G.R. No. 82511 March 3, 1992

GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and IMELDA SALAZAR, respondents.

Castillo, Laman, Tan & Pantaleon for petitioner.

Gerardo S. Alansalon for private respondent.

ROMERO, J.:

For private respondent Imelda L. Salazar, it would seem that her close association with Delfin Saldivar would mean the loss of her job. In May 1982, private respondent was employed by Globe-Mackay Cable and Radio Corporation (GMCR) as general systems analyst. Also employed by petitioner as manager for technical operations' support was Delfin Saldivar with whom private respondent was allegedly very close.

Sometime in 1984, petitioner GMCR, prompted by reports that company equipment and spare parts worth thousands of dollars under the custody of Saldivar were missing, caused the investigation of the latter's activities. The report dated September 25, 1984 prepared by the company's internal auditor, Mr. Agustin Maramara, indicated that Saldivar had entered into a partnership styled Concave Commercial and Industrial Company with Richard A. Yambao, owner and manager of Elecon Engineering Services (Elecon), a supplier of petitioner often recommended by Saldivar. The report also disclosed that Saldivar had taken petitioner's missing Fedders airconditioning unit for his own personal use without authorization and also connived with Yambao to defraud petitioner of its property. The airconditioner was recovered only after petitioner GMCR filed an action for replevin against Saldivar. 1

It likewise appeared in the course of Maramara's investigation that Imelda Salazar violated company reglations by involving herself in transactions conflicting with the company's interests. Evidence showed that she signed as a witness to the articles of partnership between Yambao and Saldivar. It also appeared that she had full knowledge of the loss and whereabouts of the Fedders airconditioner but failed to inform her employer.

Consequently, in a letter dated October 8, 1984, petitioner company placed private respondent Salazar under preventive suspension for one (1) month, effective October 9, 1984, thus giving her thirty (30) days within which to, explain her side. But instead of submitting an explanations three (3) days later or on October 12, 1984 private respondent filed a complaint against petitioner for illegal suspension, which she subsequently amended to include illegal dismissal, vacation and sick leave benefits, 13th month pay and damages, after petitioner notified her in writing that effective November 8, 1984, she was considered dismissed "in view of (her) inability to refute and disprove these findings. 2

After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered petitioner company to reinstate private respondent to her former or equivalent position and to pay her full backwages and other benefits she would have received were it not for the illegal dismissal. Petitioner was also ordered to pay private respondent moral damages of P50,000.00. 3

On appeal, public respondent National Labor Relations, Commission in the questioned resolution dated December 29, 1987 affirmed the aforesaid decision with respect to the reinstatement of private respondent but limited the backwages to a period of two (2) years and deleted the award for moral damages. 4

Hence, this petition assailing the Labor Tribunal for having committed grave abuse of discretion in holding that the suspension and subsequent dismissal of private respondent were illegal and in ordering her reinstatement with two (2) years' backwages.

On the matter of preventive suspension, we find for petitioner GMCR.

The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in conflict with his position as technical operations manager, necessitated immediate and decisive action on any employee closely, associated with Saldivar. The suspension of Salazar was further impelled by th.e discovery of the missing Fedders airconditioning unit inside the apartment private respondent shared with Saldivar. Under such circumstances, preventive suspension was the proper remedial recourse available to the company pending Salazar's investigation. By itself, preventive suspension does, not signify that the company has adjudged the employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to for the protection of the company's property pending investigation any alleged malfeasance or misfeasance committed by the employee. 5

Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to due process when she was promptly suspended. If at all, the fault, lay with private respondent when she ignored petitioner's memorandum of October 8, 1984 "giving her ample opportunity to present (her) side to the Management." Instead, she went directly to the Labor Department and filed her complaint for illegal suspension without giving her employer a chance to evaluate her side of the controversy.

But while we agree with the propriety of Salazar's preventive suspension, we hold that her eventual separation from employment was not for cause.

What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the victim who has not merely lost her job which, under settled Jurisprudence, is a property right of which a person is not to be deprived without due process, but also the compensation that should have accrued to her during the period when she was unemployed?

Art. 279 of the Labor Code, as amended, provides:

Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. 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. 6 (Emphasis supplied)

Corollary thereto are the following provisions of the Implementing Rules and Regulations of the Labor Code:

Sec. 2. Security of Tenure. — In cases of regular employments, the employer shall not terminate the services of an employee except for a just cause as provided in the Labor Code or when authorized by existing laws.

Sec. 3. Reinstatement. — An employee who is unjustly dismissed from work shall by entitled to reinstatement without loss of seniority rights and to backwages." 7 (Emphasis supplied)

Before proceeding any furthers, it needs must be recalled that the present Constitution has gone further than the 1973 Charter in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Given the pro-poor orientation of several articulate Commissioners of the Constitutional Commission of 1986, it was not surprising that a whole new Article emerged on Social Justice and Human Rights designed, among other things, to "protect and enhance the right of all the people to human dignity, reduce social, economic and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good." 8 Proof of the priority accorded to labor is that it leads the other areas of concern in the Article on Social Justice, viz., Labor ranks ahead of such topics as Agrarian and Natural Resources Reform, Urban Land Roform and Housing, Health, Women, Role and Rights of Poople's Organizations and Human Rights. 9

The opening paragraphs on Labor states

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits is may be provided by law. 10 (Emphasis supplied)

Compare this with the sole.provision on Labor in the 1973 Constitution under the Article an Declaration of Principles and State Policies that provides:

Sec. 9. The state shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employers. The State shall ensure the rights of workers to self-organization, collective baegaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration. 11

To be sure, both Charters recognize "security of tenure" as one of the rights of labor which the State is mandated to protect. But there is no gainsaying the fact that the intent of the framers of the present Constitution was to give primacy to the rights of labor and afford the sector "full protection," at least greater protection than heretofore accorded them, regardless of the geographical location of the workers and whether they are organized or not.

It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who substantially contributed to the present formulation of the protection to labor provision and proposed that the same be incorporated in the Article on Social Justice and not just in the Article on Declaration of Principles and State Policies "in the light of the special importance that we are giving now to social justice and the necessity of emphasizing the scope and role of social justice in national development." 12

If we have taken pains to delve into the background of the labor provisions in our Constitution and the Labor Code, it is but to stress that the right of an employee not to be dismissed from his job except for a just or authorized cause provided by law has assumed greater importance under the 1987 Constitution with the singular prominence labor enjoys under the article on Social Justice. And this transcendent policy has been translated into law in the Labor Code. Under its terms, where a case of unlawful or unauthorized dismissal has been proved by the aggrieved employee, or on the other hand, the employer whose duty it is to prove the lawfulness or justness of his act of dismissal has failed to do so, then the remedies provided in Article 279 should find, application. Consonant with this liberalized stance vis-a-vis labor, the legislature even went further by enacting Republic Act No. 6715 which took effect on March 2, 1989 that amended said Article to remove any possible ambiguity that jurisprudence may have generated which watered down the constitutional intent to grant to labor "full protection." 13

To go back to the instant case, there being no evidence to show an authorized, much less a legal, cause for the dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but ay well, to full backwages." 14

The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in the former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of the word "reinstate" is "to restore to a state, conditione positions etc. from which one had been removed" 15 and in the latter, to give her

back the income lost during the period of unemployment. Both remedies, looking to the past, would perforce make her "whole."

