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Basiao thereafter filed with the then Ministry of Labor a complaint4against the Company
and its president. Without contesting the termination of the first contract, the complaint
sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was
not the Company's employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that theunderwriting agreement had established an employer-employee relationship between him
and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his
claim. Said official's decision directed payment of his unpaid commissions "... equivalent to
the balance of the first year's premium remaining unpaid, at the time of his termination, of
all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus
10% attorney's fees.6
This decision was, on appeal by the Company, affirmed by the National Labor Relations
Commission.7Hence, the present petition for certiorariand prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the
Company's employee by virtue of the contract invoked by him, thereby placing his claim for
unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under
the provisions of Section 217 of the Labor Code,8or, contrarily, as the Company would have
it, that under said contract Basiao's status was that of an independent contractor whose
claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts
in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the contract they
had entered into, which, either expressly or by necessary implication, made Basiao the
master of his own time and selling methods, left to his judgment the time, place and means
of soliciting insurance, set no accomplishment quotas and compensated him on the basis of
results obtained. He was not bound to observe any schedule of working hours or report toany regular station; he could seek and work on his prospects anywhere and at anytime he
chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basi
contract with the Company, the respondents contend that they do not constitute the
decisive determinant of the nature of his engagement, invoking precedents to the effe
that the critical feature distinguishing the status of an employee from that of an
independent contractor is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct in rendering such ser
Pursuing the argument, the respondents draw attention to the provisions of Basiao's
contract obliging him to "... observe and conform to all rules and regulations which thCompany may from time to time prescribe ...," as well as to the fact that the Company
prescribed the qualifications of applicants for insurance, processed their applications
determined the amounts of insurance cover to be issued as indicative of the control, w
made Basiao, in legal contemplation, an employee of the Company.9
It is true that the "control test" expressed in the following pronouncement of the Cour
the 1956 case of Viana vs. Alejo Al-Lagadan10
... In determining the existence of employer-employee relationship, the following elem
are generally considered, namely: (1) the selection and engagement of the employee;
the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees' conduct although the latter is the most important element (35 Am. Jur....
has been followed and applied in later cases, some fairly recent.11
Indeed, it is withou
question a valid test of the character of a contract or agreement to render service. It s
however, be obvious that not every form of control that the hiring party reserves to h
over the conduct of the party hired in relation to the services rendered may be accord
effect of establishing an employer-employee relationship between them in the legal o
technical sense of the term. A line must be drawn somewhere, if the recognized distin
between an employee and an individual contractor is not to vanish altogether. Realist
it would be a rare contract of service that gives untrammelled freedom to the party hi
and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towa
the achievement of the mutually desired result without dictating the means or metho
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be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it. The distinction acquires particular relevance in the
case of an enterprise affected with public interest, as is the business of insurance, and is on
that account subject to regulation by the State with respect, not only to the relations
between insurer and insured but also to the internal affairs of the insurance
company. 12Rules and regulations governing the conduct of the business are provided for inthe Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and
expected for an insurance company to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of the law and what it requires or
prohibits. Of such a character are the rules which prescribe the qualifications of persons
who may be insured, subject insurance applications to processing and approval by the
Company, and also reserve to the Company the determination of the premiums to be paid
and the schedules of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee
relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be
independent contractors, instead of employees of the parties for whom they worked.
In Mafinco Trading Corporation vs. Ople,13
the Court ruled that a person engaged to sell soft
drinks for another, using a truck supplied by the latter, but with the right to employ his own
workers, sell according to his own methods subject only to prearranged routes, observing no
working hours fixed by the other party and obliged to secure his own licenses and defray his
own selling expenses, all in consideration of a peddler's discount given by the other party for
at least 250 cases of soft drinks sold daily, was not an employee but an independent
contractor.
In Investment Planning Corporation of the Philippines us. Social Security System14
a case
almost on all fours with the present one, this Court held that there was no employer-
employee relationship between a commission agent and an investment company, but that
the former was an independent contractor where said agent and others similarly placed
were: (a) paid compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal representatives
event of death or registration; (b) required to put up performance bonds; (c) subject t
of rules and regulations governing the performance of their duties under the agreeme
with the company and termination of their services for certain causes; (d) not required
report for work at any time, nor to devote their time exclusively to working for the com
nor to submit a record of their activities, and who, finally, shouldered their own sellin
transportation expenses.
More recently, in Sara vs. NLRC,15
it was held that one who had been engaged by a ric
miller to buy and sell rice and palay without compensation except a certain percentag
what he was able to buy or sell, did work at his own pleasure without any supervision
control on the part of his principal and relied on his own resources in the performance
work, was a plain commission agent, an independent contractor and not an employee
The respondents limit themselves to pointing out that Basiao's contract with the Com
bound him to observe and conform to such rules and regulations as the latter might fr
time to time prescribe. No showing has been made that any such rules or regulations
in fact promulgated, much less that any rules existed or were issued which effectively
controlled or restricted his choice of methods or the methods themselves of sell
insurance. Absent such showing, the Court will not speculate that any exceptions orqualifications were imposed on the express provision of the contract leaving Basiao ".
to exercise his own judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connect
with the Company for twenty-five years. Whatever this is meant to imply, the obvious
would be that what is germane here is Basiao's status under the contract of July 2, 196
the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whos
claim for unpaid commissions should have been litigated in an ordinary civil action. Th
Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being withoujurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. Th
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conclusion renders it unnecessary and premature to consider Basiao's claim for commissions
on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set
aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-
83 is dismissed. No pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.
