Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 78742 July 14, 1989

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ,

GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR
B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J.
PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M. MORALES,
BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.

G.R. No. 79310 July 14, 1989

ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,

HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.

G.R. No. 79744 July 14, 1989

INOCENTES PABICO, petitioner,

vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON.
JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and
Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO
TAAY, respondents.

G.R. No. 79777 July 14, 1989

NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,

vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life
on his way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules
flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their
struggle. This happened several times to Hercules' increasing amazement. Finally, as they
continued grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never die
as long as any part of his body was touching his Mother Earth. Thus forewarned, Hercules then held
Antaeus up in the air, beyond the reach of the sustaining soil, and crushed him to death.

Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the
powerful Antaeus weakened and died.

The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental
forces of life and death, of men and women who, like Antaeus need the sustaining strength of the
precious earth to stay alive.

"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this
precious resource among our people. But it is more than a slogan. Through the brooding centuries, it
has become a battle-cry dramatizing the increasingly urgent demand of the dispossessed among us
for a plot of earth as their place in the sun.

Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the
well-being and economic security of all the people," 1 especially the less privileged. In 1973, the new
Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property and equitably diffuse property
ownership and profits." 2 Significantly, there was also the specific injunction to "formulate and
implement an agrarian reform program aimed at emancipating the tenant from the bondage of the
soil." 3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted
one whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but
undoubtedly sincere provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:

SEC. 4. The State shall, by law, undertake an agrarian reform program founded on
the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for voluntary land-
sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already
been enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated
principles. This was substantially superseded almost a decade later by P.D. No. 27, which was
promulgated on October 21, 1972, along with martial law, to provide for the compulsory acquisition
of private lands for distribution among tenant-farmers and to specify maximum retention limits for
landowners.

The people power revolution of 1986 did not change and indeed even energized the thrust for
agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228,
declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the
valuation of still unvalued lands covered by the decree as well as the manner of their payment. This
was followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a comprehensive
agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took over
legislative power from the President and started its own deliberations, including extensive public
hearings, on the improvement of the interests of farmers. The result, after almost a year of spirited
debate, was the enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This law, while considerably
changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions,
including serious challenges to the constitutionality of the several measures mentioned above. They
will be the subject of one common discussion and resolution, The different antecedents of each case
will require separate treatment, however, and will first be explained hereunder.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and
R.A. No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner
Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by
petitioner Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No.
228 as qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of
separation of powers, due process, equal protection and the constitutional limitation that no private
property shall be taken for public use without just compensation.

They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228.
The said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure
to provide for retention limits for small landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.

In connection with the determination of just compensation, the petitioners argue that the same may
be made only by a court of justice and not by the President of the Philippines. They invoke the
recent cases of EPZA v. Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just
compensation contemplated by the Bill of Rights is payable in money or in cash and not in the form
of bonds or other things of value.

In considering the rentals as advance payment on the land, the executive order also deprives the
petitioners of their property rights as protected by due process. The equal protection clause is also
violated because the order places the burden of solving the agrarian problems on the owners only of
agricultural lands. No similar obligation is imposed on the owners of other properties.

The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners
of the lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due
process. Worse, the measure would not solve the agrarian problem because even the small farmers
are deprived of their lands and the retention rights guaranteed by the Constitution.

In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the
earlier cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn
Producers of the Philippines, Inc. v. The National Land Reform Council. 9 The determination of just
compensation by the executive authorities conformably to the formula prescribed under the
questioned order is at best initial or preliminary only. It does not foreclose judicial intervention
whenever sought or warranted. At any rate, the challenge to the order is premature because no
valuation of their property has as yet been made by the Department of Agrarian Reform. The
petitioners are also not proper parties because the lands owned by them do not exceed the
maximum retention limit of 7 hectares.

Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for
retention limits on tenanted lands and that in any event their petition is a class suit brought in behalf
of landowners with landholdings below 24 hectares. They maintain that the determination of just
compensation by the administrative authorities is a final ascertainment. As for the cases invoked by
the public respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez, while
what was decided in Gonzales was the validity of the imposition of martial law.

In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228
and 229 (except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless,
this statute should itself also be declared unconstitutional because it suffers from substantially the
same infirmities as the earlier measures.

A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a
1. 83- hectare land, who complained that the DAR was insisting on the implementation of P.D. No.
27 and E.O. No. 228 despite a compromise agreement he had reached with his tenant on the
payment of rentals. In a subsequent motion dated April 10, 1989, he adopted the allegations in the
basic amended petition that the above- mentioned enactments have been impliedly repealed by R.A.
No. 6657.

G.R. No. 79310

The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias,
Negros Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400
planter-members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No.
229.

The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as
decreed by the Constitution belongs to Congress and not the President. Although they agree that the
President could exercise legislative power until the Congress was convened, she could do so only to
enact emergency measures during the transition period. At that, even assuming that the interim
legislative power of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still
have to be annulled for violating the constitutional provisions on just compensation, due process,
and equal protection.

They also argue that under Section 2 of Proc. No. 131 which provides:

Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost
of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
wealth received through the Presidential Commission on Good Government and such other sources
as government may deem appropriate. The amounts collected and accruing to this special fund shall
be considered automatically appropriated for the purpose authorized in this Proclamation the amount
appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated
expropriation has yet to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just compensation as it
is traditionally understood, i.e., with money and in full, but no such payment is contemplated in
Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to be established by the government,
which shall be based on the owner's declaration of current fair market value as provided in Section 4
hereof, but subject to certain controls to be defined and promulgated by the Presidential Agrarian
Reform Council." This compensation may not be paid fully in money but in any of several modes that
may consist of part cash and part bond, with interest, maturing periodically, or direct payment in
cash or bond as may be mutually agreed upon by the beneficiary and the landowner or as may be
prescribed or approved by the PARC.

The petitioners also argue that in the issuance of the two measures, no effort was made to make a
careful study of the sugar planters' situation. There is no tenancy problem in the sugar areas that
can justify the application of the CARP to them. To the extent that the sugar planters have been
lumped in the same legislation with other farmers, although they are a separate group with problems
exclusively their own, their right to equal protection has been violated.

A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane
Planters (NASP) which claims a membership of at least 20,000 individual sugar planters all over the
country. On September 10, 1987, another motion for intervention was filed, this time by Manuel
Barcelona, et al., representing coconut and riceland owners. Both motions were granted by the
Court.

NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that,
in any event, the appropriation is invalid because of uncertainty in the amount appropriated. Section
2 of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty
billion pesos and thus specifies the minimum rather than the maximum authorized amount. This is
not allowed. Furthermore, the stated initial amount has not been certified to by the National
Treasurer as actually available.

Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and
convincing evidence the necessity for the exercise of the powers of eminent domain, and the
violation of the fundamental right to own property.

The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of
the said land for an amount equal to the government assessor's valuation of the land for tax
purposes. On the other hand, if the landowner declares his own valuation he is unjustly required to
immediately pay the corresponding taxes on the land, in violation of the uniformity rule.

In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality
in favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as
explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general survey on the people's
opinion thereon are not indispensable prerequisites to its promulgation.

On the alleged violation of the equal protection clause, the sugar planters have failed to show that
they belong to a different class and should be differently treated. The Comment also suggests the
possibility of Congress first distributing public agricultural lands and scheduling the expropriation of
private agricultural lands later. From this viewpoint, the petition for prohibition would be premature.

The public respondent also points out that the constitutional prohibition is against the payment of
public money without the corresponding appropriation. There is no rule that only money already in
existence can be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as
Agrarian Reform Fund, although denominated as an initial amount, is actually the maximum sum
appropriated. The word "initial" simply means that additional amounts may be appropriated later
when necessary.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing
the constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends
that the measure is unconstitutional because:

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;

(3) The power of the President to legislate was terminated on July 2, 1987; and

(4) The appropriation of a P50 billion special fund from the National Treasury did not
originate from the House of Representatives.

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due
process and the requirement for just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.

On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding
under Operation Land transfer and asked for the recall and cancellation of the Certificates of Land
Transfer in the name of the private respondents. He claims that on December 24, 1986, his petition
was denied without hearing. On February 17, 1987, he filed a motion for reconsideration, which had
not been acted upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion
moot and academic because they directly effected the transfer of his land to the private respondents.

The petitioner now argues that:

(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.

(2) The said executive orders are violative of the constitutional provision that no
private property shall be taken without due process or just compensation.

(3) The petitioner is denied the right of maximum retention provided for under the
1987 Constitution.

The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress
convened is anomalous and arbitrary, besides violating the doctrine of separation of powers. The
legislative power granted to the President under the Transitory Provisions refers only to emergency
measures that may be promulgated in the proper exercise of the police power.

The petitioner also invokes his rights not to be deprived of his property without due process of law
and to the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of
the Constitution. He likewise argues that, besides denying him just compensation for his land, the
provisions of E.O. No. 228 declaring that:
 Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972
shall be considered as advance payment for the land.

is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of
even small landowners in the program along with other landowners with lands consisting of seven
hectares or more is undemocratic.

In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article
XVIII of the Transitory Provisions of the 1987 Constitution which reads:

The incumbent president shall continue to exercise legislative powers until the first Congress is
convened.

On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on
October 21. 1972, the tenant-farmer of agricultural land was deemed the owner of the land he was
tilling. The leasehold rentals paid after that date should therefore be considered amortization
payments.

In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved
on December 14, 1987. An appeal to the Office of the President would be useless with the
promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public
respondent's acts.

G.R. No. 78742

The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and
corn lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the
same. Their respective lands do not exceed the statutory limit but are occupied by tenants who are
actually cultivating such lands.

According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be

ejected or removed from his farmholding until such time as the respective rights of
the tenant- farmers and the landowner shall have been determined in accordance
with the rules and regulations implementing P.D. No. 27.

The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of
retention because the Department of Agrarian Reform has so far not issued the implementing rules
required under the above-quoted decree. They therefore ask the Court for a writ of mandamus to
compel the respondent to issue the said rules.

In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474
removing any right of retention from persons who own other agricultural lands of more than 7
hectares in aggregate area or lands used for residential, commercial, industrial or other purposes
from which they derive adequate income for their family. And even assuming that the petitioners do
not fall under its terms, the regulations implementing P.D. No. 27 have already been issued, to wit,
the Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small Landowners, with
an accompanying Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated December
29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners),
and DAR Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to
Apply for Retention and/or to Protest the Coverage of their Landholdings under Operation Land
Transfer pursuant to P.D. No. 27). For failure to file the corresponding applications for retention
under these measures, the petitioners are now barred from invoking this right.

The public respondent also stresses that the petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the
issuance of the implementing rules, assuming this has not yet been done, involves the exercise of
discretion which cannot be controlled through the writ of mandamus. This is especially true if this
function is entrusted, as in this case, to a separate department of the government.

In their Reply, the petitioners insist that the above-cited measures are not applicable to them
because they do not own more than seven hectares of agricultural land. Moreover, assuming
arguendo that the rules were intended to cover them also, the said measures are nevertheless not in
force because they have not been published as required by law and the ruling of this Court
in Tanada v. Tuvera.10 As for LOI 474, the same is ineffective for the additional reason that a mere
letter of instruction could not have repealed the presidential decree.

Although holding neither purse nor sword and so regarded as the weakest of the three departments
of the government, the judiciary is nonetheless vested with the power to annul the acts of either the
legislative or the executive or of both when not conformable to the fundamental law. This is the
reason for what some quarters call the doctrine of judicial supremacy. Even so, this power is not
lightly assumed or readily exercised. The doctrine of separation of powers imposes upon the courts
a proper restraint, born of the nature of their functions and of their respect for the other departments,
in striking down the acts of the legislative and the executive as unconstitutional. The policy, indeed,
is a blend of courtesy and caution. To doubt is to sustain. The theory is that before the act was done
or the law was enacted, earnest studies were made by Congress or the President, or both, to insure
that the Constitution would not be breached.

In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members of the Supreme
Court who took part in the deliberations and voted on the issue during their session en banc.11 And
as established by judge made doctrine, the Court will assume jurisdiction over a constitutional
question only if it is shown that the essential requisites of a judicial inquiry into such a question are
first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination, the constitutional question must have been opportunely raised
by the proper party, and the resolution of the question is unavoidably necessary to the decision of
the case itself. 12

With particular regard to the requirement of proper party as applied in the cases before us, we hold
that the same is satisfied by the petitioners and intervenors because each of them has sustained or
is in danger of sustaining an immediate injury as a result of the acts or measures complained
of. 13 And even if, strictly speaking, they are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking
only an indirect and general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental importance to the
public of these cases demands that they be settled promptly and definitely, brushing aside, if we
must, technicalities of procedure." We have since then applied this exception in many other cases. 15

The other above-mentioned requisites have also been met in the present petitions.

In must be stressed that despite the inhibitions pressing upon the Court when confronted with
constitutional issues like the ones now before it, it will not hesitate to declare a law or act invalid
when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the
Constitution as God and its conscience give it the light to probe its meaning and discover its
purpose. Personal motives and political considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.

For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make
the hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these
departments, or of any public official, betray the people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that —

... when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under
the Constitution and to establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is in truth all that is
involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitution. 16

The cases before us categorically raise constitutional questions that this Court must categorically
resolve. And so we shall.

II

We proceed first to the examination of the preliminary issues before resolving the more serious
challenges to the constitutionality of the several measures involved in these petitions.

The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law
has already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on
that issue. As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and
229, the same was authorized under Section 6 of the Transitory Provisions of the 1987 Constitution,
quoted above.

The said measures were issued by President Aquino before July 27, 1987, when the Congress of
the Philippines was formally convened and took over legislative power from her. They are not
"midnight" enactments intended to pre-empt the legislature because E.O. No. 228 was issued on
July 17, 1987, and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on
July 22, 1987. Neither is it correct to say that these measures ceased to be valid when she lost her
legislative power for, like any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso facto become inoperative
simply because of the dissolution of the legislature that enacted it. By the same token, President
Aquino's loss of legislative power did not have the effect of invalidating all the measures enacted by
her when and as long as she possessed it.

Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially
affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A.
No. 6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said
measures, like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and
21 of E.O. No. 229, have been incorporated by reference in the CARP Law. 18

That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No.
131 is not an appropriation measure even if it does provide for the creation of said fund, for that is
not its principal purpose. An appropriation law is one the primary and specific purpose of which is to
authorize the release of public funds from the treasury. 19 The creation of the fund is only incidental to
the main objective of the proclamation, which is agrarian reform.

It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section
25(4) of Article VI, are not applicable. With particular reference to Section 24, this obviously could
not have been complied with for the simple reason that the House of Representatives, which now
has the exclusive power to initiate appropriation measures, had not yet been convened when the
proclamation was issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated
because they do not provide for retention limits as required by Article XIII, Section 4 of the
Constitution is no longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the
law, which in fact is one of its most controversial provisions. This section declares:

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-sized farm, such as
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. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or
directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.

