Mano, Razna I.

Dear Sugarlandia Distribution Corporation (SDC),

This legal opinion seeks to answer your question if you can be held liable for the case filed by the workers against you for illegal dismissal after their employment was terminated by the farmowners without just cause.

Per our discussion and the documents you have shown me, you have stated that you entered into a contract of Supply Agreement with the farmowners under which the latter will provide you with certain amounts of high grade sugars in exchange for your commitment to provide them with financial and technical assistance. Then, the farmowners will be the one who will provide for the hiring and paying of the workers and their equipment will be used to grow and harvest the sugar. However, the farmowners began to have problems with their workers which prompted them to terminate the employment of the latter without just cause.

I am confident to say that there is sufficient ground to conclude that you cannot be held liable for illegal dismissal filed by the workers of the farmowners.

To repeat, you entered into a contract of Supply Agreement with the farmowners for the supply of high grade sugars and in turn, you will provide them with financial and technical assistance. To make the supply of high grade sugars easier and faster, the farmowners hired the workers. Consequently, problems arose as regards the farmowners and workers which led to the termination of employment of the workers.

The workers may contend that they were hired by the farmowners pursuant to the contract entered into between you and the farmowners. They may claim that they were the one who grew and harvested the high grade sugars; hence, they can file a case against you for illegal dismissal. However, I believe that the argument of the workers is untenable because the workers are not parties to the contract you entered with the farmowners. The workers may prove that they are parties to the contract of Supply Agreement to satisfy conviction for illegal dismissal. If they can prove that they were parties to the Supply Agreement, the applicable provision will be Article 1308 of the Civil Code which provides, “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them”.1 This means that once the contract is perfected, it must bind both parties. In the case of the workers, they may argue that terminating their employment without just cause cannot be left to the will of the employer because they have a binding and perfected contract. On the other hand, you may prove that the workers are not parties to the Supply Agreement by showing pertinent documents and papers. You may prove that there is no employer-employee relationship between you and the workers.

To answer the legal problem, you cannot be held liable for illegal dismissal filed by the workers. This is because you did not enter into an employment contract with the workers. The farmowners and the workers are the parties to the employment contract. In the case of Integrated Packaging Corp. v. Court of Appeals, it was provided that the third party cannot be held liable under the contracts entered into by the real parties to the contract.2 In your case, you are not a party to the employment contract. The law says under Article 1311 of the Civil Code of the Philippines, “Contracts take effect only between the parties, their assigns and heirs”.3 This means that the charge filed by the workers is unsustainable because you

1 Article 1308, Civil Code of the Philippines2 Integrated Packaging Corp. v. Court of Appeals, G.R. No. 116227, June 8, 20003 Article 1311, Civil Code of the Philippines

are not a party to the employment contract. Aforementioned employment contract could not affect third persons like you because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, 4 even if he is aware of such contract and has acted with knowledge thereof.5 Even if you have knowledge or not of the employment contract entered into between the farmowners and the workers, you cannot be held liable for the illegal dismissal case because you are not the one who entered into the employment contract.

In the case of Sy v. Court of Appeals, it was ruled that before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship existed between petitioner and respondent.6 The factors that determine if there is employer-employee relationship include who has the power to select the employee, who pays the employee’s wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is accomplished.7 All these factors are not present in your case because based from the facts you provided, you did not take part in the employment contract between the farmowners and the workers. The farmowners were the one in charge for the employment of the workers, hence, the employer-employee relationship existed only between the farmowners and the workers.

Based on the foregoing facts and cases, it is clear that no employer-employee relationship existed between you and the workers. The workers could not seek refuge behind the Supply Agreement entered into between you and the farmowners. It was not provided in the aforesaid contract that you will hire the workers to make the supply of sugars. It is the farmowners who will be liable for the hiring and paying of the workers. The law says under Article 1370 of the Civil Code of the Philippines, “If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control”.8 This means that the literal or ordinary meaning of the Supply Agreement will prevail and that is, no employer-employee relationship existed between you and the workers.

As to what will be your proper action, we have already established that no employer-employee relationship existed between you and the workers. Thus, I am of the considered opinion that the illegal dismissal case filed against you will most likely be dismissed. I recommend that we should file a Motion to Dismiss the case under Section 1(g), Rule 16 of the Rules of Court on the ground that the pleading asserting the claim states no cause of action.9

I appreciate the opportunity to advise you regarding this matter. Please let me know if you wish to discuss any of these issues further. Thank you.

Kind regards,

Atty. Razna Mano

4 Ramos v. Court of Appeals, G.R. No. 1110227, February 3, 19995 Tolentino IV Civil Code of the Philippines, p. 428 (1985)6 Sy v. Court of Appeals, G.R. No. 142293, February 27, 20037 Leonardo v. Court of Appeals, G.R. No. 152459, June 15, 20068 Article 1370, Civil Code of the Philippines9 Section 1(g), Rule 16, Revised Rules of Court