Manaya vs. Alabang Country Club Incorporated

The perfection of an appeal within the reglementary period is mandatory and jurisdictional, and notice to counsel of record is notice to client; absent a notice of withdrawal or substitution of counsel, the reckoning date is the date of receipt by the original counsel, and the negligence of counsel in failing to perfect an appeal does not bind the client only when it constitutes gross negligence amounting to deprivation of property without due process. Absent exceptional circumstances, the rules on perfection of appeal must be strictly applied, particularly in labor cases where delay prejudices the workingman's welfare.

Petitioner Fernando G. Manaya was a maintenance helper later designated as company electrician who worked for respondent Alabang Country Club Incorporated from 21 August 1989 until his dismissal on 22 August 1998. Respondent maintained that petitioner was not its employee but was supplied by job-contracting agencies — first Supreme Construction, then First Staffing Network Corporation (FSNC) — pursuant to service contracts between respondent and those agencies. The dispute centers on whether petitioner was respondent's regular employee and whether respondent's appeal from the Labor Arbiter's adverse decision was timely perfected.

Petitioner Fernando G. Manaya was initially hired by respondent Alabang Country Club Incorporated on 21 August 1989 as a maintenance helper receiving a salary of ₱198.00 per day, and was later designated as company electrician. He continued to work for respondent until 22 August 1998, when respondent, through its Engineering and Maintenance Department Manager Engr. Ronnie B. de la Cruz, informed him that his services were no longer required. Petitioner alleged that he was forcibly and illegally dismissed without cause and without due process, having committed no infraction of company policies or rules. He further claimed non-payment of service incentive leave pay, holiday pay, and 13th month pay, and asserted that with his more or less nine years of service he had become a regular employee. He accordingly demanded reinstatement without loss of seniority rights with full backwages and all monetary benefits due him.

Respondent denied that petitioner was its employee. It countered that petitioner was employed by First Staffing Network Corporation (FSNC), with which respondent had an existing Memorandum of Agreement dated 21 August 1989, and that by virtue of legitimate job contracting, petitioner — as an employee of FSNC — came to work with respondent, first as a maintenance helper and subsequently as an electrician. Respondent narrated that it had initially had a contract of services with Supreme Construction, which assigned petitioner to work with respondent starting as a painter and later performing electrical jobs. After terminating its contract with Supreme Construction, respondent entered into a new contract with FSNC, and petitioner continued to work for respondent, supposedly as an employee supplied by FSNC.

The Labor Arbiter, in a Decision dated 20 November 2000, found petitioner to be a regular employee of respondent and declared his dismissal illegal for having been effected without just and valid cause and without due process. The Labor Arbiter ordered reinstatement without loss of seniority rights with full backwages in the partial amount of ₱160,724.48, and jointly and severally ordered respondent and FSNC to pay service incentive leave (₱2,961.75), 13th month pay (₱15,401.10), and attorney's fees equivalent to 10% of the total monetary award. The Labor Arbiter found that respondent failed to produce the contract of service with Supreme Construction, that petitioner continued working for respondent even after the termination of Supreme Construction's contract — contrary to the normal course of events — and that the FSNC contract covered almost all of respondent's workforce including positions directly related to its business, indicating labor-only contracting. FSNC also failed to prove it had substantial capital or investment in tools, equipment, machinery, and premises.

Respondent appealed to the NLRC. The NLRC found that respondent's counsel of record, Atty. Angelina A. Mailon of Monsod, Valencia and Associates, received a copy of the Labor Arbiter's Decision on or before 11 December 2000 as shown by the postal stamp or registry return card. Said counsel did not file a withdrawal of appearance. Instead, a Memorandum of Appeal dated 26 December 2000 was filed by respondent's new counsel, Atty. Arizala of Tierra and Associates Law Office. Reckoned from 11 December 2000, the filing on 26 December 2000 was beyond the ten-day reglementary period. The NLRC dismissed the appeal, declared the Labor Arbiter's decision final and executory, and an Entry of Judgment dated 8 January 2003 was issued. The Court of Appeals, however, granted respondent's subsequent Petition for Certiorari under Rule 65, relying on the doctrine that litigation must be decided on the merits and that negligence of counsel should not bind the client, and ordered the NLRC to give due course to the appeal. Petitioner's Motion for Reconsideration was denied, prompting the instant petition.

