67. Meralco vs.

Benamira
Indirect Employer – Labor Only Agency
FACTS: Rogelio Benamira et al are security guards who worked for People’s Security, Inc. ( PSI). PSI was the
security agency contracted by MERALCO. The contract between PSI and MERALCO expired. MERALCO
subsequently contracted Armed Security & Detective Agency, Inc. (ASDAI) as its new security agency. ASDAI
absorbed Benamira et al upon MERALCO’s advice. After two years, the contract between ASDAI and
MERALCO expired. MERALCO subsequently contracted AFSISI. Advance Forces Security & Investigation
Services, Inc (AFSISI) did not schedule any work for Benamira et al. It was interpreted as a constructive
dismissal. Benamira sued MERALCO, ASDAI, and AFSISI.

The Labor Arbiter ruled that ASDAI should reinstate Benamira et al and that MERALCO is solidarily liable. No
liability for AFSISI. NLRC affirmed LA. The CA reversed the lower courts. The CA ruled that the employer is
actually MERALCO.

ISSUE: Whether or not MERALCO is the employer of the fired security guards.

HELD: No. Under the contract between ASDAI and MERALCO, it can be seen that ASDAI is indeed the
employer of the guards. Applying the 4 Fold Test: ASDAI employed the guards when it absorbed them from
PSI. ASDAI provided the salaries of the guards (MERALCO merely pays ASDAI for providing the guards).
ASDAI has control over the guards because they are being inspected (MERALCO has the right to conduct its
own inspection as per contract with ASDAI only). ASDAI has the power to terminate the guards, as when they
did not provide any tours or schedules to them.
Further, the services offered by the guards is not necessary to the principal business of MERALCO which is to
provide electricity.

AFSISI is not the employer of the guards as well (as claimed by the guards) because AFSISI never absorbed
them nor was there any evidence showing otherwise.

These security agencies are not Labor Only agencies (unlike HR agencies) because they have their own
equipments, machineries and in general they carry their own business.
68. Broadway Motors Inc. vs. NLRC

FACTS: By virtue of a written undated "Work Contract," private respondent Vicente Apolinario, sometime in
March 1967, began work as an auto painter in the premises of petitioner Broadway Motors, Inc.. The contract
was signed by Vicente Apolinario as "Contractor"and Mr. Johnny L. Chieng, Parts and Service Operations
Manager of petitioner Corporation. Apolinario worked as an auto painter for a period of 18 years, until 23
January 1985 when he was barred from entering the premises of the petitioner Corporation, and his alleged
involvement in a fist-fight with the shop superintendent of Broadway Motors the day before.

Apolinario commenced an action for illegal dismissal with the NLRC. Petitioner Corporation contends that
Apolinario was not its own employee but, rather, an independent contractor who conducted his own separate
business under the trade name of "VM Automotive Repair Service" and had his own "Contract Workers."

ISSUE:W/N Apolinario is an independent contractor.

HELD:No. The evidence of record reveals that the alleged "Contract Work" carried out by Apolinario and his
"Contract Workers," excepting overtime work, was performed during regular working hours 6 days in a week,
which circumstance must have made it virtually impossible for them to carry on any additional and
independent auto painting business outside the premises of Broadway Motors. Finally, Apolinario and his
men were engaged in the performance of a line of work — automobile painting — which was directly related
to, if not an integral part altogether of the regular business operations of petitioner Corporation i.e., that of an
automotive repair shop.

We conclude that while there is present in the relationship between petitioner Corporation and private
respondent some factors suggestive of an owner- independent contractor relationship (e.g., the manner of
payment of compensation to Apolinario and his "Contract Workers"), many other factors are present which
demonstrate that that relationship is properly characterized as one of employer-employee. We conclude,
further, that the same factors indicate the existence of a "labor-only" contracting arrangement between
petitioner Corporation on the one hand as owner, and upon the other hand, Apolinario as "labor-only"
contractor and his "Contract Workers." Thus, an employer-employee relationship must be held to have
existed between petitioner Corporation and private respondent, whether considered as a result of the
contractual arrangements between them or as a result of the operation of the Labor Code (at least from 1974
onwards) and its Implementing Rules.
69. RUBBERWORLD PHILS. INC. vs. NLRC

FACTS: Petitioner Rubberworld (Phils.), Inc. ( Rubberworld), a corporation established in 1965, was engaged
in manufacturing footwear, bags and garments. Aquilino Magsalin, et al.were employed as dispatcher,
warehouseman, issue monitor, foreman, jacks cementer and outer sole attacher, respectively. On August 26,
1994, Rubberworld filed with the Department of Labor and Employment a notice of temporary shutdown of
operations to take effect on September 26, 1994. Before the effectivity date, however, Rubberworld was
forced to prematurely shutdown its operations.

