Tag: 2016-01

Sale of Agricultural Land and Waiver of Retention Rights

Decision in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, January 20, 2016.

On 26 June 1986, Romeo C. Carriedo bought approximately 70.4788 hectares of agricultural land covered by the following titles and tax declarations:

Transfer Certificate of Title No. 35055
Tax Declaration No. 48354
Transfer Certificate of Title No. 17681
Transfer Certificate of Title No. 56897
Transfer Certificate of Title No. 17680

The area sold to Romeo C. Carriedo included a part covered by Transfer Certificate of Title No. 17680 of which herein petitioner, Pablo Mendoza, was a tenant.

In June of 1990, Romeo C. Carriedo then sold these lands to the Peoples’ Livelihood Foundation, Inc. Except for that area covered by Transfer Certificate of Title No. 17680, the lands were subjected to the Voluntary Land Transfer/Direct Payment Scheme and were awarded to agrarian reform beneficiaries in 1997.

On 5 October 1999, the land covered by Transfer Certificate of Title No. 17680 was divided into five (5) sub-lots.

Three of these lots were then distributed to beneficiaries under Presidential Decree No. 27 and covered by Transfer Certificate of Title Nos. 44384, 44385, and 44386, issued on 10 September 1999.

The remaining two (2) lots, consisting of approximately 5 hectares and which was also the land being occupied by Pablo Mendoza, were registered in the name of Romeo C. Carriedo and covered by Transfer Certificate of Title Nos. 344281 and 344282, respectively.

On 26 February 2002, Pablo Mendoza, Corazon Mendoza, and Orlando Gomez filed a Petition for Coverage of these two (2) lots under Comprehensive Agrarian Reform Law of 1988. They claimed that they had been in physical and material possession of the said land as tenants since 1956 and had made the land productive. They prayed that

an order be issued placing the land under Comprehensive Agrarian Reform Program; and
the Department of Agrarian Reform, the Provincial Agrarian Reform Officer, and the Municipal Agrarian Reform Officer be ordered to proceed with the acquisition and distribution of the land in their favor.

The Regional Director granted the petition in an Order dated 2 October 2002.

The Supreme Court, in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, January 20, 2016, however, reversed the said order and declared that the land covered by Transfer Certificate of Title Nos. 344281 and 344282 was Romeo C. Carriedo’s retained area.

In said case, the Court ruled:

The right of retention is a constitutionally-guaranteed right¹, subject to certain qualifications specified by the legislature². It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant by implementing the doctrine that social justice was not meant to perpetrate an injustice against the landowner.

Deparment of Agrarian Reform Administrative Order No. 02, Series of 2003³ clearly shows that the disposition of agricultural land is not an act constituting waiver of the right of retention.

The Court further found that Romeo C. Carriedo has not committed any of the acts found under Deparment of Agrarian Reform Administrative Order No. 02, Series of 2003.

1)

Romeo C. Carriedo was not shown to have expressly waived in writing his right of retention, as required under sub-section 6.3, Section 6 of Department of Agrarian Reform Administrative Order No. 02, Series of 2003.

2)

Romeo C. Carriedo was not said to have abandoned or declined to assert his right of retention, under subsection 6.7, Section 6 of Department of Agrarian Reform Administrative Order No. 02, Series of 2003.

According to the Court, prevailing rules⁴ give Romeo C. Carriedo any time before receipt of the notice of coverage to exercise his right of retention, or if under compulsory acquisition, within sixty (60) days from receipt of the notice of coverage. Since the validity of the notice of coverage was the very subject of the present case, the Court ruled that the period within which Romeo C. Carriedo should exercise his right of retention had yet to commence.

The Court added that even assuming that the period within which Romeo C. Carriedo could exercise his right of retention has commenced, he could not have been said to have neglected to assert his right of retention over the land, for he filed an application for retention which was even contested by Pablo Mendoza’s son, Fernando. Although Romeo C. Carriedo was shown to have subsequently withdrawn his application, his act of filing an application for retention had belied the allegation that he abandoned his right of retention or declined to assert it.

3)

Not even the sale made by the herein Romeo C. Carriedo of more than fifty (50) hectares in favor of the Peoples’ Livelihood Foundation, Inc. could have been considered as a waiver of his right of retention.

In this case, it was asserted that Romeo C. Carriedo has waived his right of retention by way of estoppel under another rule, i.e., Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 which states:

II. Statement of Policies
x x x
4. Where the transfer/sale involves more than the five (5) hectares retention area, the transfer is considered violative of Sec. 6 of R.A. No. 6657.
In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name of the transferee shall, under the principle of estoppel, be considered valid and shall be treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-hectare landholding ceiling pursuant to Sections 6, 70 and 73(a) of R.A. No. 6657. Insofar as the excess area is concerned, the same shall likewise be covered considering that the transferor has no right of disposition since CARP coverage has been vested as of 15 June 1988. Any landholding still registered in the name of the landowner after earlier dispositions totaling an aggregate of five (5) hectares can no longer be part of his retention area and therefore shall be covered under CARP. x x x (emphasis supplied)

It was argued that Romeo C. Carriedo should have lost his right of retention over the land because he had already sold or disposed, after the effectivity of the Comprehensive Agrarian Reform Law of 1988, more than fifty (50) hectares of land in favor of Peoples’ Livelihood Foundation, Inc.

The Court, however, found such assertions untenable. According to the Court, nowhere in the Comprehensive Agrarian Reform Law of 1988 was it indicated that a multiple or series of transfers/sales of land would result in the loss of retention rights. Neither did it provide that the multiple or series of transfers or sales would amount to the waiver of such right.

The Court mentioned the following relevant portions of the Comprehensive Agrarian Reform Law of 1988, as referred to in Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006:

Section 6. Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-size farm, such as the commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. x x x
x x x
Upon the effectivity of this Act, any sale, disposition, lease, management, contract or transfer of possession of private lands executed by the original landowner in violation of the Act shall be null and void: Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the Department of Agrarian Reform (DAR) within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares.

Section 70. Disposition of Private Agricultural Lands. — The sale or disposition of agricultural lands retained by a landowner as a consequence of Section 6 hereof shall be valid as long as the total landholdings that shall be owned by the transferee thereof inclusive of the land to be acquired shall not exceed the landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the effectivity of this Act found to be contrary to the provisions hereof shall be null and void. x x x

Section 73. Prohibited Acts and Omissions. — The following are prohibited:
(a) The ownership or possession, for the purpose of circumventing the provisions of this Act, of agricultural lands in excess of the total retention limits or award ceilings by any person, natural or juridical, except those under collective ownership by farmer-beneficiaries; x x x

The Court ruled that Sections 6 and 70 are clear in stating that any sale and disposition of agricultural lands in violation of the Comprehensive Agrarian Reform Law of 1988 shall be null and void. The reasonable reading of these three provisions in relation to the constitutional right of retention reveals that the consequence of nullity pertains to the area/s which were sold, or owned by the transferee, in excess of the five (5)-hectare land ceiling. Thus, the Court ruled that the lands covered by Transfer Certificate of Title Nos. 344281 and 344282 fell within Romeo C. Carriedo’s retained area.