The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one
subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill
does not have to be a catalogue of its contents and will suffice if the matters embodied in the text are
relevant to each other and may be inferred from the title. 20

The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever
name it was called, had the force and effect of law because it came from President Marcos. Such
are the ways of despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI
474 could not have repealed P.D. No. 27 because the former was only a letter of instruction. The
important thing is that it was issued by President Marcos, whose word was law during that time.

But for all their peremptoriness, these issuances from the President Marcos still had to comply with
the requirement for publication as this Court held in Tanada v. Tuvera. 21 Hence, unless published in
the Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that case. LOI 474 was
published, though, in the Official Gazette dated November 29,1976.)

Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus
cannot issue to compel the performance of a discretionary act, especially by a specific department of
the government. That is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be exercised. In other words, mandamus
can issue to require action only but not specific action.

Whenever a duty is imposed upon a public official and an unnecessary and

unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed
by law, the courts will intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will require specific action. If
the duty is purely discretionary, the courts by mandamus will require action only. For
example, if an inferior court, public official, or board should, for an unreasonable
length of time, fail to decide a particular question to the great detriment of all parties
concerned, or a court should refuse to take jurisdiction of a cause when the law
clearly gave it jurisdiction mandamus will issue, in the first case to require a decision,
and in the second to require that jurisdiction be taken of the cause. 22

And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy
and adequate remedy available from the administrative authorities, resort to the courts may still be
permitted if the issue raised is a question of law. 23

III

There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. In the case
of City of Baguio v. NAWASA, 24for example, where a law required the transfer of all municipal
waterworks systems to the NAWASA in exchange for its assets of equivalent value, the Court held
that the power being exercised was eminent domain because the property involved was wholesome
and intended for a public use. Property condemned under the police power is noxious or intended for
a noxious purpose, such as a building on the verge of collapse, which should be demolished for the
public safety, or obscene materials, which should be destroyed in the interest of public morals. The
confiscation of such property is not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.

In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police
power in a famous aphorism: "The general rule at least is that while property may be regulated to a
certain extent, if regulation goes too far it will be recognized as a taking." The regulation that went
"too far" was a law prohibiting mining which might cause the subsidence of structures for human
habitation constructed on the land surface. This was resisted by a coal company which had earlier
granted a deed to the land over its mine but reserved all mining rights thereunder, with the grantee
assuming all risks and waiving any damage claim. The Court held the law could not be sustained
without compensating the grantor. Justice Brandeis filed a lone dissent in which he argued that there
was a valid exercise of the police power. He said:

Every restriction upon the use of property imposed in the exercise of the police
power deprives the owner of some right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition of
a noxious use. The property so restricted remains in the possession of its owner. The
state does not appropriate it or make any use of it. The state merely prevents the
owner from making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious — as it may because of further
changes in local or social conditions — the restriction will have to be removed and
the owner will again be free to enjoy his property as heretofore.

Recent trends, however, would indicate not a polarization but a mingling of the police power and the
power of eminent domain, with the latter being used as an implement of the former like the power of
taxation. The employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the University of Illinois
College of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which
sustained a zoning law under the police power) makes the following significant remarks:

Euclid, moreover, was decided in an era when judges located the Police and eminent
domain powers on different planets. Generally speaking, they viewed eminent
domain as encompassing public acquisition of private property for improvements that
would be available for public use," literally construed. To the police power, on the
other hand, they assigned the less intrusive task of preventing harmful externalities a
point reflected in the Euclid opinion's reliance on an analogy to nuisance law to
bolster its support of zoning. So long as suppression of a privately authored harm
bore a plausible relation to some legitimate "public purpose," the pertinent measure
need have afforded no compensation whatever. With the progressive growth of
government's involvement in land use, the distance between the two powers has
contracted considerably. Today government often employs eminent domain
interchangeably with or as a useful complement to the police power-- a trend
expressly approved in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use" test to match that of the
police power's standard of "public purpose." 27

The Berman case sustained a redevelopment project and the improvement of blighted areas in the
District of Columbia as a proper exercise of the police power. On the role of eminent domain in the
attainment of this purpose, Justice Douglas declared:

If those who govern the District of Columbia decide that the Nation's Capital should
be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands
in the way.

Once the object is within the authority of Congress, the right to realize it through the
exercise of eminent domain is clear.

For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S
Supreme Court sustained the respondent's Landmarks Preservation Law under which the owners of
the Grand Central Terminal had not been allowed to construct a multi-story office building over the
Terminal, which had been designated a historic landmark. Preservation of the landmark was held to
be a valid objective of the police power. The problem, however, was that the owners of the Terminal
would be deprived of the right to use the airspace above it although other landowners in the area
could do so over their respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central Terminal which it
said would "undoubtedly mitigate" the loss caused by the regulation. This "fair compensation," as he
called it, was explained by Prof. Costonis in this wise:

In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized
to transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark — the rights which would have been exhausted by the 59-
story building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on
neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its
losses at the Terminal site by constructing or selling to others the right to construct larger, hence
more profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation, it becomes necessary to
deprive such owners of whatever lands they may own in excess of the maximum area allowed, there
is definitely a taking under the power of eminent domain for which payment of just compensation is
imperative. The taking contemplated is not a mere limitation of the use of the land. What is required
is the surrender of the title to and the physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer-beneficiary. This is definitely an exercise not of the
police power but of the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent domain, the several
measures before us are challenged as violative of the due process and equal protection clauses.

The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many
bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits finally
agreed upon are, curiously enough, not being questioned in these petitions. We therefore do not
discuss them here. The Court will come to the other claimed violations of due process in connection
with our examination of the adequacy of just compensation as required under the power of
expropriation.

The argument of the small farmers that they have been denied equal protection because of the
absence of retention limits has also become academic under Section 6 of R.A. No. 6657.
Significantly, they too have not questioned the area of such limits. There is also the complaint that
they should not be made to share the burden of agrarian reform, an objection also made by the
sugar planters on the ground that they belong to a particular class with particular interests of their
own. However, no evidence has been submitted to the Court that the requisites of a valid
classification have been violated.

Classification has been defined as the grouping of persons or things similar to each other in certain
particulars and different from each other in these same particulars. 31 To be valid, it must conform to
the following requirements: (1) it must be based on substantial distinctions; (2) it must be germane to
the purposes of the law; (3) it must not be limited to existing conditions only; and (4) it must apply
equally to all the members of the class. 32 The Court finds that all these requisites have been met by
the measures here challenged as arbitrary and discriminatory.

Equal protection simply means that all persons or things similarly situated must be treated alike both
as to the rights conferred and the liabilities imposed. 33 The petitioners have not shown that they
belong to a different class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the burden of implementing
land reform must be rejected. There is a substantial distinction between these two classes of owners
that is clearly visible except to those who will not see. There is no need to elaborate on this matter.
In any event, the Congress is allowed a wide leeway in providing for a valid classification. Its
decision is accorded recognition and respect by the courts of justice except only where its discretion
is abused to the detriment of the Bill of Rights.

It is worth remarking at this juncture that a statute may be sustained under the police power only if
there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the
public generally as distinguished from those of a particular class require the interference of the State
and, no less important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be examined is the validity of the method employed
to achieve the constitutional goal.

One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the strongest
moral conviction or the most urgent public need, subject only to a few notable exceptions, will
excuse the bypassing of an individual's rights. It is no exaggeration to say that a, person invoking a
right guaranteed under Article III of the Constitution is a majority of one even as against the rest of
the nation who would deny him that right.

That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.

This brings us now to the power of eminent domain.

IV

Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the State
over the interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored justification, as in the
case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed
no power is absolute). The limitation is found in the constitutional injunction that "private property
shall not be taken for public use without just compensation" and in the abundant jurisprudence that
has evolved from the interpretation of this principle. Basically, the requirements for a proper exercise
of the power are: (1) public use and (2) just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should
first distribute public agricultural lands in the pursuit of agrarian reform instead of immediately
disturbing property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not
correct to say that only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the decision to redistribute private
agricultural lands in the manner prescribed by the CARP was made by the legislative and executive
departments in the exercise of their discretion. We are not justified in reviewing that discretion in the
absence of a clear showing that it has been abused.

A becoming courtesy admonishes us to respect the decisions of the political departments when they
decide what is known as the political question. As explained by Chief Justice Concepcion in the case
of Tañada v. Cuenco: 36

The term "political question" connotes what it means in ordinary parlance, namely, a
question of policy. It refers to "those questions which, under the Constitution, are to
be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of
the government." It is concerned with issues dependent upon the wisdom, not
legality, of a particular measure.

It is true that the concept of the political question has been constricted with the enlargement of
judicial power, which now includes the authority of the courts "to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government." 37 Even so, this should not be construed as a license
for us to reverse the other departments simply because their views may not coincide with ours.

The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the
redistribution of private landholdings (even as the distribution of public agricultural lands is first
provided for, while also continuing apace under the Public Land Act and other cognate laws). The
Court sees no justification to interpose its authority, which we may assert only if we believe that the
political decision is not unwise, but illegal. We do not find it to be so.

In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:

Congress having determined, as it did by the Act of March 3,1909 that the entire St.
Mary's river between the American bank and the international line, as well as all of
the upland north of the present ship canal, throughout its entire length, was
"necessary for the purpose of navigation of said waters, and the waters connected
therewith," that determination is conclusive in condemnation proceedings instituted
by the United States under that Act, and there is no room for judicial review of the
judgment of Congress ... .

As earlier observed, the requirement for public use has already been settled for us by the
Constitution itself No less than the 1987 Charter calls for agrarian reform, which is the reason why
private agricultural lands are to be taken from their owners, subject to the prescribed maximum
retention limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary measures "to
encourage and undertake the just distribution of all agricultural lands to enable farmers who are
landless to own directly or collectively the lands they till." That public use, as pronounced by the
fundamental law itself, must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and more
thoughtful examination.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. 39 It has been repeatedly stressed by this Court that the measure is not the taker's
gain but the owner's loss. 40 The word "just" is used to intensify the meaning of the word
"compensation" to convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, ample. 41

It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking of
private agricultural lands that has dispossessed the owners of their property and deprived them of all
its beneficial use and enjoyment, to entitle them to the just compensation mandated by the
Constitution.

As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following
conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more
than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the
property must be devoted to public use or otherwise informally appropriated or injuriously affected;
and (5) the utilization of the property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property. All these requisites are envisioned in the
measures before us.

Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking
possession of the condemned property, as "the compensation is a public charge, the good faith of
the public is pledged for its payment, and all the resources of taxation may be employed in raising
the amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:

Upon receipt by the landowner of the corresponding payment or, in case of rejection
or no response from the landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession of the land and shall request
the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the
name of the Republic of the Philippines. The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries.

Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is
entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is
made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the
offer of the government to buy his land-

... the DAR shall conduct summary administrative proceedings to determine the
compensation for the land by requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for the land, within fifteen (15)
days from the receipt of the notice. After the expiration of the above period, the
matter is deemed submitted for decision. The DAR shall decide the case within thirty
(30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the courts of justice
and may not be usurped by any other branch or official of the government. EPZA v. Dulay 44 resolved
a challenge to several decrees promulgated by President Marcos providing that the just
compensation for property under expropriation should be either the assessment of the property by
the government or the sworn valuation thereof by the owner, whichever was lower. In declaring
these decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:

The method of ascertaining just compensation under the aforecited decrees

constitutes impermissible encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution is reserved to it for final
determination.

Thus, although in an expropriation proceeding the court technically would still have
the power to determine the just compensation for the property, following the
applicable decrees, its task would be relegated to simply stating the lower value of
the property as declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation of the owner and that
of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair.
Even a grade school pupil could substitute for the judge insofar as the determination
of constitutional just compensation is concerned.

xxx

In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the opportunity to prove that the
valuation in the tax documents is unfair or wrong. And it is repulsive to the basic
concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or
clerk to absolutely prevail over the judgment of a court promulgated only after expert
commissioners have actually viewed the property, after evidence and arguments pro
and con have been presented, and after all factors and considerations essential to a
fair and just determination have been judiciously evaluated.

A reading of the aforecited Section 16(d) will readily show that it does not suffer from the
arbitrariness that rendered the challenged decrees constitutionally objectionable. Although the
proceedings are described as summary, the landowner and other interested parties are nevertheless
allowed an opportunity to submit evidence on the real value of the property. But more importantly,
the determination of the just compensation by the DAR is not by any means final and conclusive
upon the landowner or any other interested party, for Section 16(f) clearly provides:

Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

The determination made by the DAR is only preliminary unless accepted by all parties concerned.
Otherwise, the courts of justice will still have the right to review with finality the said determination in
the exercise of what is admittedly a judicial function.

The second and more serious objection to the provisions on just compensation is not as easily
resolved.

This refers to Section 18 of the CARP Law providing in full as follows:

SEC. 18. Valuation and Mode of Compensation. — The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR
and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and
other pertinent provisions hereof, or as may be finally determined by the court, as the
just compensation for the land.

The compensation shall be paid in one of the following modes, at the option of the
landowner:

(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the

excess hectarage is concerned — Twenty-five
percent (25%) cash, the balance to be paid in
government financial instruments negotiable at any
time.

(b) For lands above twenty-four (24) hectares and up

to fifty (50) hectares — Thirty percent (30%) cash, the
balance to be paid in government financial
instruments negotiable at any time.

(c) For lands twenty-four (24) hectares and below —

Thirty-five percent (35%) cash, the balance to be paid
in government financial instruments negotiable at any
time.

(2) Shares of stock in government-owned or controlled corporations, LBP preferred

shares, physical assets or other qualified investments in accordance with guidelines
set by the PARC;

(3) Tax credits which can be used against any tax liability;

(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 91-day treasury
bill rates. Ten percent (10%) of the face value of the
bonds shall mature every year from the date of
issuance until the tenth (10th) year: Provided, That
should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;

(b) Transferability and negotiability. Such LBP bonds

may be used by the landowner, his successors-in-
interest or his assigns, up to the amount of their face
value, for any of the following:

(i) Acquisition of land or other real properties of the

government, including assets under the Asset
Privatization Program and other assets foreclosed by
government financial institutions in the same province
or region where the lands for which the bonds were
paid are situated;

(ii) Acquisition of shares of stock of government-

owned or controlled corporations or shares of stock
owned by the government in private corporations;

(iii) Substitution for surety or bail bonds for the

provisional release of accused persons, or for
performance bonds;

(iv) Security for loans with any government financial

institution, provided the proceeds of the loans shall be
invested in an economic enterprise, preferably in a
small and medium- scale industry, in the same
province or region as the land for which the bonds are
paid;

(v) Payment for various taxes and fees to

government: Provided, That the use of these bonds
for these purposes will be limited to a certain
percentage of the outstanding balance of the financial
instruments; Provided, further, That the PARC shall
determine the percentages mentioned above;

(vi) Payment for tuition fees of the immediate family of

the original bondholder in government universities,
colleges, trade schools, and other institutions;

(vii) Payment for fees of the immediate family of the

original bondholder in government hospitals; and

(viii) Such other uses as the PARC may from time to

time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional
insofar as it requires the owners of the expropriated properties to accept just compensation therefor
in less than money, which is the only medium of payment allowed. In support of this contention, they
cite jurisprudence holding that:

The fundamental rule in expropriation matters is that the owner of the property
expropriated is entitled to a just compensation, which should be neither more nor
less, whenever it is possible to make the assessment, than the money equivalent of
said property. Just compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation . 45 (Emphasis supplied.)

