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Urbanes, Jr. vs. Secretary of Labor and Employment

*
G.R. No. 122791. February 19, 2003.

PLACIDO O. URBANES, JR., doing business under the name &

style of CATALINA SECURITY AGENCY, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR AND EMPLOYMENT
and SOCIAL SECURITY SYSTEM, respondents.

Courts; National Labor Relations Commission; Jurisdiction; Where no

employer-employee relationship exists between the parties, it is the Regional
Trial Court that has jurisdiction.—It is well settled in law and jurisprudence
that where no employer-employee relationship exists between the parties
and no issue is involved; which may be resolved by reference to the Labor
Code, other labor statutes or any collective bargaining agreement, it is the
Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks
payment of a sum of money and damages on account of petitioner’s alleged
breach of its obligation under their Guard Service Contract. The action is
within the realm of civil law hence jurisdiction over the case belongs to the
regular courts. While the resolution of the issue involves the application of
labor laws, reference to the labor code was only for the determination of the
solidary liability of the petitioner to the respondent where no employer-
employee relation exists.
Civil Law; Obligations; Solidary Liability; It is only when the
contractor pays the increases mandated that it can claim an adjustment
from the principal.—It is only when [the] contractor pays the increases
mandated that it can claim an adjustment from the principal to cover the
increases payable to the security guards. The conclusion that the right of the
contractor (as principal debtor) to recover from the principal (as solidary co-
debtor) arises only if he has paid the amounts for which both of them are
jointly and severally liable is in line with Article 1217 of the Civil Code.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

     Rene Ruel B. Almero & Celestino Alcantara for petitioner.
          Godofredo S. Sison, Amador M. Monteiro & Rodrigo R.
Castillo for private respondent SSS.

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* THIRD DIVISION.

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666 SUPREME COURT REPORTS ANNOTATED

Urbanes, Jr. vs. Secretary of Labor and Employment

CARPIO-MORALES, J.:

Before this Court is a Petition for Certiorari under Rule 65 of the

Revised Rules of Court assailing the June 22, 1995 Order of the
Department of Labor and Employment (DOLE) Secretary which set
aside the September 16, 1994 Order of the Regional Director,
National Capital Region (NCR).
The antecedent facts of the case are as follows:
Petitioner Placido O. Urbanes, Jr., doing business under the name
1
and style of Catalina Security Agency, entered into an agreement to
provide security services to respondent Social Security System
(SSS).
During the 2 effectivity of the agreement, petitioner, by letter of
May 16, 1994, requested the SSS for the upward adjustment of their
contract rate in view of Wage Order No. NCR-03 which was issued
by the Regional Tripartite Wages and Productivity Board-NCR
pursuant to Republic Act 6727 otherwise known as the Wage
Rationalization Act, the pertinent provision of which wage order
reads:

Section 9. In the case of contracts for construction projects and for security,
janitorial and similar services, the prescribed amount set forth herein for
covered workers shall be borne by the principals or the clients of the
construction/service contractors and the contract shall be deemed amended
accordingly. In the event, however, that the principal or client failed to pay
the prescribed increase, the construction/service contractors shall be jointly
and severally liable with the principal or client. (Emphasis and
underscoring supplied.)

As his May 16, 1994 letter to the SSS remained unheeded, petitioner
3
sent another letter, dated June 7, 1994, reiterating the request, which
4
was followed by still another letter, dated June 8, 1994.
On June 24, 1994, petitioner pulled out his agency’s services
from the premises of the SSS and another security agency, Jaguar,
5
took over.

_______________

1 Rollo at pp. 127-133.

2 Id., at pp. 101-103.

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3 Id., at p. 105.
4 Id., at p. 107.
5 Id., at pp. 499, 523.

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Urbanes, Jr. vs. Secretary of Labor and Employment

6
On June 29, 1994, petitioner filed a complaint with the DOLE-NCR
against the SSS seeking the implementation of Wage Order No.
NCR-03.
7
In its position paper, the SSS prayed for the dismissal of the
complaint on the ground that petitioner is not the real party in
interest and has no legal capacity to file the same. In any event, it
argued that if it had any obligation, it was to the security guards. On
8
the other hand, petitioner in his position paper, citing Eagle Security
9
Agency, Inc. v. NLRC, contended that the security guards assigned
to the SSS do not have any legal basis to file a complaint against it
for lack of contractual privity.
Finding for petitioner, the Regional Director of the DOLE-NCR
10
issued an Order of September 16, 1994, the dispositive portion of
which reads, quoted verbatim:

“WHEREFORE, premises considered, the respondent Social Security

System (SSS) is hereby Ordered to pay Complainant the total sum of ONE
MILLION SIX HUNDRED THOUSAND EIGHT HUNDRED FIFTY
EIGHT AND 46/100 (P1,600,858.46) representing the wage differentials
under Wage Order No. NCR-03 of the ONE HUNDRED SIXTY EIGHT
(168) Security Guards of Catalina Security Agency covering the period
from December 16, 1993 to June 24, 1994, inclusive within ten (10) days
from receipt hereof, otherwise a writ of execution shall be issued to enforce
this Order.
The claims for the payment of interest and Attorney’s fees are hereby
ordered dismissed for want of jurisdiction.
SO ORDERED.”

The SSS moved to reconsider the September 16, 1994 Order of the
11
Regional Director,
12
praying that the computation be revised.
By Order of December 9, 1994, the Regional Director modified
his September 16, 1994 Order by reducing the amount payable by

_______________

6 Id., at pp. 109-116.

7 Id., at pp. 172-180.
8 Id., at pp. 118-126.
9 173 SCRA 479 (1989).

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10 Rollo at pp. 234-241.
11 Id., at pp. 243-246.
12 Id., at pp. 299-301.

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668 SUPREME COURT REPORTS ANNOTATED

Urbanes, Jr. vs. Secretary of Labor and Employment

the SSS to petitioner. The dispositive portion of the Regional

Director’s Order of December 9, 1994 reads:

“WHEREFORE, premises considered, the Order of this Office dated

September 16 1994 is hereby modified. Respondent Social Security System
is hereby ordered to pay complainant the amount of ONE MILLION TWO
HUNDRED THIRTY SEVEN THOUSAND SEVEN HUNDRED FORTY
PESOS (P1,237,740.00) representing the wage differentials under Wage
Order No. NCR-03 of the one hundred sixty-eight (168) security guards of
Catalina Security Agency covering the period from December 16, 1993 to
June 20, 1994, inclusive, within ten (10) days from receipt of this Order,
otherwise, execution shall issue.”
13
The SSS appealed to the Secretary of Labor upon the following
assigned errors, quoted verbatim:

A. THE REGIONAL DIRECTOR HAS NO JURISDICTION

OF THE CASE AT BAR.
B. THE HONORABLE REGIONAL DIRECTOR ERRED IN
FINDING THAT COMPLAINANT IS THE REAL PARTY
IN INTEREST AND HAS LEGAL CAPACITY TO FILE
THE CASE.
C. THE HONORABLE REGIONAL DIRECTOR ERRED IN
ADOPTING COMPLAINANT’S COMPUTATION FOR
WAGE ADJUSTMENT UNDER WAGE ORDER NO. 14
NCR-03 AS BASIS OF RESPONDENT’S LIABILITY.
15
The Secretary of Labor, by Order of June 22, 1995, set aside the
order of the Regional Director and remanded the records of the case
“for recomputation of the wage differentials using P5,281.00 as the
basis of the wage adjustment.” And the Secretary held petitioner’s
security agency “JOINTLY AND SEVERALLY liable for wage
differentials, the amount of which should be paid DIRECTLY to the
security guards concerned.”
Petitioner’s Motion for Reconsideration of the DOLE Secretary’s
16
Order of June 22, 1995 having been denied by Order of October
10, 1995, the present petition was filed, petitioner contending that
the DOLE Secretary committed grave abuse of discretion when he:

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_______________

13 Id., at pp. 303-314.

14 Id., at pp. 308-309.
15 Id., at pp. 366-371.
16 Id., at pp. 373-375.

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Urbanes, Jr. vs. Secretary of Labor and Employment

1. . . . TOTALLY IGNORED THE PROVISION OF

ARTICLE 129 OF THE LABOR CODE FOR
PERFECTING AN APPEAL FROM THE DECISION OF
THE REGIONAL DIRECTOR UNDER ARTICLE 129
INVOKED BY RESPONDENT SSS;
2. . . . DISREGARDED THE PROVISION ON APPEALS
FROM THE DECISIONS OR RESOLUTIONS OF THE
REGIONAL DIRECTOR, DOLE, UNDER ARTICLE 129
OF THE LABOR CODE, AS AMENDED BY REPUBLIC
ACT NO. 6715;
3. . . . TOTALLY OVERLOOKED THE LAW AND
PREVAILING JURISPRUDENCE WHEN 17
IT ACTED ON
THE APPEAL OF RESPONDENT SSS.