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02. FIRST DIVISION
G.R. No. 119930 March 12, 1998
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (Fourth Division, Cebu City), LABOR ARBITER NICASIO P. ANINON and
PANTALEON DE LOS REYES, respondents.
BELLOSILLO,J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII
Case No. 03-0309-94 filed by private respondent Pantaleon de los Reyes against petitioner
Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of
salaries and back wages after finding no employer-employee relationship between De los
Reyes and petitioner INSULAR LIFE. 1On appeal by private respondent, the order of
dismissal was reversed by the National Labor Relations Commission (NLRC) which ruled that
respondent De los Reyes was an employee of petitioner.2Petitioner's motion for
reconsideration having been denied, the NLRC remanded the case to the Labor Arbiter for
hearing on the merits.
Seeking relief through this special civil action for certiorariwith prayer for a restraining
order and/or preliminary injunction, petitioner now comes to us praying for annulment of
the decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995
denying the motion for reconsideration of the decision. It faults NLRC for acting without
jurisdiction and/or with grave abuse of discretion when, contrary to established facts and
pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter and held
instead that the complaint was properly filed as an employer-employee relationship existed
between petitioner and private respondent.
Petitioner reprises the stand it assumed below that it never had any employer-employee
relationship with private respondent, this being an express agreement between them in the
agency contracts, particularly reinforced by the stipulation therein that De los Reyes was
allowed discretion to devise ways and means to fulfill his obligations as agent and would be
paid commission fees based on his actual output. It further insists that the nature of t
work status as described in the contracts had already been squarely resolved by the C
the earlier case of Insular Life Assurance Co., Ltd. v. NLRCand Basiao3where the
complainant therein, Melecio Basiao, was similarly situated as respondent De los Reye
that he was appointed first as an agent and then promoted as agency manager, and th
contracts under which he was appointed contained terms and conditions identical to t
of Delos Reyes. Petitioner concludes that since Basiao was declared by the Court to be
independent contractor and not an employee of petitioner, there should be no reasonthe status of De los Reyes herein vis-a-vispetitioner should not be similarly determine
We reject the submissions of petitioner and hold that respondent NLRC acted appropr
within the bounds of the law. The records of the case are replete with telltale indicato
an existing employer-employee relationship between the two parties despite written
contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an agency cont
with respondent Pantaleon de los Reyes4authorizing the latter to solicit within the
Philippines applications for life insurance and annuities for which he would be paid
compensation in the form of commissions. The contract was prepared by petitioner in
entirety and De los Reyes merely signed his conformity thereto. It contained the stiputhat no employer-employee relationship shall be created between the parties and tha
agent shall be free to exercise his own judgment as to time, place and means of solicit
insurance. De los Reyes however was prohibited by petitioner from working for any ot
life insurance company, and violation of this stipulation was sufficient ground for
termination of the contract. Aside from soliciting insurance for the petitioner, private
respondent was required to submit to the former all completed applications for insura
within ninety (90) consecutive days, deliver policies, receive and collect initial premium
balances of first year premiums, renewal premiums, deposits on applications and paym
on policy loans. Private respondent was also bound to turn over to the company
immediately any and all sums of money collected by him. In a written communication
petitioner to respondent De los Reyes, the latter was urged to register with the Social
Security System as a self-employed individual as provided under PD No. 1636. 5
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On 1 March 1993 petitioner and private respondent entered into another contract6where
the latter was appointed as Acting Unit Manager under its office the Cebu DSO V (157).
As such, the duties and responsibilities of De los Reyes included the recruitment, training,
organization and development within his designated territory of a sufficient number of
qualified, competent and trustworthy underwriters, and to supervise and coordinate the
sales efforts of the underwriters in the active solicitation of new business and in the
furtherance of the agency's assigned goals. It was similarly provided in the management
contract that the relation of the acting unit manager and/or the agents of his unit to thecompany shall be that of independent contractor. If the appointment was terminated for
any reason other than for cause, the acting unit manager would be reverted to agent status
and assigned to any unit. As in the previous agency contract, De los Reyes together with his
unit force was granted freedom to exercise judgment as to time, place and means of
soliciting insurance. Aside from being granted override commissions, the acting unit
manager was given production bonus, development allowance and a unit development
financing scheme euphemistically termed "financial assistance" consisting of payment to
him of a free portion of P300.00 per month and a validate portion of P1,200.00. While the
latter amount was deemed as an advance against expected commissions, the former was
not and would be freely given to the unit manager by the company only upon fulfillment by
him of certain manpower and premium quota requirements. The agents and underwriters
recruited and trained by the acting unit manager would be attached to the unit but
petitioner reserved the right to determine if such assignment would be made or, for any
reason, to reassign them elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the
company's conservation program, i.e., preservation and maintenance of existing insurance
policies, and to accept moneys duly receipted on agent's receipts provided the same were
turned over to the company. As long as he was unit manager in an acting capacity, De los
Reyes was prohibited from working for other life insurance companies or with the
government. He could not also accept a managerial or supervisory position in any firm doing
business in the Philippines without the written consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager until he was
notified by petitioner on 18 November 1993 that his services were terminated effective 18
December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the
ground that he was illegally dismissed and that he was not paid his salaries and separa
pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdictio
citing the absence of employer-employee relationship. It reasoned out that based on t
criteria for determining the existence of such relationship or the so-called "four-fold
test," i.e., (a) selection and engagement of employee, (b) payment of wages, (c) powe
dismissal, and, (d) power of control, De los Reyes was not an employee but an indepe
contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the ca
was dismissed on the ground that the element of control was not sufficiently establish
since the rules and guidelines set by petitioner in its agency agreement with responde
Delos Reyes were formulated only to achieve the desired result without dictating the m
or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different perspective. It
determined that respondent De los Reyes was under the effective control of petitione
the critical and most important aspects of his work as Unit Manager. This conclusion w
derived from the provisions in the contract which appointed private respondent as Ac
Unit Manager, to wit: (a) De los Reyes was to serve exclusively the company, therefore
was not an independent contractor; (b) he was required to meet certain manpower an
production quota; and, (c) petitioner controlled the assignment to and removal of soli
agents from his unit.