In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:

It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short of
that is less, than just compensation. It means a fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not whatever gain would accrue to
the expropriating entity. The market value of the land taken is the just compensation
to which the owner of condemned property is entitled, the market value being that
sum of money which a person desirous, but not compelled to buy, and an owner,
willing, but not compelled to sell, would agree on as a price to be given and received
for such property. (Emphasis supplied.)

In the United States, where much of our jurisprudence on the subject has been derived, the weight
of authority is also to the effect that just compensation for property expropriated is payable only in
money and not otherwise. Thus —

The medium of payment of compensation is ready money or cash. The condemnor

cannot compel the owner to accept anything but money, nor can the owner compel
or require the condemnor to pay him on any other basis than the value of the
property in money at the time and in the manner prescribed by the Constitution and
the statutes. When the power of eminent domain is resorted to, there must be a
standard medium of payment, binding upon both parties, and the law has fixed that
standard as money in cash. 47 (Emphasis supplied.)

Part cash and deferred payments are not and cannot, in the nature of things, be
regarded as a reliable and constant standard of compensation. 48

"Just compensation" for property taken by condemnation means a fair equivalent in

money, which must be paid at least within a reasonable time after the taking, and it is
not within the power of the Legislature to substitute for such payment future
obligations, bonds, or other valuable advantage. 49(Emphasis supplied.)

It cannot be denied from these cases that the traditional medium for the payment of just
compensation is money and no other. And so, conformably, has just compensation been paid in the
past solely in that medium. However, we do not deal here with the traditional excercise of the power
of eminent domain. This is not an ordinary expropriation where only a specific property of relatively
limited area is sought to be taken by the State from its owner for a specific and perhaps local
purpose.

What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever
kind as long as they are in excess of the maximum retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a particular community or of a small segment of
the population but of the entire Filipino nation, from all levels of our society, from the impoverished
farmer to the land-glutted owner. Its purpose does not cover only the whole territory of this country
but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision
and the sacrifice of the present generation of Filipinos. Generations yet to come are as involved in
this program as we are today, although hopefully only as beneficiaries of a richer and more fulfilling
life we will guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself that has ordained this revolution in the farms,
calling for "a just distribution" among the farmers of lands that have heretofore been the prison of
their dreams but can now become the key at least to their deliverance.

Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering
the vast areas of land subject to expropriation under the laws before us, we estimate that hundreds
of billions of pesos will be needed, far more indeed than the amount of P50 billion initially
appropriated, which is already staggering as it is by our present standards. Such amount is in fact
not even fully available at this time.

We assume that the framers of the Constitution were aware of this difficulty when they called for
agrarian reform as a top priority project of the government. It is a part of this assumption that when
they envisioned the expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less conventional if more
practical method. There can be no doubt that they were aware of the financial limitations of the
government and had no illusions that there would be enough money to pay in cash and in full for the
lands they wanted to be distributed among the farmers. We may therefore assume that their
intention was to allow such manner of payment as is now provided for by the CARP Law, particularly
the payment of the balance (if the owner cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of value. We may also suppose that what they
had in mind was a similar scheme of payment as that prescribed in P.D. No. 27, which was the law
in force at the time they deliberated on the new Charter and with which they presumably agreed in
principle.

The Court has not found in the records of the Constitutional Commission any categorical agreement
among the members regarding the meaning to be given the concept of just compensation as applied
to the comprehensive agrarian reform program being contemplated. There was the suggestion to
"fine tune" the requirement to suit the demands of the project even as it was also felt that they should
"leave it to Congress" to determine how payment should be made to the landowner and
reimbursement required from the farmer-beneficiaries. Such innovations as "progressive
compensation" and "State-subsidized compensation" were also proposed. In the end, however, no
special definition of the just compensation for the lands to be expropriated was reached by the
Commission. 50

On the other hand, there is nothing in the records either that militates against the assumptions we
are making of the general sentiments and intention of the members on the content and manner of
the payment to be made to the landowner in the light of the magnitude of the expenditure and the
limitations of the expropriator.

With these assumptions, the Court hereby declares that the content and manner of the just
compensation provided for in the afore- quoted Section 18 of the CARP Law is not violative of the
Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our
decision on this issue, but after all this Court is not a cloistered institution removed from the realities
and demands of society or oblivious to the need for its enhancement. The Court is as acutely
anxious as the rest of our people to see the goal of agrarian reform achieved at last after the
frustrations and deprivations of our peasant masses during all these disappointing decades. We are
aware that invalidation of the said section will result in the nullification of the entire program, killing
the farmer's hopes even as they approach realization and resurrecting the spectre of discontent and
dissent in the restless countryside. That is not in our view the intention of the Constitution, and that is
not what we shall decree today.

Accepting the theory that payment of the just compensation is not always required to be made fully
in money, we find further that the proportion of cash payment to the other things of value constituting
the total payment, as determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in
money, primarily because the small landowner will be needing it more than the big landowners, who
can afford a bigger balance in bonds and other things of value. No less importantly, the government
financial instruments making up the balance of the payment are "negotiable at any time." The other
modes, which are likewise available to the landowner at his option, are also not unreasonable
because payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and
other things of value equivalent to the amount of just compensation.

Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not
a little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly
hoped that these countrymen of ours, conscious as we know they are of the need for their
forebearance and even sacrifice, will not begrudge us their indispensable share in the attainment of
the ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for the
Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem
to be viable any more as it appears that Section 4 of the said Order has been superseded by Section
14 of the CARP Law. This repeats the requisites of registration as embodied in the earlier measure
but does not provide, as the latter did, that in case of failure or refusal to register the land, the
valuation thereof shall be that given by the provincial or city assessor for tax purposes. On the
contrary, the CARP Law says that the just compensation shall be ascertained on the basis of the
factors mentioned in its Section 17 and in the manner provided for in Section 16.

The last major challenge to CARP is that the landowner is divested of his property even before
actual payment to him in full of just compensation, in contravention of a well- accepted principle of
eminent domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle
is consistent both here and in other democratic jurisdictions. Thus:

Title to property which is the subject of condemnation proceedings does not vest the condemnor
until the judgment fixing just compensation is entered and paid, but the condemnor's title relates
back to the date on which the petition under the Eminent Domain Act, or the commissioner's report
under the Local Improvement Act, is filed. 51

... although the right to appropriate and use land taken for a canal is complete at the time of entry,
title to the property taken remains in the owner until payment is actually made. 52 (Emphasis
supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the
decisions appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was
held that "actual payment to the owner of the condemned property was a condition precedent to the
investment of the title to the property in the State" albeit "not to the appropriation of it to public use."
In Rexford v. Knight, 55 the Court of Appeals of New York said that the construction upon the statutes
was that the fee did not vest in the State until the payment of the compensation although the
authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further
said that "both on principle and authority the rule is ... that the right to enter on and use the property
is complete, as soon as the property is actually appropriated under the authority of law for a public
use, but that the title does not pass from the owner without his consent, until just compensation has
been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:

If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation adopted in
this jurisdiction is such as to afford absolute reassurance that no piece of land can be
finally and irrevocably taken from an unwilling owner until compensation is paid ...
. (Emphasis supplied.)

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972
and declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized
farm except that "no title to the land owned by him was to be actually issued to him unless and until
he had become a full-fledged member of a duly recognized farmers' cooperative." It was understood,
however, that full payment of the just compensation also had to be made first, conformably to the
constitutional requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972
of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis
supplied.)

it was obviously referring to lands already validly acquired under the said decree, after proof of full-
fledged membership in the farmers' cooperatives and full payment of just compensation. Hence, it
was also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to
the landowner by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after
full payment of just compensation), shall be considered as advance payment for the land."

The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt by the landowner of the corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with
the landowner. 57 No outright change of ownership is contemplated either.

Hence, the argument that the assailed measures violate due process by arbitrarily transferring title
before the land is fully paid for must also be rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as
recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should
counter-balance the express provision in Section 6 of the said law that "the landowners whose lands
have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead."

In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by
the petitioners with the Office of the President has already been resolved. Although we have said
that the doctrine of exhaustion of administrative remedies need not preclude immediate resort to
judicial action, there are factual issues that have yet to be examined on the administrative level,
especially the claim that the petitioners are not covered by LOI 474 because they do not own other
agricultural lands than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have
not yet exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are
entitled to the new retention rights provided for by R.A. No. 6657, which in fact are on the whole
more liberal than those granted by the decree.

The CARP Law and the other enactments also involved in these cases have been the subject of
bitter attack from those who point to the shortcomings of these measures and ask that they be
scrapped entirely. To be sure, these enactments are less than perfect; indeed, they should be
continuously re-examined and rehoned, that they may be sharper instruments for the better
protection of the farmer's rights. But we have to start somewhere. In the pursuit of agrarian reform,
we do not tread on familiar ground but grope on terrain fraught with pitfalls and expected difficulties.
This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to use Justice
Holmes's words, "it is an experiment, as all life is an experiment," and so we learn as we venture
forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should
strive for it by all means. Meantime, we struggle as best we can in freeing the farmer from the iron
shackles that have unconscionably, and for so long, fettered his soul to the soil.

By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform
program are removed, to clear the way for the true freedom of the farmer. We may now glimpse the
day he will be released not only from want but also from the exploitation and disdain of the past and
from his own feelings of inadequacy and helplessness. At last his servitude will be ended forever. At
last the farm on which he toils will be his farm. It will be his portion of the Mother Earth that will give
him not only the staff of life but also the joy of living. And where once it bred for him only deep
despair, now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can he
banish from his small plot of earth his insecurities and dark resentments and "rebuild in it the music
and the dream."

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein petitions.

2. Title to all expropriated properties shall be transferred to the State only upon full
payment of compensation to their respective owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are
retained and recognized.
 4. Landowners who were unable to exercise their rights of retention under P.D. No.
27 shall enjoy the retention rights granted by R.A. No. 6657 under the conditions
therein prescribed.

5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.

SO ORDERED.

ECOND DIVISION

[G. R. No. 119594. January 18, 2000]

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. BENZON ONG y

SATE alias "BENZ ONG," accused-appellant.

DECISION

MENDOZA, J.:

This is an appeal from the decision[1]of the Regional Trial Court, Branch 5, Baguio City, finding
accused-appellant Benzon Ong y Sate, alias Benz Ong, guilty of (1) illegal recruitment
committed in large scale and sentencing him to suffer life imprisonment, pay a fine
of P100,000.00, without subsidiary imprisonment in case of insolvency, and pay the costs; and
(2) seven counts of estafa for which he was sentenced to suffer, on each count, an indeterminate
prison term ranging from four years and two months of prision correccional, as minimum, to
eight years of prision mayor, as maximum, in two cases, and to nine years of prision mayor, as
maximum, in five cases, and to indemnify the eight private complainants in the aggregate
amount of P277,500.00 with interest at the legal rate counted from July 25, 1994, until fully paid.

In Criminal Case No. 13146-R, the information for illegal recruitment in large scale[2] alleged -

That sometime during and between the period from November, 1993 to January,
1994, in the City of Baguio, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, representing himself to have the
capacity to contract, enlist, hire and transport Filipino workers for employment
abroad, did then and there willfully, unlawfully and feloniously, for a fee, recruit
and promise employment/job placement to the following persons: Kyler

1. Noel Bacasnot y Baldivino;

2. Ruth A. Eliw;
3. Samuel Bagni;
4. Francisca Cayaya;
5. Teofilo S. Gallao, Jr.;
6. Sally Kamura;
7. Paul G. Esteban;
 8. David Joaquin; and
9. Solidad M. Malinias

in Taiwan, without first obtaining or securing license or authority from the proper
governmental agency.

CONTRARY TO LAW.

In Criminal Case Nos. 13147-R to 13154-R, eight informations for estafa were filed. Save for the
dates of commission of the crime, the names of the complainant and the amounts involved, the
informations uniformly alleged -

That sometime in [date],[3] in the City of Baguio, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused did then and there
wilfully, unlawfully and feloniously defraud one [name][4] by way of false
pretenses, which are executed prior to or simultaneously with the commission of
the fraud, as follows, to wit: the accused knowing fully well that he/she/they is/are
not authorized job recruiters for persons intending to secure work abroad
convinced said [name] and pretended that he/she/they could secure a job for
him/her abroad, for and in consideration of the sum of [amount],[5] when in truth
and in fact they could not; the said [name], deceived and convinced by the false
pretenses employed by the accused, parted away the total sum of [amount], in
favor of the accused, to the damage and prejudice of the said [name] in the
aforementioned amount of [amount in words][6] [amount], Philippine Currency.

CONTRARY TO LAW.

All indictments being based on the same facts, the cases were tried jointly. Accused-appellant
entered a plea of not guilty to each of the charges, whereupon trial commenced.