Petitioner asserts that the Secretary of Labor does not have

jurisdiction to review appeals from decisions of the Regional
Directors in complaints filed under Article 129 of the Labor
18
Code which provides:

ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND

OTHER BENEFITS.—Upon complaint of any interested party, the regional
director of the Department of Labor and Employment or any duly
authorized hearing officers of the Department is empowered, through
summary proceeding and after due notice, to hear and decide any matter
involving the recovery of wages and other monetary claims and benefits,
including legal interest, owing to an employee or person employed in
domestic or household service or househelper under this Code, arising from
employer-employee relations: Provided, That such complaint does not
include a claim for reinstatement; Provided, further, That the aggregate
money claim of each employee or househelper does not exceed Five
Thousand pesos (P5,000.00). The regional director or hearing officer shall
decide or resolve the complaint within thirty (30) calendar days from the
date of the filing of the same. Any sum thus recovered on behalf of any
employee or househelper pursuant to this Article shall be held in a special
deposit account by, and shall be paid on order of, the Secretary of Labor and
Employment or the regional director directly to the employee or

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househelper concerned. Any such sum not paid to the employee or house-
helper, because he cannot be located after diligent and reasonable effort to
locate him within a period of three (3) years, shall be held as a special fund
of the Department of Labor and Employment to be used exclusively for the
amelioration and benefit of workers.

_______________

17 Id., at p. 14.
18 Id., at p. 510.

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670 SUPREME COURT REPORTS ANNOTATED

Urbanes, Jr. vs. Secretary of Labor and Employment

Any decision or resolution of the regional director or officer pursuant to this

provision may be appealed on the same grounds provided in Article 223 of
this Code, within five (5) calendar days from receipt of a copy of said
decision or resolution, to the National Labor Relations Commission which
shall resolve the appeal within ten (10) calendar days from submission of
the last pleading required or allowed under its rules.
x x x (Emphasis supplied).

Petitioner thus contends that as the appeal of SSS was filed with the
19
wrong forum, it should have been dismissed.
The SSS, on the other hand, contends that Article. 128, not
Article 129, is applicable to the case. Article 128 provides:

ART. 128. VISITORIAL AND ENFORCEMENT POWERS.—

xxx
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code
to the contrary, and in cases where the relationship of employer-employee
still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of
inspection.
xxx
An order issued by the duly authorized representative of the Secretary of
Labor and Employment under this article may be appealed to the latter.
x x x (Emphasis supplied).

Neither the petitioner’s contention nor the SSS’s is impressed with

merit. Lapanday Agricultural Development Corporation v. Court of
20
Appeals instructs so. In that case, the security agency filed a
complaint before the Regional Trial Court (RTC) against the
principal or client Lapanday for the upward adjustment of the
contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday
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argued that it is the National Labor Relations Commission, not the

civil courts, which has jurisdiction to resolve the issue in the case, it
involving the enforcement of wage adjustment and other benefits
due the agency’s security guards as mandated by several

_______________

19 Id., at p. 17.
20 324 SCRA 39 (2000), citing Manliquez v. Court of Appeals, 232 SCRA 427
(1994) and Dai-Chi Electronics Manufacturing Corp. v. Villarama, Jr., 238 SCRA
267 (1994).

671

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Urbanes, Jr. vs. Secretary of Labor and Employment

wage orders. Holding that the RTC has jurisdiction over the
controversy, this Court ruled:

We agree with the respondent that the RTC has jurisdiction over the subject
matter of the present case. It is well settled in law and jurisprudence that
where no employer-employee relationship exists between the parties and no
issue is involved; which may be resolved by reference to the Labor Code,
other labor statutes or any collective bargaining agreement, it is the
Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks
payment of a sum of money and damages on account of petitioner’s alleged
breach of its obligation under their Guard Service Contract. The action is
within the realm of civil law hence jurisdiction over the case belongs to the
regular courts. While the resolution of the issue involves the application of
labor laws, reference to the labor code was only for the determination of the
solidary liability of the petitioner to the respondent where no
21
employeremployee relation exists.
x x x (Emphasis and underscoring supplied).

In the case at bar, even if petitioner filed the complaint on his and
22
also on behalf of the security guards, the relief sought has to do
with the enforcement of the contract between him and the SSS
which was deemed amended by virtue of Wage Order No. NCR-03.
The controversy subject of the case at bar is thus a civil dispute, the
proper forum for the resolution of which is the civil courts.
But even assuming arguendo that petitioner’s complaint were
filed with the proper forum, for lack of cause of action it must be
dismissed.
Articles 106, 107 and 109 of the Labor Code provide:

ART. 106. CONTRACTOR OR SUBCONTRACTOR.—Whenever an

employer enters into contract with another person for the performance of the
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former’s work, the employees of the contractor and of the latter’s

subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to pay the wage of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.