The Court stressed that item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 has attempted to defeat the above reading by providing that, under the principle of estoppel, the sale of the first five (5) hectares is valid. But, said rule has also hastened to add that the first five (5) hectares sold corresponded to the transferor/s’ retained area. Thus, since the sale of the first five (5) hectares was valid, therefore, the landowner had lost the five (5) hectares because it happened to be, at the same time, the retained area limit. In reality, Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 had operated as a forfeiture provision in the guise of estoppel. It punished the landowner who had sold agricultural land in excess of five (5) hectares. For the Court, forfeitures, however, partake of a criminal penalty.

The Court stated that in order for an administrative regulation to have the force of a penal law, (1) the violation of the administrative regulation must be made a crime by the delegating statute itself; and (2) the penalty for such violation must be provided by the statute itself.

The Court also found that Sections 6, 70 and 73 (a) of the Comprehensive Agrarian Reform Law of 1988 did not provide that a sale or disposition of land in excess of five (5) hectares results in a forfeiture of the five (5) hectare retention area. According to the Court, Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 imposed a penalty where none was provided by law.

The Court further stated that the repugnancy between the Comprehensive Agrarian Reform Law of 1988 and Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 was apparent by a simple comparison of their texts. The conflict undermined the statutorily-guaranteed right of the landowner to choose the land he shall retain, and Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, in effect, amended the Comprehensive Agrarian Reform Law of 1988, which should not have happened.

Consistent with the principle that a statute prevails over an administrative order, the Court declared the invalidity of Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 for being ultra vires. Thus, Romeo C. Carriedo neither waived his right to retain the land, nor was placed under estoppel for his sale the land to the Peoples’ Livelihood Foundation, Inc.

Resolution of Petitioners’ Motion for Reconsideration in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, October 10, 2018.

The Court gave due course to the motion filed by the Department of Agrarian Reform that sought the reconsideration of the Decision dated 20 January 2016.

The Court noted that the Department of Agrarian Reform is legally mandated to implement the Comprehensive Agrarian Reform Law of 1988. The said department possesses the special knowledge and acquired expertise on the implementation of the agrarian reform program. According to the Court, to pay no heed to the issues the said department has raised would ignore the basic precepts of due process. The Court accordingly revisited its Decision by taking into account the arguments and position of the department.

The Court reversed and set aside its Decision dated 20 January 2016, taking into consideration Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, which provides:

II. STATEMENT OF POLICIES
x x x
4. Where the transfer/sale involves more than the five (5) hectare retention area, the transfer is considered violative of Sec. 6 of R.A. No. 6657.
In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name of the transferee shall, under the principle of estoppel, be considered valid and shall be treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-hectare landholding ceiling pursuant to Sections 6, 70 and 73 (a) of R.A. No. 6657. Insofar as the excess area is concerned, the same shall likewise be covered considering that the transferor has no right of disposition since CARP coverage has been vested as of 15 June 1988. Any landholding still registered in the name of the landowner after earlier dispositions totaling an aggregate of five (5) hectares can no longer be part of his retention area and therefore shall be covered under CARP.

In the present case, the Court acknowledged that the sale of the first (5) hectares of agricultural land to the Peoples’ Livelihood Foundation, Inc. made by Romeo C. Carriedo could be viewed as valid.

However, said sale should also be treated as the exercise of Romeo C. Carriedo’s retention rights, such that he would no longer be able to lawfully claim the subject landholding as his retained area.

Accordingly, the remaining landholding also can no longer be part of his retention area and therefore shall be covered under Comprehensive Agrarian Reform Program. As narrated above, the remaining land that pertained to Transfer Certificate of Title No. 17680 was divided into sub-lots, of which two (2) of the lots (the land covered by Transfer Certificate of Title Nos. 344281 and 344282) were thereafter registered in the name of Romeo C. Carriedo.

1)

Both the Constitution⁵ and Comprehensive Agrarian Reform Law of 1988⁶ underscore the underlying principle of the agrarian reform program, that is, to endeavor a more equitable and just distribution of agricultural lands taking into account, among others, equity considerations. The objective of Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is equitable — that in order to ensure the effective implementation of the law, previous sales of landholding (without Department of Agarian Reform clearance) should be treated as the exercise of retention rights of the landowner, as embodied in Item No. 4 of the said administrative order.

2)

The equity in this policy of Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is apparent and easily discernible. With the sale of the lands, it was reasonably presumed that the landowner already received an amount (as purchase price) commensurate to the just compensation conformable with the constitutional and statutory requirement. At this point, equity dictates that he ought not to claim anymore, either in the guise of his retention area or otherwise, that which he already received in the previous sale of his land.

3)

Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is in consonance with the Stewardship Doctrine, under which private property is supposed to be held by the individual only as a trustee for the people in general, who are its real owners. As a mere steward, the individual must exercise his rights to the property not for his own exclusive and selfish benefit but for the good of the entire community or nation. Property use must not only be for the benefit of the owner but of society as well. The State, in the promotion of social justice, may regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property ownership and profits.

4)

The objective of land distribution to the landless farmers and farmworkers is carried out by Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, as it provides for the consequences in situations where a landowner had sold portions of his/her land with an area more than the statutory limitation of five (5) hectares. In this scenario, such administrative order treats the sale of the first five hectares as the exercise of the landowner’s retention rights because, effectively, the landowner has already chosen, and in fact has already disposed of, and has been duly compensated for, the area he is entitled to retain under the law.

5)

Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is consistent with Section 70⁷ of the Comprehensive Agrarian Reform Law of 1988, as the former likewise treats the sale of the first five hectares (in case of multiple/series of transactions) as valid, such that the same already constitutes the retained area of the landowner. This legal consequence arising from the previous sale of land therefore eliminates the prejudice, in terms of equitable land distribution, that may befall the landless farmers and farmworkers.

6)

Finally, the sale of Romeo C. Carriedo’s landholdings was made in violation of the Comprehensive Agrarian Reform Law of 1988⁸, having been made without the clearance of the Department of Agrarian Reform. To rule that Romeo C. Carriedo was still entitled to retain the land covered by Transfer Certificate of Title Nos. 344281 and 344282 will, in effect, reward the violation, which the Court maintains will not allow. The Court stressed that the right of retention serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant, and by implementing the doctrine that social justice is not meant to perpetrate an injustice against the landowner.