The evidence for the prosecution established the following facts: Kycalr

Complainant Noel B. Bacasnot is an optometrist by profession. In September 1993, he met

accused-appellant at the insurance office of Zaldy Galos at Laperal Building in Session Road,
Baguio City. Accused-appellant represented to Bacasnot that he had contacts in Taiwan,
Republic of China, who were looking for workers. Factory workers would be paid P15,000.00 a
month, while construction workers would be paid P1,200.00 a day. According to him, his mother
was in Taiwan and could help Bacasnot get a job as an optometrist with a salary of as much
as P50,000.00 to P80,000.00 a month. A week later, accused-appellant told Bacasnot that, after
talking to his mother, he thought it would be better if he (Bacasnot) worked initially as a factory
worker for six months. Bacasnot agreed. He was charged P30,000.00 for placement fee, of
which P15,000.00 was to be paid at once and the balance of P15,000.00 to be deducted from his
salary once he got a job in Taiwan. As Bacasnot did not have enough money, he was allowed to
pay P10,000.00 as downpayment for his placement and processing fee which accused-appellant
received on January 31, 1994 (Exh. A)[7] at the Kimsam Eatery on Session Road. Bacasnot was
assured by accused-appellant that upon completion of his papers, he would leave for Taiwan
within three to four months thereafter.[8]

On the other hand, upon learning of job opportunities abroad, complainants Ruth A. Eliw, Sally
Kamura and Solidad Malinias also sought the assistance of accused-appellant. They were
charged a higher placement fee of P40,000.00 each, and payments were made to accused-
appellant at the Gallaos Optical Clinic, where Bacasnot treated patients, at 159 Magsaysay
Avenue, Baguio City. Accused-appellant later accompanied complainants to Manila purportedly
for interview and medical examination at the Steadfast Recruitment Agency with which accused-
appellant claimed to be connected. However, instead of taking them to a recruitment agency,
accused-appellant took them to an office in United Nations Avenue where three men, allegedly
Taiwanese nationals, interviewed them and later took them to a clinic where they were
examined.[9] Mesm

Eliw, Kamura and Malinias each paid accused-appellant the amount of P25,000.00 on January
21, February 13 and March 30, 1994 (Exhs. D-1 and K),[10] respectively. On May 30, 1994, each
of them paid the balance of P15,000.00 (Exh. D).[11] In a handwritten agreement (Exh. D)
prepared by Almi G. Bacasnot (wife of Noel B. Bacasnot), accused-appellant acknowledged
payment of P45,000.00, representing the balance of P15,000.00 from each of complainants and
promised them that they would leave for Taiwan in three weeks. The agreement reads:

AGREEMENT

I, BENSON ONG, OF LEGAL AGE, RECEIVED THE AMOUNT OF FORTY

FIVE THOUSAND PESOS ONLY (P45,000.00) AS RECRUITMENT FULL
PAYMENT ADDITIONAL TO SEVENTY FIVE THOUSAND PESOS
(P75,000.00) WHICH WAS FIRST GIVEN TO ME FROM

1. SALLY KAMURA
2. RUTH ELIW
3. SOLIDAD MALINIAS

IN A CONDITION THAT I SHOULD LET THEM SIGN THE ABOVE

NAMES THE CONTRACT OF EMPLOYMENT FOR TAIWAN NOT MORE
THAN THREE WEEKS (JUNE 3 TO JUNE 24, 1994).

HEREBY, IF I COULD NOT LET THEM HAVE THE CONTRACT OF

EMPLOYMENT FOR TAIWAN, I WILL RETURN THE MONEY WITHIN
ONE MONTH THE AMOUNT OF (P120,000.00) ONE HUNDRED TWENTY
THOUSAND PESOS ONLY AFTER THE CONDITION ON THE DATE OF
JULY 24, 94.

SIGNED ON THE MONTH OF MAY IN THE 30th DAY OF THE YEAR 1994.

APPLICANTS NAME AND SIGNATURE Calrky

 SOLIDAD M. MALINIAS (Sgd.)
RUTH ELIW (Sgd.).RECEIVED AND AGREED BY:
SALLY KAMURA (Sgd.)

(Sgd.)
BENSON ONG
RECEIVER

WITNESSES:

(Sgd.)
ALMI G. BACASNOT

(Sgd.)
NOEL B. BACASNOT

Accused-appellant never fulfilled his promise. When complainants sought to inquire about their
application, they discovered that accused-appellant no longer held office at the place in the upper
story of Marios Restaurant on Session Road. Apparently, accused-appellant was already into
hiding.

A week before June 27, 1994, Eliw chanced upon accused-appellant and she was told that
Kamura and Malinias had passed the interview and medical examination in Manila. Accused-
appellant then asked Eliw to pay an additional amount of P5,000.00 for processing. Instead of
paying, Eliw denounced accused-appellants recruitment activities to the local office of the
National Bureau of Investigation. On June 25, 1994, the NBI confirmed from the Philippine
Overseas Employment Administration-Regional Extension Unit (POEA-REU) in the Cordillera
Autonomous Region that accused-appellant had not been licensed to recruit for overseas
employment. On June 27, 1994, a team composed of an NBI agent and three special investigators
conducted an entrapment operation. Eliw handed the P1,500.00 marked money to accused-
appellant, promising to pay the balance of P3,500.00 later. At that instance, the NBI group
nabbed accused-appellant and placed him under arrest. He was subjected to paraffin test and
found positive for the presence of fluorescent powder.[12] Slx

Complainants Samuel Bagni, Teofilo Gallao, Jr., Paul Esteban and David Joaquin were
likewise swindled. Accused-appellant collected P25,000.00 from Bagni on January 17, 1994
(Exh. M)[13] and P15,000.00 on May 9, 1994 (Exh. M-1).[14] From Gallao he collected P25,000.00
on January 31, 1994 (Exh. I)[15] and P15,000.00 on May 9, 1994 (Exh. I-1).[16] He collected various
amounts from the others, as follows: from Esteban, P7,500.00 on November 30, 1993 (Exh.
E)[17] and P30,000.00 on March 7, 1994 (Exh. F);[18] from Joaquin, P7,500.00 on November 30,
1993 (Exh. E),[19] P7,500.00 on December 28, 1993 (Exh. E-1),[20] and P15,000.00 on March 6,
1994 (Exh. E-2).[21] Joaquin was with Esteban when he was introduced to accused-appellant
through Alice Sabala on November 15, 1993, at the Laperal Building on Session Road, Baguio
City where they made their first and second payments. Joaquins third payment was made at the
Bombay Bazaar on Magsaysay Avenue and he, together with Esteban, was supposed to leave in
March 1994. On the other hand, Gallao was a technician at the Gallaos Optical Clinic. He came
to know accused-appellant through Bacasnot who is the husband of Gallaos cousin, Almi Gallao
Bacasnot. Bagni, meanwhile, met accused-appellant through Bacasnot, Bagnis brother-in-law.
Gallao and Bagni were scheduled to leave by June 15, 1994. As with Eliw, Kamura and
Malinias, both Gallao and Bagni gave the downpayment of their fees to accused-appellant at
Gallaos Optical Clinic. The balance of their fees was paid at the house of accused-appellant at 83
Happy Homes, Baguio City.Slxmis

Accused-appellant failed to comply with his commitment to send complainants Bacasnot, Eliw,
Kamura, Malinias, Bagni, Gallao, Esteban and Joaquin to Taiwan as he could no longer be
located after collecting placement fees from them.[22]

Earlier, at the instance of complainant Bacasnot, Atty. Justinian O. Licnachan, POEA-REU

Legal Officer of the Cordillera Autonomous Region, issued a certification dated June 24, 1994
(Exh. C)[23] which read:

This is to certify that BENZ ONG a.k.a. "BENZON ONG SATE & JOHNSON
ONG SATE", per existing and available records from this office, is not licensed
nor authorized to recruit workers for overseas employment in the City of Baguio
or any part of the region. He is neither in possession of the required Provincial
Recruitment Authority.

Complainant Francisca Cayaya failed to testify despite due notice to her. Her complaint for
estafa was, therefore, dismissed.[24] On the other hand, the complaint for estafa of complainant
Bacasnot, which should have been filed with the Municipal Trial Court in view of the amount
(P10,000.00) involved, was nonetheless allowed because it arose out of the same facts as the case
for illegal recruitment. Sdaadsc

For his defense, accused-appellant Benzon Ong y Sate admitted having met complainant
Bacasnot through Zaldy Galos. He got to know the other complainants through Bacasnot and one
Patring Esteban (sister of complainant Paul Esteban), his partner in the video rental business. He
introduced himself to Bacasnot as one from Taiwan and told Bacasnot that his mother and
brother were based in Taiwan. Accused-appellant testified that when complainants sought his
help, he advised them to go to the POEA but complainants claimed that they do not know anyone
at said office. He then offered to scout for a recruitment agency in Manila. Accused-appellant
accompanied complainants to Steadfast Recruitment Agency in Manila and introduced them to a
certain Marilyn Pagsibigan, Marketing Manager of the agency. He came to know about the
agency through a friend in Manila, one Ernesto Sy. He denied collecting placement fees from the
complainants and claimed that his signatures on the receipts had been forged. He also claimed
that on June 27, 1994, he was at the Gallaos Optical Clinic to collect the payment for the
betamax player which Bacasnot had previously ordered and which accused-appellant had
delivered a week earlier. Bacasnot told accused-appellant that Eliw wanted to buy the betamax
player for P10,000.00. As Eliw had only P1,500.00, accused-appellant at first refused to accept
the payment. When Eliw assured him she would pay the balance, accused-appellant finally
agreed to receive the payment. As accused-appellant received the money, he was nabbed by NBI
agents who identified themselves and asked accused-appellant to go with them to the NBI office.
He was later charged with illegal recruitment.[25]
On November 23, 1994, the trial court rendered its decision convicting accused-appellant of
illegal recruitment committed in large scale and of seven counts of estafa. The dispositive
portion of its decision reads:[26]

WHEREFORE, the Court finds and declares the accused BENZON ONG y SATE
alias Benz Ong, guilty beyond reasonable doubt of the crime of illegal recruitment
in large scale as charged in Crim. Case No. 13146-R and hereby sentences him to
suffer life imprisonment, to pay a fine of P100,000.00, without subsidiary
imprisonment in case of insolvency; and to pay the costs.

The Court also finds and declares the same accused BENZON ONG y SATE,
alias Benz Ong, guilty beyond reasonable doubt of the crime of estafa on seven
counts and hereby sentences him:

(a) In Crim. Case No. 13147-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to NINE (9) YEARS
of prision mayor, as maximum; and to pay the costs;

(b) In Crim. Case No. 13148-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to NINE (9) YEARS
of prision mayor, as maximum; and to pay the costs;

(c) In Crim. Case No. 13150-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to NINE (9) YEARS
of prision mayor, as maximum; and to pay the costs;

(d) In Crim. Case No. 13151-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to NINE (9) YEARS
of prision mayor, as maximum; and to pay the costs; Scslx

(e) In Crim. Case No. 13152-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to EIGHT (8) YEARS
of prision mayor, as maximum; and to pay the costs;

(f) In Crim. Case No. 13153-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
of prision correccional, as minimum, to EIGHT (8) YEARS
of prision mayor, as maximum; and to pay the costs; and

(g) In Crim. Case No. 13154-R, to suffer an indeterminate penalty

of FOUR (4) YEARS and TWO (2) MONTHS
 of prision correccional, as minimum, to NINE (9) YEARS
of prision mayor, as maximum; and to pay the costs.

In the service of his sentence, the accused shall be credited with his preventive
imprisonment under the terms and conditions prescribed in Article 29 of the
Revised Penal Code, as amended.

The said accused BENZON ONG y SATE, alias Benz Ong, shall furthermore
indemnify the below-named persons the amounts indicated opposite their names,
to wit:

1.........Noel Bacasnot - - - - - -........P10,000.00

2.........Ruth Eliw - - - - - -........ 40,000.00

3.........Samuel Bagni - - - - - -........ 40,000.00

4.........Teofilo Gallao, Jr. - - - - - -........ 40,000.00

5.........Sally Kamura - - - - - -........ 40,000.00

6.........Paul Esteban - - - - - -........ 37,500.00

7.........David Joaquin - - - - - -........ 30,000.00

8.........Solidad Malinias - - - - - -........40,000.00

all amounts to bear interest at the legal rate from July 25, 1994, the date of the
filing of the indictments, until fully paid.

SO ORDERED.

Hence, this appeal. Accused-appellant contends that

I. THE TRIAL COURT ERRED IN GIVING CREDENCE TO THE

TESTIMONIES OF THE COMPLAINING WITNESSES. Slxsc

II. THE TRIAL COURT ERRED IN FINDING THE ACCUSED-APPELLANT

GUILTY WHEN THE PROSECUTION FAILED TO PROVE HIS GUILT
BEYOND REASONABLE DOUBT.

First. Accused-appellant claims that when complainants filled out their respective bio-data,
application forms and other documents for employment in Taiwan, they knew that they were
applying for employment abroad through the Steadfast Recruitment Agency. He claims that he
merely suggested to them the opportunity to work overseas but that he never advertised himself
as a recruiter.
The contention has no merit

Accused-appellant is charged with violation of Art. 38 of the Labor Code, as amended by

Presidential Decree No. 2018, which provides that any recruitment activity, including the
prohibited practices enumerated in Art. 34 of said Code, undertaken by persons who have no
license or authority to engage in recruitment for overseas employment is illegal and punishable
under Art. 39. Under Art. 13(b) of the Labor Code, "recruitment and placement" refer to 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; provided, that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons, is considered engaged in recruitment and
placement. On the other hand, "referral" is defined as the act of passing along or forwarding of
an applicant for employment after an initial interview of a selected applicant for employment to a
selected employer, placement officer or bureau.[27]

On the other hand, illegal recruitment is considered an offense involving economic sabotage if
any of these qualifying circumstances exist, namely, (a) when illegal recruitment is committed
by a syndicate, i.e., if it is carried out by a group of three or more persons conspiring and/or
confederating with one another; or, (b) when illegal recruitment is committed in large scale, i.e.,
if it is committed against three or more persons individually or as a group. The essential elements
of the crime of illegal recruitment in large scale are: (1) the accused engages in acts of
recruitment and placement of workers defined under Art. 13(b) or in any prohibited activities
under Art. 34 of the Labor Code; (2) the accused has not complied with the guidelines issued by
the Secretary of Labor and Employment, particularly with respect to the securing of a license or
an authority to recruit and deploy workers, either locally or overseas; and (3) the accused
commits the unlawful acts against three or more persons, individually or as a group. As defined,
a "license" is that which is issued by the Department of Labor and Employment authorizing a
person or entity to operate a private employment agency, while an "authority" is that issued by
the DOLE entitling a person or association to so engage in recruitment and placement activities
as a private recruitment agency. It is the lack of the necessary license or authority that renders the
recruitment unlawful or criminal.[28] Missdaa

To prove illegal recruitment, it must be shown that the accused-appellant gave complainants the
distinct impression that he 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.[29] Accused-
appellant represented himself to complainants as one capable of deploying workers abroad and
even quoted the alleged salary rates of factory and construction workers in Taiwan. He advised
Bacasnot to accept a job as a factory worker first because it would be then easier for him to
transfer jobs once he got to Taiwan. Accused-appellant said his mother, who was based in
Taiwan, could help Bacasnot. Bacasnot paid accused-appellant an initial placement fee agreeing
to pay the balance through salary deductions once he was employed. Accused-appellant also
promised jobs to Eliw and the other complainants. He accompanied them to Manila so that they
could be interviewed and physically examined at the Steadfast Recruitment Agency with which
accused-appellant represented he was connected. These acts of accused-appellant created the
distinct impression on the eight complainants that he was a recruiter for overseas
employment.[30] There is no question that he was neither licensed nor authorized to recruit
workers for overseas employment. Nor is there any question that he dealt with complainants.
What he claims is that he merely "suggested" to complainants to apply at the Steadfast
Recruitment Agency, which is a recruitment agency.

