Facts:

Sunace (a corporation) deployed to Taiwan Divina as a domestic helper

under a 12-month contract. 1 The deployment was with the assistance of a
Taiwanese broker, Edmund Wang. After the contract expired, Divina
continued working for her Taiwanese employer, Hang Rui Xiong, for two
more years.

After her return or on February 14, 2000, Divina filed a complaint2 before
NLRC against Sunace, one Adelaide Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and
that she was underpaid. She claimed that under her original one-year
contract and the 2-year extended contract which was with the knowledge
and consent of Sunace, amounts (deduction for savings) were deducted in
1998 and 1999 were not refunded. Sunace countered that she is not entitled
to refund of her 24 months savings as she already took back her saving
already last year and the employer did not deduct any money from her
salary. Also, Sunace claimed that that Divina’s 2-year extension of her
contract was without its knowledge and consent, hence, it had no liability
attaching to any claim arising therefrom.

LA, however, rejected the claim since Wang and Sunace are communicating
with one another. LA decided in favor of Divina. NLRC affirmed the decision.

Likewise, CA dismissed the petition of Sunace. It opined that Sunace

impliedly consented to the extension of the contract of private
respondent Divina as it was continually communicating with private
respondent’s foreign employer (sic). As agent of the foreign principal,
"petitioner cannot profess ignorance of such extension as obviously, the act
of the principal extending complainant (sic) employment contract necessarily
bound it.

Hence, the petition for certiorari before the Court.

Issue:
Whether Sunace can be held liable to the claim of Divina.
Ruling:
No. The Court reversed and set aside the decision of CA.
The Court adduced that the letter communication was just an information
given to the petitioner that the private respondent had t[aken] already her
savings from her foreign employer and that no deduction was made on her
salary. It contains nothing about the extension or the petitioner’s consent
thereto.
No need to recite this, for your reference only 😊
The letter reads:

Regarding to Divina, she did not say anything about her saving in
police station. As we contact with her employer, she took back
her saving already last years. And they did not deduct any
money from her salary. Or she will call back her employer to
check it again. If her employer said yes! we will get it back for
her.

Thank you and best regards.

(Sgd.)
Edmund Wang

The Court also said that CA misapplied the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent,
Sunace, to the principal, employer Xiong, not the other way
around.23 The knowledge of the principal-foreign employer cannot,
therefore, be imputed to its agent Sunace. There being no substantial
proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As
such, it and its "owner" cannot be held solidarily liable for any of Divina’s
claims arising from the 2-year employment extension. As provided in NCC,
contracts take effect only between the parties xxx.

Lastly, the Court agreed to Sunace that there was an implied

revocation of its agency relationship with its foreign principal when,
after the termination of the original employment contract, the
foreign principal directly negotiated with Divina and entered into a
new and separate employment contract in Taiwan. As cited in NCC, the
agency is revoked if the principal directly manages the business entrusted to
the agent, dealing directly with third persons.
 THIRD DIVISION

G.R. No. 161757             January 25, 2006

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON.
ERNESTO S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR,
Arbitration Branch, Quezon City and DIVINA A.
MONTEHERMOZO, Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner, Sunace International Management Services (Sunace), a

corporation duly organized and existing under the laws of the Philippines,
deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper
under a 12-month contract effective February 1, 1997. 1 The deployment was
with the assistance of a Taiwanese broker, Edmund Wang, President of Jet
Crown International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued

working for her Taiwanese employer, Hang Rui Xiong, for two more years,
after which she returned to the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a
complaint2 before the National Labor Relations Commission (NLRC) against
Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-
foreign principal alleging that she was jailed for three months and that she
was underpaid.

The following day or on February 15, 2000, Labor Arbitration Associate

Regina T. Gavin issued Summons3 to the Manager of Sunace, furnishing it
with a copy of Divina’s complaint and directing it to appear for mandatory
conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been
concluded, however.

