PHILIPPINE SUPREME COURT JURISPRUDENCE

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EN BANC

G.R. Nos. L-22951 and L-22952           January 31, 1967

ALLIED FREE WORKERS' UNION (PLUM), Petitioner, vs. COMPA�IA MARITIMA, Manager JOSE C. TEVES, and COURT OF INDUSTRIAL RELATIONS, Respondents.

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G.R. No. L-22971           January 31, 1967

COMPA�IA MARITIMA and Manager JOSE C. TEVES Petitioners, vs. ALLIED FREEWORKERS' (PLUM) and COURT OF INDUSTRIAL RELATIONS, Respondents.

L-22951 and 22952:
Vicente A. Rafael and Associates for petitioner.
Rafael Dinglasan for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.

L-22971:
Rafael Dinglasan for petitioner.
Vicente A. Rafael and Associates for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.

BENGZON, J.P., J.: chanrobles virtual law library

The three cases before this Court are the respective appeals separately taken by the parties hereto from an order¹ of the Court of Industrial Relations en banc affirming its trial judge's decision, rendered on November 4, 1963, in CIR Case 175-MC and CIR Case 426-ULP. Thus L-22971 is the appeal of MARITIMA² in CIR Case 175-MC; L-22952 is AFWU's appeal in the same case; and L-22951 refers to AFWU's3 appeal in CIR Case 426-ULP. Since these cases were jointly tried and decided in the court a quo and they involve the same fundamental issue - the presence or absence of employer-employee relationship - they are jointly considered herein.

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In Via�a vs. Al Lagadan et al., G.R. No. L-8967, May 31, 1956, the Supreme Court states the rule as follows.

'In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employees; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct - although the latter is the most important element (35 Am. Jur. 445). Assuming that the share received by the deceased could partake of the nature of wages - on which we need not and do not express our view - and that the second element, therefore, exists in the case at bar, the record does not contain any specific data regarding the third and fourth elements.'

The clear implication of the decision of the Supreme Court is that if the defendant has no power of control - which, according to the Supreme Court, is the "most important element" - there is no employer-employee relationship. (Emphasis supplied)

The conclusion thus reached by the court a quo is in full accord with the facts and the applicable jurisprudence. We totally agree with the court a quo that AFWU was an independent contractor. And an independent contractor is not an "employee".¹⁷ chanrobles virtual law library

Neither is there any direct employment relationship between MARITIMA and the laborers. The latter have no separate individual contracts with MARITIMA. In fact, the court a quo found that it was AFWU that hired them. Their only possible connection with MARITIMA is through AFWU which contracted with the latter. Hence, they could not possibly be in a better class than AFWU which dealt with MARITIMA.¹⁸ chanrobles virtual law library

In this connection, it is interesting to note that the facts as found by the court a quo strongly indicate that it is AFWU itself who is the "employer" of those laborers. The facts very succinctly show that it was AFWU, through its officers, which (1) selected and hired the laborers, (2) paid their wages, (3) exercised control and supervision over them, and (4) had the power to discipline and dismiss them. These are the very elements constituting an employer-employee relationship.¹⁹ chanrobles virtual law library

Of course there is no legal impediment for a union to be an "employer". ²⁰ Under the particular facts of this case, however, AFWU appears to be more of a distinct and completely autonomous business group or association. Its organizational structure and operational system is no different from other commercial entities on the same line. It even has its own bill collectors and trucking facilities. And that it really is engaged in business is shown by the fact that it had arrastre and stevedoring contracts with other shipping firms in Iligan City.chanroblesvirtualawlibrary chanrobles virtual law library

Now, in its all-out endeavor to make an "employer" out of MARITIMA, AFWU citing an impressive array of jurisprudence, even goes to the extent of insisting that it be considered a mere "agent" of MARITIMA. Suffice it to say on this point that an agent can not represent two conflicting interests that are diametrically opposed. And that the cases sought to be relied upon did not involve representatives of opposing interests.chanroblesvirtualawlibrary chanrobles virtual law library

Anent the second point raised: AFWU claims that the court a quo found that acts of interferences and discriminations were committed by MARITIMA against the former's members simply for their union affiliation. ²¹ However, nowhere in the 32-page decision of the court a quo can any such finding be found. On the contrary, said court made the following finding:

18. There is no showing that this new union, the Iligan Stevedoring Union, was organized with the help of the branch manager Jose C. Teves. The organizer of the union like Messrs. Sergio Obach, Labayos and Atty. Obach and their colleagues have never sought the intervention, help or aid of the respondent Compa�ia MARITIMA or its branch manager Teves in the formation and/or organization of the said Iligan Stevedoring Union. It appears that these people have had previous knowledge and experience in handling stevedoring and in the arrastre service prior to the employment of the Allied Free Workers Union in the Iligan port. The charge of union interference and domination finds no support from the evidence. (Emphasis supplied)

More worthy of consideration is the suggestion that the termination of the CONTRACT was in bad faith. First of all, contrary to AFWU's sweeping statement, the court a quo did not find that the termination of the CONTRACT was "in retaliation to AFWU's demand for collective bargaining. On the contrary, the court a quo held that MARITIMA's authority to terminate the CONTRACT was rightfully exercised:

21. The evidence does not show substantially any act of interference in the union membership or activities of the petitioner union. The rescission of their CONTRACT is not a union interference contemplated in the law.

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x x x Further, the Court is satisfied that there is no act or acts of discrimination as claimed by herein petitioner to have been committed by the respondent firm or its branch manager Teves. Evidence is clear that Teves, in representation of the principal, the respondent Compa�ia MARITIMA, has also acted, in good faith in implementing the provisions of their existent CONTRACT (Exhibit "A"), and when he advised the union of the rescission of the said CONTRACT effective August 31, 1954, he did so in the concept that the employer firm may so terminate their contract pursuant to paragraph 4 of Exhibit "A" which at the time was the law controlling between them. ... (Emphasis supplied)

We are equally satisfied that the real reason for the termination of the CONTRACT was AFWU's inefficient service. The court a quo drew its conclusion from the following findings:

11. During the first month of the existence of the labor CONTRACT Exhibit 'A', the petitioner union rendered satisfactory service. Under this situation, the Compa�ia MARITIMA's representative at Iligan City was authorized to renew verbally with the extension of the CONTRACT Exhibit "A" from month to month basis after the first month of its expiration. This situation of harmony lasted up to the latter part of 1953 when the Compa�ia MARITIMA and its branch manager agent complained to the union of the unsatisfactory service of the union laborers hired to load and unload cargoes aboard Compa�ia MARITIMA boats. This deteriorating situation was admitted as a fact by the union president (See Exhs. "3", "3-A" and "3-B"; See also t.s.n. pp. 65-66, August 9, 1960).chanroblesvirtualawlibrary chanrobles virtual law library

12. There was a showing that the laborers employed by the union were inefficient in performing their jobs, and the business of the respondent company in Iligan City suffered adversely during the year 1954; and this was due to the fact that respondents' vessels were forced to leave cargoes behind in order not to disrupt the schedule of departures. The Union laborers were slow in loading and/or unloading freight from which the respondent Compa�ia MARITIMA secured its income and/or profits. At times, cargoes were left behind because of the union's failure to load them before vessel's departure. In order to solve this inefficiency of the complaining union, the branch manager of the Compa�ia MARITIMA was forced to hire extra laborers from among 'stand-by' workers not affiliated to any union for the purpose of helping in the stevedoring and arrastre work on their vessels because, at that time, the union was not performing and/or rendering efficient service in the loading and unloading of cargoes. ...

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14. Because of the deterioration of the Service rendered to the respondent, the branch manager of the respondent Compa�ia MARITIMA informed the union of its intention to rescind the CONTRACT Exhibit "A" because the company had been suffering losses for such inefficient service. (See Exhibit "N").chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Teves reported to the MARITIMA's head office on the financial losses of the company in its operations. (See Exhibits 'Y', 'Y-1' to 'X-5').chanroblesvirtualawlibrary chanrobles virtual law library

15. On August 24, 1954, branch manager Jose C. Teves of the Iligan City MARITIMA Branch, wrote the petitioner union informing them of the termination of their CONTRACT , Exhibit "A". (See Exhibit "N"). This step was taken after the company found the union lagging behind their work under the CONTRACT , so much so that MARITIMA boats have to leave on schedule without loading cargoes already contacted to be transported. (Emphasis supplied)

