REPUBLIC OF THE PHILIPPINES (PHILIPPINE AIR FORCE), PETITIONER, VS. THE WORKMEN’S COMPENSATION COMMISSION, AND NAZARIO BAUTISTA, RESPONDENTS.

Republic of the Philippines versus Workmen's Compensation Commission

The Case

This is an appeal by the Republic of the Philippines, acting through the Philippine Air Force, from a decision of the Workmen's Compensation Commission awarding compensation to Nazario Bautista, a mason injured inside Nichols Air Base. The Air Force insists it was never Bautista's employer, pointing to the independent contractor who hired him. The case matters because it fixes the statutory meaning of employer under the Workmen's Compensation Act — an owner or manager of a workplace is liable as statutory employer even without a direct employment relation — and because it shows how equity treats a quitclaim and a voluntary payment once the claimant insists on his strict legal rights.

Procedural History

Nazario Bautista filed a claim for compensation with the Department of Labor. After hearing, the regional office hearing officer, Regino Veridiano II, rendered a decision in favor of the claimant. The Workmen's Compensation Commission, through Commissioner Cesario Perez, affirmed that decision with some modification, and on a motion for reconsideration the Commission affirmed it in banc. Still dissatisfied, the Philippine Air Force filed a petition for review before the Supreme Court, arguing in the main that it had no employer-employee relationship with Bautista and that the independent contractor, Carlos Pineda, was his employer.

Facts

On 15 January 1959, the Philippine Air Force, represented by its Base Installation Engineer, Major Francisco C. Millena, contracted with Carlos Pineda for 2,000 pesos, for Pineda to furnish labor and equipment and construct complete, except electrical, the Men's and Ladies Toilet of the Base Theatre at Nichols Air Base in Pasay City. The agreement required completion within sixty days, exclusive of Sundays and holidays, allowed extensions for inclement weather or unforeseen circumstances, fixed liquidated damages of 10 pesos for each day of delay, and provided for payment with a ten percent retention until sixty days after completion. Carlos Pineda recruited Nazario Bautista as one of his laborers. Bautista had worked as a mason at an average weekly wage of 36 pesos since 1958 in several Air Force projects.

On 24 February 1959, immediately after alighting from a jeepney at the corner of Sales and Gozar Streets inside the base, Bautista was bumped from behind by a baby tractor owned by the Philippine Air Force and driven by one of its prisoners. He suffered fractures in his lower extremities, was given first-aid at the military dispensary, and was brought to the National Orthopedic Hospital. His attending physician evaluated his injuries at 63 percent permanent partial disability of the left leg and 26 percent of the right leg.

The Philippine Air Force conducted two benefit shows and turned over the proceeds, 900 pesos, through a certain Captain Valdemor, to the injured worker as a gesture of sympathy. On 5 March 1959, Bautista signed a notarized deed releasing the Philippine Air Force and all persons and entities from all claims and demands resulting from the accident. Notwithstanding the sum received and the quitclaim, he filed his claim for compensation.

Issues

• Whether or not the Philippine Air Force is the employer of Nazario Bautista within the meaning of the Workmen's Compensation Act, despite the intervening independent contractor.
• Whether or not the Philippine Air Force or the Solicitor General had the right to controvert the laborer's claim, and whether either validly controverted it.
• Whether or not the 900 pesos voluntarily given to Bautista should be deducted from the compensation awarded to him.

Applicable Provisions

Section 39(a) of the Workmen's Compensation Act defines the term employer:

"Employer" includes every person or association of persons, incorporated or not, public or private, and the legal representative of the deceased employer. It includes the owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or manager of the business carried on in the establishment or place of work but who, for the reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there.

This is the provision on which the entire liability of the Philippine Air Force rests, making the owner or manager a statutory employer despite the presence of an independent contractor.

Ruling

On the first issue, the Court agreed with the Commission that the Philippine Air Force is the employer of Bautista under Section 39(a). The Air Force was organized, trained, and equipped primarily for prompt and sustained combat operations in the air, and to carry out that function it must provide facilities such as baths and toilets to keep its personnel under proper and healthful conditions. While constructing these facilities is not its function or business, their existence is necessarily tied up with the exercise of its broad primary function. Moreover, the conduct of Bautista and Pineda, along with everybody else while on base, was subject to military restrictions or control because the whole base is under the charge of the base commander. Even if it is not the direct employer, the Air Force, as virtual owner or manager of the construction job where Bautista was working at the time of the accident, is his statutory employer and liable for the compensation.

On the second issue, the Court held that the question of which party may controvert the claim is a question between the Air Force and the Solicitor General inter se, and its resolution does not affect the claimant's rights. In any event, neither complied with the requirements for a valid controversion: the Air Force, which knew of the accident on the day it occurred, controverted the claim only on 11 August 1959, much beyond the period prescribed in Section 24 of the Act, while the Solicitor General failed to file an employer's report as required by Section 45. Any report by the latter would also be essentially hearsay, without actual knowledge of the facts.

On the third issue, the Court held that the 900 pesos should be deducted from the award. The Air Force never agreed to liability, believing bona fide that it was not the employer, but for humanitarian reasons and without solicitation by Bautista it raised funds through benefit shows; in tendering the money it had reservations embodied in the deed of release, which Bautista accepted and signed. Since Bautista relies on his strictly legal rights, he is entitled only to the corresponding legal compensation and no more. It is morally certain that the Air Force would not have paid the 900 pesos independently of the legal compensation had it realized it would be liable, so it would be unjust if the hand of equity should not relieve the Air Force from abuse of its generosity.

Doctrine

Under Section 39(a) of the Workmen's Compensation Act, the term employer includes the owner or lessee of a factory, establishment, or place of work, or any person who is virtually the owner or manager of the business carried on there, even if, because an independent contractor is present or for any other reason, he is not the direct employer of the laborers employed there. Such a person is a statutory employer and is liable for compensation. A public entity may be such a statutory employer where the work is necessarily tied up with its primary function and the workplace is under its control. Failure to controvert the claim within the period fixed by Section 24, and failure to file the employer's report required by Section 45, bar the employer from contesting liability. Finally, a voluntary payment made for humanitarian reasons, with reservations, may be deducted from the compensation award when the claimant insists on his strict legal rights.

Disposition

The Supreme Court affirmed the decision under review, with the modification that the 900 pesos previously paid should be deducted from the compensation award, without costs.

Remember This

Memorize the rule that the owner or manager of the workplace is a statutory employer under Section 39(a) even when an independent contractor stands between him and the laborer. Examiners use this case to test statutory employer liability, the effect of a late controversion, and the deductibility of voluntary payments from a compensation award.