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G.R.NO.157647

RepublicofthePhilippines
SupremeCourt
Manila

THIRDDIVISION

GOVERNMENTSERVICEG.R.NO.157647
INSURANCESYSTEM(GSIS),
Petitioner,
Present:

YNARESSANTIAGO,J.,
Chairperson,
versusAUSTRIAMARTINEZ,
CHICONAZARIO,
NACHURA,and
REYES,JJ.

NATIONALLABORRELATIONS
COMMISSION,LANTINGSECURITY
andWATCHMANAGENCY,TOMAS
LANTING,DANIELFANILA,*HECTOR
MORENO,ISAUROFERRER,**RUBIN
WILFREDO,JESUSDELIMA,JR.,
MARIALEGASPI,SANTIAGONOTO,
JR.,andVIRGILIOSORIANO,Promulgated:
Respondents.October15,2007
xx

DECISION

AUSTRIAMARTINEZ,J.:

[1]
BeforetheCourtisaPetitionforReviewonCertiorarioftheDecision datedJuly25,
[2]
2002oftheCourtofAppeals(CA)inCAG.R.SPNo.61570andtheCAResolution dated
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March19,2003whichdeniedthemotionforreconsiderationthereof.

Thefacts:

Tomas Lanting, doing business under the name and style of Lanting Security and
WatchmanAgency(LSWA)enteredintoaSecurityServiceContracttoprovidesecurityguards
to the properties of the Government Service Insurance System (GSIS) at the contract rate of
[3]
P3,000.00perguardpermonth.

During the effectivity of the contract, LSWA requested the GSIS for an upward
adjustmentofthecontractrateinviewofSection7ofWageOrderNo.1andSection3ofWage
OrderNo.2,whichwereissuedbytheRegionalTripartiteWagesandProductivityBoardNCR
pursuanttoRepublicActNo.6727,otherwiseknownastheWageRationalizationAct.

ActingontherequestofLSWA,theGSIS,throughitsBoardofTrusteesandunderBoard
ResolutionNo.207,datedMay24,1991,approvedtheupwardadjustmentsofthecontractprice
from P3,000.00 to P3,716.07 per guard, per month effective November 1, 1990 to January 7,
[4]
1991,andP4,200.00effectiveJanuary8,1991toMay31,1991.

LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin
Wilfredo,JesusDelima,Jr.,MariaLegaspi, Santiago Noto, Jr., and Virgilio Soriano (hereafter
complainants)toguardoneofGSIS'sproperties.Thecomplainantshavethefollowingdatesof
employmentandcompensationpackagewithLSWA:

1.DanielFanila3/28/913/15/93P3,100/month
2.VirgilioSoriano10/0/913/15/93P3,100/month
3.HectorMoreno1/04/893/15/93P3,100/month
4.IsauroTorres11//883/15/93P3,100/month
5.RubinWilfredo3/08/913/15/93P3,100/month
6.JesusDelima,Jr.3/28/913/15/93P3,100/month
7.MariaLegaspi3/13/913/15/93P3,100/month

OnMarch15,1993,GSISterminatedtheSecurityServiceContractwithLSWA.Allthe
complainants,exceptVirgilioSoriano,wereabsorbedbytheincomingsecurityagency.

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On March 7, 1994, complainants filed separate complaints against LSWA for

underpaymentofwagesandnonpaymentoflaborstandardbenefitsfromMarch1991toMarch
15,1993.VirgilioSorianoalsocomplainedofillegaldismissal.

InitsPositionPaper,LSWAallegedthatcomplainantswereestoppedfromclaimingthat
theywereunderpaidbecausetheywereinformedthatthepayandbenefitsgiventothemwere
basedonthecontractrateofP103.00pereighthoursofworkoraboutP3,100.00permonth.

On August 9, 1994, LSWA filed a ThirdParty Complaint

[5]
against GSIS for

underpaymentofcomplainants'wages.