In this case, however, the Court noted that Romeo C. Carriedo has claimed his right over the land covered by Transfer Certificate of Title Nos. 344281 and 344282, not because he was “deprived” of a portion of his land as a consequence of compulsory land coverage, but precisely because he already previously sold his landholdings, so that the remaining portion would still be his.

The Court accordingly stated that although the exercise by a landowner of his retention right is constitutionally guaranteed, the same should not be done without due regard to other considerations which may affect the implementation of the agrarian reform program. This is especially true when such exercise pays no heed to the intent of the law, or worse, when such exercise amounts to its circumvention.

The Court upheld the validity of Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006. As a corollary, Romeo C. Carriedo no longer possessed retention rights to the land covered by Transfer Certificate of Title Nos. 344281 and 344282.

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2018 October 10

Effect of Delaying Payment of Just Compensation

The landowner in this case had a parcel of agricultural land in Camarines Sur which was taken in 1984 under Presidential Decree No. 27,¹ then distributed to the farmer-beneficiaries. The Department of Agrarian Reform fixed just compensation of the said land at P66,214.03 using the formula provided under Executive Order No. 228, Series of 1987.²

On 30 August 2000 and 17 December 2003, respectively, the landowner was issued Agrarian Reform Bond No. 0079665 in the amount of P11,674.59 representing the initial valuation of the taken land and AR Bond No. 0079666 in the amount of P30,428.83 representing the 6% increment under Presidential Decree No. 27 and Executive Order No. 228, and paid cash in the total amount of P4,678.16.

The landowner found the valuation unreasonable, which is why he filed a petition for summary administrative proceedings for the determination of just compensation of the taken land before the Office of the Provincial Agrarian Reform Adjudicator.

On 27 March 2001, the Office of the Provincial Agrarian Reform Adjudicator fixed just compensation in the amount of P1,147,466.73 24, using the formula, LV = AGP x 2.5 x GSP. However, in arriving at such values, the Office of the Provincial Agrarian Reform Adjudicator used the recent government support price for corn of P300.00/cavan (P6.00/kilo) as certified by the National Food Authority Provincial Manager of Camarines Sur, instead of the P31.00/cavan provided under Section 2³ of Executive Order No. 228.

Hence, the Office of the Provincial Agrarian Reform Adjudicator no longer applied the 6% annual incremental interest granted under Department of Agrarian Reform Administrative Order No. 13, Series of 1994.⁴ In a letter dated 5 September 2001, the landowner unconditionally accepted and called for the immediate payment of the valuations for the land.

Dissatisfied with the Office of the Provincial Agrarian Reform Adjudicator’s valuation, the Land Bank of the Philippines instituted a complaint for the determination of just compensation before the Regional Trial Court, averring that the said office erred in disregarding the formula provided under Executive Order No. 228.

In an Order dated 17 March 2010, the Regional Trial Court directed the Land Bank of the Philippines to submit a revaluation for the land in accordance with the factors set forth under the Comprehensive Agrarian Reform Law of 1988,⁵ as implemented by Department of Agrarian Reform Administrative Order No. 1, Series of 2010.⁶

The Land Bank of the Philippines complied and reached an amount of P1,155,223.41, as recomputed value of the land. The landowner accepted the said computation.

On 22 June 2011, the Regional Trial Court rendered a decision adopting and approving the Land Bank of the Philippines’ uncontested revaluation the land in the amount of P1,155,223.41, as well as ordering its payment to landowner in accordance with Section 18 of Comprehensive Agrarian Reform Law of 1988, minus the initial valuation that had already been paid to him.

The landowner moved for reconsideration, contending that the Regional Trial Court failed to order an additional payment of 12% interest in his favor, reckoned from the time his land was taken from him by the government in 1972 and distributed to the farmer beneficiaries until full payment of the just compensation.

In an Order dated 31 August 2011, the Regional Trial Court granted the said motion and awarded 12% interest computed from 26 June 2000, when the Land Bank of the Philippines approved the payment of the initial valuation for the land up to the date the decision was rendered, or a total amount of P1,437,669.75.

The Regional Trial Court modified its 31 August 2011 Order, by way of its Order dated 10 October 2011, holding that the 12% interest should be reckoned from 1 January 2010 until full payment since the revaluation the land already included the required 6% annual incremental interest under Department of Agrarian Reform Administrative Order No. 13, Series of 1994,⁷ Department of Agrarian Reform Administrative Order No. 2, Series of 2004,⁸ and Department of Agrarian Reform Administrative Order No. 6, Series of 2008,⁹ from the time of taking until December 31, 2009.

Is the landowner entitled to the payment of annual interest of 12% on the unpaid balance of just compensation, even if he was already granted the 6% annual incremental interest prescribed under Department of Agrarian Reform Order Nos.

13, Series of 1994;
02, Series of 2004; or
06, Series of 2008?

Yes.

The Supreme Court ruled that in expropriation cases, interest is imposed if there is delay in the payment of just compensation to the landowner since the obligation is deemed to be an effective forbearance on the part of the State.

The Court pegged said interest at the rate of 12% per annum on the unpaid balance of the just compensation, reckoned from the time of taking, or the time when the landowner was deprived of the use and benefit of his property, such as when title is transferred to the Republic, or emancipation patents are issued by the government, until full payment.

The Court clarified that, unlike the 6% annual incremental interest allowed in the above-mentioned department orders, this 12% annual interest is not granted on the computed just compensation. Rather, it is a penalty imposed for damages incurred by the landowner due to the delay in its payment.

The reason is that just compensation also embraces, not only the correct determination of the amount to be paid to the landowner, but also the payment of the land within a reasonable time from its taking, as otherwise, compensation cannot be considered “just,” for the owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for years before actually receiving the amount necessary to cope with his loss. Said the Court:

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The true measure is not the taker’s gain but the owner’s loss. The word “just” is used to modify the meaning of the word “compensation” to convey the idea that the equivalent to be given for the property to be taken shall be real, substantial, full, and ample.
The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking. Without prompt payment, compensation cannot be considered “just” inasmuch as the property owner is made to suffer the consequences of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss.
While prompt payment of just compensation requires the immediate deposit and release to the landowner of the provisional compensation as determined by the Department of Agrarian Reform, it does not end there. Verily, it also encompasses the payment in full of the just compensation to the landholders as finally determined by the courts. Thus, it cannot be said that there is already prompt payment of just compensation when there is only a partial payment thereof, as in this case.

N.B.:

Beginning 1 July 2013, the rate of six percent (6%) interest per annum shall be imposed until full payment, under the modification introduced by BSP-MB Circular No. 799 as affirmed in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013.

We Can’t. There is No Order of Restitution Yet.