Sadly, the avowed intent of the law has at times been thwarted when reinstatement has not been forthcoming and the hapless dismissed employee finds himself on the outside looking in.

Over time, the following reasons have been advanced by the Court for denying reinstatement under the facts of the case and the law applicable thereto; that reinstatement can no longer be effected in view of the long passage of time (22 years of litigation) or because of the realities of the situation; 16 or that it would be "inimical to the employer's interest; " 17 or that reinstatement may no longer be feasible; 18 or, that it will not serve the best interests of the parties involved; 19 or that the company would be prejudiced by the workers' continued employment; 20 or that it will not serve any prudent purpose as when supervening facts have transpired which make execution on that score unjust or inequitable 21 or, to an increasing extent, due to the resultant atmosphere of "antipathy and antagonism" or "strained relations" or "irretrievable estrangement" between the employer and the employee. 22

In lieu of reinstatement, the Court has variously ordered the payment of backwages and separation pay 23 or solely separation pay. 24

In the case at bar, the law is on the side of private respondent. In the first place the wording of the Labor Code is clear and unambiguous: "An employee who is unjustly dismissed from work shall be entitled to reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof statutory construction, if a statute is clears plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by, the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. 26 The legislature is presumed to know the meaning of the words, to:have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute. 27 Verba legis non est recedendum, or from the words of a statute there should be no departure. Neither does the provision admit of any qualification. If in the wisdom of the Court, there may be a ground or grounds for non-application of the above-cited provision, this should be by way of exception, such as when the reinstatement may be inadmissible due to ensuing strained relations between the employer and the employee.

In such cases, it should be proved that the employee concerned occupies a position where he enjoys the trust and confidence of his employer; and that it is likely that if reinstated, an atmosphere of antipathy and antagonism may be generated as to adversely affect the efficiency and productivity of the employee concerned.

A few examples, will suffice to illustrate the Court's application of the above principles: where the employee is a Vice-President for Marketing and as such, enjoys the full trust and confidence of top management; 28 or is the Officer-In-Charge of the extension office of the bank where he works; 29 or is an organizer of a union who was in a position to sabotage the union's efforts to organize the workers in commercial and industrial establishments; 30 or is a

warehouseman of a non-profit organization whose primary purpose is to facilitate and maximize voluntary gifts. by foreign individuals and organizations to the Philippines; 31 or is a manager of its Energy Equipment Sales. 32

Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwisey reinstatement can never be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That is human nature. 33

Besides, no strained relations should arise from a valid and legal act of asserting one's right; otherwise an employee who shall assert his right could be easily separated from the service, by merely paying his separation pay on the pretext that his relationship with his employer had already become strained. 34

Here, it has not been proved that the position of private respondent as systems analyst is one that may be characterized as a position of trust and confidence such that if reinstated, it may well lead to strained relations between employer and employee. Hence, this does not constitute an exception to the general rule mandating reinstatement for an employee who has been unlawfully dismissed.

On the other hand, has she betrayed any confidence reposed in her by engaging in transactions that may have created conflict of interest situations? Petitioner GMCR points out that as a matter of company policy, it prohibits its employees from involving themselves with any company that has business dealings with GMCR. Consequently, when private respondent Salazar signed as a witness to the partnership papers of Concave (a supplier of Ultra which in turn is also a supplier of GMCR), she was deemed to have placed. herself in an untenable position as far as petitioner was concerned.

However, on close scrutiny, we agree with public respondent that such a circumstance did not create a conflict of interests situation. As a systems analyst, Salazar was very far removed from operations involving the procurement of supplies. Salazar's duties revolved around the development of systems and analysis of designs on a continuing basis. In other words, Salazar did not occupy a position of trust relative to the approval and purchase of supplies and company assets.

In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As we have held countless times, while loss of confidence or breach of trust is a valid ground for terminations it must rest an some basis which must be convincingly established. 35 An employee who not be dismissed on mere presumptions and suppositions. Petitioner's allegation that since Salazar and Saldivar lived together in the same apartment, it "presumed reasonably that complainant's sympathy would be with Saldivar" and its averment that Saldivar's investigation although unverified, was probably true, do not pass this Court's test. 36 While we should not condone the acts of disloyalty of an employee, neither should we dismiss him on the basis of suspicion derived from speculative inferences.

To rely on the Maramara report as a basis for Salazar's dismissal would be most inequitous because the bulk of the findings centered principally oh her friend's alleged thievery and anomalous transactions as technical operations' support manager. Said report merely

insinuated that in view of Salazar's special relationship with Saldivar, Salazar might have had direct knowledge of Saldivar's questionable activities. Direct evidence implicating private respondent is wanting from the records.

It is also worth emphasizing that the Maramara report came out after Saldivar had already resigned from GMCR on May 31, 1984. Since Saldivar did not have the opportunity to refute management's findings, the report remained obviously one-sided. Since the main evidence obtained by petitioner dealt principally on the alleged culpability of Saldivar, without his having had a chance to voice his side in view of his prior resignation, stringent examination should have been carried out to ascertain whether or not there existed independent legal grounds to hold Salatar answerable as well and, thereby, justify her dismissal. Finding none, from the records, we find her to have been unlawfully dismissed.

WHEREFORE, the assailed resolution of public respondent National Labor Relations Commission dated December 29, 1987 is hereby AFFIRMED. Petitioner GMCR is ordered to REINSTATE private respondent Imelda Salazar and to pay her backwages equivalent to her salary for a period of two (2) years only.

This decision is immediately executory.

SO ORDERED.

G.R. No. 120592 March 14, 1997

TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL NOEL A. CRUZ, respondents.

REGALADO, J.:

Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26, 1987 whereby the former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's undertaking to render the services enumerated in their contract. 1 Parenthetically, said retainer agreement was terminated by the union on April 4, 1990. 2

During the existence of that agreement, petitioner union referred to private respondent the claims of its members for holiday, mid-year and year-end bonuses against their employer, Traders Royal Bank (TRB). After the appropriate complaint was filed by private respondent, the case was certified by the Secretary of Labor to the National Labor Relations Commission (NLRC) on March 24, 1987 and docketed as NLRC-NCR Certified Case No. 0466. 3

On September 2, 1988, the NLRC rendered a decision in the foregoing case in favor of the employees, awarding them holiday pay differential, mid-year bonus differential, and year-end bonus differential. 4 The NLRC, acting on a motion for the issuance of a writ of execution filed by private respondent as counsel for petitioner union, raffled the case to Labor Arbiter Oswald Lorenzo. 5

However, pending the hearing of the application for the writ of execution, TRB challenged the decision of the NLRC before the Supreme Court. The Court, in its decision promulgated on August 30, 1990, 6 modified the decision of the NLRC by deleting the award of mid-year and year-end bonus differentials while affirming the award of holiday pay differential. 7

The bank voluntarily complied with such final judgment and determined the holiday pay differential to be in the amount of P175,794.32. Petitioner never contested the amount thus found by TRB. 8 The latter duly paid its concerned employees their respective entitlement in said sum through their payroll. 9