The NLRC also took into account other circumstances showing that petitioner exercise
employer's prerogatives over De los Reyes, e.g., (a) limiting the work of respondent De
Reyes to selling a life insurance policy known as "Salary Deduction Insurance" onlyto
members of the Philippine National Police, public and private school teachers and oth
employees of private companies; (b) assigning private respondent to a particular place
table where he worked whenever he was not in the field; (c) paying private responden
during the period of twelve (12) months of his appointment as Acting Unit Manager th
amount of P1,500.00 as Unit Development Financing of which 20% formed his salary a
rest, i.e., 80%, as advance of his expected commissions; and, (d) promising that upon
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completion of certain requirements, he would be promoted to Unit Manager with the right
of petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the
management contract entered into between petitioner and De los Reyes as contracts of
agency. We however hold otherwise. Unquestionably there exist major distinctions between
the two agreements. While the first has the earmarks of an agency contract, the second is
far removed from the concept of agency in that provided therein are conditionalities that
indicate an employer-employee relationship. The NLRC therefore was correct in finding that
private respondent was an employee of petitioner, but this holds true only insofar as the
management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over
the case..
It is axiomatic that the existence of an employer-employee relationship cannot be negated
by expressly repudiating it in the management contract and providing therein that the
"employee" is an independent contractor when the terms of the agreement clearly show
otherwise. For, the employment status of a person is defined and prescribed by law and not
by what the parties say it should be.7In determining the status of the management
contract, the "four-fold test" on employment earlier mentioned has to be applied.
Petitioner contends that De los Reyes was never required to go through the pre-
employment procedures and that the probationary employment status was reserved only to
employees of petitioner. On this score, it insists that the first requirement of selection and
engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent was appointed as
Acting Unit Manager only upon recommendation of the District Manager.8This indicates
that private respondent was hired by petitioner because of the favorable endorsement of its
duly authorized officer. But, this approbation could only have been based on the
performance of De los Reyes as agent under the agency contract so that there can be no
other conclusion arrived under this premise than the fact that the agency or underwriter
phase of the relationship of De los Reyes with petitioner was nothing more than a trial or
probationary period for his eventual appointment as Acting Unit Manager of petitioner.
Then, again, the very designation of the appointment of private respondent as "acting" unit
manager obviously implies a temporary employment status which may be made perm
only upon compliance with company standards such as those enumerated under Sec.
the management contract.9
On the matter of payment of wages, petitioner points out that respondent was
compensated strictly on commission basis, the amount of which was totally dependen
his total output. But, the manager's contract, speaks differently. Thus
4. Performance Requirements. To maintain your appointment as Acting Unit Manag
must meet the following manpower and production requirements:
Quarter Active Calendar Year
Production Agents Cumulative FYP
Production
1st 2 P 125,000
2nd 3 250,000
3rd 4 375,000
4th 5 500,000
5.4. Unit Development Financing (UDF). As an Acting Unit Manager you shall be giveduring the first 12 months of your appointment a financial assistance which is compos
two parts:
5.4.1. Free Portion amounting to P300 per month, subject to your meeting prescribed
minimum performance requirement on manpower and premium production. The free
portion is not payable by you.
5.4.2. Validate Portion amounting to P1,200 per month, also subject to meeting the sa
prescribed minimum performance requirements on manpower and premium product
The validated portion is an advance against expected compensation during the UDF pe
and thereafter as may be necessary.
The above provisions unquestionably demonstrate that the performance requirement
imposed on De los Reyes was applicable quarterlywhile his entitlement to the free po
(P300) and the validated portion (P1,200) wasmonthlystarting on the first month of th
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twelve (12) months of the appointment. Thus, it has to be admitted that even before the
end of the first quarter and prior to the so-called quarterly performance evaluation, private
respondent was already entitled to be paid both the free and validated portions of the UDF
every month because his production performance could not be determined until after the
lapse of the quarter involved. This indicates quite clearly that the unit manager's quarterly
performance had no bearing at all on his entitlement at least to the free portion of the UDF
which for all intents and purposes comprised the salary regularly paid to him by petitioner.
Thus it cannot be validly claimed that the financial assistance consisting of the free portionof the UDF was purely dependent on the premium production of the agent. Be that as it
may, it is worth considering that the payment of compensation by way of commission does
not militate against the conclusion that private respondent was an employee of petitioner.