[6]
InitsPositionPaper, GSISallegedthattheThirdPartyComplaintstatesnocauseof
actionagainstitthatLSWAobligateditselfintheSecurityServiceContracttobesolelyliable
fortheenforcementofandcompliancewithallexistinglaborlaws,rulesandregulationsthat
the GSIS Board of Trustees approved the upward adjustment on a monthtomonth basis, at
P4,200perguardpermonth,effectiveJanuary8,1991toMay31,1991,underBoardResolution
No. 207 dated May 24, 1991, which was incorporated in the Security Service Contract that
GSIS fully paid the services of the security guards as agreed upon in the Security Service
Contract.

[7]
On August 27, 1996, LaborArbiter Renato Bugarin rendered a Decision in favor of
complainants,thedispositiveportionofwhichreads:

WHEREFORE,premisesconsideredjudgmentisherebyrendered:

1.OrderingrespondentsLantingSecurityandWatchmanAgencyandTomasLanting to
reinstatecomplainantVirgilioSorianowithoutlossofseniorityrightsandbenefitsandtopayhis
backwagesamountingtoP161,400.47,computeduptothepromulgationofthisdecision.Failure
toreinstatecomplainanttohisformerpositionasherebyordered,hisbackwagesshallcontinueto
runbutinnocaseshallexceedthree(3)years

2.Ordering,respondentsLantingSecurityandWatchmanAgencyand/orThomasLanting
and the Government Service Insurance System, jointly and severally liable to pay the
complainants, their salary differentials cash equivalent of their service incentive leaves and
proportionate13thmonthpaycoveringtheperiodfromJune1,1991toMarch15,1993,hereto
indicatedasfollows:

1.DanielFanila,Jr.P18,439.50
2.HectorMorenoP18,439.50
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3.IsauroTorresP18,439.50
4.RubinWilfredoP18,439.50
5.JesusDelima,Jr.P18,439.50
6.MariaLegaspiP18,439.50
7.VirgilioSorianoP18,439.50

3.Allotherclaimsareherebydismissedforlackofmerit.

[8]
SOORDERED.

TheLaborArbiterheldLSWAandGSISjointlyandseverallyliableforthepaymentof
complainants'moneyclaims,pursuanttoArticles106and107oftheLaborCode.

[9]
LSWAappealedtotheNLRC.OnApril14,2000,theNLRCissuedaResolution, the
dispositiveportionofwhichreads:

WHEREFORE,premisesconsidered,theAppealisherebyGRANTED.Accordingly,the
DecisionappealedfromisSUSTAINEDsubjecttothemodificationthatComplainantAppellee
Soriano was not illegally dismissed and hence, is not entitled to reinstatement to his former
positionandtopaymentofanybackwagesthatfromtheotherComplainantsAppellees'awarded
salary differentials from 7 March 1991 to 1 June 1991 in the amount of (sic) each should be
deductedfromtheirawardedtotalsalarydifferentialsinthesumofP10,917.00eachandthatthe
ThirdPartyRespondentGSISisaloneliableforpaymentoftheirsalarydifferentials.

[10]
SOORDERED.

TheNLRCheldtheGSISsolelyliableforpaymentofcomplainants'moneyclaims.

[11]
Dissatisfied, the GSIS filed on May 15, 2000 a Motion for Reconsideration.
On
[12]
August 20, 2000, the NLRC issued a Resolution
denying GSIS's Motion for
Reconsideration.

[13]
OnNovember6,2000,theGSISfiledaPetitionforCertiorari
withtheCAarguing
that the NLRC gravely abused its discretion in holding GSIS solely liable for complainants'
moneyclaims.

OnJuly25,2002,theCArenderedaDecision,

[14]
thedispositiveportionofwhichreads:

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WHEREFORE, the petition is GRANTED for being meritorious. The questioned

resolution dated 14 April 2000 of the NLRC is hereby modified insofar as it holds petitioner
GSISsolelyliableforthesalarydifferentialsofthecomplainants.Instead,Werevertbacktothe
rulingoftheHonorableLaborArbiterandholdpetitionerGSISandrespondentLantingSecurity
and Watchman Agency and/or Tomas Lanting jointly and severally liable for the payment of
complainants'salarydifferentials.

[15]
SOORDERED.

WhilefindingthattheGSIScompliedwithitsobligationsunderWageOrderNos.1and2
byincorporatingthemandatedincreaseintheSecurityServiceContract,theCAheldtheGSIS
jointlyandseverallyliablewithLSWAforcomplainants'moneyclaimspursuanttoArticles106
and107oftheLaborCode.