After private respondent received the above decision of the Supreme Court on September 18, 1990, 10 he notified the petitioner union, the TRB management and the NLRC of his right to exercise and enforce his attorney's lien over the award of holiday pay differential through a letter dated October 8, 1990. 11

Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter Lorenzo for the determination of his attorney's fees, praying that ten percent (10%) of the total award

for holiday pay differential computed by TRB at P175,794.32, or the amount of P17,579.43, be declared as his attorney's fees, and that petitioner union be ordered to pay and remit said amount to him. 12

The TRB management manifested before the labor arbiter that they did not wish to oppose or comment on private respondent's motion as the claim was directed against the union, 13 while petitioner union filed a comment and opposition to said motion on July 15, 1991. 14 After considering the position of the parties, the labor arbiter issued an order 15 on November 26, 1991 granting the motion of private respondent, as follows:

WHEREFORE, premises considered, it is hereby ordered that the TRADERS ROYAL BANK EMPLOYEES UNION with offices at Kanlaon Towers, Roxas Boulevard is hereby ordered (sic) to pay without delay the attorney's fees due the movant law firm, E.N.A. CRUZ and ASSOCIATES the amount of P17,574.43 or ten (10%) per cent of the P175,794.32 awarded by the Supreme Court to the members of the former.

This constrained petitioner to file an appeal with the NLRC on December 27, 1991, seeking a reversal of that order. 16

On October 19, 1994, the First Division of the NLRC promulgated a resolution affirming the order of the labor arbiter. 17 The motion for reconsideration filed by petitioner was denied by the NLRC in a resolution dated May 23, 1995, 18 hence the petition at bar.

Petitioner maintains that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in upholding the award of attorney's fees in the amount of P17,574.43, or ten percent (10%) of the P175,794.32 granted as holiday pay differential to its members, in violation of the retainer agreement; and that the challenged resolution of the NLRC is null and void, 19 for the reasons hereunder stated.

Although petitioner union concedes that the NLRC has jurisdiction to decide claims for attorney's fees, it contends that the award for attorney's fees should have been incorporated in the main case and not after the Supreme Court had already reviewed and passed upon the decision of the NLRC. Since the claim for attorney's fees by private respondent was neither taken up nor approved by the Supreme Court, no attorney's fees should have been allowed by the NLRC.

Thus, petitioner posits that the NLRC acted without jurisdiction in making the award of attorney's fees, as said act constituted a modification of a final and executory judgment of the Supreme Court which did not award attorney's fees. It then cited decisions of the Court declaring that a decision which has become final and executory can no longer be altered or modified even by the court which rendered the same.

On the other hand, private respondent maintains that his motion to determine attorney's fees was just an incident of the main case where petitioner was awarded its money claims. The grant of attorney's fees was the consequence of his exercise of his attorney's lien. Such

lien resulted from and corresponds to the services he rendered in the action wherein the favorable judgment was obtained. To include the award of the attorney's fees in the main case presupposes that the fees will be paid by TRB to the adverse party. All that the non-inclusion of attorney's fees in the award means is that the Supreme Court did not order TRB to pay the opposing party attorney's fees in the concept of damages. He is not therefore precluded from filing his motion to have his own professional fees adjudicated.

In view of the substance of the arguments submitted by petitioner and private respondent on this score, it appears necessary to explain and consequently clarify the nature of the attorney's fees subject of this petition, in order to dissipate the apparent confusion between and the conflicting views of the parties.

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. 20 In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.

It is the first type of attorney's fees which private respondent demanded before the labor arbiter. Also, the present controversy stems from petitioner's apparent misperception that the NLRC has jurisdiction over claims for attorney's fees only before its judgment is reviewed and ruled upon by the Supreme Court, and that thereafter the former may no longer entertain claims for attorney's fees.

It will be noted that no claim for attorney's fees was filed by private respondent before the NLRC when it acted on the money claims of petitioner, nor before the Supreme Court when it reviewed the decision of the NLRC. It was only after the High Tribunal modified the judgment of the NLRC awarding the differentials that private respondent filed his claim before the NLRC for a percentage thereof as attorney's fees.

It would obviously have been impossible, if not improper, for the NLRC in the first instance and for the Supreme Court thereafter to make an award for attorney's fees when no claim therefor was pending before them. Courts generally rule only on issues and claims presented to them for adjudication. Accordingly, when the labor arbiter ordered the payment of attorney's fees, he did not in any way modify the judgment of the Supreme Court.

As an adjunctive episode of the action for the recovery of bonus differentials in NLRC-NCR Certified Case No. 0466, private respondent's present claim for attorney's fees may be filed before the NLRC even though or, better stated, especially after its earlier decision had been reviewed and partially affirmed. It is well settled that a claim for attorney's fees may be asserted either in the very action in which the services of a lawyer had been rendered or in a separate action. 21

With respect to the first situation, the remedy for recovering attorney's fees as an incident of the main action may be availed of only when something is due to the client. 22 Attorney's fees cannot be determined until after the main litigation has been decided and the subject of the recovery is at the disposition of the court. The issue over attorney's fees only arises when something has been recovered from which the fee is to be paid. 23

While a claim for attorney's fees may be filed before the judgment is rendered, the determination as to the propriety of the fees or as to the amount thereof will have to be held in abeyance until the main case from which the lawyer's claim for attorney's fees may arise has become final. Otherwise, the determination to be made by the courts will be premature. 24 Of course, a petition for attorney's fees may be filed before the judgment in favor of the client is satisfied or the proceeds thereof delivered to the client. 25

It is apparent from the foregoing discussion that a lawyer has two options as to when to file his claim for professional fees. Hence, private respondent was well within his rights when he made his claim and waited for the finality of the judgment for holiday pay differential, instead of filing it ahead of the award's complete resolution. To declare that a lawyer may file a claim for fees in the same action only before the judgment is reviewed by a higher tribunal would deprive him of his aforestated options and render ineffective the foregoing pronouncements of this Court.

Assailing the rulings of the labor arbiter and the NLRC, petitioner union insists that it is not guilty of unjust enrichment because all attorney's fees due to private respondent were covered by the retainer fee of P3,000.00 which it has been regularly paying to private respondent under their retainer agreement. To be entitled to the additional attorney's fees as provided in Part D (Special Billings) of the agreement, it avers that there must be a separate mutual agreement between the union and the law firm prior to the performance of the additional services by the latter. Since there was no agreement as to the payment of the additional attorney's fees, then it is considered waived.

En contra, private respondent contends that a retainer fee is not the attorney's fees contemplated for and commensurate to the services he rendered to petitioner. He asserts that although there was no express agreement as to the amount of his fees for services rendered in the case for recovery of differential pay, Article 111 of the Labor Code supplants this omission by providing for an award of ten percent (10%) of a money judgment in a labor case as attorney's fees.

It is elementary that an attorney is entitled to have and receive a just and reasonable compensation for services performed at the special instance and request of his client. As long as the lawyer was in good faith and honestly trying to represent and serve the interests of the client, he should have a reasonable compensation for such services. 26 It will thus be appropriate, at this juncture, to determine if private respondent is entitled to an additional remuneration under the retainer agreement 27 entered into by him and petitioner.