Under Art. 97 of the Labor Code, "wage" shall mean "however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, price or
commission basis . . . ."10
As to the matter involving the power of dismissal and control by the employer, the latter of
which is the most important of the test, petitioner asserts that its termination of De los
Reyes was but an exercise of its inherent right as principal under the contracts and that the
rules and guidelines it set forth in the contract cannot, by any stretch of the imagination, be
deemed as an exercise of control over the private respondent as these were merelydirectives that fixed the desired result without dictating the means or method to be
employed in attaining it. The following factual findings of the NLRC11however contradict
such claims:
A perusal of the appointment of complainant as Acting Unit Manager reveals that:
1. Complainant was to "exclusively" serve respondent company. Thus it is provided: . . . 7..7
Other causes of Termination:
This appointment may likewise be terminated for any of the following causes: . . . 7..7..2.
Your entering the service of the government or another life insurance company; 7..7..3. Your
accepting a managerial or supervisory position in any firm doing business in the Philippines
without the written consent of the Company; . . .
2. Complainant was required to meet certain manpower and production quotas.
3. Respondent (herein petitioner) controlled the assignment and removal of soliciting
to and from complainant's unit, thus: . . . 7..2. Assignment of Agents: Agents recruited
trained by you shall be attached to your unit unless for reasons of Company policy, no
assignment should be made. The Company retains the exclusive right to assign new
soliciting agents to the unit. It is agreed that the Company may remove or transfer any
soliciting agents appointed and assigned to the said unit. . . .
It would not be amiss to state that respondent's duty to collect the company's premiu
using company receipts under Sec. 7.4 of the management contract is further evidenc
petitioner's control over respondent, thus:
xxx xxx xxx
7.4.Acceptance and Remittance of Premiums. . . . . the Company hereby authorizes
to accept and to receive sums of money in payment of premiums, loans, deposits on
applications, with or without interest, due from policyholders and applicants for insur
and the like, specially from policyholders of business solicited and sold by the agents
attached to your unit provided however, that all such payments shall be duly receipte
you on the corresponding Company's "Agents' Receipt" to be provided you for this pu
and to be covered by such rules and accounting regulations the Company may issue fr
time to time on the matter. Payments received by you shall be turned over to the
Company's designated District or Service Office clerk or directly to the Home Office no
than the next working day from receipt thereof . . . .
Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC an
Basiao12to the instant case under the doctrine of stare decisis, postulating that both c
involve parties similarly situated and facts which are almost identical.
But we are not convinced that the cited case is on all fours with the case at bar. In Bas
the agent was appointed Agency Manager under an Agency Manager Contract. To
implement his end of the agreement, Melecio Basiao organized an agency office to wh
gave the name M. Basiao and Associates. TheAgency Manager Contract practically
contained the same terms and conditions as the Agency Contract earlier entered into,
the Court observed that, "drawn from the terms of the contract they had entered into
(which) either expressly or by necessary implication, Basiao (was) made the master of
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own time and selling methods, left to his own judgment the time, place and means of
soliciting insurance, set no accomplishment quotas and compensated him on the bases of
results obtained. He was not bound to observe any schedule of working hours or report to
any regular station; he could seek and work on his prospects anywhere and at anytime he
chose to and was free to adopt the selling methods he deemed most effective." Upon these
premises, Basiao was considered as agent an independent contractor of petitioner
INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointedActing Unit Manager, not
agency manager. There is no evidence that to implement his obligations under the
management contract, De los Reyes had organized an office. Petitioner in fact has admitted
that it provided De los Reyes a place and a table at its office where he reported for and
worked whenever he was not out in the field. Placed under petitioner's Cebu District Service
Office, the unit was given a name by petitioner De los Reyes and Associates and
assigned Code No. 11753 and Recruitment No. 109398. Under the managership contract, De
los Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was
imposed premium production quotas. Of course, the acting unit manager could not
underwrite other lines of insurance because his Permanent Certificate of Authority was for
life insurance only and for no other. He was proscribed from accepting a managerial or
supervisory position in any other office including the government without the writtenconsent of petitioner. De los Reyes could only be promoted to permanent unit manager if he
met certain requirements and his promotion was recommended by the petitioner's District
Manager and Regional Manager and approved by its Division Manager. As Acting Unit
Manager, De los Reyes performed functions beyond mere solicitation of insurance business
for petitioner. As found by the NLRC, he exercised administrative functions which were
necessary and beneficial to the business of INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC13which is closer in application
than Basiaoto this present controversy, we found that "the relationships of the Ruiz
brothers and Grepalife were those of employer-employee. First, their work at the time of
their dismissal as zone supervisor and district manager was necessary and desirable to the
usual business of the insurance company. They were entrusted with supervisory, sales and
other functions to guard Grepalife's business interests and to bring in more clients to the
company, and even with administrative functions to ensure that all collections, reports and
data are faithfully brought to the company . . . . A cursory reading of their respective
functions as enumerated in their contracts reveals that the company practically dictat
manner by which their jobs are to be carried out . . . ." We need elaborate no further.
Exclusivity of service, control of assignments and removal of agents under private
respondent's unit, collection of premiums, furnishing of company facilities and materi
well as capital described as Unit Development Fund are but hallmarks of the managem
system in which herein private respondent worked. This obtaining, there is no escapin
conclusion that private respondent Pantaleon de los Reyes was an employee of herein
petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the
Decision of the National Labor Relations Commission dated 3 March 1995 and its Orde
April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the Labor Arbite
quowho is directed to hear and dispose of this case with deliberate dispatch in light o
views expressed herein.
SO ORDERED.
Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.
