G.R. No. 103606 . October 13, 1999.
RELIGIOUS OF THE VIRGIN MARY, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION, COLEGIO DE SAN PASCUAL BAYLON (Girls’ Department), AUREA EVANGELISTA, et al., respondents.

FACTS

Private respondent Colegio de San Pascual Baylon (CDSPB) is a religious educational institution owned by the Diocese of Malolos, Bulacan, operating two high school departments. On July 18, 1983, CDSPB, represented by the Bishop of Malolos, entered into a 10-year Agreement with petitioner Religious of the Virgin Mary (RVM), a religious congregation. Under the Agreement, RVM was designated to “run, administer and operate” the Girls’ Department of CDSPB. The Agreement stipulated that RVM would undertake, at its sole responsibility and expense, the administration, management, and operation of the Girls’ Department, including providing qualified sisters and teachers, paying all salaries and benefits, and bearing all operating expenses. RVM would also receive whatever net profit from the operation. The parish priest remained the Director of the entire institution. Pursuant to this Agreement, petitioner RVM hired teachers and administrative personnel for the Girls’ Department under pro forma appointment papers signed by an RVM principal. RVM received all income from the department and paid all its expenses. On April 10, 1987, the Bishop of Malolos terminated the Agreement. The teachers and employees of the Girls’ Department filed a complaint for unpaid salaries for May 1987 against both RVM and CDSPB before the Labor Arbiter. The Labor Arbiter ruled in favor of the employees, holding RVM and CDSPB jointly and severally liable. The National Labor Relations Commission affirmed this decision. RVM filed the present petition for certiorari.

ISSUE

The principal issue is who, between petitioner RVM and respondent CDSPB, is the employer of the private respondent teachers and employees for purposes of liability for their unpaid salaries for May 1987.

RULING

The Supreme Court GRANTED the petition and SET ASIDE the decision of the NLRC. The Court ruled that petitioner RVM was not the employer of the private respondents; the employer was respondent Colegio de San Pascual Baylon (CDSPB).
The Court held that the Agreement between CDSPB and RVM constituted an agency, not a lease. CDSPB (the Bishop) was the principal and RVM was the agent. The terms of the Agreement showed that RVM was appointed and designated to run, administer, and operate the school on behalf of CDSPB. The school’s ownership, including the land and buildings, remained with CDSPB. The parish priest, a representative of CDSPB, remained the Director. The power to terminate the Agreement was vested in the Bishop (CDSPB). These indicia pointed to an agency relationship where the agent (RVM) acted in the name and for the benefit of the principal (CDSPB).
Consequently, the teachers and employees, although hired by RVM, were actually employees of CDSPB. The appointment papers, while signed by an RVM principal, were for employment in “Colegio de San Pascual Baylon.” As an agent, RVM acted on behalf of CDSPB, and the legal effects of its acts, including hiring, bound the principal. The fact that RVM paid the salaries from the school’s income did not make it the employer; it was merely fulfilling its obligation under the agency agreement to manage operations. Upon termination of the agency, the obligation to pay the employees’ salaries fell upon the principal, CDSPB. The Court thus ordered CDSPB to pay the private respondents their salaries for May 1987, amounting to P67,139.84, plus attorney’s fees.