The parties subscribed therein to the following stipulations:

xxx xxx xxx

The Law Firm shall handle cases and extend legal services under the parameters of the following terms and conditions:

A. GENERAL SERVICES

1. Assurance that an Associate of the Law Firm shall be designated and be available on a day-to-day basis depending on the Union's needs;

2. Legal consultation, advice and render opinion on any actual and/or anticipatory situation confronting any matter within the client's normal course of business;

3. Proper documentation and notarization of any or all transactions entered into by the Union in its day-to-day course of business;

4. Review all contracts, deeds, agreements or any other legal document to which the union is a party signatory thereto but prepared or caused to be prepared by any other third party;

5. Represent the Union in any case wherein the Union is a party litigant in any court of law or quasi-judicial body subject to certain fees as qualified hereinafter;

6. Lia(i)se with and/or follow-up any pending application or any papers with any government agency and/or any private institution which is directly related to any legal matter referred to the Law Firm.

B. SPECIAL LEGAL SERVICES

1. Documentation of any contract and other legal instrument/documents arising and/or required by your Union which do not fall under the category of its ordinary course of business activity but requires a special, exhaustive or detailed study and preparation;

2. Conduct or undertake researches and/or studies on special projects of the Union;

3. Render active and actual participation or assistance in conference table negotiations with TRB management or any other third person(s), juridical or natural, wherein the presence of counsel is not for mere consultation except CBA negotiations which shall be subject to a specific agreement (pursuant to PD 1391 and in relation to BP 130 & 227);

4. Preparation of Position Paper(s), Memoranda or any other pleading for and in behalf of the Union;

5. Prosecution or defense of any case instituted by or against the Union; and,

6. Represent any member of the Union in any proceeding provided that the particular member must give his/her assent and that prior consent be granted by the principal officers. Further, the member must conform to the rules and policies of the Law Firm.

C. FEE STRUCTURE

In consideration of our commitment to render the services enumerated above when required or necessary, your Union shall pay a monthly retainer fee of THREE THOUSAND PESOS (PHP 3,000.00), payable in advance on or before the fifth day of every month.

An Appearance Fee which shall be negotiable on a case-to-case basis.

Any and all Attorney's Fees collected from the adverse party by virtue of a successful litigation shall belong exclusively to the Law Firm.

It is further understood that the foregoing shall be without prejudice to our claim for reimbursement of all out-of-pocket expenses covering filing fees, transportation, publication costs, expenses covering reproduction or authentication of documents related to any matter referred to the Law Firm or that which redound to the benefit of the Union.

D. SPECIAL BILLINGS

In the event that the Union avails of the services duly enumerated in Title B, the Union shall pay the Law Firm an amount mutually agreed upon PRIOR to the performance of such services. The sum agreed upon shall be based on actual time and effort spent by the counsel in relation to the importance and magnitude of the matter referred to by the Union. However, charges may be WAIVED by the Law Firm if it finds that time and efforts expended on the particular services are inconsequential but such right of waiver is duly reserved for the Law Firm.

xxx xxx xxx

The provisions of the above contract are clear and need no further interpretation; all that is required to be done in the instant controversy is its application. The P3,000.00 which petitioner pays monthly to private respondent does not cover the services the latter actually rendered before the labor arbiter and the NLRC in behalf of the former. As stipulated in Part C of the agreement, the monthly fee is intended merely as a consideration for the law firm's commitment to render the services enumerated in Part A (General Services) and Part B (Special Legal Services) of the retainer agreement.

The difference between a compensation for a commitment to render legal services and a remuneration for legal services actually rendered can better be appreciated with a discussion of the two kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a retaining fee, and a specialretainer. 28

A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for any ordinary legal problem that may arise in the routinary business of the client and referred to him for legal action. The future services of the lawyer are secured and committed to the retaining client. For this, the client pays the lawyer a fixed retainer fee which could be monthly or otherwise, depending upon their arrangement. The fees are paid whether or not there are cases referred to the lawyer. The reason for the remuneration is that the lawyer is deprived of the opportunity of rendering services for a fee to the opposing party or other parties. In fine, it is a compensation for lost opportunities.

A special retainer is a fee for a specific case handled or special service rendered by the lawyer for a client. A client may have several cases demanding special or individual attention. If for every case there is a separate and independent contract for attorney's fees, each fee is considered a special retainer.

As to the first kind of fee, the Court has had the occasion to expound on its concept in Hilado vs. David 29 in this wise:

There is in legal practice what is called a "retaining fee," the purpose of which stems from the realization that the attorney is disabled from acting as counsel for the other side after he has given professional advice to the opposite party, even if he should decline to perform the contemplated services on behalf of the latter. It is to prevent undue hardship on the attorney resulting from the rigid observance of the rule that a separate and independent fee for consultation and advice was conceived and authorized. "A retaining fee is a preliminary fee given to an attorney or counsel to insure and secure his future services, and induce him to act for the client. It is intended to remunerate counsel for being deprived, by being retained by one party, of the opportunity of rendering services to the other and of receiving pay from him, and the payment of such fee, in the absence of an express understanding to the contrary, is neither made nor received in payment of the services contemplated; its payment has no relation to the obligation of the client to pay his attorney for the services for which he has retained him to perform." (Emphasis supplied).

Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the union and the law firm refers to a general retainer, or a retaining fee, as said monthly fee covers only the law firm's pledge, or as expressly stated therein, its "commitment to render the legal services enumerated." The fee is not payment for private respondent's execution or performance of the services listed in the contract, subject to some particular qualifications or permutations stated there.

Generally speaking, where the employment of an attorney is under an express valid contract fixing the compensation for the attorney, such contract is conclusive as to the amount of compensation. 30 We cannot, however, apply the foregoing rule in the instant petition and treat the fixed fee of P3,000.00 as full and sufficient consideration for private respondent's services, as petitioner would have it.

We have already shown that the P3,000.00 is independent and different from the compensation which private respondent should receive in payment for his services. While petitioner and private respondent were able to fix a fee for the latter's promise to extend services, they were not able to come into agreement as to the law firm's actual performance of services in favor of the union. Hence, the retainer agreement cannot control the measure of remuneration for private respondent's services.

We, therefore, cannot favorably consider the suggestion of petitioner that private respondent had already waived his right to charge additional fees because of their failure to come to an agreement as to its payment.

Firstly, there is no showing that private respondent unequivocally opted to waive the additional charges in consonance with Part D of the agreement. Secondly, the prompt actions taken by private respondent, i.e., serving notice of charging lien and filing of motion to determine attorney's fees, belie any intention on his part to renounce his right to compensation for prosecuting the labor case instituted by the union. And, lastly, to adopt such theory of petitioner may frustrate private respondent's right to attorney's fees, as the former may simply and unreasonably refuse to enter into any special agreement with the latter and conveniently claim later that the law firm had relinquished its right because of the absence of the same.

The fact that petitioner and private respondent failed to reach a meeting of the minds with regard to the payment of professional fees for special services will not absolve the former of civil liability for the corresponding remuneration therefor in favor of the latter.