Even if accused-appellant did no more than "suggest" to complainants where they could apply
for overseas employment, his act constituted "referral" within the meaning of Art. 13(b) of the
Labor Code. Indeed, the testimonial and documentary evidence in the record shows that accused-
appellant did more than just make referrals. The evidence shows that he made misrepresentations
to them concerning his authority to recruit for overseas employment and collected various
amounts from them for placement fees. Clearly, accused-appellant committed acts constitutive of
large scale illegal recruitment.

Second. Accused-appellant denies that the signatures in the receipts of payments are his. To be
sure, the presentation of the receipts acknowledging payments is not necessary for the successful
prosecution of accused-appellant. We have already ruled that the absence of receipts in a case for
illegal recruitment does not warrant the acquittal of the accused-appellant and is not fatal to the
case of the prosecution. As long as the prosecution is able to establish through credible
testimonial evidence that the accused-appellant has engaged in illegal recruitment, a conviction
for the offense can very well be justified.[31] Rtcsppedo

The prosecution evidence proves beyond reasonable doubt that accused-appellant was engaged
in illegal recruitment committed in large scale. He was positively identified by complainants as
the person who had recruited them for employment in Taiwan. He succeeded in inveigling them
into paying various amounts to him for their placement fees. Their testimonies dovetail with each
other in material points. There is no showing that any of complainants had any ill-motives to
testify against accused-appellant. Their testimonies were straightforward, credible and
convincing.[32] In contrast, accused-appellant failed to present evidence to rebut the evidence of
the prosecution. He failed to present the person allegedly responsible for the recruitment of the
complainants. As a result of his failure to do so, he risked the adverse inference and legal
presumption that he did not present such witnesses because their testimonies would actually be
adverse if produced.[33] For, indeed, accused-appellant could have adduced evidence to prove that
he was an employee of the Steadfast Recruitment Agency, a duly authorized agency. He could
have presented the manager of the agency to corroborate his claim that complainants actually
applied to the agency and not through him. Instead, he merely interposed denials in his defense.

As against the positive and categorical testimonies of the complainants, accused-appellants mere
denials cannot prevail.[34] He was aptly meted out the penalty of life imprisonment and to pay the
fine of P100,000.00 under Art. 39(a) of the Labor Code.

Third. Accused-appellant contends that the elements of estafa have not been proven by the
prosecution, specifically, the requirement that complainants must have relied on the false
pretenses of accused-appellant, because complainants knew that he was not a licensed recruiter.

The contention has no merit. The following elements of estafa are present in these cases, to wit:
(1) the accused has defrauded the offended party by means of abuse of confidence or by deceit;
and (2) as a result, damage or prejudice, which is capable of pecuniary estimation, is caused to
the offended party or third person. Accused-appellant misrepresented himself to complainants as
one who can make arrangements for job placements in Taiwan, and by reason of his
misrepresentations, false assurances and deceit, complainants were induced to part with their
money, thus causing them damage and prejudice.

Moreover, it is settled that a person who is convicted of illegal recruitment may, in addition, be
convicted of estafa under Art. 315(2)(a) of the Revised Penal Code. There is no problem of
double jeopardy because illegal recruitment is malum prohibitum, in which the criminal intent is
not necessary, whereas estafa is malum in se in which the criminal intent of the accused is
necessary.[35]

WHEREFORE, the decision appealed from is AFFIRMED.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.2/3/00 9:18 AM

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner
VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek
to annul the 10 February 1995 Decision 1 of the National Labor Relations Commission (hereafter
NLRC), and its 6 April 1995 Resolution 2 denying the motion to reconsider the former in NLRC-NCR-
CA No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-
03994-92.

The parties present conflicting sets of facts.

Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18
July 1989 as part of the filming crew with a salary of P375.00 per week. About four months later, he
was designated Assistant Electrician with a weekly salary of P400.00, which was increased to
P450.00 in May 1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary
of P475.00, which was increased to P539.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as
a member of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in
May 1991, then to P475.00 on 21 December 1991.3

Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting
area as instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in
the "fixing" of the lighting system, and performing other tasks that the cameraman and/or director
may assign.4

Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria
Cesario, to facilitate their request that private respondents adjust their salary in accordance with the
minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would
agree to increase their salary only if they signed a blank employment contract. As petitioners refused
to sign, private respondents forced Enero to go on leave in June 1992, then refused to take him back
when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company
payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was again asked to sign a
blank employment contract, and when he still refused, private respondents terminated his services
on 20 July 1992. 5 Petitioners thus sued for illegal dismissal6 before the Labor Arbiter.

On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade
name of Viva Productions, Inc., and that it is primarily engaged in the distribution and
exhibition of movies — but not in the business of making movies; in the same vein, private
respondent Vic del Rosario is merely an executive producer, i.e., the financier who invests a
certain sum of money for the production of movies distributed and exhibited by VIVA.7

Private respondents assert that they contract persons called "producers" — also referred to
as "associate producers"8 — to "produce" or make movies for private respondents; and
contend that petitioners are project employees of the association producers who, in turn, act
as independent contractors. As such, there is no employer-employee relationship between
petitioners and private respondents.

Private respondents further contend that it was the associate producer of the film "Mahirap
Maging Pogi," who hired petitioner Maraguinot. The movie shot from 2 July up to 22 July
1992, and it was only then that Maraguinot was released upon payment of his last salary, as
his services were no longer needed. Anent petitioner Enero, he was hired for the movie
entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on vacation on 8 June
1992, and by the time he reported for work on 20 July 1992, shooting for the movie had
already been completed.9

After considering both versions of the facts, the Labor Arbiter found as follows:

On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent
contractor but should be considered only as a labor-only contractor and as
such, acts as a mere agent of the real employer, the herein respondent.
Respondents even failed to name and specify who are the producers. Also, it is
an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents, Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
 It is very clear also that complainants are doing activities which are necessary
and essential to the business of the respondents, that of movie-making.
Complainant Maraguinot worked as an electrician while complainant Enero
worked as a crew [member]. 10

Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were

illegally dismissed.

Respondents are hereby ordered to reinstate complainant to their former

positions without loss [of] seniority rights and pay their backwages starting
July 21, 1992 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.

Respondents are ordered to pay also attorney's fees equivalent to ten (10%)
and/or P8,400.00 on top of the award.11

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its
decision 12 of 10 February 1995, the NLRC found the following circumstances of petitioners'
work "clearly established:"

1. Complainants [petitioners herein] were hired for specific movie projects and
their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.

xxx xxx xxx

2 Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous
in nature but depends on the availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the

total working hours logged by complainants in a month show extreme
variations. . . For instance, complainant Maraguinot worked for only 1.45 hours
in June 1991 but logged a total of 183.25 hours in January 1992. Complainant
Enero logged a total of only 31.57 hours in September 1991 but worked
for 183.35 hours the next month, October 1991.

4. Further shown by respondents is the irregular work schedule of

complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25
days. Complainant Enero worked on 10 September 1991 and his next
scheduled working day was 28 September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants' work

explain the lump sum payment for complainants' services for each movie
project. Hence, complainants were paid a standard weekly salary regardless of
the number of working days and hours they logged in. Otherwise, if the
 principle of "no work no pay" was strictly applied, complainants' earnings for
certain weeks would be very negligible.

6. Respondents also alleged that complainants were not prohibited from

working with such movie companies like Regal, Seiko and FPJ Productions
whenever they are not working for the independent movie producers engaged
by respondents . . . This allegation was never rebutted by complainants and
should be deemed admitted.

The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances,
taken together, indicated that complainants (herein petitioners) were "project
employees."

After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6 April
1995, petitioners filed the instant petition, claiming that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were
project employees; (2) ruling that petitioners were not illegally dismissed; and (3) reversing
the decision of the Labor Arbiter.

To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary or
desirable in the usual trade or business of private respondents and added that their work was
continuous, i.e., after one project was completed they were assigned to another project.
Petitioners thus considered themselves part of a work pool from which private respondents
drew workers for assignment to different projects. Petitioners lamented that there was no
basis for the NLRC's conclusion that they were project employees, while the associate
producers were independent contractors; and thus reasoned that as regular employees, their
dismissal was illegal since the same was premised on a "false cause," namely, the
completion of a project, which was not among the causes for dismissal allowed by the Labor
Code.

Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners' irregular work
load and work schedule; emphasize the NLRC's finding that petitioners never controverted
the allegation that they were not prohibited from working with other movie companies; and
ask that the facts be viewed in the context of the peculiar characteristics of the movie
industry.

The Office of the Solicitor General (OSG) is convinced that this petition is improper since
petitioners raise questions of fact, particularly, the NLRC's finding that petitioners were
project employees, a finding supported by substantial evidence; and submits that petitioners'
reliance on Article 280 of the Labor Code to support their contention that they should be
deemed regular employees is misplaced, as said section "merely distinguishes between two
types of employees, i.e., regular employees and casual employees, for purposes of
determining the right of an employee to certain benefits."

The OSG likewise rejects petitioners' contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees.
Citing Mamansag v. NLRC, 14 the OSG asserts that what matters is that there was a time-frame
for each movie project made known to petitioners at the time of their hiring. In closing, the
OSG disagrees with petitioners' claim that the NLRC's classification of the movie producers
as independent contractors had no basis in fact and in law, since, on the contrary, the NLRC
"took pains in explaining its basis" for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes issue
with, we rule that a special civil action for certiorari under Rule 65 of the Rules of Court is the
proper remedy for one who complains that the NLRC acted in total disregard of evidence
material to or decisive of the controversy. 15 In the instant case, petitioners allege that the
NLRC's conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.

The judicious resolution of this case hinges upon, first, the determination of whether an
employer-employee relationship existed between petitioners and private respondents or any
one of private respondents. If there was none, then this petition has no merit; conversely, if
the relationship existed, then petitioners could have been unjustly dismissed.

A related question is whether private respondents are engaged in the business of making
motion pictures. Del Rosario is necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it does not "make" movies, but
merely distributes and exhibits motion pictures. There being no further proof to this effect,
we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is engaged in the business of
making movies.

We now turn to the critical issues. Private respondents insist that petitioners are project
employees of associate producers who, in turn, act as independent contractors. It is settled
that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule
VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job
contracting in this wise:

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.

Assuming that the associate producers are job contractors, they must then be engaged in the
business of making motion pictures. As such, and to be a job contractor under the preceding
description, associate producers must have tools, equipment, machinery, work premises,
and other materials necessary to make motion pictures. However, the associate producers
here have none of these. Private respondents' evidence reveals that the movie-making
equipment are supplied to the producers and owned by VIVA. These include
generators, 16 cables and wooden platforms, 17 cameras and "shooting equipment;" 18 in fact,
VIVA likewise owns the trucks used to transport the equipment. 19 It is thus clear that the
associate producer merely leases the equipment from VIVA. 20 Indeed, private respondents'
Formal Offer of Documentary Evidence stated one of the purposes of Exhibit "148" as:

To prove further that the independent Producers rented Shooting Unit No. 2
from Viva to finish their films. 21

While the purpose of Exhibits "149," "149-A" and "149-B" was:

[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget
and time-frame of at least 30 shooting days or 45 days whichever comes first. 22

Private respondent further narrated that VIVA's generators broke down during petitioners'
last movie project, which forced the associate producer concerned to rent generators,
equipment and crew from another company. 23 This only shows that the associate producer
did not have substantial capital nor investment in the form of tools, equipment and other
materials necessary for making a movie. Private respondents in effect admit that their
producers, especially petitioners' last producer, are not engaged in permissible job
contracting.

If private respondents insist that the associate producers are labor contractors, then these
producers can only be "labor-only" contractors, defined by the Labor Code as follows:

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

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.

A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:

Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only
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 person 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.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the
same a mere agent or intermediary of the direct employer. But even by the preceding
standards, the associate producers of VIVA cannot be considered labor-only contractors as
they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario,
Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an
"available group of free-lance workers which includes the complainants Maraguinot and
Enero." 24 And in their Memorandum, private respondents declared that the associate
producer "hiresthe services of . . . 6) camera crew which includes (a) cameraman; (b) the
utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . . .
." 25 This clearly showed that the associate producers did not supply the workers required by
the movie project.

The relationship between VIVA and its producers or associate producers seems to be that of
agency, 26 as the latter make movies on behalf of VIVA, whose business is to "make" movies.
As such, the employment relationship between petitioners and producers is actually one
between petitioners and VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established
by the "control test." While four elements are usually considered in determining the existence
of an employment relationship, namely: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control
of the employee's conduct, the most important element is the employer's control of the
employee's conduct, not only as to the result of the work to be done but also as to the means
and methods to accomplish the same. 27 These four elements are present here. In their
position paper submitted to the Labor Arbiter, private respondents narrated the following
circumstances:

[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the
company . . .
 The ensure that qualify films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant
varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria
Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and of
the Executive Producer to monitor the progress of the PRODUCER's work
accomplishment. He is there usually in the field doing the rounds of inspection
to see if there is any problem that the PRODUCER is encountering and to
assist in threshing out the same so that the film project will be finished on
schedule. He supervises about 3 to 7 movie projects simultaneously [at] any
given time by coordinating with each film "PRODUCER". The Project
Accountant on the other hand assists the PRODUCER in monitoring the actual
expenses incurred because the company wants to insure that any additional
budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the
company on how a certain scene must be presented to make the film more
interesting and more commercially viable. (emphasis supplied).

VIVA's control is evident in its mandate that the end result must be a "quality film acceptable
to the company." The means and methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule without exceeding the budget,
and additional expenses must be justified; certain scenes are subject to change to suit the
taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA and del
Rosario, intervenes in the movie-making process by assisting the associate producer in
solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie director's
control, and not VIVA's direction. The director merely instructs petitioners on how to better
comply with VIVA's requirements to ensure that a quality film is completed within schedule
and without exceeding the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately resting on the
employer.

Moreover, appointment slips 28 issued to all crew members state:

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

The words "supervisors" and "Top Management" can only refer to the "supervisors" and
"Top Management" of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVA's control over
petitioners.

Aside from control, the element of selection and engagement is likewise present in the
instant case and exercised by VIVA. A sample appointment slip offered by private
respondents "to prove that members of the shooting crew except the driver are project
employees of the Independent Producers" 29 reads as follows:
 VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City

PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP

You are hereby appointed as SOUNDMAN for the film project entitled
"MANAMBIT". This appointment shall be effective upon the commencement of
the said project and shall continue to be effective until the completion of the
same.

For your services you shall receive the daily/weekly/monthly compensation of

P812.50.

