Philippine Contractors Accreditation Board v. Manila Water Company, Inc. G.R. No. 217590 | March 10, 2020

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Philippine Contractors Accreditation Board v. Manila Water Company, Inc.

G.R. No. 217590 | March 10, 2020

EN BANC, GESMUNDO, J.

 

Unconstitutionality of PCAB’s Implementing Rules; Limits of Administrative Rule-Making

 

The clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation. 

 

Manila Water Company, Inc. sought accreditation for its foreign contractors to undertake construction projects for its waterworks and sewerage systems. The Philippine Contractors Accreditation Board (PCAB) denied the request, citing Section 3.1, Rule 3 of the Revised Rules and Regulations Governing Licensing and Accreditation of Constructors, which reserved Regular Licenses for Filipino-owned firms (at least 60% Filipino equity participation) while allowing foreign firms only a Special License for a single specific project. 

Manila Water filed a Petition for Declaratory Relief, arguing that the rule was unconstitutional as it imposed foreign ownership restrictions without Congressional authority. The Regional Trial Court (RTC) ruled in favor of Manila Water, declaring Section 3.1, Rule 3 void for exceeding PCAB’s delegated powers under Republic Act No. 4566 (Contractors’ License Law). 

PCAB appealed, asserting that it had the authority to regulate the construction industry and that the rule was consistent with the 1987 Constitution’s policy on professions and national economic protectionism. The case reached the Supreme Court.

 

 

Whether Section 3.1, Rule 3 of PCAB’s Implementing Rules, which imposes nationality restrictions on contractor licensing, is unconstitutional. 

YES. The Supreme Court struck down the nationality-based licensing requirement as unconstitutional, ruling that: 

1.    PCAB exceeded its delegated powers – The Contractors’ License Law (R.A. No. 4566) does not impose nationality restrictions on contractor licensing, and PCAB had no authority to create such a limitation. Administrative rules cannot go beyond the law they seek to implement. 

2.    Contracting is not a profession – PCAB wrongly classified construction as a profession subject to nationality restrictions under Section 14, Article XII of the 1987 Constitution. The Court clarified that construction is an industry, not a profession, and thus, should not be subject to restrictions on professional practice. 

3.    The restriction violates economic competition principles – The nationality-based rule unfairly restricted market entry, discouraging foreign investment in the construction industry, and contradicting economic policies promoting open competition. 

4.    The rule lacked basis in the Constitution or law – The Court emphasized that only Congress can impose nationality restrictions on economic activities under Section 10, Article XII of the Constitution, and there was no law reserving the construction industry exclusively for Filipinos.

 

Since Republic Act No. 4566 does not impose nationality-based restrictions, PCAB had no authority to create them through its rules. The Court affirmed the RTC ruling and declared void the nationality-based restrictions under Section 3.1, Rule 3 of PCAB’s Implementing Rules.

 

 

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Gaspar v. M.I.Y. Real Estate Corp. [G.R. No. 239385 | April 17, 2024]

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Gaspar v. M.I.Y. Real Estate Corp.

G.R. No. 239385 | April 17, 2024

FIRST DIVISION, HERNANDO, J.

 

Illegal Dismissal; Control Test; Employer-employee relationship; Kasambahay

 

The power to control is the most significant among the four factors. Under this test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end. 

 

Petitioner Flordivina Gaspar filed a complaint for illegal dismissal and money claims against M.I.Y. Real Estate Corporation (M.I.Y.) and its director, Melissa Ilagan Yu. Gaspar alleged that she was employed by M.I.Y. as Facilities Maintenance and Services (FM&S) personnel at Goldrich Mansion, where she performed cleaning, maintenance, and monitoring tasks for various establishments within the building, including Yu's office and residence. 

Gaspar claimed that M.I.Y. forced her to sign resignation letters every six months to prevent her from attaining regular employment status. She further alleged that she was dismissed on July 2, 2014, when she was barred from entering the building and was pressured to sign a notice of termination in exchange for her final salary. 

M.I.Y. denied that Gaspar was its employee, asserting that she was a domestic worker (kasambahay) of Yu, initially hired to perform household tasks in Yu’s Pasig residence before being transferred to her penthouse in Goldrich Mansion. The company presented documentary evidence, including payroll records, which did not include Gaspar’s name. The Labor Arbiter, NLRC, and the Court of Appeals all ruled that Gaspar was not an employee of M.I.Y. but a domestic worker of Yu, dismissing her claims for illegal dismissal and labor benefits.

  

Whether Gaspar was an employee of M.I.Y. or a domestic worker of Yu, and consequently, whether she was illegally dismissed. 

NO. The Supreme Court upheld the rulings of the lower tribunals and dismissed the petition. It ruled that Gaspar failed to establish an employer-employee relationship with M.I.Y. under the four-fold test, which requires: 

• 1.    Selection and engagement – No evidence showed that M.I.Y. hired Gaspar.
• 2.    Payment of wages – M.I.Y.’s payroll and government contributions did not include Gaspar’s name.
• 3.    Power to dismiss – The alleged notice of termination was unsigned and unverified.
• 4.    Power to control – M.I.Y. did not control the manner and means of Gaspar’s work.

Gaspar was found to be a domestic worker of Yu under Republic Act No. 10361 (Batas Kasambahay), as she was primarily engaged in cleaning and maintaining Yu’s private residence, regardless of its location within a commercial building. He was not an employee of M.I.Y. Since Gaspar did not establish an employment relationship with M.I.Y., her claims for illegal dismissal and labor benefits were denied.




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FLB Construction v. Trinidad G.R. No. 194931 | October 6, 2021

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FLB Construction v. Trinidad

G.R. No. 194931 | October 6, 2021

THIRD DIVISION, ZALAMEDA, J.