[16]
On September 3, 2002, the GSIS filed a Motion for Reconsideration.
In a
[17]
Resolution
datedMarch19,2003,theCAdeniedthemotionforreconsideration.

Hence,thepresentpetitionanchoredonthefollowingassignederror:

THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN

HOLDING THAT PETITIONER GSIS IS SOLIDARILY LIABLE FOR PAYMENT OF
[18]
COMPLAINANTSRESPONDNENTS'SALARYDIFFERENTIALS.

The GSISaversthatitcannottwicebeheldliableforcomplainants'salarydifferentialssinceit

fullypaidcomplainants'salariesbyincorporatingintheSecurityServiceContractthesalaryrate
increasesmandatedbyWageOrderNos.1and2otherwise,itwouldbeunjustenrichmenton
thepartofcomplainantsand/orLSWAatitsexpense.ItsubmitsthatArticles106and107ofthe
Labor Code were not contemplated by its framers to cover principals or clients of service
contractorswhohadalreadypaidforthewagesofthecontractororsubcontractor.

[19]
InitsComment,
LSWAmaintainsthattheGSISisjointlyandseverallyliablewithLSWA
becauseArticles106and107oftheLaborCodeprovidesoandtheseprovisionswereintended
toensurethatemployeesarepaidthewagesduethemincaseofviolationoftheLaborCodeof
either the contractor or the principal that the GSIS cannot claim that holding it jointly and
severallyliablewithLSWAwouldresultingraveinjusticesincethelawdidnotleaveitwithout

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[20]
recourseastheGSIShastherightofreimbursementfromitscodebtorunderArticle1217
oftheCivilCode.

[21]
In their Comment,
complainants argue that the GSIS is jointly and severally liable with
LSWAforcomplainants'moneyclaimssinceLSWAactuallypaidonlythesumofP3,100.00a
month,eventhoughtheGSISincorporatedintheSecurityServiceContractthemandatedwage
increasesinWageOrderNos.1and2thatalthoughtheSecurityServiceContractprovidedthat
thereshallbeemployeremployerrelationshipbetweenLSWAand/oritssecurityguardsandthe
GSIS, Article 106 of the Labor Code establishes an employeremployee relationship between
theemployerandthejobcontractor'semployeesforalimitedpurpose,thatis,inordertoensure
thatthelattergetpaidthewagesduethem.

The Court gave due course to the petition and required the parties to submit their respective
[22]
[23]
memoranda.
OnlytheGSIScomplied.
Intheinterestofjusticeandspeedydisposition
ofcases,theCourtresolvedtodispensewiththefilingoftherespectivememorandaofLSWA
[24]
andthecomplainantsandtodecidethecasebasedonthepleadingsfiled.

Thepetitionisbereftofmerit.

Articles106and107oftheLaborCodeprovide:

ART.106.Contractororsubcontractor.Wheneveranemployerentersintocontractwithanother
personfortheperformanceoftheformerswork,theemployeesofthecontractorandofthelatters
subcontractor,ifany,shallbepaidinaccordancewiththeprovisionsofthisCode.

Intheeventthatthecontractororsubcontractorfailstopaythewageofhisemployees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractororsubcontractortosuchemployeestotheextentoftheworkperformedunder
thecontract,inthesamemannerandextentthatheisliabletoemployeesdirectlyemployed
byhim.
xxx

ART.107Indirectemployer.TheprovisionsoftheimmediatelyprecedingArticleshalllikewise
apply to any person, partnership, association or corporation which, not being an employer,
contractswithanindependentcontractorfortheperformanceofanywork,task,joborproject.
(Emphasissupplied.)

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In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants'
salariesbyincorporatingintheSecurityServiceContractthesalaryrateincreasesmandatedby
Wage Order Nos. 1 and 2 by increasing the contract price from P3,000.00 to P3,176.07 per
guard per month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective
January8,1991toMay31,1991.