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In sum, the main issue before this Court is whether the CA acted correctly in giving due
course and granting respondents late Petition for Certiorari.
This Courts Ruling
The Petition is meritorious.
Main Issue:
Timeliness of the Appeal to the CA
The records reveal that respondents received a copy of the NLRC Decision on September 18,
1998. On September 24, 1998, they filed a Motion for Reconsideration, which was denied
on November 27, 1998. On February 19, 1999, they filed their Petition for Certiorari, which
this Court referred to the CA.
Section 3, Rule 46 of the Rules of Court, provides:
Section 3. Contents and filing of petition; effect of non -compliance with requirements.
xxx xxx xxx
In actions filed under Rule 65, the petition shall further indicate the material dates showingwhen notice of the judgment or final order or resolution subject thereof was received, when
a motion for new trial or reconsideration, if any, was filed and when notice of the denial
thereof was received.
xxx xxx xxx
The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition.[22]
In the present case, not only did respondents fail to include an explanation for the service by
registered mail but, more important, their Petition also lacked a verified statement on the
material date of their receipt of the notice of the NLRCs denial of their Motion for
Reconsideration. Hence, the CA properly dismissed their Petition.
However, the CAs dismissal of their appeal did not deter respondents from committin
more grievous blunders. In their Urgent Motion for Reconsideration dated June 25, 19
they stated that they had received notice of the NLRCs denial of their Motion for
Reconsideration on December 21, 1998. Under Section 4, Rule 65 of the Rules of Cou
Petition for Certiorari shall be filed not later than sixty (60) days from notice of the
judgment, the order or the resolution sought to be assailed. Furthermore, it provides:
If the petitioner had filed a motion for new trial or reconsideration in due time after n
of said judgment, order or resolution, the period herein fixed shall be interrupted. If th
motion is denied, the aggrieved party may file the petition within the remaining perio
[it] shall not be less than five (5) days in any event, reckoned from notice of such deni
xxx.[23]
Applying the above-mentioned rule, the 60-day period for filing a Petition for Certiora
interrupted when respondents filed their Motion for Reconsideration on September 2
1998. When their Motion was denied, they had a remaining period of fifty-four (54) da
until February 15, 1999, within which to file their Petition for Certiorari.[24]
However, t
filed their Petition only on February 19, 1999, thereby prompting the CA to issue on Ju
1999, another Resolution of denial, reiterating its dismissal of their Petition for having
filed late.
In another Motion for Reconsideration filed on August 17, 1999, respondents reasone
they were allegedly not aware of Supreme Court Circular No. 39-98, which had taken e
on September 1, 1998. This Motion was, however, denied by the CA since a second M
for Reconsideration was a prohibited pleading.
On September 8, 1999, respondents filed a third Motion for Reconsideration, arguing
the Motion filed on August 17, 1999 was not a Second Motion for Reconsideration. Th
contended that it was a plea for reconsideration of the CAs Resolution dated June 22,
which had reiterated its dismissal of their Petition for being four (4) days late.
Citing Siguenza v. Court of Appeals,[25]
respondents contend that rules of procedure sh
not to be applied in a very rigid and technical manner. They are supposed to be used help secure, not override, substantial justice. Further, a short delay does not warrant
dismissal of an appeal.
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We hold, however, that procedural rules setting the period for perfecting an appeal or filing
a petition for review are generally inviolable. It is doctrinally entrenched that appeal is not a
constitutional right, but a mere statutory privilege. Hence, parties who seek to avail
themselves of it must comply with the statutes or rules allowing it. The requirements for
perfecting an appeal within the reglementary period specified in law must, as a rule, be
strictly followed. Such requirements are considered indispensable interdictions against
needless delays and are necessary for the orderly discharge of the judicial
business. Furthermore, the perfection of an appeal in the manner and within the periodpermitted by law is not only mandatory, but also jurisdictional. Failure to perfect the appeal
renders the judgment of the court final and executory. Just as a losing party has the
privilege to file an appeal within the prescribed period, so does the winner also have the
correlative right to enjoy the finality of the decision.[26]
This Court may deign to veer away from the general rule only if, on its face, the appeal
appears to be absolutely meritorious. Indeed, this Court has in a number of instances
relaxed procedural rules in order to serve substantial justice. However, we see no reason to
do so in this case. The delay incurred by respondents was simply inexcusable. They explain
that they were not aware of SC Circular 39-98, which had been published in several
newspapers of general circulation in the country on July 26, 1998, and had taken effect on
September 1, 1998. Respondents filed their Petition for Certiorari on February 19, 1999,some seven (7) months after the Circular had been published in major newspapers, five (5)
months after taking effect. This Court must emphasize once again that lawyers are duty-
bound to keep abreast of legal developments and to participate in continuing legal
education programs.[27]
We repeat: the timely perfection of an appeal is a mandatory requirement, which cannot be
trifled with as a mere technicality to suit the interest of a party. The rules on periods for
filing appeals are to be observed religiously, and parties who seek to avail themselves of the
privilege must comply with the rules.[28]
In view of the foregoing, we find no necessity to pass upon the other issues raised,
especially regarding the legality of petitioners dismissal. After all, the NLRCs Decision hasbecome final and, whether right or wrong, is no longer reviewable on appeal. It has become
the law of the case.[29]
WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET A
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.