The seafarer in this case had earlier obtained a favorable judgment from the Office of the Labor Arbiter. The National Labor Relations Commission denied the employers’ appeal. This decision of the Commission became final and a corresponding writ of execution was thereafter issued. The employers paid the judgment award consisting of the seafarer’s permanent and total disability benefits.

Later, the Court of Appeals reversed the rulings of the Office of the Labor Arbiter and the Commission and decided that the seafarer was not entitled to permanent and total disability benefits.

The seafarer filed a petition to the Supreme Court to assail the decision of the Court of Appeals. The Supreme Court denied the seafarer’s petition. The Supreme Court’s resolution soon became final.

The employers then filed a motion for issuance of a writ of execution before the Office of the Labor Arbiter seeking the restitution of the judgment award paid to the seafarer.

The said office issued an order denying employers’ motion for issuance of a writ of execution because the same was prematurely filed. Relying on the provisions of the 2011 NLRC Rules of Procedure, as amended, the said office stated that the employers failed to show that the Court of Appeals had ordered restitution in its decision.

The employers filed a petition at the National Labor Relations Commission seeking to annul the order of the Office of the Labor Arbiter and execute the Court of Appeals decision.

The National Labor Relations Commission denied the employers’ petition. According to the Commission, its 2011 NLRC Rules of Procedure, as amended, specifically Section 18 of Rule XI, expressly required that either the Court of Appeals or the Supreme Court must first order restitution before the same could be carried out by the Office of the Labor Arbiter. Since the decision of the Court of Appeals was silent on the propriety of restitution of the judgment, the Commission concluded that it could not grant the employers’ motion.

Is a higher court’s separate order of restitution or reparation of damages a conditio sine qua non before the Office of the Labor Arbiter could proceed with execution of the same?

No.

Order to Restitute Was Necessarily Included in Court of Appeals Decision

A judgment is not confined to what appears on the face of the decision, but extends as well to those necessarily included therein or necessary thereto. The execution is consequently extended to those matters necessarily included in the judgment.

In this case, the Decision of the Court of Appeals clearly found that the seafarer was not entitled to the permanent disability benefits awarded. As noted above, said Decision of the Court of Appeals was upheld by the Supreme Court.

The Supreme Court ruled that the Office of the Labor Arbiter and the National Labor Relations Commission should have determined the true intent and meaning of the Decision of the Court of Appeals, in that the said Decision should have been considered in its entirety. Thus, when the Court of Appeals declared that the disability award to seafarer was invalid, necessarily, the judgment award earlier paid by the employers should have been restituted to them.

No Supplemental Decision or Separate Order of Restitution Needed

For context, the rule relied upon by the Office of the Labor Arbiter and the National Labor Relations Commission was Section 18, Rule XI of the 2011 NLRC Rules of Procedure, as amended, which provides:

“SECTION 18. Restitution. — Where the executed judgment is totally or partially reversed or annulled by the Court of Appeals or the Supreme Court with finality and restitution is so ordered, the Labor Arbiter shall, on motion, issue such order of restitution of the executed award, except reinstatement wages paid pending appeal.”

After analyzing the said provision, the Supreme Court ruled that the same never required a separate restitution order before actual restitution can take effect.

First, the phrase “where the executed judgment is totally or partially reversed or annulled by the Court of Appeals or the Supreme Court with finality and restitution is so ordered” did not direct it and the Court of Appeals to include an order of restitution in their judgment, or otherwise restitution shall not take effect.

Second, the Supreme Court added that it, as well as the Court of Appeals, is not bound by the procedural rules of an administrative tribunal. Once the higher courts have rendered a decision, the lower tribunals have no choice but to execute the same.

Finally, the Supreme Court noted that the interpretation advanced by the Office of the Labor Arbiter and the National Labor Relations Commission was manifestly prejudicial to the victorious litigant. The Court said:

“It commands that the party must first secure an order of restitution in the higher courts before there can be a recovery of payment which, to begin with, was improper. There is no assurance that the party could definitely secure the required order of restitution in due time. The winning party will be left at the mercy of the labor tribunals, while the defeated party conveniently sits on top of another man’s earnings. The substantive right of a party to enjoy the fruits of a favorable judgment will be negated by a mere procedural technicality.”

In sum, the decision of the Supreme Court or the Court of Appeals reversing the executed judgment in this case had attained finality. The Office of the Labor Arbiter should have ordered the restitution of the executed award.

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2016 January 27

To Strong-arm Colleagues and Superiors into Succumbing to One’s Arrogance

Under the law¹ an employer may validly terminate the services of an employee for serious misconduct and willful breach by the employee of the trust reposed in him by his employer.

Serious misconduct is characterized as a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful intent and not mere error in judgment.

For misconduct to be considered as a just cause for termination, the following requisites must concur:

the misconduct must be serious;
it must relate to the performance of the employee’s duties showing that the employee has become unfit to continue working for the employer; and
it must have been performed with wrongful intent.

Loss of trust and confidence, in turn, will validate an employee’s dismissal when it is shown that:

the employee concerned holds a position of trust and confidence;² and
he performs an act that would justify such loss of trust and confidence.

Employers are allowed a wider latitude of discretion in terminating the services of employees who perform functions by which their nature require the employer’s full trust and confidence. Mere existence of basis for believing that the employee has breached the trust and confidence of the employer is sufficient and does not require proof beyond reasonable doubt. Thus, when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor tribunal cannot deny the employer the authority to dismiss him.

In this case, the Supreme Court affirmed the valid dismissal of this employee on the grounds of serious misconduct and loss of trust and confidence because it found that the employer was able to prove, through substantial evidence, the existence of the same.

SERIOUS MISCONDUCT

Employee’s misconduct was serious.

The Court found that the employee frequently exhibited disrespectful and belligerent behavior, not only to his colleagues, but also to his superiors.

Specifically, the employee had used his stature as a law graduate to insist that he is “above” his colleagues and superiors, often using misguided legalese to weasel his way out of the charges against him, as well as to strong-arm his colleagues and superiors into succumbing to his arrogance.

The Court noticed the employee’s obnoxious attitude from the following documents:

his reply to HRD 202 File 2008.02.26.036 dated February 26, 2008 wherein he threatened HRD Manager Marquez with a lawsuit, stating that if the memorandum is “proven malicious, [she] might be answerable to a certain degree of civil liability which the 1987 Constitution has given to individuals”;
HRD 202 File 2008.06.26.086 dated June 26, 2008 wherein he berated COO Bentillo in front of her subordinates with the statement: “[y]ou’re the only one who doesn’t trust her, she is very qualified, you even lose in comparison to her[,]” and his reply thereto wherein he dismissed the charge as made with malicious intent and aimed to discredit his person;
HRD 202 File 2008.06.26.088 dated June 26, 2008 wherein he argued with the CEO Quevedo, insisting that he had the authority to hire a new staff, and his reply thereto where he cited the Philippine Law Dictionary to maintain that his act did not amount to insubordination;
HRD 202 File 2008.06.26.087 dated June 26, 2008 wherein he openly questioned the authority of HRD Manager Marquez in refusing to hire a new staff and his reply thereto where he again cited the Philippine Law Dictionary to insist that he did not commit acts of insubordination; and
HRD 202 File 2008.07.04.095 dated July 4, 2008 wherein he openly and improperly confronted the CPMPC CEO during a Board of Directors’ inquiry hearing, to which he again maintained that his acts did not constitute misconduct, gross disrespect, and loss of trust and confidence as he was only looking after the welfare of the cooperative.