• Illegal Dismissal: Petitioner alleged that he was forcibly and illegally dismissed without cause and without due process on 22 August 1998, having committed no infraction of company policies or rules.
• Regular Employment: Petitioner asserted that with his more or less nine years of service with respondent, he had become a regular employee entitled to reinstatement without loss of seniority rights with full backwages and all monetary benefits due him.
• Unpaid Benefits: Petitioner claimed that he was not paid his service incentive leave pay, holiday pay, and 13th month pay.
• Timeliness of Appeal Issue: Petitioner maintained that the Court of Appeals erred in ordering the NLRC to give due course to respondent's appeal, which was filed beyond the reglementary period of ten days for perfecting an appeal.

• No Employer-Employee Relationship: Respondent denied that petitioner was its employee, maintaining that petitioner was employed by FSNC — with which respondent had an existing Memorandum of Agreement dated 21 August 1989 — and that by virtue of legitimate job contracting, petitioner came to work with respondent as an employee of FSNC.
• Job Contracting Arrangement: Respondent insisted that petitioner was directly hired first by Supreme Construction and later by FSNC, and was deployed to work with respondent based on contracts of services between respondent and these job-contracting agencies, making petitioner not its employee.
• Abandonment by Counsel: Respondent claimed before the Court of Appeals that its lawyer abandoned the case, such that it was not effectively represented by competent counsel, and that the negligence of its counsel should not bind it.
• Timeliness of Appeal: Respondent contended that upon its receipt of the Labor Arbiter's Decision on 15 December 2000, it filed its appeal on 26 December 2000 through a new lawyer, which was within the reglementary period since 25 December 2000 was a holiday.

• Perfection of Appeal: Whether the Court of Appeals committed error when it ordered the NLRC to give due course to respondent's appeal even though said appeal was filed beyond the reglementary period of ten days for perfecting an appeal.
• Employer-Employee Relationship: Whether petitioner was a regular employee of respondent, or an employee of the job-contracting agencies (Supreme Construction and FSNC) deployed to work with respondent.

• Perfection of Appeal: Yes, the Court of Appeals erred. The appeal was not timely perfected because notice to counsel of record is notice to client, and the reckoning date is the date of receipt by respondent's original counsel on 11 December 2000 — not the date of receipt by respondent itself. The rules on perfection of appeal are mandatory and jurisdictional, and no exceptional circumstances justified their relaxation.
• Employer-Employee Relationship: Yes, petitioner was a regular employee of respondent. The arrangement between respondent and FSNC constituted labor-only contracting, as FSNC lacked substantial capital or investment and the workers supplied performed activities directly related to respondent's main business, making FSNC merely an agent of respondent.

• Perfection of Appeal: It is axiomatic that when a client is represented by counsel, notice to counsel is notice to client. In the absence of a notice of withdrawal or substitution of counsel, the Court assumes that the counsel of record continues to represent the client, and receipt of notice by the former is the reckoning point of the reglementary period. Respondent's original counsel, Atty. Mailon, received the Labor Arbiter's Decision on or before 11 December 2000 and did not file any notice of withdrawal; neither was there any intimation by respondent at that time that it was terminating its counsel's services. The Memorandum of Appeal filed by new counsel on 26 December 2000 was therefore beyond the ten-day reglementary period. For negligence of counsel not to bind the client, it must constitute gross negligence amounting to deprivation of property without due process — a standard not met here, since notice sent to counsel of record is binding upon the client and the neglect or failure of counsel to inform the client of an adverse judgment resulting in the loss of the right to appeal is not a ground for setting aside a judgment valid and regular on its face. Moreover, it is the client's duty to maintain contact with counsel and inquire about the status of the case. While the Court has, in highly exceptional instances, relaxed the rules on reglementary periods — such as where counsel was already dead, where a gross miscarriage of justice would result, or where the subject matter had already been judicially settled in another case — no such exceptional circumstances exist here. Three additional reasons reinforce strict application: first, entry of judgment had already been made, rendering the Labor Arbiter's decision final and executory; second, the workingman's welfare is the primordial consideration under Article 4 of the Labor Code, and delay in labor cases wears down the meager resources of workers to the point that they either give up or compromise for less than what is due them; and third, respondent failed to show sufficient justification to reverse the Labor Arbiter's findings as affirmed by the NLRC, none of the grounds under Article 223 of the Labor Code being present.