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Petitioners construe the above paragraph to mean that the refusal of the employer to
reinstate an employee as directed in an executory order of reinstatement would make it
liable to pay the latter's salaries. This interpretation is correct. Under Article 223 of the
Labor Code, as amended, an employer has two options in order for him to comply with an
order of reinstatement, which is immediately executory, even pending appeal. Firstly, he
can admit the dismissed employee back to work under the same terms and conditions
prevailing prior to his dismissal or separation or to a substantially equivalent position if the
former position is already filled up as we have ruled in Union of Supervisors (RB) NATU
vs. Sec. of Labor, 128 SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252 [1986].
Secondly, he can reinstate the employee merely in the payroll. Failing to exercise any of the
above options, the employer can be compelled under pain of contempt, to pay instead the
salary of the employee. This interpretation is more in consonance with the constitutional
protection to labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor
is deemed to be property within the meaning of the constitutional guaranty that no one
shall be deprived of life, liberty, and property without due process of law. Therefore, he
should be protected against any arbitrary and unjust deprivation of his job (Bondoc vs.
People's Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not be left
without any remedy in case the employer unreasonably delays reinstatement. Therefore,
we hold that the unjustified refusal of the employer to reinstate an illegally dismissed
employee entitles the employee to payment of his salaries . . . .21
The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting
the import of Article 223 in Maranaw, the Court22declared that the reinstatement aspect of
the Labor Arbiter's decision needs a writ of execution as it is not self-executory, a
declaration the Court recently reiterated and adopted inArchilles Manufacturing
Corp. v. NLRC.23
We note that prior to the enactment of R.A. No. 6715, Article 22324of the Labor Code
contains no provision dealing with the reinstatement of an illegally dismissed employee. The
amendment introduced by R.A. No. 6715 is an innovation and a far departure from the old
law indicating thereby the legislature's unequivocal intent to insert a new rule that will
govern the reinstatement aspect of a decision or resolution in any given labor dispute. Infact, the law as now worded employs the phrase "shall immediately be executory" without
qualification emphasizing the need for prompt compliance. As a rule, "shall" in a statute
commonly denotes an imperative obligation and is inconsistent with the idea of
discretion25and that the presumption is that the word "shall", when used in a statute
mandatory.26
An appeal or posting of bond, by plain mandate of the law, could not ev
forestall nor stay the executory nature of an order of reinstatement. The law, moreov
unambiguous and clear. Thus, it must be applied according to its plain and obvious me
according to its express terms. In Globe-Mackay Cable and Radio Corporation v. NLRC,
held that:
Under the principles of statutory construction, if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legisderived from themaxim index an
sermo est(speech is the index of intention) rests on the valid presumption that the wo
employed by the legislature in a statute correctly express its intent or will and preclud
court from construing it differently. The legislature is presumed to know the meaning
words, to have used words advisedly, and to have expressed its intent by the use of su
words as are found in the statute. Verba legis non est recedendum, or from the words
statute there should be no departure.28
And in conformity with the executory nature of the reinstatement order, Rule V, Secti
(3) of the New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to dir
the employer to immediately reinstate the dismissed employee. Thus:
In case the decision includes an order of reinstatement, the Labor Arbiter shall direct t
employer to immediately reinstate the dismissed or separated employee even pendin
appeal. The order of reinstatement shall indicate that the employee shall either be ad
back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll.
In declaring that reinstatement order is not self-executory and needs a writ of executi
the Court, in Maranaw, adverted to the rule provided under Article 224. We said:
It must be stressed, however, that although the reinstatement aspect of the decision
is immediately executory, it does not follow that it is self-executory. There must be a wexecution which may be issuedmotu proprioor on motion of an interested party. Artic
of the Labor Code provides:
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Art. 224. Execution of decision, orders or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbitter
or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ
of execution on a judgment within five (5) years from the date it becomes final and
executory . . . (emphasis supplied)
The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC also
provides:
The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized
hearing officer of origin shall, motu proprioor on motion of any interested party, issue a writ
of execution on a judgment only within five (5) years from the date it becomes final and
executory . . . . No motion for execution shall be entertained nor a writ he issued unless the
Labor Arbiter is in possession of the records of the case which shall include an entry of
judgment. (emphasis supplied)
xxx xxx xxx
In the absence then of an order for the issuance of a writ of execution on the reinstatement
aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to
admit back to work the private respondent under the terms and conditions prevailing priorto her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An
option is a right of election to exercise a privilege, and the option in Article 223 of the Labor
Code is exclusively granted to the employer. The event that gives rise for its exercise is not
the reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the
employer to reinstate the employee, while the final act which compels the employer to
exercise the option is the service upon it of the writ of execution when, instead of admitting
the employee back to his work, the employer chooses to reinstate the employee in the
payroll only. If the employer does not exercise this option, it must forthwith admit the
employee back to work, otherwise it may be punished for contempt.29
A closer examination, however, shows that the necessity for a writ of execution under
Article 224 applies only to final and executory decisions which are not within the coverageof Article 223. For comparison, we quote the material portions of the subject articles:
Art. 223. Appeal. . . .
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be exec
even pending appeal. The employee shall either be admitted back to work under the s
terms and conditions prevailing prior to his dismissal or separation or, at the option of
employer, merely reinstated in the payroll. The posting of a bond by the employer sha
stay the execution for reinstatement provided herein.
xxx xxx xxx
Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-a
or voluntary arbitrator may, motu propioor on motion of any interested party, issue a
of execution on a judgment within five (5) years from the date it becomes final and
executory, requiring a sheriff or a duly deputized officer to execute or enforce final
decisions, orders or awards of the Secretary of Labor and Employment or regional dire
the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case
shall be the duty of the responsible officer to separately furnish immediately the coun
record and the parties with copies of said decisions, orders or awards. Failure to comp
with the duty prescribed herein shall subject such responsible officer to appropriateadministrative sanctions.