The Court stated that while management has the rightful prerogative to take away dissidents and undesirables from the workplace within the bounds of law, it should not be forced to deal with difficult personnel, else it be compelled to act against the best interest of its business.

According to the Court, demeanor of the employee, as revealed by the evidence above, not only reflected his defiance, but also bred antagonism in his work environment.

Employee’s conduct was work-related.

The Court found that the employee’s demeanor were were incidents which sprung from the performance of his duties.

Employee’s misconduct was performed with wrongful intent.

The Court found that the complainant did not advance any justifiable reason for the same. According to the Court, the employee came off as a smart aleck who went to the extent of dangling whatever knowledge he had of the law against his employer in a combative manner. According to the Court:

“[e]very time [the employee’s] attention was called for some inappropriate actions, he would always show his Book, Philippine Law Dictionary and would ask the CEO or HRD Manager under what provision of the law he would be liable for the complained action or omission.”

The Court concluded that the employer was justified in no longer tolerating the grossly discourteous attitude of [the employee] as it clearly constituted conduct unbecoming of his managerial position and a serious breach of order and discipline in the workplace.

LOSS OF TRUST AND CONFIDENCE

The employee occupied a position of trust and confidence.

The Court found that he was employed as Credit and Collection Manager, and later on, as Legal and Collection Manager, tasked with the duties of, among others, handling the credit and collection activities of the cooperative, which included recommending loan approvals, formulating and implementing credit and collection policies, and conducting trainings.

The employee performed acts that justified the employer’s loss of trust and confidence upon him.

The Court noted the following acts of the employee:

the forwarding of the mediation settlements for notarization to a lawyer who was not the authorized legal retainer of CPMPC;
the pull-out of important records and vital documents from the office premises, which were either lost or returned already tampered and altered; and
the incurring of unliquidated cash advances related to the notarial transactions of the mediation agreements.

Although the employee claimed that he had good intentions in entering into those transactions as he was only finding ways for his employer to save up on legal fees, the Court did not give credence to the same, considering that said transactions were not only highly irregular, but also done without the prior knowledge and consent of his employer.

Union Deprived Member’s Right to Appeal

Petitioner was a member of the Manila Water Employees Union (MWEU).

On 11 April 2007, MWEU informed petitioner that it was unable to fully deduct the increased union dues from his salary because the latter failed to issue a check-off authorization. It warned petitioner that his failure to pay the union dues would result in sanctions upon him.

MWEU, through its executive board, soon charged petitioner because he failed to pay his union dues. After hearing, the board imposed a penalty of suspension.

Following the provisions of the MWEU constitution and by-laws, petitioner appealed the decision of the executive board to MWEU’s general membership assembly. The assembly denied the appeal, stating that the prescribed period for appeal had expired. Petitioner wrote the assembly demanding that it should entertain his appeal, but the latter did not act on the same.

Thereafter, petitioner was charged again in connection with his failure to pay union dues. After hearing, the board penalized him with suspension.

Petitioner invoked his right to appeal to the assembly. However, the board did not act on the same.

Meanwhile, MWEU scheduled an election of officers, to which petitioner filed his certificate of candidacy for Vice-President. MWEU disqualified him for not being a member in good standing on account of his suspension.

MWEU charged petitioner with non-payment of union dues for the third time, but the latter did not attend the scheduled hearing. This time, the board imposed the penalty of expulsion from MWEU.

Petitioner’s plea for an appeal to the assembly were once more unheeded.

Petitioner filed a complaint against MWEU and its officers for unfair labor practices, damages, and attorney’s fees before the National Labor Relations Commission (NLRC). Petitioner accused the respondents of illegal termination from MWEU in connection with the events relative to his non-payment of union dues.

Respondents countered:

the Office of the Labor Arbiter had no jurisdiction over the dispute, it being intra-union in nature;
the Bureau of Labor Relations (BLR) was the proper venue, in accordance with law¹ and prevailing rules;² and
they were not guilty of unfair labor practices, discrimination, coercion, or restraint.

The Supreme Court acknowledged that some of petitioner’s causes of action constitute intra-union cases cognizable by the BLR under the Labor Code of the Philippines:

“An intra-union dispute refers to any conflict between and among union members, including grievances arising from any violation of the rights and conditions of membership, violation of or disagreement over any provision of the union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as inter/intra-union disputes.”

However, the Court ruled that petitioner’s charge of unfair labor practices fell within the original and exclusive jurisdiction of the Office of the Labor Arbiter under law.³ In addition, the law⁴ provides that:

“the civil aspects of all cases involving unfair labor practices, which may include claims for actual, moral, exemplary and other forms of damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of the Labor Arbiters.”

Unfair labor practices may be committed both by the employer⁵ and by labor organizations⁶. With regard to labor organizations, the law provides:

“ART. 260 (Formerly 249). Unfair labor practices of labor organizations. — It shall be unfair labor practice for a labor organization, its officers, agents or representatives:
“(a) To restrain or coerce employees in the exercise of their right to self-organization. However, a labor organization shall have the right to prescribe its own rules with respect to the acquisition or retention of membership;
“(b) To cause or attempt to cause an employer to discriminate against an employee, including discrimination against an employee with respect to whom membership in such organization has been denied or to terminate an employee on any ground other than the usual terms and conditions under which membership or continuation of membership is made available to other members;” x x x

Petitioner contended that the respondents committed unfair labor practices when he was illegally suspended and expelled with the denial of his right to appeal his case to the assembly.

On the other hand, respondents argued that such charge was intra-union in nature, and that petitioner lost his right to appeal when he failed to petition to convene the assembly in accordance with MWEU’s constitution and by-laws.

The Supreme Court interpreted said constitution and by-laws and noted that:

When an MWEU member is suspended, he is given the right to appeal such suspension within three working days from the date of notice of said suspension, which appeal the board is obligated to act upon by a simple majority vote.
When the member is expelled, said member is given seven days from notice of said dismissal and/or expulsion to appeal to the board, which is required to act by a simple majority vote of its members.
The board’s decision shall then be approved/disapproved by a majority vote of the assembly in a meeting duly called for the purpose.