Perhaps, AFWU might say that this right to terminate appearing in paragraph 4 of the CONTRACT is contrary to law, morals, good customs, public order, or public policy. ²² However, it has not adduced any argument to demonstrate such point. Moreover, there is authority to the effect that the insertion in a CONTRACT for personal services of a resolutory condition permitting the cancellation of the CONTRACT by one of the contracting parties is valid. ²³ Neither would the termination constitute "union-busting". Oceanic Air Products vs. CIR, ²⁴ cited by AFWU is not in point. That case presupposes an employer-employee relationship between the parties disputants - a basis absolutely wanting in this case.chanroblesvirtualawlibrary chanrobles virtual law library

AFWU's third point is again that MARITIMA's act of terminating the CONTRACT constituted union interference. As stated, the court a quo found as a fact that there is no sufficient evidence of union interference. And no reason or argument has been advanced to show that the fact of said termination alone constituted union interference.

THE CERTIFICATION ELECTION CASE
(L-22952 ^** & L-22971 [CIR Case No. 175-MC]).chanroblesvirtualawlibrary chanrobles virtual law library

In the certification ejection case, the court a quo directed the holding of a certification election among the laborers then doing arrastre and stevedoring work. Both MARITIMA and AFWU have appealed from that ruling. The latter maintains that the lower court should have directly certified it as the majority union, entitled to represent all the workers in the arrastre and stevedoring work unit, whereas MARITIMA contends that said court could not even have correctly ordered a certification election considering that there was an absence of employer-employee relationship between it and said laborers.chanroblesvirtualawlibrary chanrobles virtual law library

There is no question that certification election could not have been proper during the existence of the CONTRACT in view of the court a quo's finding that there was no employment relationship thereunder between the parties. But after the termination of the CONTRACT on August 31, 1954, what was the nature of the relationship between MARITIMA and the laborers-members of AFWU? chanrobles virtual law library

From the finding that after the rescission of the CONTRACT , MARITIMA continued to avail of the services of AFWU the court a quo concluded that there came about an implied employer-employee relationship between the parties. This conclusion cannot be sustained.chanroblesvirtualawlibrary chanrobles virtual law library

First of all, it is contradicted by the established facts. In its findings of fact, the court a quo observed that after the rescission, the AFWU laborers continued working in accordance with the "cabo" system, which was the prevailing custom in the place. Said the court:

20. After the rescission of the CONTRACT Exhibit "A" on August 31, 1954, the Allied Free Workers Union and its members were working or performing the work of arrastre and stevedoring service aboard 'vessels of the Compa�ia MARITIMA docking at Iligan City port under the 'cabo system' then prevailing in that teritory; and the customs and conditions then prevailing were observed by the parties without resorting to the conditions of the former labor contract Exhibit "A". (Emphasis supplied)

Under the "Cabo" system, the union was an independent contractor. This is shown by the court a quo's own finding that prior to the CONTRACT between MARITIMA and AFWU, the former had an oral arrastre and stevedoring agreement with another union. This agreement was also based on the "cabo" system. As found by the court a quo:

4. That prior to the execution of Exhibit "A", the arrastre and stevedoring work was performed by the Iligan Wharf Laborers Union headed by one Raymundo Labayos under a verbal agreement similar to the nature and contents of Exhibit "A"; and this work continued from 1949 to 1952.chanroblesvirtualawlibrary chanrobles virtual law library

5. Under the oral CONTRACT , the Iligan Laborers Union acting as an independent labor contractor engaged [in] the services of its members as laborers to perform the contract work of arrastre and stevedoring service aboard vessels of the Compa�ia MARITIMA calling and docking at Iligan City; and for the services therein rendered the union charged shippers and/or consignees in accordance with the consignment or place, and the proceeds thereof shall be shared by the union members in accordance with the union's internal rules and regulations. This system of work is locally known as the 'cabo system'. The laborers who are members of the union and hired for the arrastre and stevedoring work were paid on union payrolls and the Compa�ia MARITIMA has had nothing to do with the preparation of the same. chanrobles virtual law library

6. Because of unsatisfactory service rendered by the Iligan Wharf Labor Union headed by Labayos, the Compa�ia MARITIMA through its agent in Iligan City cancelled their oral contractor and entered into a new contractor, Exhibit "A" with the Allied Free Workers Union (PLUM) now petitioner in this case. The terms and conditions of the same continued and was similar to the oral contractor entered into with the union headed by Labayos. ...chanroblesvirtualawlibrary chanrobles virtual law library