Article 224 states that the need for a writ of execution applies only within five (5) year
the date a decision, an order or award becomes final and executory. It can not relate t
award or order of reinstatement still to be appealed or pending appeal which Article 2
contemplates. The provision of Article 223 is clear that an award for reinstatement sh
immediately executory even pending appealand the posting of a bond by the employe
not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to
an award of reinstatement immediately enforceable, even pending appeal. To require
application for and issuance of a writ of execution as prerequisites for the execution o
reinstatement award would certainly betray and run counter to the very object and in
Article 223, i.e., the immediate execution of a reinstatement order. The reason is simp
application for a writ of execution and its issuance could be delayed for numerous rea
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former exercise supervision and control over the latter. The management of the business is
in the owner's hands. The owner as holder of the certificate of public convenience must see
to it that the driver follows the route prescribed by the franchising authority and the rules
promulgated as regards its operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary" they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus conductor,20
auto-calesa
owner/operator and driver,21and recently between taxi owners/operators and taxi
drivers.22
Hence, petitioners are undoubtedly employees of private respondent because as
taxi drivers they perform activities which are usually necessary or desirable in the usual
business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in
accordance with law. The just and authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of notice
and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners, being
employees of private respondent, can be dismissed only for just and authorized cause, and
after affording them notice and hearing prior to termination. In the instant case, private
respondent had no valid cause to terminate the employment of petitioners. Neither were
there two (2) written notices sent by private respondent informing each of the petitioners
that they had been dismissed from work. These lack of valid cause and failure on the part of
private respondent to comply with the twin-notice requirement underscored the illegality
surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his actual
reinstatement.23
It must be emphasized, though, that recent judicial
pronouncements24
distinguish between employees illegally dismissed prior to the effectivity
of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals wereeffected after such date. Thus, employees illegally dismissed prior to March 21, 1989, are
entitled to backwages up to three (3) years without deduction or qualification, while those
illegally dismissed after that date are granted full backwages inclusive of allowances a
other benefits or their monetary equivalent from the time their actual compensation
withheld from them up to the time of their actual reinstatement. The legislative policy
behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal. Considering that petitioners were
terminated from work on August 1, 1991, they are entitled to full backwages on the b
their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for
washing of the taxi units, we view the same as not illegal in the context of the law. We
that after a tour of duty, it is incumbent upon the driver to restore the unit he has driv
the same clean condition when he took it out. Car washing after a tour of duty is indee
practice in the taxi industry and is in fact dictated by fair play.25
Hence, the drivers are
entitled to reimbursement of washing charges.1wphi1.nt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respon
dated October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent date
28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED sub
MODIFICATION. Private respondent is directed to reinstate petitioners to their positio
held at the time of the complained dismissal. Private respondent is likewise ordered to
petitioners their full backwages, to be computed from the date o f dismissal until their
reinstatement. However, the order of public respondent that petitioners be reimburse
amount paid as washing charges is deleted. Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza and De Leon, Jr., JJ.,concur.
Buena,on official leave.
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Aggrieved, Balagtas appealed the decision to the National Labor Relations Commission
(NLRC) but failed to post either a cash or surety bond as required by Article 223 of the Labor
Code. Instead, petitioners filed a manifestation and motion, stating, among others, that
under Republic Act No. 6938, Article 62(7) of the Cooperative Code of the Philippines,
petitioners are exempt from putting up a bond in an appeal from the decision of the inferior
court.
On July 20, 1998, the NLRC rendered the assailed order, to wit:
"WHEREFORE, premises considered, respondents are hereby given ten (10) inextendible
days from receipt of this Order within which to post a cash or surety bond in the amount of
TWO HUNDRED EIGHTEEN THOUSAND PESOS (P218,000.00) PESOS, failure of which shall
constitute a waiver and non-perfection of the appeal.
In addition thereto, the employer as well as counsel shall submit a joint declaration under
oath attesting that the surety bond posted is genuine and that it shall be in effect until final
disposition of the case.
SO ORDERED." (NLRC Order, p. 4; Rollo, p. 15)
On September 28, 1998, the NLRC struck down petitioners' Motion for Reconsideration
(Annex B, pp. 18-20, Rollo).
Petitioners then filed a petition for certiorari with the CA, alleging that the NLRC acted with
grave abuse of discretion amounting to excess or lack of jurisdiction in directing them to
post an appeal bond despite the clear mandate of Article 62, paragraph (7)4of Republic Act
No. 6938 (Cooperative Code) which dispensed with such requirement. The CA initially
dismissed the petition for failure of petitioners to attach copies of the certain relevant
documents and records cited therein. However, when the matter was elevated to the Court,
the CA was directed to admit the petition filed by petitioners.
After the parties submitted their respective pleadings, the CA resolved to dismiss the
petition in the assailed decision dated September 27, 2002 holding that the exemption from
putting up a bond by a cooperative applies to cases decided by inferior courts only. The CAratiocinated as follows:
If the lawmakers' intention is for an "all embracing exemption in favor of all cooperativ
including but not limited to quasi-judicial bodies, Congress could simply have provided
all cooperatives are exempted from the requirement of posting appeal bonds in all its
appeal(s) regardless of the nature of the suit or the forum where the action is filed.
