Finman General Assurance Corporation vs. NLRC (POEA)

A surety that issued a bond guaranteeing a recruitment agency's faithful compliance with labor laws may be impleaded motu proprio by the POEA and held jointly and severally liable for the agency's money claims to recruited workers, because the surety is considered in law as the same party as the debtor, and their liabilities are interwoven as to be inseparable.

Pan Pacific Overseas Recruitment was a licensed private placement agency with offices at the Feros Building, Salcedo Street, Makati, Metro Manila. Finman General Assurance Corporation acted as Pan Pacific's surety pursuant to Article 31 of the Labor Code, having executed a suretyship agreement binding itself jointly and severally liable for claims that might arise should the recruitment agency violate the conditions of its license. The surety bond was conditioned upon the true and faithful performance and observance by Pan Pacific of its duties and obligations as a licensed placement agency.

On July 23, 1987, Romeo Galiza and Milagros Bumanglag applied with Pan Pacific Overseas Recruitment for jobs as airport porter and domestic helper, respectively. Galiza was required by the agency's General Manager, Engr. Celia Aranda, to pay a placement fee of ₱6,000, which he paid on the same date to the Recruitment Director, Normita Egil, evidenced by a receipt issued in his favor. Bumanglag was required to pay ₱3,000 as a "processing fee," for which no receipt was issued to her by the agency.

After several months, Bumanglag followed up her application with the agency. Since the agency failed to deploy her, she withdrew her travel documents on January 23, 1988 and demanded a refund of her ₱3,000 placement fee. Instead of returning her money, the agency advised her to return on March 12, 1988 for a refund of only ₱2,400, explaining that deductions had been made from her initial deposit to cover expenses for her pictures. The agency issued in her favor a note scheduling such refund.

When it appeared that the recruitment agency had merely furnished false information relating to their recruitment and placement for jobs overseas, Galiza and Bumanglag filed individual complaints against Pan Pacific before the Philippine Overseas Employment Administration for violation of Articles 32 and 34(a) of the Labor Code, as amended. The POEA motu proprio impleaded as party-respondent Pan Pacific's surety, Finman General Assurance Corporation, which had bound itself to be jointly and severally liable for claims that might arise should the recruitment agency violate the conditions of its license. Summons were sent to the respondents at their respective official addresses, but the summons for Pan Pacific was returned unserved with the notation "Company moved out."

Finman filed an Answer denying liability for the claims and alleging POEA's lack of jurisdiction to enforce the surety's undertaking. During the hearing, Finman further alleged that the note which the agency issued to Bumanglag indicating her refund schedule was not a receipt because it did not acknowledge payment of any fee. The POEA Administrator found that while the note was not strictly a receipt, it was sufficient proof that Bumanglag had paid the amount to the agency, particularly since it had been established in several other POEA cases against the respondent agency that it issued such "notes" to applicants claiming refund of fees. As for Galiza, a receipt for ₱6,000 and a similar note scheduling the refund for the same amount substantially established his payment, which was in excess of the allowable recruitment fee of ₱5,000 from each hired worker. That the agency furnished false information relating to recruitment and placement was established beyond cavil.

• Lack of Authority to Implead Surety: Petitioner argued that the POEA has no authority under its own Rules and Regulations to implead the surety of any recruitment or placement agency in actions and/or complaints for suspension, cancellation, or revocation of license or authority of the latter.
• Limited Jurisdiction of POEA: Petitioner maintained that the POEA's authority is limited to a determination of whether there is sufficient cause for an action upon the agency's license, and that POEA's jurisdiction to hear and decide money claims is confined to employer-employee relations arising out of or by virtue of any law or contract, not money claims arising from pre-employment or during recruitment conducted by the respondent agency.
• Scope of Surety Bond Liability: Petitioner alleged that if the surety bond may be held liable for infractions or violations of the Labor Code and POEA rules and regulations, it shall be answerable only for the sanctions, penalties, or fines imposed upon the agency but definitely not for money claims of applicants not arising from employment contracts.

• Authority to Implead Surety: Whether the POEA acted with grave abuse of discretion amounting to lack of jurisdiction in motu proprio impleading Finman as a co-respondent with Pan Pacific in the case below.
• Joint and Several Liability of Surety: Whether the POEA may direct Finman to pay jointly and severally with Pan Pacific the claims of Galiza and Bumanglag on the basis of the suretyship agreement executed by Finman, Pan Pacific, and the POEA.