7. The cancellation of the oral contract with the Iligan Wharf Labor Union headed by Labayos was due to the inefficient service rendered by the said union. The labor contract entered into by the petitioner herein (Exh. "A") was negotiated through the intervention of Messrs. Salvador Lluch, Mariano Ll Badelles, Laurentino Ll. Badelles, Nicanor T. Halivas and Raymundo Labayos. The contract was prepared by their legal panel and after several negotiations, respondent Teves reluctantly signed the said written contract with the union with the assurance however that the same arrange previously had with the former union regarding the performance and execution of the arrastre and stevedoring contract be followed in accordance with the custom of such kind of work at Iligan City. The petitioner union, operated as a labor contractor under the so-called "cabor" system; ... (Emphasis supplied)

From the above findings, it is evident that, insofar as the working arrangement was concerned, there was no real difference between the CONTRACT and the prior oral agreement. Both were based on the "cabo" system. Under both, (1) the union was an independent contractor which engaged the services of its members as laborers; (2) the charges against the consignees and owners of cargoes were made directly by the union; and (3) the laborers were paid on union payrolls and MARITIMA had nothing to do with the preparation of the same. These are the principal characteristics of the "cabo" system on which the parties based their relationship after the termination of the CONTRACT.chanroblesvirtualawlibrary chanrobles virtual law library

Hence, since the parties observed the "cabo" system after the rescission of the CONTRACT, and since the characteristics of said system show that the contracting union was an independent contractor, it is reasonable to assume that AFWU continued being an independent contractor of MARITIMA. And, being an independent contractor, it could not qualify as an "employee". With more reason would be true with respect to the laborers.chanroblesvirtualawlibrary chanrobles virtual law library

Moreover, there is no evidence at all regarding the characteristics of the working arrangement between AFWU and MARITIMA after the termination of the CONTRACT. All we have to go on is the court a quo's finding that the "cabo" system was observed - a system that negatives employment relationship. The four elements generally regarded as indicating the employer-employee relationship - or at the very least, the element of "control" - must be shown to sustain the conclusion that there came about such relationship. The lack of such a showing in the case at bar is fatal to AFWU's contention.chanroblesvirtualawlibrary chanrobles virtual law library

Lastly, to uphold the court a quo's conclusion would be tantamount to the imposition of an employer-employee relationship against the will of MARITIMA. This cannot be done, since it would violate MARITIMA's exclusive prerogative to determine whether it should enter into an employment CONTRACT or not, i.e, whether it should hire others or not. ²⁵ In Pampanga Bus Co. vs. Pambusco Employees' Union, ²⁶ We said:

x x x The general right to make a contract in relation to one's business is an essential part of the liberty of the citizens protected by the due process clause of the constitution. The right of a laborer to sell his labor to such person as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the constitution. 'If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression (Emphasis supplied) .

Therefore, even if the AFWU laborers continued to perform arrastre and stevedoring work after August 31, 1954, it cannot be correctly concluded - as did the court a quo - that an employer-employee relationship - even impliedly at that - arose when before there never had been any. Indeed, it would appeal unreasonable and unjust to force such a relationship upon MARITIMA when it had clearly and continuously manifested its intention not to have any more business relationship whatsoever with AFWU because of its inefficient service. It was only to comply with injunctions and other judicial mandates that MARITIMA continued to abide by the status quo, extending in fact and in effect the operation of the MARITIMA contract.chanroblesvirtualawlibrary chanrobles virtual law library

The only remaining question now is whether, in the particular context of what We have said, the lower court's ruling ordering a certification election can be sustained. As already stated, the duty to bargain collectively exists only between the "employer" and its "employees". However, the actual negotiations - which may possibly culminate in a concrete collective bargaining contract - are carried on between the "employer" itself and the official representative of the "employees" ²⁷ - in most cases, the majority labor union. Since the only function of a certification election is to determine, with judicial sanction, who this official representative or spokesman of the "employees" will be, ²⁸ the order for certification election in question cannot be sustained. There being no employer-employee relationship between the parties disputants, there is neither a "duty to bargain collectively" to speak of. And there being no such duty, to hold certification elections would be pointless. There is no reason to select a representative to negotiate when there can be no negotiations in the first place. We therefore hold that where - as in this case - there is no duty to bargain collectively, it is not proper to hold certification elections in connection therewith.chanroblesvirtualawlibrary chanrobles virtual law library