The Court found that when the petitioner received the decision to suspend him for the second time, he immediately and timely filed a written appeal. However, the board did not act thereon. Then again, when petitioner was charged for the third time and meted the penalty of expulsion from MWEU, the board did not act on his timely appeal.

Thus, the Court did not agree with respondents’ argument that petitioner lost his right to appeal when he failed to petition to convene the assembly under MWEU’s constitution and by-laws. The Court ruled that the petitioner was illegally suspended for the second time and thereafter unlawfully expelled from MWEU due to respondents’ failure to act on his appeals.

According to the Court, the required petition to convene the assembly does not apply in petitioner’s case because the board must first act on his two appeals before the matter could properly be referred to the assembly.

Because respondents did not act on the two (2) appeals, petitioner was:

unceremoniously suspended;
disqualified and deprived of his right to run for the position of MWEU Vice-President;
expelled from MWEU; and
forced to join another union.

For these, the Court concluded that the respondents were guilty of unfair labor practices under law⁷ through the:

violation of petitioner’s right to self-organization;
his unlawful discrimination; and
illegal termination of his union membership.

According to the court, petitioner’s case falls within the original and exclusive jurisdiction of the Office of the Labor Arbiter.⁸

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2016 January 25

Only an Applicant; Not a Recruiter

Recruitment and Placement

The Labor Code of the Philippines¹ defines recruitment and placement as

“any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers; and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not.”

Illegal Recruitment

On the other hand, the Labor Code of the Philippines² defines illegal recruitment as

“any recruitment activities, including the prohibited practices enumerated under Article 34, to be undertaken by non-licensees or non-holders of authority.”

Illegal recruitment under the Labor Code of the Philippines³ encompasses recruitment activities for both local and overseas employment undertaken by non-licensees or non-holders of authority.

Illegal recruitment is thus committed by persons who, without authority from the government, give the impression that they have the power to send workers abroad for employment purposes.

Illegal Recruitment in Large Scale

The crime of illegal recruitment in large scale is committed when the following elements concur:

the offender has no valid license or authority required by law to enable one to engage lawfully in recruitment and placement of workers;
he or she undertakes either any activity within the meaning of “recruitment and placement” defined under Article 13, paragraph b, or any prohibited practices enumerated under Article 34 of the Labor Code; and
that the accused commits the acts against three or more persons, individually or as a group.

The Migrant Workers and Overseas Filipinos Act of 1995

Notably, the Migrant Workers and Overseas Filipinos Act of 1995 broadened the concept of illegal recruitment under the Labor Code of the Philippines and provided stiffer penalties, especially for those that constitute economic sabotage, i.e., Illegal Recruitment Committed by a Syndicate and Illegal Recruitment in Large Scale.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise, or scheme. It is deemed committed in large scale if committed against three (3) or more persons individually or as a group.

Part II of the Migrant Workers and Overseas Filipinos Act of 1995 defines and penalizes illegal recruitment for employment abroad, whether undertaken by a non-licensee or non-holder of authority or by a licensee or holder of authority.

The situation in People v. Dela Cruz⁴ was that the complainants all positively identified the appellant as the person who:

promised them employment abroad;
explained the nature of their work and their corresponding salaries;
asked for documentary requirements such as resumés, photos, and medical certificates;
asked for their placement fees;
and either directly or ultimately received the placement fees they paid.

Nonetheless, the appellant raised the defense that she was a mere applicant for overseas work at a travel agency, and not a recruiter.

The Court was not convinced of said defense.

It held that to prove illegal recruitment, it must be shown that the appellant gave complainants the distinct impression that she had the power or ability to send complainants abroad for work such that the latter were convinced to part with their money in order to be employed. The Court found the testimonies of these witnesses credible and convincing.

It also noted that the appellant failed to present any evidence to substantiate her claim that she was recruited by the supposed owners of the agency as a domestic helper in Brunei. Record even showed that she signed some of the petty cash vouchers issued to the complainants. It thus ruled that the appellant’s mere denial failed over the positive and categorical testimonies of the complainants.

Appellant was found guilty of committing illegal recruitment in large scale.

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2016 January 25

Seafarer’s Unjustified Refusal to Continue His Medical Treatment

On 30 September 2008, the respondents hired the seafarer in this case as fitter aboard the vessel Crown Garnet for a period of nine (9) months. He embarked on 4 October 2008.

The seafarer claimed that in January 2009, he started experiencing neck and lower back pain. He then stated that he signed off from the vessel on 13 July 2009 (although it was not clear in the case whether the same was by way of medical repatriation or of the expiration of his employment contract).

Upon arrival in the Philippines on 15 July 2009, he was referred to the company-designated physician and was diagnosed with “cervical radiculopathy, thoracic and lumbar spondylosis, as well as carpal tunnel syndrome of the left, and trigger finger, third digit of his right hand.” He underwent carpal tunnel surgery on his left hand, and physical therapy sessions for his cervical and lumbar condition.

On 23 November 2009, the seafarer filed a complaint for disability benefits against the respondents.

The Supreme Court denied the seafarer’s disability benefits in this case.

At the time the complaint for disability benefits was filed, the seafarer had no cause of action.

The Court found that when the seafarer filed said complaint, he was still under the care of the company-designated physician. He also had not even consulted a personal doctor before he instituted his complaint.

The company-designated physician even advised the seafarer to seek the opinion of an orthopedic specialist. The seafarer, however, did not heed the advice and proceeded to file his complaint for disability benefits. It was only a day after its filing that the seafarer requested from the company-designated physician the latter’s assessment on his medical condition.

Since the company-designated physician was yet to issue an assessment on the seafarer’s medical condition, and since the 240-day maximum period for determining the seafarer’s disability or fitness to work had not yet lapsed, the Court accordingly concluded that the seafarer prematurely filed his complaint.

The seafarer reneged on his duties under the Philippine Overseas Employment Administration Standard Employment Contract.

In his report, the company-designated physician stated that while there was a good chance the seafarer will be declared fit to work, this was premised on the completion of his remaining therapy sessions to address the pain in his left hand and back. The seafarer thereafter complained of pain on the neck and additional pain of the lower back which was not originally present at the start of his treatment. Thus, the company-designated physician intended to prolong the seafarer’s treatment. However, the seafarer no longer reported to the clinic of the said physician.

The Philippine Overseas Employment Administration Standard Employment Contract¹ provides that

“[n]o compensation and benefits shall be payable in respect of any injury, incapacity, disability or death of the seafarer resulting from his willful or criminal act or intentional breach of his duties, provided however, that the employer can prove that such injury, incapacity, disability or death is directly attributable to the seafarer.”