Ironically, this is not what appears in the cooperative law, and [it] instead delimits the
exemption only to appeals from the decision of the inferior courts. That, a fortiori, is t
manifest intention of the legislators.
Withal, we are dealing with a matter of exemption from a usual requirement in takingappeal. In the ordinary course of things, if there is a genuine intention to give coopera
"a cover all" exemption from the appeal bond requirement, it must be clearly and
unequivocally stated in the law. Exemptions cannot spring out o f mere presumptions o
deductions.5
Their motion for reconsideration having been denied, petitioners filed the present pet
The issues are:
Whether cooperatives are exempted from filing a cash or surety bond required to per
employer's appeal under Section 2236of Presidential Decree No. 442 (the Labor Code)
Whether a certification issued by the Cooperative Development Authority constitutes
substantial compliance with the requirement for the posting of a bond.
Petitioners argue that Article 62, paragraph (7) of the Cooperative Code exempts
cooperatives from posting an appeal bond. Moreover, the CA should not have given a
restrictive interpretation to "inferior courts" as encompassing only municipal, metropo
and regional trial courts because the term appears in a special law. Rather, "inferior co
should be interpreted to have a generic meaning which includes even quasi-judicial co
or bodies like the NLRC. Petitioners assert this would be more in accord with the inten
the legislators to grant more benefits and privileges to cooperatives under the Cooper
Code. Otherwise, the exemption granted under the law would have no meaning consi
that appeal bonds are, in almost all instances, no longer required in perfecting an appe
from the decisions of municipal, metropolitan and regional trial courts.
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(4) Any judge in his capacity as notary public, ex-officio, shall render service, free of charge,
to any person or group of persons requiring either the administration of oath or the
acknowledgment of articles of cooperation of a cooperative applicant for registration and
instruments of loan from cooperative not exceeding Fifty thousand pesos (P50,000.00).
(5) Any register of deeds shall accept for registration, free of charge, any instrument relative
to a loan made under this Code which does not exceed Fifty thousand pesos (P50,000.00) or
the deeds of title of any property acquired by the cooperative or any paper or document
drawn in connection with any action brought by the cooperative or with any court judgmentrendered in its favor or any instrument relative to a bond of any accountable officer of a
cooperative for the faithful performance of his duties and obligations.
(6) Cooperatives shall be exempt from the payment of all court sheriff's fees payable to the
Philippine Government for and in connection with all actions brought under this Code, or
where such action is brought by the Cooperative Development Authority before the court,
to enforce the payment of obligations contracted in favor of the cooperative.
(7) All cooperatives shall be exempt from putting up a bond for bringing an appeal against
the decision of an inferior court or for seeking to set aside any third party claim: Provided,
That a certification of the Authority showing that the net assets of the cooperative are in
excess of the amount of the bond required by the court in similar cases shall be accepted bythe court as a sufficient bond.
(8) Any security issued by cooperatives shall be exempt from the provisions of the Securities
Act provided such security shall not be speculative.
Considering that the above provision relates to "tax and other exemptions," the same must
be strictly construed. This follows the well-settled principle that exceptions are to be strictly
but reasonably construed; they extend only so far as their language warrants, and all doubts
should be resolved in favor of the general provision rather than the exceptions.8
An express exception, exemption, or saving clause excludes other exceptions. Express
exceptions constitute the only limitations on the operation of a statute and no other
exception will be implied.9The rule proceeds f rom the premise that the legislative body
would not have made specific enumerations in a statute, if it had the intention not to
restrict its meaning and confine its terms to those expressly mentioned.
Consequently, where a general rule is established by a statute with exceptions, the Co
will not curtail the former nor add to the latter by implication.10
Courts may not, in the
of interpretation, enlarge the scope of a statute and include therein situations not pro
nor intended by the lawmakers.11
Statutes which are plain and specific should be appl
without attempted construction and interpretation. Thus, where a provision of law
expressly limits its application to certain transactions, it cannot be extended to othertransactions by interpretation.
12
The term "court" has a settled meaning in this jurisdiction which cannot be reasonably
interpreted as extending to quasi-judicial bodies like the NLRC unless otherwise clearl
expressly indicated in the wording of the statute. Simply because these tribunals or ag
exercise quasi-judicial functions does not convert them into courts of law.
In any event, Article 119 of the Cooperative Code itself expressly embodies the legisla
intention to extend the coverage of labor statutes to cooperatives, to wit:
Art. 119. Compliance with Other Laws. (1) The Labor Code and all other labor laws s
apply to all cooperatives.
For this reason, petitioners must comply with the requirement set forth in Article 223
Labor Code in order to perfect their appeal to the NLRC. It must be pointed out that th
right to appeal is not a constitutional, natural or inherent right. It is a privilege of statu
origin and, therefore, available only if granted or provided by statute. The law may val
provide limitations or qualifications thereto or relief to the prevailing party in the even
appeal is interposed by the losing party.13
In this case, the obvious and logical purpose of an appeal bond is to insure, during the
period of appeal, against any occurrence that would defeat or diminish recovery by th
employee under the judgment if the latter is subsequently affirmed.14
This is consisten
the State's constitutional mandate to afford full protection to labor in order to forcefu
meaningfully underscore labor as a primary social and economic force.15
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