The court a quo's objective in imposing the employer-employee relationship may have been to do away with the "cabo" system which, although not illegal, is in its operation regarded as disadvantageous to the laborers and stevedores. The rule however remains that the end cannot justify the means. For an action to be sanctioned by the courts, the purpose must not only be good but the means undertaken must also be lawful.chanroblesvirtualawlibrary chanrobles virtual law library

A true and sincere concern for the welfare of AFWU members-laborers would call for reforms within AFWU itself, if the evil of the so-called "cabo" system is to be eliminated. As We suggested in Bermiso vs. Hijos de Esca�o, ²⁹ the remedy against the "cabo" system need not be sought in the courts but in the laborers themselves who should organize into a closely-knit union "which would secure the privileges that the members desire thru the election of officers among themselves who would not exploit them." chanrobles virtual law library

Wherefore, the appealed decision of the Court of Industrial Relations is hereby affirmed insofar as it dismissed the charge of unfair labor practice in CIR Case 426-ULP, but reversed and set aside insofar as it ordered the holding of a certification election in CIR Case No. 175-MC, and the petition for certification in said case should be, as it is hereby, dismissed. No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.

¹Dated February 4, 1964.

²Short for Compa�ia MARITIMA and Manager Jose C. Teves.

³Short for Allied Free Workers' Union (PLUM).

⁴Short for the arrastre and stevedoring contract.

⁵See Annex "B" of Petition in L-22951-52.

⁶CIR Case No. 175-MC.

⁷CIR Case No. 426-ULP.chanroblesvirtualawlibrary chanrobles virtual law library

⁸Subsequently, this union was dissolved and its registration cancelled because of its failure to carry out its agreement with MARITIMA.

⁹Civil Case No. 577 in the Court of First Instance of Lanao del Norte.

¹⁰Allied Free Workers' Union (PLUM) vs. Judge Apostol, G.R. No L- 8876, Oct. 31, 1957.chanroblesvirtualawlibrary chanrobles virtual law library

¹¹We finally declared the preliminary injunction issued by the Court of First Instance as invalid. (Decision of Supreme Court in L-8876, Oct. 31, 1957).chanroblesvirtualawlibrary chanrobles virtual law library

¹²CFI of Lanao del Norte has since been ordered by this Court in L-19651 to proceed considering these steps taken to appeal its decision. See infra, Note 15.chanroblesvirtualawlibrary chanrobles virtual law library

¹³Allied Free Workers' Union (PLUM) vs. Hon. Estipona, G.R. No. L-17934. Our decision was promulgated on Dec. 28, 1961, where We set aside the said order of January 6, 1961.

¹⁴Allied Free Workers' Union (PLUM) vs. Hon. Estipona, G.R. No. L-19651, June 30, 1966.chanroblesvirtualawlibrary chanrobles virtual law library

¹⁵In L-19651, We held the orders of March 24 and 31, 1962 as invalid because the decisions of January 11, 1961 and December 5, 1960 were the same, and We also ordered the Court of First Instance to proceed to the hearing for the approval of the AFWU appeal.

^*Same rollo as L-22952.

¹⁶Sec. 13, Rep. Act No. 875.

¹⁷Cruz vs. Manila Hotel, G.R. No. L-9110, April 30, 1957.

¹⁸Cruz vs. Manila Hotel, supra, see also Chuan & Sons vs. CIR, 85 Phil. 365.

¹⁹Via�a vs. Al Lagadan G.R. No. L-8967, May 31, 1956; 99 Phil. 408.

²⁰See. 2(c), Rep. Act No. 875.

²¹Petition in L-22951-52, p. 14.

²²Art. 1306, Civil Code of the Philippines.

²³Taylor vs. Uy Tieng, 43 Phil. 873.

²⁴G.R. Nos. L-18704-05, January 31, 1963..

^**Same rollo as L-22951.

²⁵Fernandez & Quiason, Law of Labor Relations, 1963 ed., pp. 43-48.

²⁶68 Phil. 541, 543.

²⁷Secs 12(2) and 13, Rep. Act No. 875.

²⁸Sec 12(b), Rep. Act No. 875.

²⁹G.R. No L-11606, February 28, 1959.