• Employer-Employee Relationship: The Labor Arbiter's finding that petitioner was a regular employee of respondent is supported by the evidence and entitled to full credence, the Labor Arbiter being the trier of facts in labor cases with the opportunity to discuss factual matters with the parties during the conciliation phase. Respondent failed to produce the contract of service with Supreme Construction, giving rise to the presumption that the document would prove petitioner's assertion of having been hired directly by respondent long before Supreme Construction entered the picture. Petitioner continued working for respondent even after the termination of Supreme Construction's contract — contrary to the normal course of events where a contractor's employees leave upon termination of the contract. The FSNC contract covered almost all of respondent's workforce, including positions directly related to respondent's business, and did not even include petitioner's position of electrician among the covered positions. FSNC failed to prove it had substantial capital or investment in tools, equipment, machinery, and premises, establishing that it was engaged in labor-only contracting prohibited under Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18. In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose — to prevent circumvention of labor laws — and the contractor is considered merely an agent of the principal employer, who is responsible to the employees as if they had been directly employed. The employer-employee relationship was further fortified by the fact that respondent gave petitioner the opportunity to attend a seminar/training on refrigeration and air conditioning, with a certificate of participation signed by three of respondent's officials.

• Notice to Counsel is Notice to Client — When a client is represented by counsel, notice to counsel is notice to client. In the absence of a notice of withdrawal or substitution of counsel, the Court assumes that the counsel of record continues to represent the client, and receipt of notice by counsel is the reckoning point of the reglementary period. Applied here to hold that the date of receipt by respondent's original counsel (11 December 2000), not the date of receipt by respondent itself, controlled the period for perfecting the appeal.

• Perfection of Appeal is Mandatory and Jurisdictional — The perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional. Failure to perfect the appeal renders the judgment final and executory and deprives the appellate court of jurisdiction to alter the final judgment. The winning party has a correlative right to enjoy the finality of the resolution of the case. Applied here to hold that respondent's belatedly filed appeal did not confer jurisdiction on the NLRC to entertain it.

• Negligence of Counsel — The negligence of counsel binds the client. For negligence not to bind the client, it must constitute gross negligence amounting to deprivation of property without due process. The neglect or failure of counsel to inform the client of an adverse judgment resulting in the loss of the right to appeal is not a ground for setting aside a judgment valid and regular on its face. The client also has the duty to inquire from counsel about the status and progress of the case. Applied here to reject respondent's claim that its counsel's alleged abandonment should excuse the late filing.

• Exceptional Circumstances for Relaxation of Procedural Rules — The policy of liberal interpretation is qualified by the requirement that there must be exceptional circumstances to allow relaxation of the rules on reglementary periods. Examples include: (1) where counsel of record was already dead at the time of receipt of judgment (Ramos vs. Bagasao); (2) where a gross miscarriage of justice would result, such as the Republic losing hundreds of hectares of titled land (Republic vs. Court of Appeals); and (3) where the subject matter had already been judicially settled with finality in another case, such that dismissal would result in double reparation (Olacao vs. NLRC). No such exceptional circumstances existed here.

• Labor-Only Contracting — Under Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code (as amended by Department Order No. 18), labor-only contracting exists where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job for a principal, and either (i) the contractor lacks substantial capital or investment and the workers perform activities directly related to the principal's main business, or (ii) the contractor does not exercise the right to control over the performance of the work. In labor-only contracting, the contractor is considered merely an agent of the principal employer, who is responsible to the employees as if they had been directly employed. Applied here to find FSNC a labor-only contractor and respondent the direct employer of petitioner.

• Workingman's Welfare as Paramount Consideration — In interpreting and implementing the Labor Code and its implementing regulations, the workingman's welfare is the primordial and paramount consideration. Under Article 4 of the Labor Code, all doubts in the implementation and interpretation of the provisions of the Labor Code shall be resolved in favor of labor. Delay in the settlement of labor cases cannot be countenanced because it wears down the meager resources of workers to the point that they either give up or compromise for less than what is due them. Applied here to justify strict application of the rules on perfection of appeal against the employer.

• "It is axiomatic that when a client is represented by counsel, notice to counsel is notice to client. In the absence of a notice of withdrawal or substitution of counsel, the Court will rightly assume that the counsel of record continues to represent his client and receipt of notice by the former is the reckoning point of the reglementary period." — This passage states the controlling rule on notice to counsel and its effect on the reglementary period for appeal, which is the ratio decidendi for the procedural ruling.

• "For negligence not to be binding on the client, the same must constitute gross negligence as to amount to a deprivation of property without due process." — This defines the threshold for excusing a client from counsel's negligence, a doctrine frequently cited in Philippine procedural jurisprudence.

• "The perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect the appeal renders the judgment of the court final and executory." — This is the canonical formulation of the jurisdictional nature of perfecting appeals, central to the Court's refusal to relax the rules.