Obligations do not emanate only from contracts. 31 One of the sources of extra-contractual obligations found in our Civil Code is the quasi-contract premised on the Roman maxim that nemo cum alterius detrimento locupletari protest. As embodied in our law, 32 certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

A quasi-contract between the parties in the case at bar arose from private respondent's lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting the latter's consent and approval. Petitioner cannot deny that it did benefit from private respondent's efforts as the law firm was able to obtain an award of holiday pay differential in favor of the union. It cannot even hide behind the cloak of the monthly retainer of P3,000.00 paid to private respondent because, as demonstrated earlier, private respondent's actual rendition of legal services is not compensable merely by said amount.

Private respondent is entitled to an additional remuneration for pursuing legal action in the interest of petitioner before the labor arbiter and the NLRC, on top of the P3,000.00 retainer

fee he received monthly from petitioner. The law firm's services are decidedly worth more than such basic fee in the retainer agreement. Thus, in Part C thereof on "Fee Structure," it is even provided that all attorney's fees collected from the adverse party by virtue of a successful litigation shall belong exclusively to private respondent, aside from petitioner's liability for appearance fees and reimbursement of the items of costs and expenses enumerated therein.

A quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles of absolute justice. Some of these principles are: (1) It is presumed that a person agrees to that which will benefit him; (2) Nobody wants to enrich himself unjustly at the expense of another; and (3) We must do unto others what we want them to do unto us under the same circumstances. 33

As early as 1903, we allowed the payment of reasonable professional fees to an interpreter, notwithstanding the lack of understanding with his client as to his remuneration, on the basis of quasi-contract. 34 Hence, it is not necessary that the parties agree on a definite fee for the special services rendered by private respondent in order that petitioner may be obligated to pay compensation to the former. Equity and fair play dictate that petitioner should pay the same after it accepted, availed itself of, and benefited from private respondent's services.

We are not unaware of the old ruling that a person who had no knowledge of, nor consented to, or protested against the lawyer's representation may not be held liable for attorney's fees even though he benefited from the lawyer's services. 35 But this doctrine may not be applied in the present case as petitioner did not object to private respondent's appearance before the NLRC in the case for differentials.

Viewed from another aspect, since it is claimed that petitioner obtained respondent's legal services and assistance regarding its claims against the bank, only they did not enter into a special contract regarding the compensation therefor, there is at least the innominate contract of facio ut des (I do that you may give). 36 This rule of law, likewise founded on the principle against unjust enrichment, would also warrant payment for the services of private respondent which proved beneficial to petitioner's members. In any case, whether there is an agreement or not, the courts can fix a reasonable compensation which lawyers should receive for their professional services. 37 However, the value of private respondent's legal services should not be established on the basis of Article 111 of the Labor Code alone. Said article provides:

Art. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of the wages recovered.

xxx xxx xxx

The implementing provision 38 of the foregoing article further states:

Sec. 11. Attorney's fees. — Attorney's fees in any judicial or administrative proceedings for the recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party.

In the first place, the fees mentioned here are the extraordinary attorney's fees recoverable as indemnity for damages sustained by and payable to the prevailing part. In the second place, the ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the maximum of the award that may thus be granted. 39 Article 111 thus fixes only the limit on the amount of attorney's fees the victorious party may recover in any judicial or administrative proceedings and it does not even prevent the NLRC from fixing an amount lower than the ten percent (10%) ceiling prescribed by the article when circumstances warrant it. 40

The measure of compensation for private respondent's services as against his client should properly be addressed by the rule of quantum meruit long adopted in this jurisdiction. Quantum meruit, meaning "as much as he deserves," is used as the basis for determining the lawyer's professional fees in the absence of a contract, 41 but recoverable by him from his client.

Where a lawyer is employed without a price for his services being agreed upon, the courts shall fix the amount on quantum meruit basis. In such a case, he would be entitled to receive what he merits for his services. 42

It is essential for the proper operation of the principle that there is an acceptance of the benefits by one sought to be charged for the services rendered under circumstances as reasonably to notify him that the lawyer performing the task was expecting to be paid compensation therefor. The doctrine of quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it. 43

Over the years and through numerous decisions, this Court has laid down guidelines in ascertaining the real worth of a lawyer's services. These factors are now codified in Rule 20.01, Canon 20 of the Code of Professional Responsibility and should be considered in fixing a reasonable compensation for services rendered by a lawyer on the basis of quantum meruit. These are: (a) the time spent and the extent of services rendered or required; (b) the novelty and difficulty of the questions involved; (c) the importance of the subject matter; (d) the skill demanded; (e) the probability of losing other employment as a result of acceptance of the proffered case; (f) the customary charges for similar services and the schedule of fees of the IBP chapter to which the lawyer belongs; (g) the amount involved in the controversy and the benefits resulting to the client from the services; (h) the contingency or certainty of compensation; (i) the character of the employment, whether occasional or established; and (j) the professional standing of the lawyer.

Here, then, is the flaw we find in the award for attorney's fees in favor of private respondent. Instead of adopting the above guidelines, the labor arbiter forthwith but erroneously set the amount of attorney's fees on the basis of Article 111 of the Labor Code. He completely relied

on the operation of Article 111 when he fixed the amount of attorney's fees at P17,574.43. 44 Observe the conclusion stated in his order. 45

xxx xxx xxx

FIRST. Art. 111 of the Labor Code, as amended, clearly declares movant's right to a ten (10%) per cent of the award due its client. In addition, this right to ten (10%) per cent attorney's fees is supplemented by Sec. 111, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code, as amended.

xxx xxx xxx

As already stated, Article 111 of the Labor Code regulates the amount recoverable as attorney's fees in the nature of damages sustained by and awarded to the prevailing party. It may not be used therefore, as the lone standard in fixing the exact amount payable to the lawyer by his client for the legal services he rendered. Also, while it limits the maximum allowable amount of attorney's fees, it does not direct the instantaneous and automatic award of attorney's fees in such maximum limit.

It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case at bar, involving a conflict between lawyer and client, to observe the above guidelines in cases calling for the operation of the principles of quasi-contract and quantum meruit, and to conduct a hearing for the proper determination of attorney's fees. The criteria found in the Code of Professional Responsibility are to be considered, and not disregarded, in assessing the proper amount. Here, the records do not reveal that the parties were duly heard by the labor arbiter on the matter and for the resolution of private respondent's fees.

It is axiomatic that the reasonableness of attorney's fees is a question of fact. 46 Ordinarily, therefore, we would have remanded this case for further reception of evidence as to the extent and value of the services rendered by private respondent to petitioner. However, so as not to needlessly prolong the resolution of a comparatively simple controversy, we deem it just and equitable to fix in the present recourse a reasonable amount of attorney's fees in favor of private respondent. For that purpose, we have duly taken into account the accepted guidelines therefor and so much of the pertinent data as are extant in the records of this case which are assistive in that regard. On such premises and in the exercise of our sound discretion, we hold that the amount of P10,000.00 is a reasonable and fair compensation for the legal services rendered by private respondent to petitioner before the labor arbiter and the NLRC.