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

V
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l
y
y
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s
,

(
a
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l
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s
i
 g
n
a
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e
)

CONFORME:

_________________

Name of appointee

Signed in the presence of:

___________________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate
producer who hired the crew members; moreover, it is VIVA's corporate name which appears
on the heading of the appointment slip. What likewise tells against VIVA is that it paid
petitioners' salaries as evidenced by vouchers, containing VIVA's letterhead, for that
purpose. 30

All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.

The next issue is whether petitioners were illegally dismissed. Private respondents contend
that petitioners were project employees whose employment was automatically terminated
with the completion of their respective projects. Petitioners assert that they were regular
employees who were illegally dismissed.

It may not be ignored, however, that private respondents expressly admitted that petitioners
were part of a work pool; 31 and, while petitioners were initially hired possibly as project
employees, they had attained the status of regular employees in view if VIVA's conduct.

A project employee or a member of a work pool may acquire the status of a regular employee
when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project;32 and

2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 33

However, the length of time during which the employee was continuously re-hired is
not controlling, but merely serves as a badge of regular employment.34

In the instant case, the evidence on record shows that petitioner Enero was employed for a
total of two (2) years and engaged in at least eighteen (18) projects, while petitioner
Maraguinot was employed for some three (3) years and worked on at least twenty-three (23)
projects. 35 Moreover, as petitioners' tasks involved, among other chores, the loading,
unloading and

FILM DATE DATE ASSOCIATE

STARTED COMPLETED PRODUCER

LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG

PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL

ROCKY & ROLLY 2/13/90 3/29/90 M. ONG

PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL

ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG

NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING

BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL

BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL

HINUKAY KO NA ANG LIBINGAN 9/6/90 10/20/90 JUN CHING

MO

MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA

M. SINO KA MAN (2nd contract) 12/9/90 1/22/91 SANDY S

NOEL JUICO 1/29/91 3/14/90 JUN CHING

NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING

ROBIN GOOD 5/7/91 6/20/91 M. ONG

UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING

KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.

DARNA 10/4/91 11/18/91 E. MANUEL

DARNA (addl. 1/2) 11/20/91 12/12/91 E. MANUEL

MAGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT

M. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT

HIRAM NA MUKHA 3/15/92 4/29/92 M. ONG

HIRAM (2nd contract) 5/1/92 6/14/92 M. ONG

KAHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA

SIGAW NG PUSO 7/1/92 8/4/92 M. ONG

 SIGAW (addl. 1/2) 8/15/92 9/5/92 M. ONG

NGAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made the following movies
(Annex "4-A" of Respondents' Position Paper; OR, 29):

FILM DATE DATE ASSOCIATE

STARTED COMPLETED PRODUCER
GUMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING
PETRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA
LUSAK (2nd contract) 3/14/90 4/27/90 JUN CHING
P. KABAYO (Addl 1/2 contract) 4/21/90 5/13/90 RUTH GRUTA
BADBOY 6/15/90 7/29/90 EDITH MANUEL
BADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL
ANAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA
A.B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA
A.B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
BOYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG
HUMANAP KA NG PANGET 1/20/91 3/5/91 EDITH MANUEL
H. PANGET(2nd contract) 3/10/91 4/23/91 E. MANUEL
B. MANALAC (2nd contract) 5/22/91 7/5/91 M. ONG
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG
PITONG GAMOL 8/30/91 10/13/91 M. ONG
P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
ALABANG GIRLS (1/2 contract) 3/4/92 3/26/92 M. ONG
BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT
UTOL (addl. 1/2 contract) 5/7/92 5/29/92 B. GRIMALT
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA
MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG

arranging of movie equipment in the shooting area as instructed by the cameramen,

returning the equipment to the Viva Films' warehouse, and assisting in the "fixing" of
the lighting system, it may not be gainsaid that these tasks were vital, necessary and
indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the
nature of the work performed and its relation to the scheme of the particular business
or trade in its entirety. 36

A recent pronouncement of this Court anent project or work pool employees who had
attained the status of regular employees proves most instructive:
 The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners
themselves who admit that: . . .

A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the
business, provided that the worker shall be available when called to report of a
project. Although primarily applicable to regular seasonal workers, this set-up
can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense
of capital" and at the same time enables the workers to attain the status of
regular employees. Clearly, the continuous rehiring of the same set of
employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from
which petitioners drew its workers for its various projects.

In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other
companies when there were no on-going projects. This argument however
cannot defeat the workers' status of regularity. We apply by analogy the vase
of Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA
526, 567-568 (1966)] which deals with regular seasonal employees. There we
held: . . .

Truly, the cessation of construction activities at the end of every project is a

foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the end of
a project and before the start of a new one is regular and expected by both
parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees
are, strictly speaking, not separated from services but merely on leave of
absence without pay until they are reemployed. Thus we cannot affirm the
argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project
employment. 37 (emphasis supplied)

While Lao admittedly involved the construction industry, to which Policy Instruction No.
20/Department Order No. 19 38 regarding work pools specifically applies, there seems to be no
impediment to applying the underlying principles to industries other than the construction
industry. 39 Neither may it be argued that a substantial distinction exists between the projects
undertaken in the construction industry and the motion picture industry. On the contrary,
the raison d' etre of both industries concern projects with a foreseeable suspension of work.

At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for which
he was hired. The import of this decision is not to impose a positive and sweeping obligation
upon the employer to re-hire project employees. What this decision merely accomplishes is a
judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of
project or work pool employees who perform tasks necessary or desirable to the employer's
usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has
ruled, project or work pool employees who have gained the status of regular employees are
subject to the "no work-no pay" principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free to
seek other employment during temporary breaks in the business, provided that the worker
shall be available when called to report for a project. Although primarily applicable to regular
seasonal workers, this set-up can likewise be applied to project workers insofar as the effect
of temporary cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense of capital" and
at the same time enables the workers to attain the status of regular employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector, 40 but, we stress, not at the expense of management. Lest it be
misunderstood, this ruling does not mean that simply because an employee is a project or
work pool employee even outside the construction industry, he is deemed, ipso jure, a
regular employee. All that we hold today is that once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to
the usual business or trade of the employer, then the employee must be deemed a regular
employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of
tenurial security by project or work pool employees who have already gained the status of
regular employees by the employer's conduct.

In closing then, as petitioners had already gained the status of regular employees, their
dismissal was unwarranted, for the cause invoked by private respondents for petitioners'
dismissal, viz.: completion of project, was not, as to them, a valid cause for dismissal under
Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and
reinstatement, without loss of seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of work" and "no pay"
between the end of one project and the start of a new one, in computing petitioners' back
wages, the amounts corresponding to what could have been earned during the periods from
the date petitioners were dismissed until their reinstatement when petitioners' respective
Shooting Units were not undertaking any movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was
already in effect. Pursuant to Section 34 thereof which amended Section 279 of the Labor
Code of the Philippines and Bustamante v. NLRC, 42 petitioners are entitled to receive full
back wages from the date of their dismissal up to the time of their reinstatement, without
deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject
however, to the above observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor
Relations Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its
Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been
rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR
Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN,
NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES
and/or ARSENIO DE GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.

FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the fishermen-crew members of the
trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing
Enterprises, and if so, whether or not they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of
several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises
which is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur.
Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga
and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer;
Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and
Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier
of private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the
sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing
trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot,
chief engineer and master fisherman received a minimum income of P350.00 per week while the
assistant engineer, second fisherman, and fisherman-winchman received a minimum income of
P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman,
president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for
investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the same was a countermove to their having
formed a labor union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and
no criminal charges were formally filed against them. Notwithstanding, private respondent refused to
allow petitioners to return to the fishing vessel to resume their work on the same day, September 11,
1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-
payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the
then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V,
Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that
they were arbitrarily dismissed without being given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,
submitted its position paper denying the employer-employee relationship between private
respondent and petitioners on the theory that private respondent and petitioners were engaged in a
joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for
joint hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2)
previously scheduled joint hearings were postponed due to the absence of private respondent, one
of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among
others, on the manner the fishing operations were conducted, mode of payment of compensation for
services rendered by the fishermen-crew members, and the circumstances leading to their
dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde
rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing
venture" and not one of employer-employee relationship existed between private respondent and
petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations
Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming
the decision of the labor arbiter that a "joint fishing venture" relationship existed between private
respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private
respondent and petitioners is a joint venture arrangement and not an employer-employee
relationship. To stress that there is an employer-employee relationship between them and private
respondent, petitioners invite attention to the following: that they were directly hired by private
respondent through its general manager, Arsenio de Guzman, and its operations manager, Conrado
de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8
to 15 years in various capacities; that private respondent, through its operations manager,
supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of
the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch
the time to return to the fishing port, which were communicated to the patron/pilot by radio (single
side band); that they were not allowed to join other outfits even the other vessels owned by private
respondent without the permission of the operations manager; that they were compensated on
percentage commission basis of the gross sales of the fish-catch which were delivered to them in
cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company
policies, rules and regulations imposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private
respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or
abused its discretion when it added facts not contained in the records when it stated that the pilot-
crew members do not receive compensation from the boat-owners except their share in the catch
produced by their own efforts; that public respondent ignored the evidence of petitioners that private
respondent controlled the fishing operations; that public respondent did not take into account
established jurisprudence that the relationship between the fishing boat operators and their crew is
one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is
now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar
days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public
respondent that a "joint fishing venture" exists between private respondent and petitioners rests on
the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman
Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein,
from compulsory coverage of the SSS on the ground that there is no employer-employee relations
between the boat-owner and the fishermen-crew members following the doctrine laid down
in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo
vs. SSS, supra, that there is no employer-employee relationship between the boat-owner and the
pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and
crew members contribute the corresponding labor and the parties get specific shares in the catch for
their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the
pilot and crew members shared in the catch.

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the instant case on the
merits rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative
accorded to this Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone
Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is
that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a
procedural misstep, the idea being that its power be exercised according to justice and equity and
substantial merits of the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly

engaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or
more 7 in the open sea performing their job to earn a living to support their families, convince Us to
adopt a more liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals
with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only
on July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo
who received the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the
pendency of the case understandably have to earn a living by seeking employment elsewhere,
impress upon Us that in the ordinary course of events, the information as to the adverse decision
against them would not reach them within such time frame as would allow them to faithfully abide by
the 10-calendar day appeal period. This peculiar circumstance and the fact that their representative
is a non-lawyer provide equitable justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984,
or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail.

We have consistently ruled that 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 employer's power to
control the employee with respect to the means and methods by which the work is to be
accomplished. 8 The employment relation arises from contract of hire, express or implied. 9 In the
absence of hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control
test 10 where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end. The test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that
a "joint fishing venture" existed between private respondent and petitioners is not applicable in the
instant case. There is neither light of control nor actual exercise of such right on the part of the boat-
owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of
the boat-owners as regards their employment; that they go out to sea not upon directions of the
boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-
owners do not in any way control the crew-members with whom the former have no relationship
whatsoever; that they simply join every trip for which the pilots allow them, without any reference to
the owners of the vessel; and that they only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The
conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private respondent. 12 While performing
the fishing operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the
conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B
Sandyman II who is responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no change in the situation of the parties
since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable
judgment in Case No. 708 exempting it from compulsory coverage of the SSS law is not supported
by evidence on record. It was erroneous for public respondent to apply the factual situation of the
parties in the 1968 case to the instant case in the light of the changes in the conditions of
employment agreed upon by the private respondent and petitioners as discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew
members are under no obligation to remain in the outfit for any definite period as one can be the
crew member of an outfit for one day and be the member of the crew of another vessel the next day,
the herein petitioners, on the other hand, were directly hired by private respondent, through its
general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and have
been under the employ of private respondent for a period of 8-15 years in various capacities, except
for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga
was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as
a mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel; Jose
Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot
of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B Sandyman
II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as
winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the
hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of
private respondent for a period of 8-15 years since 1968 qualify them as regular employees within
the meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities
usually necessary or desirable in the usual fishing business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business of private
respondent, it must be noted that petitioners received compensation on a percentage commission
based on the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing trip, otherwise only 10% of the
proceeds of the sale. Such compensation falls within the scope and meaning of the term "wage" as
defined under Article 97(f) of the Labor Code, thus:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered, and included the fair
and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get
paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his
crew members in accordance with their own understanding 15 is not supported by recorded evidence.
Except that such claim appears as an allegation in private respondent's position paper, there is
nothing in the records showing such a sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their
fish-catch at midsea without the knowledge and consent of private respondent, petitioners were
unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against them unmistakably
reveals the disciplinary power exercised by private respondent over them and the corresponding
sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of
petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the
dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes
generally a parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 16 and where each party exercises
equal lights in the conduct of the business. 17 It would be inconsistent with the principle of parity of
standing between the joint co-venturers as regards the conduct of business, if private respondent
would outrightly exclude petitioners from the conduct of the business without first resorting to other
measures consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral
action, private respondent should have discussed with an open mind the advantages and
disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing
venture" between the parties. But this was not done in the instant case. Petitioners were arbitrarily
dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of
private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners'
stand. In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were
recruited by one master fisherman locally known as "maestro" in charge of recruiting others to
complete the crew members are considered employees, not industrial partners, of the boat-owners.
In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin
Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew
members because of an alleged partnership agreement between him, as financier, and Simplicio
Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed
the finding of the WCC that there existed an employer-employee relationship between the boat-
owner and the fishermen crew members not only because they worked for and in the interest of the
business of the boat-owner but also because they were subject to the control, supervision and
dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong;
that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not
alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA
159 (1982), we held that the employer-employee relationship between the crew members and the
owners of the fishing vessels engaged in deep sea fishing is merely suspended during the time the
vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the
next fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock,
repairs, loading of necessary provisions, form part of the regular operation of the company fishing
business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the
National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE.
Private respondent is ordered to reinstate petitioners to their former positions or any equivalent
positions with 3-year backwages and other monetary benefits under the law. No pronouncement as
to costs.

SO ORDERED.

