorial and enforcement powers have undergone a series of amendments. Confusion was engendered with the promulgation of the decision in Servandos Inc. v. Secretary of Labor and Employment.[18] In that case, this Court held that to harmonize Articles 217 (a) (6), [19] 129,[20] and 128 of the Labor Code, the Secretary of Labor should be deemed as clothed with plenary visitorial powers to order the inspection of all establishments where labor is employed, and to look into all possible violations of labor laws and regulations; but the power to hear and decide employees claims exceeding P5,000.00 for each employee should be left to the Labor Arbiter as the exclusive repository of the power to hear and decide such claims. Jurisprudence, however, rendered the Servando ruling inapplicable. In Guico, Jr. v. Quisumbing,[21] Allied Investigation Bureau, Inc. v. Sec. of Labor ,[22] and Cirineo Bowling Plaza, Inc. v. Sensing ,[23] we had occasion to explain that while it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear and decide

cases where the aggregate money claim of each employee exceeds P5,000.00, these provisions of law do not contemplate or cover the visitorial and enforcement powers of the Secretary of Labor or his duly authorized representatives. Thus, we upheld the jurisdiction of the Regional Director, notwithstanding the fact that the amount awarded exceeded P5,000.00 per employee. In order to do away with the jurisdictional limitations imposed by the Servando ruling and to finally settle any lingering doubts on the extent of the visitorial and enforcement powers of the Secretary of Labor and Employment, R.A. 7730 was enacted, amending Article 128 (b) to its present formulation, so as to free it from the jurisdictional restrictions found in Articles 129 and 217. This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of employees is not absolute. The last sentence of Article 128 (b) of the Labor Code, otherwise known as the exception clause, provides an instance when the Regional Director or his representatives may be divested of jurisdiction over a labor standards case. Under prevailing jurisprudence, the so-called exception clause has the following elements, all of which must concur: (a) that the 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. [24] In the present case, the CA aptly applied the exception clause. At the earliest opportunity, respondent registered its objection to the findings of the labor inspector. The labor inspector, in fact, noted in its report that respondent alleged that petitioners were contractual workers and/or independent and talent workers without control or supervision and also supplied with tools and apparatus pertaining to their job. [25] In its position paper, respondent again insisted that petitioners were not its employees. It then questioned the Regional Directors jurisdiction to entertain the matter before it, primarily because of the absence of an employer-employee relationship. Finally, it raised the same arguments before the Secretary of Labor and the appellate court. It is, therefore, clear that respondent contested and continues to contest the findings and conclusions of the labor inspector. To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is need to examine evidentiary matters. The following elements constitute the reliable yardstick to determine such relationship: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. [26] There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee status. [27] These pieces of evidence are readily available, as they are in the possession of either the employee or the employer; and they may easily be looked into by the labor inspector (in the course of inspection) when confronted with the question of the existence or absence of an employeremployee relationship. Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises, because that juridical relation spawns obligations connected with workmens compensation, social security, medicare, termination pay, and unionism.[28] Thus, in addition to the above-mentioned documents, other pieces of evidence are considered in ascertaining the true nature of the parties relationship. This is especially true in determining the element of control. The most important index of an employer-employee relationship is the so-called control test, that is, whether the employer controls or has reserved the right to control the employee, not only as to the result of the work to be done, but also as to the means and methods by which the same is to be accomplished. [29] In the case at bar, whether or not petitioners were independent contractors/project employees/free lance workers is a question of fact that necessitates the examination of evidentiary matters not verifiable in the normal course of inspection. Indeed, the contracts of independent services, as well as the check vouchers, were kept and maintained in or about the premises of the workplace and were, therefore, verifiable in the course of inspection. However, respondent likewise claimed that petitioners were not precluded from working outside the service contracts they had entered into with it (respondent); and that there were instances when petitioners abandoned their service contracts with the respondent, because they had to work on another project with a different company. Undoubtedly, the resolution of these issues requires the examination of evidentiary matters not verifiable in the normal course of inspection. Verily, the Regional Director and the Secretary of Labor are divested of jurisdiction to decide the case.

We would like to emphasize that to contest means to raise questions as to the amounts complained of or the absence of violation of labor standards laws; or, as in the instant case, issues as to the complainants right to labor standards benefits. To be sure, raising lack of jurisdiction alone is not the contest contemplated by the exception clause. [30] It is necessary that the employer contest the findings of the labor regulations officer during the hearing or after receipt of the notice of inspection results. [31] More importantly, the key requirement for the Regional Director and the DOLE Secretary to be divested of jurisdiction is that the evidentiary matters be not verifiable in the course of inspection. Where the evidence presented was verifiable in the normal course of inspection, even if presented belatedly by the employer, the Regional Director, and later the DOLE Secretary, may still examine it; and these officers are not divested of jurisdiction to decide the case.[32]

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised issues the resolution of which necessitated the examination of evidentiary matters not verifiable in the normal course of inspection. Hence, the Regional Director was divested of jurisdiction and should have endorsed the case to the appropriate Arbitration Branch of the NLRC. [33] Considering, however, that an illegal dismissal case had been filed by petitioners wherein the existence or absence of an employer-employee relationship was also raised, the CA correctly ruled that such endorsement was no longer necessary. WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated May 31, 2005 and its Resolution dated January 27, 2006 in CA-G.R. SP No. 76942, are AFFIRMED. SO ORDERED.