The Court found that the seafarer was aware that he had the duty to undergo medical treatment, physical therapy sessions, including the recommended consultation to an orthopedic specialist, in order to give the company-designated physician the opportunity to determine his fitness to work or to assess the degree of his disability. His inability to continue his treatment without any valid explanation proved that he neglected his corresponding duty to continue his medical treatment. Consequently, the seafarer’s inability to regularly return for his treatment caused the regress of his condition. According to the Court, had the seafarer been cooperative with his treatment and shown interest in improving his condition, it would have been possible for the company-designated physician to declare him fit to work.

The Court thus declared that the seafarer failed to comply with the terms of the Philippine Overseas Employment Administration Standard Employment Contract. The absence of a timely assessment was not caused by the company-designated physician, but had resulted from seafarer’s refusal to cooperate and undergo further treatment. Such failure to abide with the procedure under the said contract resulted in his non-entitlement to disability benefits.

A Mere Employee; Not the Owner

To constitute illegal recruitment in large scale, three elements must concur:

The offender has no valid license or authority required by law to enable him to lawfully engage in recruitment placement of workers;
The offender undertakes any of the activities within the meaning of “recruitment and placement” under the Labor Code of the Philippines, or any of the prohibited practices enumerated under the Migrant Workers and Overseas Filipinos Act of 1995; and
The offender committed the same against three or more persons, individually or as a group.

The Labor Code of the Philippines¹ defines “recruitment and placement” as

“any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not.”

It also provides that

“any person or entity which, in any manner, offers or promises for a fee, employment to two or more persons shall be deemed engaged in recruitment and placement.”

The Migrant Workers and Overseas Filipinos Act of 1995,² in turn, provides:

SEC. 6. Definition. — For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract services, promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No, 442, as amended, otherwise known as the Labor Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any person, whether a non-licensee, non-holder, licensee or holder of authority:

x x x
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and processing for purposes of deployment, in cases where the deployment does not actually take place without the worker’s fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring or confederating with one another. It is deemed committed in large scale if committed against three (3) or more persons individually or as a group. (Emphases supplied.)

The accused in this case contended that the prosecution failed to prove her guilt beyond reasonable doubt as the first element of illegal recruitment in large scale, i.e., she undertook a recruitment activity as contemplated under the law. She pointed out that:

She was incapable of deploying workers to Istanbul, Turkey, for she only worked as a cashier at the agency. She issued vouchers for payments made by its clients and subsequently turned over such payments to the true owner of the agency;
She did not entice the private complainants to apply for work overseas. The private complainants themselves testified that they learned about the job opportunities abroad from the travel agency’s employees. The accused posits that these persons were so persuasive that private complainants traveled from their respective provinces to Manila just to meet her;
If it were true that she received money from private complainants, she would have already fled after getting private complainants’ money so as to evade arrest; and
The prosecution presented a mere photocopy of the handwritten agreement that she supposedly executed. Considering that the contents of such agreement are in issue in this case, the Court wrongfully accorded much weight to such evidence.

The Supreme Court did not agree.

First, the accused’s allegations lacked corroborative evidence. The accused failed to present her appointment papers, identification card, payslips or other pieces of evidence to establish her employment. Record shows that the vouchers for the placement fees paid by private complainants were issued and signed by the accused herself, without any indication that she issued and signed the same on behalf of the purported true owner of RBC. The accused was even unable to substantiate the claim that the said owner received the amounts paid by the private complainants.

Second, there was no showing that agency was licensed as a recruitment agency. On the other hand, record revealed that the Philippine Overseas Employment Administration issued a certification on May 17, 2005 stating that the accused, in her personal capacity, and the agency were not licensed to recruit workers for overseas employment.

Third, record established that the accused had engaged in recruitment activities. Employees of the agency brought private complainants to the former’s office and introduced them to the accused. It was the accused herself who offered and promised private complainants jobs in Istanbul, Turkey, in consideration of placement fees.

Finally, the non-presentation of the original copy of the handwritten agreement was not fatal to the prosecution’s case. A private complainant personally testified before the Regional Trial Court as to the circumstances of her recruitment by the accused, who made verbal, and not only written, promises to the said complainant of employment abroad. According to the Court, the handwritten agreement merely substantiated the private complainant’s testimony at best.

Employees of the Principal

Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) was a multi-purpose cooperative composed of agrarian reform beneficiaries who were awarded portions of the banana plantation of Diamond Farms, Inc. (DFI).

DARBMUPCO entered into a Banana Production and Purchase Agreement (BPPA) with DFI. Under the BPPA, DARBMUPCO and its members, as owners of the awarded plantation, agreed to grow and cultivate only high grade quality exportable bananas to be sold exclusively to DFI.

DARBMUPCO was, however, hampered by lack of manpower to undertake the agricultural operation under the BPPA because some of its members were not willing to work. Hence, to assist DARBMUPCO in meeting its production obligations under the BPPA, DFI engaged the services of contractors. Said contractors recruited workers for the agricultural operation under the BPPA.

The legitimate labor organization representing the workers filed a petition for certification election in the Office of the Med-Arbiter. DARBMUPCO and DFI, however, denied that they were the employers of the workers. They claimed, instead, that the workers were the employees of the contractors.

A group of workers then filed a case for money claims and attorney’s fees against DFI, DARBMUPCO, and the contractors before the National Labor Relations Commission (NLRC). DARBMUPCO and DFI also averred that they were not the employers of the workers. They asserted that the money claims should be directed against the true employer, the contractors.

Who among DFI, DARBMUPCO, and the contractors is the employer of the workers?

Job contracting is permissible if the following conditions are met:

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
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.

By contrast, there is labor-only contracting if a person who undertakes to supply workers to an employer:

Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and
The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed.

In this case, the Supreme Court held that DFI was the true employer of the workers and that the contractors were labor-only contractors.

First, the Court found no evidence showing that herein contractors could be considered as independent contractors. The contractors, DFI, and DARBMUPCO also did not offer any proof that the contractors were not engaged in labor-only contracting.

Second, the Court found that the contractors also admitted and even insisted that they were engaged in labor-only contracting.

Record showed it was DFI which hired the contractors, who, in turn, hired their own men to work in the land of DARBMUPCO and in the plantation.

DFI did not deny that it engaged the services of the contractors. It did not dispute the claims of the contractors that they sent their billing to DFI for payment, and that DFI’s managers and personnel were in close consultation with the contractors.

DFI admitted that the contractors worked under the direction and supervision of the DFI managers and personnel. DFI paid the contractors for the services rendered in the plantation and the contractors, in turn, paid their workers after the contractors received payment from DFI. DARBMUPCO had nothing to do with the hiring, supervision and payment of the wages of the workers thru the contractors.