FIRST DIVISION

[G.R. No. 124055. June 8, 2000]

ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETO

BALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO
CADESIM, JOEL CATAPANG, NESTOR DELA CRUZ, EDUARDO DUNGO
ESCARIO REY, ELIZALDE ESTASIO, CAROLINO M. FABIAN, RENATO
JANER, EMER B. LIQUIGAN, ALEJANDRO MABAWAD, FERNANDO M.
MAGTIBAY, DOMINADOR B. MALLILLIN, NOEL B. MANILA, VIRGILIO A.
MANIO, ROMEO M. MENDOZA, TIMOTEO NOTARION, FREDERICK
RAMOS, JOSEPH REYES, JESSIE SEVILLA, NOEL STO. DOMINGO,
DODJIE TAJONERA, JOSELITO TIONLOC, ARNEL UMALI, MAURLIE C.
VIBAR, ROLANDO ZALDUA, RODOLFO TUAZON, TEODORO LUGADA,
MAURING MANUEL, MARCIANO VERGARA, JR., ARMANDO IBASCO,
CAYETANO IBASCO, LEONILO MEDINA, JOSELITO ODO, MELCHOR
BUELA, GOMER GOMEZ, HENRY PONCE, RAMON ORTIZ, JR., ANTONIO
MIJARES, JR., MARIO DIZER, REYNANTE PEJO, ARNALDO RAFAEL,
NELSON BERUELA, AUGUSTO RAMOS, RODOLFO VALENTIN,
ANTONIO CACAM, VERNON VELASQUEZ, NORMAN VALLO,
ALEJANDRO ORTIZ, ROSANO VALLO, ANDREW ESPINOSA, EDGAR
CABARDO, FIDELES REYES, EDGARDO FRANCISCO, FERNANDO
VILLARUEL, LEOPOLDO OLEGARIO, OSCAR SORIANO, GARY RELOS,
DANTE IRANZO, RONALDO BACOLOR, RONALD ESGUERA, VICTOR
ALVAREZ, JOSE MARCELO, DANTE ESTRELLADO, MELQUIADES
ANGELES, GREGORIO TALABONG, ALBERT BALAO, ALBERT CANLAS,
CAMILO VELASCO, PONTINO CHRISTOPHER, WELFREDO RAMOS,
REYNALDO RODRIGUEZ, RAZ GARIZALDE, MIGUEL TUAZON,
ROBERTO SANTOS, AND RICARDO MORTEL, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION, CALIFORNIA
MANUFACTURING CO. INC. AND DONNA LOUISE ADVERTISING AND
MARKETING ASSOCIATES INCORPORATED, respondents.

DECISION

KAPUNAN, J.:

Before this Court is a petition for certiorari under Rule 65, which seeks to
annul and set aside the decision, promulgated on 10 May 1995, of the
National Labor Relations Commission (NLRC). The assailed decision
reversed the decision of the Labor Arbiter, and ruled that the petitioners are
employees of Donna Louise Advertising and Marketing Associates, Inc. and
ordered the reinstatement of petitioners and the payment of backwages.

Private respondent California Marketing Co. Inc. (CMC) is a domestic

corporation principally engaged in the manufacturing of food products and
distribution of such products to wholesalers and retailers. Private respondent
Donna Louise Advertising and Marketing Associates, Inc. (D.L. Admark) is a
duly registered promotional firm.
Petitioners worked as merchandisers for the products of CMC. Their services
were terminated on 16 March 1992.

The parties presented conflicting versions of the facts.

Petitioners allege that they were employed by CMC as merchandisers. Among

the tasks assigned to them were the withdrawing of stocks from the
warehouse, the fixing of prices, price-tagging, displaying of merchandise, and
the inventory of stocks. These were done under the control, management and
supervision of CMC. The materials and equipment necessary in the
performance of their job, such as price markers, gun taggers, toys, pentel pen,
streamers and posters were provided by CMC. Their salaries were being paid
by CMC. According to petitioners, the hiring, control and supervision of the
workers and the payment of salaries, were all coursed by CMC through its
agent D.L. Admark in order for CMC to avoid its liability under the law.

On 7 February 1992, petitioners filed a case against CMC before the Labor
Arbiter for the regularization of their employment status. During the pendency
of the case before the Labor Arbiter, D.L. Admark sent to petitioners notice of
termination of their employment effective 16 March 1992. Hence, their
complaint was amended so as to include illegal dismissal as cause of action.
Thereafter, twenty-seven more persons joined as complainants. CMC filed a
motion to implead as party-defendant D. L. Admark and at the same time the
latter filed a motion to intervene. Both motions were granted.

CMC, on the other hand, denied the existence of an employer-employee

relationship between petitioner and itself. Rather, CMC contended that it is
D.L. Admark who is the employer of the petitioners. While CMC is engaged in
the manufacturing of food products and distribution of such to wholesalers and
retailers, it is not allowed by law to engage in retail or direct sales to end
consumers. It, however, hired independent job contractors such as D.L.
Admark, to provide the necessary promotional activities for its product lines.

For its part, D.L. Admark asserted that it is the employer of the petitioners. Its
primary purpose is to carry on the business of advertising, promotion and
publicity, the sales and merchandising of goods and services and conduct
survey and opinion polls. As an independent contractor it serves several
clients among which include Purefoods, Corona Supply, Firstbrand, Splash
Cosmetics and herein private respondent California Marketing.

On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners
are the employees of CMC as they were engaged in activities that are
necessary and desirable in the usual business or trade of CMC. In justifying
[1]

its ruling, the Labor Arbiter cited the case of Tabas vs. CMC which, likewise,
involved private respondent CMC. In the Tabas case, this Court ruled that
therein petitioner merchandisers were employees of CMC, to wit:

There is no doubt that in the case at bar, Livi performs "manpower

services," meaning to say, it contracts out labor in favor of clients.
We hold that it is one not withstanding its vehement claims to the
contrary and not- withstanding its vehement claims to the
contrary, and notwithstanding the provision of the contract that it
is "an independent contractor." The nature of ones business is not
determined by self-serving appellations one attaches thereto but
by the tests provided by statute and prevailing case law. The bare
fact that Livi maintains a separate line of business does not
extinguish the equal fact that it has provided California with
workers to pursue the latters own business. In this connection, we
do not agree that the petitioner has been made to perform
activities "which are not directly related to the general business of
manufacturing," Californias purported "principal operation activity.
The petitioners had been charged with merchandising [sic]
promotion or sale of the products of [California] in the different
sales outlets in Metro Manila including task and occational [sic]
price tagging," an activity that is doubtless, an integral part of the
manufacturing business. It is not, then, as if Livi had served as its
(Californias) promotions or sales arm or agent, or otherwise
rendered a piece of work it (California) could not itself have done;
Livi as a placement agency, had simply supplied it with manpower
necessary to carry out its (Californias) merchandising activities,
using its (Californias) premises and equipment. [2]

On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that
no employer-employee relationship existed between the petitioners and CMC.
It, likewise, held that D.L. Admark is a legitimate independent contractor,
hence, the employer of the petitioners. Finding no valid grounds existed for
the dismissal of the petitioners by D.L. Admark, it ordered their reinstatement.
The dispositive portion of the decision reads:

WHEREFORE, premises considered, the appealed judgment is

modified. Intervenor DL ADMARK is ordered to reinstate the
eighty one (81) complainants mentioned in the appealed decision
to their former positions with backwages from March 16, 1992
 until they are actually reinstated. The award of attorneys fees
equivalent to ten (10%) of the award is deleted for lack of basis. [3]

Petitioners filed a motion for reconsideration but the same was denied by the
NLRC for lack of merit. [4]

Hence, this petition.

In the main, the issue brought to fore is whether petitioners are employees of
CMC or D.L. Admark. In resolving this, it is necessary to determine whether
D.L. Admark is a labor-only contractor or an independent contractor.

Petitioners are of the position that D.L. Admark is a labor-only contractor and
cites this Courts ruling in the case of Tabas, which they claim is applicable to
the case at bar for the following reasons:

1. The petitioners are merchandisers and the petitioners in the

Tabas case are also merchandisers who have the same nature of
work.

2. The respondent in this case is California Manufacturing Co. Inc.

while respondent in the Tabas case is the same California
Manufacturing Co. Inc.

3. The agency in the Tabas case is Livi Manpower Services. In

this case, there are at least, three (3) agencies namely: the same
Livi Manpower Services; the Rank Manpower Services and D.L.
Admark whose participation is to give and pay the salaries of the
petitioners and that the money came from the respondent CMC as
in the Tabas case.

4. The supervision, management and/or control rest upon

respondent California Manufacturing Co. Inc. as found by the
Honorable Labor Arbiter which is also, true in the Tabas Case. [5]

We cannot sustain the petition.

Petitioners reliance on the Tabas case is misplaced. In said case, we ruled

that therein contractor Livi Manpower Services was a mere placement agency
and had simply supplied herein petitioner with the manpower necessary to
carry out the companys merchandising activity. We, however, further stated
that :
 It would have been different, we believe, had Livi been discretely
a promotions firm, and that California had hired it to perform the
latters merchandising activities. For then, Livi would have been
truly the employer of its employees and California, its client. x x
x.[6]

In other words, CMC can validly farm out its merchandising activities to a
legitimate independent contractor.

There is labor-only contracting when the contractor or sub-contractor merely

recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:

(a) 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

(b) The workers recruited and placed by such person are

performing activities which are directly related to the principal
business of the employer. [7]

In contrast, there is permissible job contracting when a principal agrees to put

out or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job or work or service is to be performed or
completed within or outside the premises of the principal. In this arrangement,
the following conditions must concur:

(a)....The contractor carries on a distinct and independent

business and undertakes the contract work on his 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 his work except as
to the results thereof; and

(b)....The contractor has substantial capital or investment in the

form of tools, equipment, machineries (sic), work premises, and
other materials which are necessary in the conduct of his
business. [8]

In the recent case of Alexander Vinoya vs. NLRC et al., this Court ruled that
[9]

in order to be considered an independent contractor it is not enough to show

substantial capitalization or investment in the form of tools, equipment,
machinery and work premises. In addition, the following factors need be
considered: (a) whether the contractor is carrying on an independent
business; (b) the nature and extent of the work; (c) the skill required; (d) the
term and duration of the relationship; (e) the right to assign the performance of
specified pieces of work; (f) the control and supervision of the workers; (g) the
power of the employer with respect to the hiring, firing and payment of
workers of the contractor; (h) the control of the premises; (i) the duty to supply
premises, tools, appliances, materials, and labor; and (j) the mode, manner
and terms of payment. [10]

Based on the foregoing criterion, we find that D.L. Admark is a legitimate

independent contractor.

Among the circumstances that tend to establish the status of D.L. Admark as
a legitimate job contractor are:

1) The SEC registration certificate of D.L. Admark states that it is

a firm engaged in promotional, advertising, marketing and
merchandising activities.

2) The service contract between CMC and D.L. Admark clearly

provides that the agreement is for the supply of sales promoting
merchandising services rather than one of manpower
placement. [11]

3) D.L. Admark was actually engaged in several activities, such as

advertising, publication, promotions, marketing and
merchandising. It had several merchandising contracts with
companies like Purefoods, Corona Supply, Nabisco Biscuits, and
Licron. It was likewise engaged in the publication business as
evidenced by it magazine the "Phenomenon." [12]

4) It had its own capital assets to carry out its promotion business.
It then had current assets amounting to P6 million and is therefore
a highly capitalized venture. It had an authorized capital stock of
[13]

P500,000.00. It owned several motor vehicles and other tools,

materials and equipment to service its clients. It paid rentals
of P30,020 for the office space it occupied.

Moreover, by applying the four-fold test used in determining employer-

employee relationship, the status of D.L. Admark as the true employer of
petitioners is further established. The elements of this test are (1) the
selection and engagement of employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct. [14]

As regards the first element, petitioners themselves admitted that they were
selected and hired by D.L. Admark. [15]

As to the second element, the NLRC noted that D.L. Admark was able to
present in evidence the payroll of petitioners, sample SSS contribution forms
filed and submitted by D.L. Admark to the SSS, and the application for
employment by R. de los Reyes, all tending to show that D.L. Admark was
paying for the petitioners salaries. In contrast, petitioners did not submit an
iota of evidence that it was CMC who paid for their salaries. The fact that the
agreement between CMC and D.L. Admark contains the billing rate and cost
breakdown of payment for core merchandisers and coordinators does not in
any way establish that it was CMC who was paying for their salaries. As
correctly pointed out by both CMC and the Office of the Solicitor
[16]

General, such cost breakdown is a standard content of service contracts

[17]

designed to insure that under the contract, employees of the job contractor will
receive benefits mandated by law.

Neither did the petitioners prove the existence of the third element. Again
petitioners admitted that it was D.L. Admark who terminated their
employment. [18]

To prove the fourth and most important element of control, petitioners

presented the memoranda of CMCs sales and promotions manager. The
Labor Arbiter found that these memos "indubitably show that the complainants
were under the supervision and control of the CMC people." However, as
[19]

correctly pointed out by the NLRC, a careful scrutiny of the documents

adverted to, will reveal that nothing therein would remotely suggest that CMC
was supervising and controlling the work of the petitioners:

x x x The memorandums (Exhibit "B") were addressed to the store

or grocery owners telling them about the forthcoming sales
promotions of CMC products. While in one of the memorandums
a statement is made that "our merchandisers and demonstrators
will be assigned to pack the premium with your stocks in the
shelves x x x, yet it does not necessarily mean to refer to the
complainants, as they claim, since CMC has also regular
merchandisers and demonstrators. It would be different if in the
memorandums were sent or given to the complainants and their
 duties or roles in the said sales campaign are therein defined. It is
also noted that in one of the memorandums it was addressed to:
"All regular merchandisers/demonstrators." x x x we are not
convinced that the documents sufficiently prove employer-
employee relationship between complainants and respondents
CMC. [20]

The Office of the Solicitor General, likewise, notes that the documents fail to
show anything that would remotely suggest control and supervision exercised
by CMC over petitioners on the matter on how they should perform their work.
The memoranda were addressed either to the store owners or "regular"
merchandisers and demonstrators of CMC. Thus, petitioners, who filed a
complaint for regularization against respondent CMC, thereby, conceding that
they are not regular employees of the latter, cannot validly claim to be the
ones referred to in said memos. [21]

Having proven the existence of an employer-employee relationship between

D.L. Admark and petitioners, it is no longer relevant to determine whether the
activities performed by the latter are necessary or desirable to the usual
business or trade of CMC.

On the issue of illegal dismissal, we agree with the findings of the NLRC that
D.L. Admark "admits having dismissed the petitioners for allegedly disowning
and rejecting them as their employer." Undoubtedly, the reason given is not
just cause to terminate petitioners. D.L. Admarks belated claim that the
[22]

petitioners were not terminated but simply did not report to work is not
[23]

supported by the evidence on record. Moreover, there is no showing that due

process was afforded the petitioners.

IN VIEW OF THE FOREGOING, finding no grave abuse of discretion on the

part of the National Labor Relations Commission, the assailed decision is
AFFIRMED in toto.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-42808 January 31, 1989

ROSARIO VDA. DE SUANES, petitioner,
vs.
THE WORKMEN'S COMPENSATION COMMISSION and THE REPUBLIC OF THE PHILIPPINES
(Bureau of Public Highways), respondents.

Dante Q. Barbosa for petitioner.

Jose A. Oliveros for respondent Provincial Engineer of Batangas.