_______________

21 Ibid.
22 Rollo at p. 114.

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Urbanes, Jr. vs. Secretary of Labor and Employment

x x x (Emphasis and underscoring supplied)

ART. 107. INDIRECT EMPLOYER.—The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work,
task, job or project.
ART. 109. SOLIDARY LIABILITY.—The provisions of existing laws to
the contrary notwithstanding, every employer or indirect employer shall be
held responsible with his contractor or subcontractor for any violation of
any provision of this Code. For purposes of determining the extent of their
civil liability under this Chapter, they shall be considered as direct
employers. (Emphasis supplied.)
23
In the case of Eagle Security Agency, Inc. v. NLRC, this Court held:

The Wage Orders are explicit that payment of the increases are “to be
borne” by the principal or client. “To be borne,” however, does not mean
that the principal, PTSI in this case, would directly pay the security guards
the wage and allowance increases because there is no privity of contract
between them. The security guards’ contractual relationship is with their
immediate employer, EAGLE. As an employer, EAGLE is tasked, among
others, with the payment of their wages [See Article VII Sec. 3 of the
Contract for Security Services, supra and Bautista v. Inciong, G.R. No.
52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI
and EAGLE wherein the former availed of the security services provided by
the latter. In return, the security agency collects from its client payment for
its security services. This payment covers the wages for the security guards
and also expenses for their supervision and training, the guards’ bonds,

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firearms with ammunitions, uniforms and other equipments, accessories,

tools, materials and supplies necessary for the maintenance of a security
force.
Premises considered, the security guards’ immediate recourse for the
payment of the increases is with their direct employer, EAGLE. However, in
order for the security agency to comply with the new wage and allowance
rates it has to pay the security guards, the Wage Orders made specific
provision to amend existing contracts for security services by allowing the
adjustment of the consideration paid by the principal to the security agency
concerned. What the Wage Orders require, therefore, is the amendment of
the contract as to the consideration to cover the service

_______________

23 Supra.

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Urbanes, Jr. vs. Secretary of Labor and Employment

contractor’s payment of the increases mandated. In the end, therefore,

ultimate liability for the payment of the increases rests with the principal.
In view of the foregoing, the security guards should claim the amount of
the increases from EAGLE. Under the Labor Code, in case the agency fails
to pay them the amounts claimed, PTSI should b e held solidarity liable with
EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an
adjustment from PTSI for an increase in consideration to cover the
increases payable to the security guards.
x x x (Emphasis and underscoring supplied).

Passing on the foregoing disquisition in Eagle, this Court, in

24
Lapanday, held:

It is clear also from the foregoing that it is only when [the] contractor pays
the increases mandated that it can claim an adjustment from the principal to
cover the increases payable to the security guards. The conclusion that the
right of the contractor (as principal debtor) to recover from the principal
(as solidary co-debtor) arises only if he has paid the amounts for which both
of them are jointly and severally liable is in line with Article 1217 of the
Civil Code which provides:

“Art. 1217. Payment made by one the solidary debtors extinguishes the obligation. If
two or more solidary debtors offer to pay, the creditor may choose which offer to
accept.
He who made payment make claim from his co-debtors only the share which
corresponds to each, with interest for the payment already made. If the payment is
made before the debt is due, no interest for the intervening period may be demanded.
25
x x x” (Emphasis and italics supplied).

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In fine, the liability of the SSS to reimburse petitioner arises only if

and when petitioner pays his employee-security guards “the
increases” mandated by Wage Order No. NCR-03.
The records do not show that petitioner has paid the mandated
increases to the security
26
guards. The security guards in fact have
filed a complaint with the NLRC against petitioner relative to,
among other things, underpayment of wages.

_______________

24 Supra.
25 Id., at p. 50.
26 Records at pp. 389-397.

674

674 SUPREME COURT REPORTS ANNOTATED

People vs. Lapitaje

WHEREFORE, the present petition is hereby DISMISSED, and

petitioner’s complaint before the Regional Director is dismissed for
lack of jurisdiction and cause of action.
SO ORDERED.

          Puno (Chairman), Panganiban, Sandoval-Gutierrez and

Corona, JJ., concur.

Petition dismissed.

Note.—The existence of an employer-employee relationship

brings the case within the coverage of the Labor Code. (Equitable
Banking Corporation vs. NLRC, 273 SCRA 352 [1997])

——o0o——

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