Private respondents filed with the NLRC a complaint[2] against petitioner for illegal dismissal and non-
payment of separation pay.

Rubberworld filed with the Securities and Exchange Commission (SEC) a petition for declaration of
suspension of payments with a proposed rehabilitation plan.[3]

SEC issued the following order:

"xxx all actions for claims against Rubberworld Philippines, Inc. pending before any court,
tribunal, office, board, body, Commission or sheriff are hereby deemed SUSPENDED.

"Consequently, all pending incidents for preliminary injunctions, writ or attachments,

foreclosures and the like are hereby rendered moot and academic.”

Petitioner submitted to the labor arbiter a motion to suspend the proceedings invoking the SEC order. The
labor arbiter did not act on the motion and ordered the parties to submit their respective position papers.

The labor arbiter rendered a decision in favor of the private respondents. Petitioner’s appeal to NLRC was
denied.

ISSUE: W/N the DOLE, the Labor Arbiter and the NLRC may legally act on the claims of respondents despite
the order of the Securities and Exchange Commission suspending all actions against a company under
rehabilitation by a management committee created by the Securities and Exchange Commission.

HELD:NO. Presidential Decree No. 902-A is clear that "all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly." The law did not make any exception in favor of labor claims.

"The justification for the automatic stay of all pending actions for claims is to enable the management
committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra
judicial interference that might unduly hinder or prevent the 'rescue' of the debtor company. To allow such
other actions to continue would only add to the burden of the management committee or rehabilitation
receiver, whose time, effort and resources would be wasted in defending claims against the corporation
instead of being directed toward its restructuring and rehabilitation." [9]

Thus, the labor case would defeat the purpose of an automatic stay. To rule otherwise would open the
floodgates to numerous claims and would defeat the rescue efforts of the management committee. This finds
ratiocination in that the power to hear and decide labor disputes is deemed suspended when the Securities
and Exchange Commission puts the corporation under rehabilitation.
70.Development Bank of the Philippines vs. Secretary of Labor

FACTS: Petitioner Development Bank of the Philippines seeks the nullification of an order issued by the
Undersecretary of Labor and Employment, directing the petitioner to deliver the properties of Riverside Mills
Corporation (RMC) which it had in its possession to the Ministry (now Department) of Labor and
Employment (MOLE) for proper disposition .

Respondents filed a complaint for illegal dismissal, unfair labor practice, illegal deductions from salaries and
violation of the minimum wage law against RMC. A decision was rendered by Director Severo M. Pucan of the
NCR, MOLE, ordering RMC to pay private respondents backwages and separation benefits. A corresponding
writ of execution was issued directing the sheriff to collect the amount of P1,256,678.76 from RMC and, in
case of failure to collect, to execute the writ by selling the goods and chattel of RMC not exempt from
execution or, in case of insufficiency thereof, the real or immovable properties of RMC.

It appears that petitioner had instituted extra-judicial foreclosure proceedings as early as 1983 on the
properties and other assets of RMC as a result of the latter's failure to meet its obligations on the loans it
secured from petitioner.Therefore writ of execution was returned unserved and unsatisfied.

Private respondents argued by stating that pursuant to Article 110 of the Labor Code, they enjoy first
preference over the mortgaged properties of RMC for the satisfaction of the judgment rendered in their favor
notwithstanding the foreclosure of the same by petitioner as mortgage creditor

Petitioner contends that Article 110 of the Labor Code finds no application in the case at bar for the following
reasons: (1) The properties sought to be delivered have ceased to belong to RMC in view of the fact that
petitioner had foreclosed on the mortgage, and the properties have been sold and delivered to third parties;
(2) The requisite condition for the application of Article 110 of the Labor Code is not present since no
bankruptcy or insolvency proceedings over RMC properties and assets have been undertaken.

ISSUE: W/N private respondents still enjoyed a preferential lien for the payment of their backwages and
separation benefits over the properties of RMC which were foreclosed by petitioner.

HELD: NO. The Court laid down the ruling that Article 110 of the Labor Code, which cannot be viewed in
isolation of, and must always be reckoned with the provisions of the Civil Code on concurrence and
preference of credits, may not be invoked by employees or workers of RMC like private respondents herein,
in the absence of a formal declaration of bankruptcy or a judicial liquidation order of RMC.