 

Illegal Dismissal; Failure to substantiate its business closure; Backwages

An employer must prove the closure of its business in full and complete compliance with all statutory requirements prior to the date of the finality of the award of backwages and/or separation pay in order to have the separation pay be computed until the date of actual closure of business. Otherwise, the separation pay shall be computed until the finality of the resolution or decision of the Court. 

 

FLB Construction, operated by spouses Fidel and Marlyn Bermudez, hired respondents Susana Trinidad, Alicia Perdido, and Daniel Sebastian in various capacities. In 2006, the respondents claimed they were instructed to stop reporting for work and subsequently filed complaints for unpaid wages and benefits. The company contended it was suffering financial losses, resulting in periodic work schedules, which respondents allegedly refused, eventually abandoning their jobs. However, no documentary evidence was provided to support payment or proper business closure. 

The Labor Arbiter found for the respondents, awarding unpaid salaries and 13th-month pay, but did not grant separation pay due to the company’s closure. The NLRC affirmed this decision, emphasizing the employer's burden to prove payment. The Court of Appeals modified this ruling, declaring the respondents illegally dismissed since the company’s closure was not properly substantiated.

 

Whether the respondents were illegally dismissed due to FLB Construction’s failure to substantiate its business closure. 

YES. The Supreme Court upheld the CA’s finding that the employees were not properly dismissed. The Supreme Court ruled that FLB Construction failed to prove a bona fide closure of its business. The company did not provide necessary documentation, such as financial statements or proper notices to the Department of Labor and Employment (DOLE), to substantiate its claims of financial losses and closure. 

Petitioners failed to show proof it served written notices to its workers and to the DOLE at least one (1) month before the intended date of closure of its business establishment. Moreover, petitioners failed to substantiate its claim that their closure was due to heavy financial losses. They did not submit financial statements prepared by independent auditors, balance sheets showing profit and loss, or annual income tax returns. 

Thus, the closure of the business without compliance with statutory requirements (notice to DOLE and proof of financial losses) rendered the dismissal illegal. The Court ruled that employees are entitled to separation pay but not backwages due to the closure of operations.

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Philippine Stock Exchange, Inc. v. Court of Appeals [G.R. No. 125469 | October 27, 1997]

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Philippine Stock Exchange, Inc. v. Court of Appeals

G.R. No. 125469 | October 27, 1997

SECOND DIVISION, TORRES, JR. J.

 

Business Judgement Rule 

 

Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts. 

 

Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, sought to list its shares in the Philippine Stock Exchange (PSE) after obtaining a Securities and Exchange Commission (SEC) permit to sell shares to the public. The PSE’s Listing Committee initially recommended approval. However, the PSE Board of Governors denied the application, citing unresolved legal claims over PALI’s assets, including a claim by the Marcos family and sequestration by the Presidential Commission on Good Government (PCGG). 

PALI appealed to the SEC, which reversed the PSE’s decision, ordering the immediate listing of PALI’s shares. The PSE challenged this order before the Court of Appeals, arguing that the SEC had no authority to interfere with the PSE’s business discretion. The appellate court upheld the SEC’s ruling, prompting PSE to elevate the case to the Supreme Court.

 

Whether the SEC had the authority to overturn the PSE’s decision denying PALI’s listing application. 

YES. he Supreme Court ruled in favor of the PSE, holding that the SEC acted arbitrarily in reversing the PSE’s decision. The PSE, as a corporate entity, had the discretion to deny the listing of PALI based on legitimate concerns about the ownership and integrity of its assets. The Court recognized that while the SEC has regulatory power, it cannot override business decisions made in good faith and within the corporation’s legal authority. Thus, absent bad faith or clear abuse of discretion, regulatory authorities cannot interfere with the reasonable exercise of corporate management decisions.

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Montelibano V. Bacolod-Murcia Milling Co. [G.R. No. L-15092 | May 18, 1962]

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MONTELIBANO V. BACOLOD-MURCIA MILLING CO.

G.R. No. L-15092 | May 18, 1962

EN BANC, REYES, J.B.L

 

Business Judgement Rule

 

It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for that of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.

  

Plaintiffs-appellants, including Alfredo and Alejandro Montelibano and Gonzaga & Co., were sugar planters with milling contracts with Bacolod-Murcia Milling Co., Inc. The original 1919 milling contract stipulated a 45%-55% division of sugar production (mill-planters). In 1936, an amended contract increased the planters' share to 60%, extending the contract for an additional 15 years. Additionally, the milling company’s Board of Directors passed a resolution (August 20, 1936) stating that if other sugar centrals in Negros Occidental granted better terms to their planters, Bacolod-Murcia would provide the same to its own planters. 

By 1951-1952, other sugar mills had increased planters’ shares beyond 60%. Plaintiffs demanded similar adjustments based on the 1936 resolution. The milling company refused, arguing that the resolution was ultra vires (beyond corporate powers) and amounted to an unenforceable donation. The trial court ruled in favor of the defendant, dismissing the complaint. Plaintiffs appealed.

 

Whether the resolution passed by Bacolod-Murcia Milling Co. increasing planters’ shares upon fulfilment of a condition was a valid corporate act and enforceable against the company. 

YES. The Supreme Court reversed the lower court’s ruling, holding that the resolution was a valid corporate act and binding upon Bacolod-Murcia Milling Co. The resolution was not a donation but an amendment to the milling contract meant to induce planters to agree to a longer contract term. The resolution was passed in good faith and was within the authority of the Board of Directors. 

Thus, since the Board of Directors acted within its discretion and in furtherance of corporate objectives, the resolution was enforceable, requiring the milling company to grant the increased sugar shares to the planters.

 

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