WHEREFORE, the impugned resolution of respondent National Labor Relations Commission affirming the order of the labor arbiter is MODIFIED, and petitioner is hereby ORDERED to pay the amount of TEN THOUSAND PESOS (P10,000.00) as attorney's fees to private respondent for the latter's legal services rendered to the former.

SO ORDERED.

G.R. No. 88168 August 30, 1990

TRADERS ROYAL BANK, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK EMPLOYEES UNION, respondents.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.

GRIÑO-AQUINO, J.:

This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National Labor Relations Commission, which found the petitioner, Traders Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and ordered it to pay the said employees' claims for differentials in their holiday, mid-year, and year-end bonuses.

On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the Conciliation Division of the Bureau of Labor Relations claiming that:

First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY PAY, but has withheld from the Union the basis of their computation.

Second, the computation in question, has allegedly decreased the daily salary rate of the employees. This diminution of existing benefits has decreased our overtime rate and has affected the employees' take home pay.

Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months gross to only two (2) months.

Fourth, the refusal by management to recall active union members from the branches which were being transferred without prior notice, solely at the instance of the branch manager. (p. 26, Rollo.)

In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations, had jurisdiction over the money claims of the employees.

On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following issues raised by the complainants:

l) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday pay but has withheld from the union the basis of their computation.

2) The computation in question has allegedly decreased the daily salary rate of the employees. This diminution of existing benefits has decreased our overtime rate and has affected the employees' take home pay.

3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months gross to only two (2) months.

4) The refusal by management to recall active union members from the branches which were being transferred without prior notice, solely at the instance of the branch, manager. (p. 28, Rollo.)

In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the terms of the CBA, to wit:

1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution, as to be liable for a differential, if the bonus given is less than that in previous years.

2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of regular compensation.

3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank, and not demandable as part of compensation. (pp. 67-68, Rollo.)

Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would apply prospectively only to claims arising after its effectivity.

Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving them bonuses at year's end, would depend on how profitable the operation of the bank had been. Generally, the bonus given was two (2) months basic mid-year and two (2) months gross end-year.

On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to pay petitioner members-employees the following:

1. Holiday differential for the period covering l983-1986 as embodied in Resolution No. 4984-1986 of respondent's Board of Directors but to start from November 11, 1983 and using the Divisor 251 days in determining the daily rate of the employees;

2. Mid-year bonus differential representing the difference between two (2) months gross pay and two (2) months basic pay and end-year bonus differential of one (1) month gross pay for 1986.

The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed, the same having prescribed.

Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for lack of merit. (pp. 72-73, Rollo.)

A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.

There is merit in the petitioner's contention that the NLRC gravely abused its discretion in ordering it to pay mid-year/year-end bonus differential for 1986 to its employees.

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission, Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).

It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its employees. The matter of giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably after 1986 on account of political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under sequestration by the present administration and is now managed by the Presidential Commission on Good Government (PCGG).

In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the employees had ripened into a company practice that may not be adjusted to the prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees.

Private respondent's contention, that the decrease in the midyear and year-end bonuses constituted a diminution of the employees' salaries, is not correct, for bonuses are not part of labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission is modified by deleting the award of bonus differentials to the employees for 1986. In other respects, the decision is affirmed. Costs against the respondent union.

SO ORDERED.

December 9, 1959

G.R. No. L-12950BENJAMIN CELESTIAL, ET AL., petitioners,vs.THE SOUTHERN MINDANAO EXPERIMENTAL STATION, ET AL., respondents.

S. Tomas de las Cruz for petitioners.Assistant Solicitor General Jose P. Alejandro and Solicitor Dominador L. Quiroz for respondents.

Montemayor, J.:

This is a petition by Benjamin Celestial and 175 others for review of the decision of the Auditor General, dated September 9, 1957, denying their claim for differential pay under the Minimum Wage Law.

The record discloses that petitioner are employees and/or workers of the Southern Mindanao Experimental Station, later referred to as Experimental Station, Bureau of Plant Industry in Davao City, and that since 1952 they had been paid each a daily wage of P2.50; that some time in March 1957, petitioners filed with the Auditor General’s Office their claims for differential pay, alleging among other things that they were entitled to the minimum wage of P4.00 a day, instead of P2.50, which was actually paid them by the Experimental Station; and that as already stated, on September 9, 1957, the Auditor General rendered a decision, holding that petitioner were not entitled to the minimum daily wage of P4.00, but only to P2.50.

The resolution of this case depends upon the interpretation and application of Section 3 (a), (b) and (c) of the Minimum Wage Law, which we reproduce below for purposes of ready reference:

SEC. 3. Minimum wage. – (a) Every employer shall pay to each of his employees who is employed by an enterprise other than in agriculture wage at the rate of not less than -

(1) . . . .

(2) Three pesos a day on the effective date of this Act and for one year after the effective date, and thereafter P4.00 a day, for employees of establishment located outside of Manila or its environs: . . . .

(b) Every employer who operates a farm enterprise comprising more than 12 hectares shall pay each of his employees who is engaged in agriculture, wage at the rate of not less than -

(1) . . .,

(2) . . .;

(3) One year thereafter, P2.50 a day and no allowance for board and lodging shall reduce this wage below P2.25 in cash.

(c) Effective on the first of July, nineteen hundred and fifty-two, the minimum wage rates for employees in the Government service shall be those provided in subsection (a) and (b) of this section . . .

From the legal provisions above-reproduce, it will readily be seen that in order that an employee or laborer may be paid the minimum wage of P2.50 a day, he must be employed by an enterprise (in this case, the Southern Mindanao Experimental Station) engaged in agriculture; that said employer operates s farm comprising more than 12 hectares; and that the employee or laborer is engaged in agriculture. The second condition is satisfied because the Experimental Station is operating a farm comprising 960 hectares. The next question to be decided is whether or not said Experimental Station is engaged in agriculture. To determine this, we have to go back to the function of the Bureau of Plant Industry (Section 1753, Revised Administrative Code) of which the Experimental Station is an agency or adjunction, said Experimental Station being provided for in Section 1754 of the same Revised Administrative Code. Said two sections are reproduced below for ready reference:

SEC. 1753. Function of Bureau of Plant Industry. – It shall be the function of said Bureau to collect and disseminate useful information pertaining to agriculture in the Philippines, to encourage the use of improved agriculture methods; and, in general, to promote the development of the agriculture resources of the Philippines, as follows:

(a) By the introduction of new domesticated animals, and the improvement of the breeds of domesticated animal now found in the Philippines;

(b) By the control and eradication of diseases of live stock;

(c) By the investigation of soil and climate conditions, and the methods of producing and handling agriculture products;

(d) By the introduction, production, and distribution of improved seeds and plants;

(e) By the control and eradication of diseases, insects, and other pests injurious to cultivated plants;

(f) By the operation of a system of demonstration and agriculture extension work;

(g) By the collection of agricultural statistics; and

(h) By the publication and distribution of bulletins, circulars, and other printed matter.

SEC. 1754. Experiment station, farms, and stations for agricultural instruction. – In such place in the Philippines as may be considered suitable for the purpose, the Director of Plant Industry, with the approval of the Head of the Department, shall be funds shall be available therefore, establish, equip, maintain, and operate experiment stations, farms, stock farms, and station for practical agriculture instruction.