It appears on record, that petitioner had extra-judicially foreclosed the subject properties from RMC as early
as 1983 and purchased the same at public auction, and that RMC had failed to exercise its right to redeem.
Thus, when the issued order which directed the delivery of these properties to the MOLE, RMC had ceased to
be the absolute owner thereof, the order was directed against properties which no longer belonged to the
judgment debtor RMC.
71.Boliano et al vs. Padoliana

Facts: Petitioners A.N. Bolinao, Jr., et al. were all former employees of Sabena Mining Corporation(SMC). In
1982 and 1983 they were laid off without being recalled. Petitioners filed a formal complaint for collection of
unpaid salaries, unused accrued vacation and sick leave benefits, 13th month pay and separation pay before
the NLRC against SMC and Development Bank of the Philippines.

On May,1984, a compromise agreement was entered into by the parties, wherein petitioners were to be paid
on a staggered basis the collective amount of P385,583.95. The company faithfully complied with the
scheduled payments only up to March, 1985 because it ceased operations effective April 1, 1985. With this
development, petitioners moved for the issuance of a writ of execution.

The Labor Arbiter issued a writ of execution against the company to collect the balance of P311,580.14 On
June 27, 1985 Deputy Sheriff garnished the remaining amount of P150,279.64 in the savings account of the
company at the DBP). However, the same amount was previously garnished by two creditors of the company;
namely, Bank of America and Phelps Dodge (Phils.), Inc. Bank of America garnished the amount in April, 1982
while Phelps Dodge garnished the amount in June, 1984.

The respondent court(RTC Manila) issued an order denying the motion to intervene and dismissing the third
party claim, declaring that the garnishment made by its Deputy Sheriff in favor of respondent Phelps Dodge,
Phils., Inc. superior to the rights of petitioners.

Petitioners contend that under Article 110 and its implementing rules; and regulations of the Labor Code, the
claims of the laborers for unpaid wages and other monetary benefits due them for services rendered prior to
bankruptcy enjoy first preference in the satisfaction of credits against a bankrupt company. The respondent
maintains that the rights of preference and first lien of petitioners, as former employees of SMC, under
aforesaid law and rules, are operative only in an insolvency court and in a bankrupt case.

ISSUE: W/N petitioners enjoy preferential right or claim over the funds of Sabena Mining Corporation as
provided for under the provisions of Article 110 of the New Labor Code

HELD:NO. It is quite clear from the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book
H of the Revised Rules and Regulations Implementing the Labor Code, that a declaration of bankruptcy or
a judicial liquidation must be present before the worker's preference may be enforced. Thus, it was held that
Article 110 of the Labor Code and its implementing rule cannot be invoked absent a formal declaration of
bankruptcy or a liquidation order

In the case at bar, there was no showing of any insolvency proceeding or declaration of bankruptcy or judicial
liquidation that was being filed by Sabena Mining Corporation. It is only an extra-judicial foreclosure that was
being enunciated as when DBP extra-judicially foreclosed the assets of Sabena Mining Corporation.
72. V.L. Enterprises vs. CA

Facts:

After an inspection was conducted, the Regional Director ordered VL to pay the 21 employees’ claims,
amounting to P822,978.00. It then appealed the Order. The Secretary of Labor affirmed and deemed the
appealed order to have become final and executory.

The DOLE Regional Director (NCR) issued an Alias Writ of Execution. On the basis thereof, the Sheriff issued a
Notice of Sale on Execution of Real Properties. VL filed a Petition for Certiorari with CA, seeking to annul the
RD’s order, the Alias writ of execution and the notice of sale.

CA dismissed the petition for certiorari. Instead of appealing said Court of Appeals Resolution via a Petition
for Review on Certiorari, VL filed a Petition for Annulment of Judgment, Writ of Execution and Notice of Sale,
with TRO. Petitioners’ ground for annulment of the three Issuances is the alleged lack of jurisdiction on the
part of the DOLE Regional Director in awarding amounts which exceeded P5,000.00.

Issues:Whether or not Regional Director have jurisdiction to award amount exceeding P5,000.

Held:Yes. The respondent Secretary held that the jurisdictional limitation imposed by Article 129 on his
visitorial and enforcement power under Article 128 (b) of the Labor Code, as amended, has been repealed by
Republic Act No. 7730. Article 128(b) -- "[n]otwithstanding the provisions of Article 129 and 217 of the Labor
Code to the contrary"Republic Act No. 7730 amended Article 128(b) to its present wording so as to free it
from the jurisdictional limitations found in Articles 129 and 217. Thus, as it is now worded, the authority
under Article 128 may be exercised by DOLE regardless of the monetary value involved, unlike in Article 129
where the authority is only for claims not exceeding P5,000.00 per claimant.