That DFI was the employer of the workers was bolstered by the fact that DFI exercised control over the workers. DFI, through its manager and supervisors, provided for the work assignments and performance targets of the workers. The managers and supervisors also had the power to directly hire and terminate the workers. Evidently, DFI wielded control over the workers.

During the proceedings before the Office of the Labor Arbiter, the contractors categorically stated that they are “labor-only” contractors who have been engaged by DFI and DARBMUPCO. They admitted that they did not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials, and they recruited workers to perform activities directly related to the principal operations of their employer.

In their petition before the Supreme Court, the contractors again admitted that they were labor-only contractors by way of the following narration:

Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner, Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers] (as represented by Southern Philippines Federation of Labor (SPFL) in this appeal by certiorari), in order to perform specific farm activities, such as pruning, deleafing, fertilizer application, bud inject, stem spray, drainage, bagging, etc., on banana plantation lands awarded to private respondent, Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on banana planted lands owned and managed by petitioner, DFI.
All farm tools, implements and equipment necessary to performance of such farm activities were supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et al. as well as to respondents-SPFL, et al. Herein respondents Voltaire Lopez, Jr. et al. had no adequate capital to acquire or purchase such tools, implements, equipment, etc.
Herein respondents Voltaire Lopez, Jr., et al. as well as respondents-SPFL, et al. were being directly supervised, controlled and managed by petitioner DFI farm managers and supervisors, specifically on work assignments and performance targets. DFI managers and supervisors, at their sole discretion and prerogative, could directly hire and terminate any or all of the respondents-SPFL, et al., including any or all of the herein respondents Voltaire Lopez, Jr., et al.
Attendance/Time sheets of respondents-SPFL, et al. were being prepared by herein respondents Voltaire Lopez, Jr., et al., and correspondingly submitted to petitioner DFI. Payment of wages to respondents-SPFL, et al. were being paid for by petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et al. The latter were also receiving their wages/salaries from petitioner DFI for monitoring/leading/recruiting the respondents-SPFL, et al.
No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al., nor to herein respondents Voltaire Lopez, [Jr.], et al. Nor did respondent DARBMUPCO directly intervene much less supervise any or all of [the] respondents-SPFL, et al. including herein respondents Voltaire Lopez, Jr., et al.

According to the Court, the contractors voluntarily pleaded that they were labor-only contractors. Such admissions had bound them.

Third, the Court ruled that DFI could not argue that DARBMUPCO was the principal of the contractors because it (DARBMUPCO) owned the awarded plantation where contractors and workers were working; and therefore DARBMUPCO was the ultimate beneficiary of the employment of the workers.

That DARBMUPCO owned the awarded plantation where the contractors and workers were working was immaterial. This did not change the situation of the parties. DFI, as the principal, hired the contractors and the latter, in turn, engaged the services of the workers.

And fourth, the Court stated that neither could DFI argue that it was only the purchaser of the bananas produced in the awarded plantation under the BPPA, and that under the terms of the BPPA, no employer-employee relationship existed between DFI and the workers, to wit:

UNDERTAKING OF THE FIRST PARTY
x x x
THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general welfare of its members working in the plantation and specifically render free and harmless the SECOND PARTY [DFI] of any expense, liability or claims arising therefrom. It is clearly recognized by the FIRST PARTY that its members and other personnel utilized in the performance of its function under this agreement are not employees of the SECOND PARTY.

In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and the workers of the labor-only contractor.

Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that workers were not employees of DFI was not controlling, as the proven facts showed otherwise. The Court stressed that the law prevails over the stipulations of the parties. The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement.

A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee relationship between the principal, and the workers of the labor-only contractor; the labor-only contractor is deemed only as the agent of the principal.

Thus, in this case, contractors were found to be labor-only contractors, and DFI was declared the true employer of the workers. Under the law, DFI should be solidarily liable with the contractors for the rightful claims of the workers, to the same manner and extent as if the latter were directly employed by DFI.

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2016 January 13

Offer to Pay Monetary Award

In the present case, the Court of Appeals reversed the decision of the National Labor Relations Commission and reinstated the Labor Arbiter’s dismissal of the complaint.

Complainant moved to reconsider the decision of the Court of Appeals, arguing that respondent’s offer to pay the monetary award granted by the National Labor Relations Commission was a compromise agreement that “operates to end litigation and put the case to rest.” The Court of Appeals denied the motion for reconsideration, after which the complainant went to the Supreme Court.

Has respondent’s offer to pay the monetary award of the National Labor Relations Commission constituted a compromise agreement that should have ended the present case?

No.

The Supreme Court held that respondent’s offer to pay the said amount was not in the nature of a compromise agreement.

The Court found that the reason for the offer of payment was complainant’s move to execute the decision of the National Labor Relations Commission, that then left respondent with no recourse but to pay. Such payment was in compliance with the writ of execution issued by the Commission.

The Rules of Procedure of the National Labor Relations Commission provides that its decisions, resolutions or orders shall become final and executory after ten (10) calendar days from receipt thereof. It also states that a writ of execution may be issued motu proprio or on motion, upon a decision or order that has become final and executory. The execution of the final and executory decision or resolution of the Commission shall proceed despite the pendency of a petition for certiorari, unless it is restrained by the proper court.

Since the Court of Appeals issued no temporary restraining order or writ of injunction against the decision of the National Labor Relations Commission, such judgment became final and executory after ten calendar days from its receipt by counsel or party. Consequently, the petitioner moved for the issuance of the writ of execution. Respondent avers that the issuance of the writ of execution and notice of garnishment forced it to pay the monetary award of the National Labor Relations Commission to avoid its bank account being frozen and to prevent the cessation of its operations.

The Supreme Court thus found no intent on the part of the respondent to enter into a compromise agreement to put an end to this dispute. According to the Court, if such was the case, then the respondent could have simply moved to withdraw its petition before the Court of Appeals, specifically manifesting the execution by the parties of a compromise agreement. On the contrary, respondent was found to have pursued its case before the Court of Appeals and vigorously opposed the petition the Supreme Court.

Paulino Ungos III

We Can’t. There is No Order of Restitution Yet.

Order to Restitute Was Necessarily Included in Court of Appeals Decision

No Supplemental Decision or Separate Order of Restitution Needed

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To Strong-arm Colleagues and Superiors into Succumbing to One’s Arrogance

SERIOUS MISCONDUCT

Employee’s misconduct was serious.

Employee’s conduct was work-related.

Employee’s misconduct was performed with wrongful intent.

LOSS OF TRUST AND CONFIDENCE

The employee occupied a position of trust and confidence.

The employee performed acts that justified the employer’s loss of trust and confidence upon him.

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Union Deprived Member’s Right to Appeal

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Employees of the Principal

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Offer to Pay Monetary Award

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