[25]
In Rosewood Processing, Inc. v. National Labor Relations Commission,
the Court
explainedtherationaleforthejointandseveralliabilityoftheemployer,thus:
The joint and several liability of the employer or principal was enacted to ensure
compliancewiththeprovisionsoftheCode,principallythoseonstatutoryminimumwage.
Thecontractororsubcontractorismadeliablebyvirtueofhisorherstatusasadirectemployer,
andtheprincipalastheindirectemployerofthecontractorsemployees.Thisliabilityfacilitates,
if not guarantees, payment of the workers compensation, thus, giving the workers ample
protection as mandated by the 1987 Constitution. This is not unduly burdensome to the
employer. Should the indirect employer be constrained to pay the workers, it can recover
whateveramountithadpaidinaccordancewiththetermsoftheservicecontractbetween
[26]
itselfandthecontractor.(Emphasissupplied)

Thus,theCourtdoesnotagreewiththeGSIS'sclaimthatadoubleburdenwouldbeimposed
upon the latter because it would be paying twice for complainants' services. Such fears are
unfounded.UnderArticle1217oftheCivilCode,iftheGSISshouldpaythemoneyclaimsof
complainants,ithastherighttorecoverfromLSWAwhateveramountithaspaidinaccordance
withthetermsoftheservicecontractbetweentheLSWAandtheGSIS.

Joint and solidary liability is simply meant to assure aggrieved workers of immediate and
sufficientpaymentofwhatisduethem.ThisisinlinewiththepolicyoftheStatetoprotectand
alleviatetheplightoftheworkingclass.

WHEREFORE,thepetitionisDENIED.TheDecisiondatedJuly25,2002andtheResolution
datedMarch19,2003oftheCourtofAppeals(CA)inCAG.R.SPNo.61570areAFFIRMED
withtheMODIFICATIONthatthejointandsolidaryliabilityofLSWAandtheGSIStopay
complainants' salary differentials shall be without prejudice to the GSIS's right of
reimbursementfromLSWA.

SOORDERED.

MA.ALICIAAUSTRIAMARTINEZ
AssociateJustice
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WECONCUR:

CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson

MINITAV.CHICONAZARIOANTONIOEDUARDOB.NACHURA

AssociateJusticeAssociateJustice

RUBENT.REYES
AssociateJustice

ATTESTATION

IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethe
casewasassignedtothewriteroftheopinionoftheCourtsDivision.

CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson,ThirdDivision

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
attestation,itisherebycertifiedthattheconclusionsintheaboveDecisionhadbeenreachedin
consultationbeforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.

REYNATOS.PUNO
ChiefJustice

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*KnownasDanielFanila,Jr.inotherpartsoftherollo.
**KnownasIsauroTorresinotherpartsoftherollo.
[1]
PennedbyAssociateJusticeEloyR.Bello,Jr.(retired)andconcurredinbyAssociateJusticesGodardoA.Jacinto(retired)and
RebeccadeGuiaSalvador,CArollo,p.101.
[2]
Id.at141.
[3]
Id.at42.
[4]
Id.at43.
[5]
Id.at71.
[6]
Id.at76.
[7]
Id.at29.
[8]
Id.
[9]
Id.at15.
[10]
Id.at24.
[11]
Id.at92.
[12]
Id.at26.
[13]
Id.at2.
[14]
Supranote1.
[15]
Id.at107108.
[16]
Id.at119.
[17]
Supranote2.
[18]
Rollo,p.33.
[19]
Id.at249.
[20]
ART.1217.Paymentmadebyoneofthesolidarydebtorsextinguishestheobligation.Iftwoormoresolidary debtors offer to
pay,thecreditormaychoosewhichoffertoaccept.
Hewhomadethepaymentmayclaimfromhiscodebtorsonlythesharewhichcorrespondstoeach,withtheinterestforthepayment
alreadymade.Ifthepaymentismadebeforethedebtisdue,nointerestfortheinterveningperiodmaybedemanded.
Whenoneofthesolidarydebtorscannot,becauseofhisinsolvency,reimbursehissharetothedebtorpayingtheobligation,such
shareshallbebornebyallhiscodebtors,inproportiontothedebtofeach.
[21]
Id.at275.
[22]
Id.at317.
[23]
Id.at330.
[24]
Id.at321,325.
[25]
352Phil.1013(1998).
[26]
Id.at10331034.SeealsoMarivelesShipyardv.CourtofAppeals,461Phil.249(2003).

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