(In the Bureau of Agriculture is also vested the supervision and control of American agriculture colonies).

On the basis of the legal provision above-reproduced, we are of the opinion that both the Bureau of Plant Industry and Experimental Station, particularly the latter, are engaged in agriculture or are dedicated to agricultural functions, specially when we take into consideration the definition of agriculture in Section 2 of the Minimum Wage Law itself, Republic Act No. 602, which is as follow:

Agriculture includes faring in all its branches and among other things include the cultivation and things of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticular commodities, the raising of livestock or poultry, and any practice performer by a farmer or on a farm as an incident to or in conjunction with such farming operations, but does not include the manufacturing or processing of sugar, coconut, abaca, tobacco, pineapples or other farm products.

And is a matter of public knowledge that experimental stations maintained by the Bureau of Plant Industry, specially when done on a big scale like the Southern Mindanao Experimental Station that operates a farm comprising 960 hectares, though its employees and laborers, actually till the soil, introduce and plant seeds of the best crop varieties found by it after study and experiment, raise said crops in the best approved methods of cultivation, including the spacing of each plant or seedling and the amount of water needed though irrigation, weeding, et., and the proper harvesting of the crop, including the timing and method, all for the instruction and benefit of Philippine farmers, and to foster agriculture in the country. Included in this cultivation is the discovery of plant pests and their eradication by means of treatment with the proper insecticides. Thereafter, from the harvest are extracted the seeds which are called certified seeds, for sale and distribution to farmers. There can be no question that all these acts and function fall within the definition of agriculture provided in the Minimum Wage Law, and, consequently, are agricultural as distinguished from no-agricultural functions. It follows that the laborers and farm workers who actually carry out and perform these functions are also engaged in agriculture. It is possible that not all the laborers and employees in the Experimental Station are actually engaged in preparing the land for planting, such as plowing, tilling, and planting the seeds or seedlings, in weeding the farm, in treating plant diseases and harvesting crops. some employees may be engaged in office work, such as, clerks, supervisors, maintenance workers, etc. But inasmuch as they are all employed by the Experimental Station, which is a farm enterprise, and their work is incidental to agriculture, they may also be considered as agricultural workers and employees. Interpretative Bulletin No. 14, issued by the United States Wage Administration Service, implementing the provisions of the Fair Labor Standards Act of the United States of 1938, from which our Minimum Wage Law was copied (Morave: Minimum Wage Law, p. 279), under the title “Office Workers, Etc.,” says:

Office Workers, Etc.

12. We have received inquiries concerning office help – secretaries, clerks, bookkeepers, etc., night watchmen, maintenance workers, engineers, etc., who are employed by a farmer or a farm in connection with the activities described in the definition of “agriculture” contained in section 3 (f). In our opinion such employees are exempt. (Teller” Labor Disputes and Collective Bargaining, Vol. II, p. 1209)

The above-reproduced portion of the bulletin, applied in this jurisdiction, means that the employees mentioned therein are not governed by our Minimum Wage Law, as regards the minimum wage of P4.00 a day for non-agricultural workers; consequently, they may receive a only the minimum wage of P2.50 a day, prescribed for workers engaged in agriculture.

But petitioners contend that the Bureau of Plant Industry and Experimental Station could not be engaged in agriculture for the reason that their farm enterprise is not for profit. In answer to this contention, it is enough to say that Minimum Wage Law in defining agriculture, does not prescribe the condition that the person or entity is engaged in it for purposes of profit. We can well imagine a person interested in research and scientific agriculture who proceeds to cultivate a little farm of, say, one or two hectares, to put into practice the results of his research, introducing in the cultivation the most modern methods, the most suitable fertilizers, etc., so that a hectare so cultivated can produce, say, from 250 to 300 cavans of palay and incidentally to compete a prize or a medal offered by the Government or any of its agencies. The fact that he does not cultivate the farm for purposes of profit, but rather in the interest of science and to prove his scientific and agricultural theories, and incidentally enter the contest for a prize, does not make him less agriculturist and his activities as agriculture.

Incidentally, it may be stated that the Secretary of Justice in an opinion rendered in connection with the different activities of the Davao Regional Fiber Station, holds that the laborers and employees of said fiber experimental station are not entitled to the minimum wage of P4.00.

In view of the foregoing, the decision appealed from is hereby reversed affirmed. No costs.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Endencia, Barrera and Gutierrez David, JJ., concur.

[G.R. No. 140364. August 15, 2000]

ACE NAVIGATION CO., INC. and/or CONNING SHIPPING LTD., petitioners, vs. COURT OF APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION) and ORLANDO ALONSAGAY, respondents.

D E C I S I O N

PUNO, J.:

This is a petition for review of the resolutions1[1] of the Court of Appeals2[2] that dismissed the petition for certiorari filed by petitioners and which denied their motion for reconsideration, respectively.

First, the facts.

In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private respondent Orlando Alonsagay to work as a bartender on board the vessel M/V "Orient Express" owned by its principal, Conning Shipping Ltd. (Conning). Under their POEA approved contract of employment, Orlando shall receive a monthly basic salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including overtime pay for 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00) per passenger per day. He, was also entitled to 2.5 days of vacation leave with pay each month. The contract was to last for one (1) year.

Petitioners alleged that on June 13, 1994, Orlando was deployed and boarded M/V "Orient Express" at the seaport of Hong Kong. After the expiration of the contract on June 13, 1995, Orlando returned to the Philippines and demanded from Ace Nav his vacation leave pay. Ace Nav did not pay him immediately. It told him that he should have been paid prior to his disembarkation and repatriation to the Philippines. Moreover, Conning did not remit any amount for his vacation leave pay. Ace Nav, however, promised to verify the matter and asked Orlando to return after a few days. Orlando never returned.

On November 25, 1995, Orlando filed a complaint3[3] before the labor arbiter for vacation leave pay of four hundred fifty U.S. dollars (U.S. $450.00) and unpaid tips amounting to thirty six, thousand U.S. dollars (U.S. $36,000.00).4[4] On November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and Conning to pay jointly and severally Orlando his vacation leave pay of US$450.00. The claim for tips of Orlando was dismissed for lack of merit.5[5]

1

2

3

4

Orlando appealed6[6] to the National Labor Relations Commission (NLRC) on February 3, 1997. In a decision7[7] promulgated on November 26, 1997, the NLRC ordered Ace Nav and Conning to pay the unpaid tips of Orlando which amounted to US$36,000.00 in addition to his vacation leave pay. Ace Nav and Conning filed a motion for reconsideration on February 2, 1998 which was denied on May 20, 1999.8[8]

On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the Court of Appeals to annul the decision of the NLRC. On July 28, 1999, the Court of Appeals promulgated a three-page resolution9[9] dismissing the petition. Their motion for reconsideration filed on September 8, 1999 was denied on October 8, 1999. Hence this appeal.