The Solicitor General for public respondent.

FELICIANO, J.:

The petitioner asks the Court to review and set aside the decision dated 31 December 1975 of the
Workmen's Compensation Commission (WCC) R04-WC Case No. 163691, entitled Rosario Vda. de
Suanes, claimant versus Republic of the Philippines (Bureau of Public Highways), respondent.

Artemio A. Suanes was a government employee for most of his life. From 1933 to 1945, he served
as market collector of the Municipal Government of the Municipality of Rosario, Batangas. He served
as a Municipal Councilor in Rosario, Batangas from 1956 to 1959. From 2 January 1964 until 30
June 1970, Artemio was a construction capataz of the Bureau of Public Highways (BPH), Batangas
Provincial Office. His Service Record 1 further shows that thereafter, from 1 July 1970 up to the time
of his death on 21 June 1973. Artemio Suanes was a constructioncapataz in the Office of the
Provincial Engineer, Batangas Province. The certificate of death issued by Dr. Salvacion Altamira of
the Magsino General Hospital in Lipa City, Batangas, attributed Artemio's demise to 'Cardio-
respiratory Arrest due to Cerebrovascular Accident'.2

On 5 March 1975, petitioner, as surviving spouse of Artemio Suanes, filed with Regional Office No.
IV of the Workmen's Compensation Unit (WCU), Department of Labor, a claim for compensation
under the applicable provisions of the Workmen's Compensation Act (Act No. 3428, as amended). In
this claim, the decedent's illness was described as "Internal Hemorrhage due to
Hypertension. 3 Petitioner's claim was referred by the WCU to the BPH which, however, controverted
the claim of petitioner. In a letter dated 26 June 1975, BPH asserted that there was "[l]ack of
causative relation of the illness alleged in [petitioner's] claim with the nature of the decedent's
employment" and that petitioner had failed to comply with the requirements of Section 24, Act No.
3428, as amended, regarding the giving of notice and subsequent filing of claim.

BPH, further, asked the WCU Regional Officeto dismiss petitioner's claim upon the ground that claim
had been filed against the wrong party, Artemio's employer at the time of his death being the
Provincial Engineer's Office of the Provincial Government of Batangas, rather than the BPH.

In an Order dated 29 August 1975, the Referee of the WCU dismissed petitioner's claim "for lack of
interest, claimant having failed to appear for the scheduled hearing despite notice. 4 Petitioner
moved,5 on 24 September 1975, to set aside the order of dismissal, denying that she had lost
interest in the prosecution of her claim and asserting that she had left her old address at No. 73-J
Panay Ave., Quezon City having moved to a new address at 2829 Felix Huertas St., Sta. Cruz,
Manila, and that she had left her new forwarding address at her old residence but that apparently no
one had received the WCU notice of hearing or that no one at the old address had informed the
process server of the claimant's new address.
The respondent Commission denied petitioner's Motion to Set Aside the Order of Dismissal upon the
ground that that Motion had not been accompanied by an affidavit of merits setting forth the facts
constituting fraud, accident, mistake or excusable negligence as required under the Rules of the
Commission. 6

Hence, the present Petition, which was filed on 15 March 1976.

Petitioner claims that respondent Commission erred in denying her Motion to Set Aside the Order of
Dismissal, since there was no law which required an affidavit of merits to be attached to her Motion,
and that she had a valid claim for death benefits considering that at the time of her husband's death,
he was a permanent employee of the BPH and considering further that the compensable nature of
his death had not been effectively controverted by the BPH. The BPH upon the other hand, took the
position that an affidavit of merits was an indispensable requirement for setting aside the order of
dismissal and that, in any case, there was no employer-employee relationship between Artemio
Suanes and the BPH at the time of the former's death since he was then employed by the office of
the Provincial Engineer of Batangas Province.

Nine years later, on 29 February 1985, this Court issued a Resolution which, after reciting very
briefly the facts described above, went on to state that:

A perusal of the copies of the Statement of Service Record in the government of the
late Artemio A. Suanes and of the Information for Membership Insurance in the
Government Service Insurance System shows that said Artemio A. Suanes was
employed as construction capataz of the Provincial Engineer's Office of Batangas
and not an employee of respondent Bureau of Public Highways, particularly the
Office of the Highways District Engineer in Batangas.

ACCORDINGLY, the Court resolved to consider the Provincial Engineer of Batangas

as IMPLEADED party respondent, to direct the Clerk of Court to FURNISH him with
a copy of the Petition for Review and to REQUIRE him to file a comment thereon
within ten (10) days from receipt. ... (Emphasis supplied)

We consider first the procedural issue of whether or not petitioner's Motion to Set Aside the Order of
Dismissal issued by the WCC Referee was properly denied simply upon the ground that it had not
been accompanied by an affidavit of merits.

We believe that this issue has to be resolved in favor of the petitioner. Section 3 of Rule 22 of the
Rules of the respondent Commission provides as follows:

Sec. 3. Time for Filing Petition; Contents and Verification. — The petition under
Section I hereof must be verified, filed within thirty (30) days after the petitioner
learns-of the decision, award, or order or other proceedings sought to be set aside
and not more than three (3) months after such decision or award was entered or
such proceedings were taken, and must be accompanied with (sic) affidavits showing
the fraud, accident, mistake' or excusable negligence relied upon and the facts
constituting the petitioner's good and substantial cause of action or defense, as the
case may be.

x x x x x x x x x. (Emphasis supplied)

There is no dispute that petitioner did not attach an affidavit of merits to her Motion to Set Aside the
Order of Dismissal. It scarcely needs to be pointed out, however, that the basic purpose of such a
requirement was to enable the Commission to evaluate the merits of the Motion or Petition to set
aside the dismissal order. Petitioner did clearly allege in her Motion the grounds she relied upon for
setting aside the order dismissing her claim for failure to attend the scheduled hearing: (a) she had
failed to attend the scheduled hearing because the notice of said hearing was sent to her old
address and not to her new forwarding address and hence was not received by her; and (b) her
husband was a permanent employee of the BPH whose death was compensable under the
Workmen's Compensation Act. To our mind, the allegations in petitioner's Motion constituted
substantial compliance with the requirements of Section 3 of Rule 22 of the Commission's Rules.
That petitioner's Motion was not a sworn motion is not a fatal defect in the circumstances of this
case. There is no suggestion in the record that petitioner had not in fact changed her address or that
she had not left her forwarding address at her old residence. If the Commission felt that an affidavit
of merit was absolutely indispensable to enable it to resolve petitioner's Motion, then the
Commission should have required petitioner to supplement her Motion with an affidavit of merit or to
simply verify her Motion, instead of dismissing that Motion out of hand. We believe that there is here
an appropriate occasion for invoking the principle that rules should not be so interpreted as to
"sacrifice substantial rights in the sophisticated altar of technicalities with [consequent] impairment of
[the] sacred principle of justice,7 a principle which is embodied in the Rules of the Commission itself.
Section 1 of Rule 10 of the Commission provides as follows:

Rule 10. — General Rule to Govern Proceedings

Section 1. The hearing, investigation and determination of any question or

controversy in workmen's compensation cases shall be without regard to
technicalities, legal forms and technical rules on evidence. Substantial evidence shall
be sufficient to support a decision, order or award.

The next issue to be resolved relates to the legal consequences if any, of the fact that petitioner's
claim had been originally filed against "the Republic of the Philippines (Bureau of Public Highways)'
and not against the Office of the Provincial Engineer of Batangas Province, the employer of Artemio
Suanes at the time of his death.

Once more, we believe that this issue should be resolved in favor of petitioner, in line with the
principle which enjoins a liberal rather than a technical view of pleading and procedure in Workmen's
Compensation cases. It is true that the petitioner's original claim (on a mimeographed form of the
Workmen's Compensation Commission) named the BPH as the decedent's employer. However, in
her Motion to Set Aside Order of Dismissal, petitioner designated the Republic of the Philippines. as
the respondent, while parenthetically referring to the Bureau of Public Highways, as part of the
caption which the Commission itself had adopted in R04-WC Case No. 163691. It is appropriate to
recall that the "Republic of the Philippines" or "Government of the Republic of the Philippines" is a
comprehensive term which has been defined in Section 2 of the Revised Administrative Code, in the
following manner:

xxx xxx xxx

The Government of the Republic of the Philippines' is a term which refers to the
corporate governmental entity through which the function of government are
exercised throughout the Philippines, including, save as the contrary appears from
the context, the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central Government or the provincial or
municipal branches or other form of local government.

xxx xxx xxx

 (Emphasis supplied)

Thus, the BPH, which is an instrumentality of the Central or National Government and the Office of
the Provincial Engineer of Batangas, and office under the supervision of the Chief Executive Officer
(the Governor) of the Province of Batangas, are both governmental offices and both are embraced in
the term Republic of the Philippines,' for purposes of the Workmen's Compensation Act. The funds
of the BPH and the fund of the Office of the Provincial Engineer of Batangas, are equally
government funds.

It must be recalled that the benefits of the Workmen's Compensation Act are extended not only to
employees in the private sector but also to all officials and employees of both the national
government and of provincial, municipal and other local governments. Section 3 of Act No. 3812, as
amended, provides:

Section 3. Applicable to Government. This Act shall also be applicable to all officials,
employees and laborers in the service of the National Government and its political
subdivisions and instrumentalities: Provided, however, that officials, laborers and
employees insured with the Government Service Insurance System, and their
dependents when entitled to the benefits of the said insurance system shall, in
addition to the same, be entitled to the benefits granted by this Act.' (Italics supplied)

The BPH was quite aware of the fact that Artemio Suanes, previously an employee of the BPH, was,
just before his death, an employee of the Office of the Provincial Engineer of Batangas Province.
The BPH conveyed this fact to the respondent Commission, when it (BPH) notified the Commission
through the Office of the Solicitor General of the filing of the claim against the BPH. In a "third
indorsement, August 6, 1975' to the WCU, the BPH said:

Respectfully returned thru the Honorable Solicitor General, Department of Justice,

Manila, to the Chief, Workmen's Compensation Section, Department of Labor,
Regional Office No. IV, Manila, the within papers relative to the claim for
compensation in R04-WC Cass No. 16391, filed by Mrs. ROSARIO VDA. DE
SUANES, widow of ARTEMIO SUANES, alleged to be a former
Construction Capataz under the Office of the Highway District Engineer, Batangas
City, inviting attention to the 2nd indorsement dated July 25, 1975 of the District
Engineer of Batangas City informing that the decedent was an employee of the
Batangas Provincial Engineer's Office at the time of his death.

It is informed that officials and employees of the Provincial Engineer's Office are not
under the administrative jurisdiction of this Department but under the Executive Head
of the Province to which they are assigned.

In view thereof, it is requested that steps be taken to dismiss the case against the
Republic of the Philippines (BPH) for lack of employee-employer relationship.

xxx xxx xxx

(Emphasis supplied)

Since both the BPH and the WCU are presumed to know the law-in this case, the Workmen's
Compensation statute including Section 3 thereof-one or the other office or the Office of the Solicitor
General, should have notified the Office of the Provincial Engineer of Batangas Province of the filing
of the claim by petitioner and referred such claim to that office. Instead, the BPH simply asked for
the dismissal of the case against the BPH 'for lack of employee-employer relationship" and, worse,
neglected to inform petitioner of the asserted lack of an employer-employee relationship between the
decedent and the BPH and where the claim should have been filed. In fact, petitioner's claim was
denied by the Referee, as already noted, not on the ground of lack of an employer-
employee relationship between the BPH and Artemio Suanes but rather because of petitioner's
failure to attend a scheduled hearing and her failure to attach to her Motion to Set Aside Order of
Dismissal an affidavit of merits. Both the respondent Commission and the WCU Referee failed to
inform petitioner of her error in designating the specific employer of her deceased husband, and in
effect waited for this Court to issue its Resolution of 29 February 1985 considering the Provincial
Engineer of Batangas as having been impleaded as a party respondent.

In view of the foregoing circumstances and considering particularly that no prejudice was sustained
by the Office of the Provincial Engineer of Batangas Province by the misdirecting of petitioner's
claim, we hold that the Office of the Provincial Engineer of Batangas Province may be held liable on
petitioner's claim.

The respondent Provincial Engineer of Batangas Province, in his Comment dated 8 April 1985,
asserts that petitioner's claim against his office has already prescribed. The ordinary rule is that the
statutory right to compensation under the Workmen's Compensation Act prescribes in ten (10)
years 8 counted from the time of accrual of the claim, in this case from the time of the death of
Artemio Suanes. Artemio Suanes died, as noted earlier, on 21 June 1973; the court impleaded the
Office of the Provincial Engineer of Batangas Province on 29 February 1985, i.e., about twelve (12)
years later. We do not, however, believe that petitioner's claim may be so cavalierly defeated, given
the circumstances of this case. In the first place, petitioner's original claim was filed, again as already
noted, on 5, March 1975. While this original claim designated the wrong employer, we believe that,
given the insistent demands of substantial justice in this case, such original claim should be
regarded, as we hereby so regard it, as having effectively tolled the running of the prescriptive
period. We note that the petitioner lost no time in filing her Petition for Review with this Court on 15
March 1976 when her claim was denied by the respondent Commission on 13 December 1975. This
Court was able formally to rectify the erroneous designation of the respondent BPH only after almost
nine (9) years from filing of the Petition for Review. Under the principle of nuncpro tunc, we do not
believe that this failure to act earlier on the part on the Court itself may be allowed to prejudice the
petitioner. The defense of prescription must, therefore, be rejected.

Turning, finally, to the merits of petitioner's claim, there is no dispute about the fact that Artemio's
ailment supervened in the course of his employment either with the BPH or the Office of the
Batangas Provincial Engineer. It is well settled that, under the Workmen's Compensation
Act,9 petitioner is accordingly relieved of the burden of proving causation between the illness and the
employment in view of the legal presumption that said illness arose out of the decedent's
employment.10 The burden of proving non-compensability of the cause of death is shifted to the
employer. Respondent Batangas Provincial Engineer had failed to discharge this burden. Indeed,
none of the respondents even attempted to present any evidence to rebut the presumption of
compensability; all of them chose to rely upon the formal defenses discussed above. But those
defenses do not constitute evidence to overthrow the statutory presumption. In legal effect, no
evidence was introduced by the respondents to offset that legal presumption. The Court, therefore,
is left with no alternative but to rule in favor of petitioner's claim.11

WHEREFORE, the Decision dated 31 December 1975 of respondent Workmen's Compensation

Commission is hereby REVERSED. The Petitioner is hereby AWARDED the Pl,500.00 claimed as
reimbursement for the doctors, medical and hospital bills incurred in connection with the decedent's
last illness, in addition to any other applicable death benefits under Act No. 3428, as amended. No
pronouncement as to costs.
SO ORDERED.