• Authority to Implead Surety: No. The POEA Administrator did not exceed his jurisdiction nor act with grave abuse of discretion in impleading Finman motu proprio, the surety bond guaranteeing faithful compliance by Pan Pacific of all laws relating to the use of its license and its recruitment activities.
• Joint and Several Liability of Surety: Yes. Finman may be directed to pay jointly and severally with Pan Pacific the claims of the complainants, because the nature of Finman's obligation under the suretyship agreement makes it privy to the proceedings against its principal, and a surety is considered in law as the same party as the debtor.

• Authority to Implead Surety: The surety bond issued by Finman for Pan Pacific guarantees the faithful compliance by the agency of all laws relating to the use of its license and its recruitment activities. The bond is conditioned upon the true and faithful performance and observance by Pan Pacific of its duties and obligations as a licensed placement agency under Article 31, Title I, Book One of the Labor Code. Because the surety bond directly relates to the agency's compliance with its licensing conditions, the POEA acted within its jurisdiction in impleading the surety motu proprio to ensure that the claims of aggrieved workers could be satisfied. There was no grave abuse of discretion; the impleader was a necessary consequence of the surety's undertaking.

• Joint and Several Liability of Surety: The nature of Finman's obligation under the suretyship agreement makes it privy to the proceedings against its principal, Pan Pacific. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. Accordingly, Finman is bound by the judgment against its principal even though it was not a party to the original proceedings. The money claims of Galiza and Bumanglag arose from violations of the Labor Code provisions governing recruitment activities — precisely the conduct guaranteed by the surety bond — and thus fall within the scope of Finman's joint and several liability.

• Surety as the Same Party as the Debtor — A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. The surety is bound by a judgment against its principal even though it was not a party to the proceedings. In this case, the Court applied the doctrine to hold that Finman, as surety of Pan Pacific, was properly impleaded and held jointly and severally liable for the money claims of recruited workers, because the surety bond guaranteed faithful compliance with all laws relating to the agency's license and recruitment activities.

• "FINMAN is bound by a judgment against its principal eventhough it was not a party to the proceedings, for a surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable" — This passage articulates the ratio decidendi, stating the canonical formulation of the suretyship doctrine as applied to the POEA's authority to hold a recruitment agency's surety jointly and severally liable for workers' money claims.

• "Said surety bond guarantees the faithful compliance by Pan Pacific of all laws relating to the use of its license and its recruitment activities. The bond is conditioned upon the true and faithful performance and observance by Pan Pacific of its duties and obligations as a licensed placement agency" — This passage defines the scope of the surety's undertaking and explains why the POEA's impleader of the surety was proper, linking the bond's coverage to the agency's statutory obligations under the Labor Code.

• PNB vs. Hon. Pineda, 197 SCRA 1 — Followed as authority for the proposition that a surety is considered in law as the same party as the debtor and is bound by judgments against the principal.
• Lirag Textile Mills, Inc. vs. SSS, 153 SCRA 338 — Cited within PNB vs. Hon. Pineda as supporting authority for the inseparability of the surety's and principal's liabilities.
• Government of the Philippines vs. Tizon, 20 SCRA 1187 — Cited within PNB vs. Hon. Pineda as supporting authority for the same suretyship doctrine.
• Finman General Assurance Corporation vs. Salik, 188 SCRA 740 — Cited as additional authority reinforcing the principle that a surety is bound by judgments against its principal.

• Article 31, Title I, Book One, Labor Code of the Philippines — Governs the surety bond required of licensed placement agencies, conditioning the bond upon the true and faithful performance and observance by the agency of its duties and obligations. The Court relied on this provision to establish that Finman's surety bond covered Pan Pacific's compliance with all laws relating to its license and recruitment activities.
• Article 32, Labor Code — Prohibits charging any fee to a worker until he has obtained employment through the agency's efforts or has actually commenced employment, and requires that any fee be covered by an approved receipt. The POEA found Pan Pacific liable for violating this provision by collecting placement fees before deployment.
• Article 34(a), Labor Code — Prohibits charging or accepting any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or making a worker pay any amount greater than actually received by him as a loan or advance. The POEA found Pan Pacific liable for charging Galiza ₱6,000, which exceeded the allowable recruitment fee of ₱5,000.

Cruz (Chairman), Medialdea, and Bellosillo, JJ., concurred.