In assailing the dismissal of their petition on technical grounds, petitioners argued that the Court of Appeals erred in rigidly and technically applying Section 13, Rule 1310[10] and Section 1, Rule 6511[11] of the 1997 Rules of Civil Procedure.12[12] They also contend that the respondent court erred in ruling that they are the ones liable to pay tips to Orlando. They point out that if tips will be considered as part of the salary of Orlando, it will make him the highest paid employee on M/V "Orient Express." The ship captain, the highest ranking officer, receives U.S.$3,000.00 per month without tips. Orlando, who is a bartender, will receive U.S.$3,450.00 per month. Allegedly, this will compel foreign ship owners to desist from hiring Filipino bartenders. It will create an unfavorable precedent detrimental to the future recruitment, hiring and deployment of Filipino overseas workers specially in service oriented businesses. It will also be a case of double compensation that will unjustly enrich Orlando at the expense of petitioners. They also stress that Orlando never complained that they should pay him the said tips.

Respondent filed a two-page comment to the petition adopting the resolution of the Court of Appeals dated July 28, 1999.

We find merit in the petition.

5

6

7

8

9

10

11

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Rules of procedure are used to help secure and not override substantial justice.13[13] Even the Rules of Court mandates a liberal construction in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding.14[14] Since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided.15[15] Thus, the dismissal of an appeal on purely technical ground is frowned upon especially if it will result to unfairness.

We apply these sound rules in the case at bar. Petitioners' petition for certiorari before the Court of Appeals contained the certified true copy of the NLRC's decision dated November 26, 1997,16[16] its order dated May 2, 199917[17] and the sworn certification of non-forum shopping.18[18] Petitioners also explained that their counsel executed an affidavit of proof of service and explanation in the afternoon of July 1, 1999. However, he forgot to attach it when he filed their petition the following day because of the volume and pressure of work and lack of office personnel. However, the Registry Receipt,19[19] which is the proof of mailing to Orlando's counsel, issued by the Central Post Office was attached on the original petition they filed with the respondent court. It was also stamped20[20] by the NLRC which is proof of receipt of the petition by the latter. The affidavit of service, which was originally omitted, was attached on their motion for reconsideration.21[21] Significantly, it was dated July 1, 1999. In view of the surrounding circumstances, the subsequent filing of the affidavit of service may be considered as substantial compliance with the rules.

We now come to the merits of the case. The issue is whether petitioners are liable to pay the tips to Orlando.

The word [“tip”] has several meanings, with origins more or less obscure, connected with "tap" and with "top." In the sense of a sum of money given for good service, other languages

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are more specific, e.g., Fr. pourboire, for drink. It is suggested that [the word] is formed from the practice, in early 18th c. London coffeehouses, of having a box in which persons in a hurry would drop a small coin, to gain immediate attention. The box was labelled To Insure Promptness; then just with the initials T.I.P.22[22]

It is more frequently used to indicate additional compensation, and in this sense "tip" is defined as meaning a gratuity; a gift; a present; a fee; money given, as to a servant to secure better or more prompt service. A tip may range from pure gift out of benevolence or friendship, to a compensation for a service measured by its supposed value but not fixed by an agreement, although usually the word is applied to what is paid to a servant in addition to the regular compensation for his service in order to secure better service or in recognition of it. It has been said that a tip denotes a voluntary act, but it also has been said that from the very beginning of the practice of tipping it was evident that, whether considered from the standpoint of the giver or the recipient, a tip lacked the essential element of a gift, namely, the free bestowing of a gratuity without a consideration, and that, despite its apparent voluntariness, there is an element of compulsion in tipping.23[23]

Tipping is done to get the attention and secure the immediate services of a waiter, porter or others for their services. Since a tip is considered a pure gift out of benevolence or friendship, it can not be demanded from the customer. Whether or not tips will be given is dependent on the will and generosity of the giver. Although a customer may give a tip as a consideration for services rendered, its value still depends on the giver. They are given in addition to the compensation by the employer. A gratuity given by an employer in order to inspire the employee to exert more effort in his work is more appropriately called a bonus.

The NLRC and the Court of Appeals held that petitioners were liable to pay tips to Orlando because of the contract of employment. Thus:

"The contract of employment entered into by and between the complainant and Ace Navigation Co., Inc. (p. 82, Record) clearly provides xxx:

'That the employee shall be employed on board under the following terms and conditions:

1.1 Duration of Contract: (12 months) 10 months remaining duration of contract

1.2 Position: Bartender

1.3 Basic Monthly Salary: U.S.$450.00 Flat rate including overtime pay for

1.4 Hours of Work: 12 hrs. work daily.

1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.

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1.6 Vacation Leave with Pay: 2.5 days/mo.' (record, p. 82)

"The record of this case shows that the respondent, in the Contract of Employment xxx undertook to pay to complainant 'tips of U.S.$2.00 per passenger per day.' Yet, there is no showing that the said undertaking was complied with by the respondents.

"It was thus a serious error on the part of the Labor Arbiter to rule that the tips were already paid, much less to rule that said tips were directly paid to the crew of M/V "ORIENT PRINCESS." With Article 4 of the Labor Code reminding us that doubts should be resolved in favor of labor, we all the more find it compelling to rule that the complainant is still entitled to the contractually covenanted sum of US$36,000.00. xxx."

We disagree. The contract of employment between petitioners and Orlando is categorical that the monthly salary of Orlando is US$450.00 flat rate. This already included his overtime pay which is integrated in his 12 hours of work. The words "plus tips of US$2.00 per passenger per day" were written at the line for overtime. Since payment for overtime was included in the monthly salary of Orlando, the supposed tips mentioned in the contract should be deemed included thereat.

The actuations of Orlando during his employment also show that he was aware his monthly salary is only US$450.00, no more no less. He did not raise any complaint about the non-payment of his tips during the entire duration of his employment. After the expiration of his contract, he demanded payment only of his vacation leave pay. He did not immediately seek the payment of tips. He only asked for the payment of tips when he filed this case before the labor arbiter. This shows that the alleged non-payment of tips was a mere afterthought to bloat up his claim. The records of the case do not show that Orlando was deprived of any monthly salary. It will now be unjust to impose a burden on the employer who performed the contract in good faith.

Furthermore, it is presumed that the parties were aware of the plain, ordinary and common meaning of the word "tip." As a bartender, Orlando can not feign ignorance on the practice of tipping and that tips are normally paid by customers and not by the employer.

It is also absurd that petitioners intended to give Orlando a salary higher than that of the ship captain. As petitioners point out, the captain of M/V "Orient Princess" receives US$3,000.00 per month while Orlando will receive US$3,450.00 per month if the tip of US$2.00 per passenger per day will be given in addition to his US$450.00 monthly salary. It will be against common sense for an employer to give a lower ranked employee a higher compensation than an employee who holds the highest position in an enterprise.

However, Orlando should be paid his vacation leave pay. Petitioners denied this liability by raising the defense that the usual practice is that vacation leave pay is given before repatriation. But as the labor arbiter correctly observed, petitioners did not present any evidence to prove that they already paid the amount. The burden of proving payment was not discharged by the petitioners.

IN VIEW WHEREOF, the resolutions of the Court of Appeals in CA G.R. SP No. 53508 are reversed and set aside. The decision of the labor arbiter ordering petitioners to pay jointly and severally the unpaid vacation leave pay of private respondent, Orlando Alonsagay, in the amount of US$450.00 and dismissing his other claim for lack of merit is reinstated.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.