• "In labor–only contracting, the statute creates an employer–employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor–only contractor as if such employees had been directly employed by the principal employer." — This articulates the legal consequence of labor-only contracting, establishing the employer-employee relationship between the principal and the contractor's workers.

• Aguam vs. Court of Appeals, 388 Phil. 587 (2000) — Cited by the Court of Appeals for the proposition that litigation must be decided on the merits and not on technicalities. The Supreme Court distinguished this case, holding that no exceptional circumstances justified relaxing the rules on perfection of appeal.

• Ramos vs. Bagasao, 96 SCRA 395 — Cited as an example of an exceptional circumstance where the Court excused a four-day delay in filing a notice of appeal because the counsel of record was already dead when the decision was served. Distinguished from the present case, where no comparable circumstance existed.

• Republic vs. Court of Appeals, 83 SCRA 453 — Cited as an example where the Court allowed perfection of an appeal despite a six-day delay to prevent a gross miscarriage of justice involving hundreds of hectares of titled land. Distinguished from the present case.

• Olacao vs. National Labor Relations Commission, 177 SCRA 38 — Cited as an example where a tardy appeal was accepted because the subject matter had already been judicially settled with finality in another case. Distinguished from the present case.

• Bunagan vs. Sentinel, G.R. No. 144376, 13 September 2006, 501 SCRA 650 — Cited for the doctrine that perfection of appeal is mandatory and jurisdictional, and that the underlying purpose is to prevent needless delay that would allow employers to wear out the efforts and meager resources of workers. Followed and applied in the present case.

• Santos vs. Velarde, 450 Phil. 381 (2003) — Cited in support of the proposition that liberal interpretation in labor cases should not be applied where it would render futile the very purpose for which the principle of liberality is adopted. Followed.

• Narag vs. National Labor Relations Commission, G.R. No. L-69628, 28 October 1987, 155 SCRA 199 — Cited for the doctrine that delay in labor cases gives employers more opportunity to wear out the efforts and meager resources of workers, to the point that they either give up or compromise for less than what is due them. Followed.

• DOLE Philippines, Inc. vs. Esteva, G.R. No. 161115, 30 November 2006 — Cited for the distinction between legitimate job contracting and labor-only contracting. Followed in upholding the Labor Arbiter's finding of labor-only contracting.

• San Miguel Corporation vs. Aballa, G.R. No. 149011, 28 June 2005, 461 SCRA 392 — Cited for the same proposition on legitimate versus labor-only contracting. Followed.

• Article 223, Labor Code — Provides that decisions of the Labor Arbiter are final and executory unless appealed to the NLRC within ten calendar days from receipt, and that appeals may be entertained only on grounds of (a) prima facie evidence of abuse of discretion, (b) decision secured through fraud or coercion, (c) pure questions of law, or (d) serious errors in findings of fact causing grave or irreparable damage. Applied to hold that respondent failed to show any of these grounds for reversal.

• Article 4, Labor Code — Provides that all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor. Applied to justify strict application of the rules on perfection of appeal in favor of the workingman's welfare.

• Article 106, Labor Code — Defines contractor or subcontractor arrangements, distinguishes legitimate job contracting from labor-only contracting, and provides that in labor-only contracting the intermediary is considered merely an agent of the employer who shall be responsible to the workers as if directly employed. Applied to find FSNC a labor-only contractor and respondent the direct employer of petitioner.

• Section 1, Rule VI, 2005 Revised Rules of the NLRC — Provides that decisions of the Labor Arbiter shall be final and executory unless appealed within ten calendar days from receipt, and that if the 10th day falls on a Saturday, Sunday, or holiday, the last day to perfect the appeal shall be the first working day following. Applied to determine the reglementary period for respondent's appeal.

• Section 3, Rule VIII-A, Book III, Omnibus Rules Implementing the Labor Code (as amended by Department Order No. 18) — Defines the trilateral relationship in legitimate contracting arrangements involving the principal, the contractor, and the contractual workers. Applied to evaluate whether the arrangement between respondent and FSNC constituted legitimate contracting.

• Section 5, Rule VIII-A, Book III, Omnibus Rules Implementing the Labor Code (as amended by Department Order No. 18) — Declares labor-only contracting prohibited and defines it as an arrangement where the contractor merely recruits, supplies, or places workers, and either lacks substantial capital or investment while the workers perform activities directly related to the principal's main business, or does not exercise the right to control over the work. Applied to find that FSNC was a labor-only contractor.

Consuelo Ynares-Santiago (Associate Justice, Chairperson, Third Division), Ma. Alicia Austria-Martinez (Associate Justice), and Antonio Eduardo B. Nachura (Associate Justice) concurred.