On April 6, 2000, Divina filed her Position Paper 4 claiming that under her
original one-year contract and the 2-year extended contract which was with
the knowledge and consent of Sunace, the following amounts representing
income tax and savings were deducted:

Year Deduction for Income Tax Deduction for Savings

1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5

and while the amounts deducted in 1997 were refunded to her, those
deducted in 1998 and 1999 were not. On even date, Sunace, by its
Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer and
Position Paper,6 claiming as follows, quoted verbatim:

COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24

MONTHS SAVINGS

3. Complainant could not anymore claim nor entitled for the refund of her 24
months savings as she already took back her saving already last year and
the employer did not deduct any money from her salary, in accordance with
a Fascimile Message from the respondent SUNACE’s employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached
as ANNEX "2" hereof;

COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS

TAX AND PAYMENT OF ATTORNEY’S FEES

4. There is no basis for the grant of tax refund to the complainant as the she
finished her one year contract and hence, was not illegally dismissed by
her employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorney’s fees as said reliefs are available only
when the dismissal of a migrant worker is without just valid or lawful cause
as defined by law or contract.

The rationales behind the award of tax refund and payment of attorney’s
fees is not to enrich the complainant but to compensate him for actual injury
suffered. Complainant did not suffer injury, hence, does not deserve to be
compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE
for monetary claims, considering that she has been totally paid of all the
monetary benefits due her under her Employment Contract  to her full
satisfaction.

6. Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant
has to obey and this Honorable Office has no authority/jurisdiction to
intervene because the power to tax is a sovereign power which the
Taiwanese Government is supreme in its own territory. The sovereign power
of taxation of a state is recognized under international law and among
sovereign states.

7. That respondent SUNACE respectfully reserves the right to file

supplemental Verified Answer and/or Position Paper to substantiate its
prayer for the dismissal of the above case against the herein respondent.
AND BY WAY OF -

x x x x (Emphasis and underscoring supplied)

Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . .
answer to complainant’s position paper"7 alleging that Divina’s 2-year
extension of her contract was without its knowledge and consent, hence, it
had no liability attaching to any claim arising therefrom, and Divina in fact
executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit
of Desistance, copy of each document was annexed to said ". . . answer to
complainant’s position paper."

To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-

page reply,8 without, however, refuting Sunace’s disclaimer of knowledge of
the extension of her contract and without saying anything about the Release,
Waiver and Quitclaim and Affidavit of Desistance.

The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s
contract for two more years was without its knowledge and consent in this
wise:

We reject Sunace’s submission that it should not be held responsible for the
amount withheld because her contract was extended for 2 more years
without its knowledge and consent because as Annex "B"9 shows, Sunace
and Edmund Wang have not stopped communicating with each other  and yet
the matter of the contract’s extension and Sunace’s alleged non-consent
thereto has not been categorically established.
What Sunace should have done was to write to POEA about the extension
and its objection thereto, copy furnished the complainant herself, her foreign
employer, Hang Rui Xiong and the Taiwanese broker, Edmund Wang.

And because it did not, it is presumed to have consented to the extension

and should be liable for anything that resulted thereform
(sic).10 (Underscoring supplied)

The Labor Arbiter rejected too Sunace’s argument that it is not liable on
account of Divina’s execution of a Waiver and Quitclaim and an Affidavit of
Desistance. Observed the Labor Arbiter:

Should the parties arrive at any agreement as to the whole or any part of
the dispute, the same shall be reduced to writing and signed by the parties
and their respective counsel (sic), if any, before the Labor Arbiter.

The settlement shall be approved by the Labor Arbiter after being satisfied
that it was voluntarily entered into by the parties and after having explained
to them the terms and consequences thereof.

A compromise agreement entered into by the parties not in the presence of

the Labor Arbiter before whom the case is pending shall be approved by him,
if after confronting the parties, particularly the complainants, he is satisfied
that they understand the terms and conditions of the settlement and that it
was entered into freely voluntarily (sic) by them and the agreement is not
contrary to law, morals, and public policy.

And because no consideration is indicated in the documents, we strike them

down as contrary to law, morals, and public policy.11

He accordingly decided in favor of Divina, by decision of October 9,

2000,12 the dispositive portion of which reads:

Wherefore, judgment is hereby rendered ordering respondents SUNACE

INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in their
personal capacities and as agent of Hang Rui Xiong/Edmund Wang  to jointly
and severally pay complainant DIVINA A. MONTEHERMOZO the sum of
NT91,950.00 in its peso equivalent at the date of payment, as refund for the
amounts which she is hereby adjudged entitled to as earlier discussed plus
10% thereof as attorney’s fees since compelled to litigate, complainant had
to engage the services of counsel.

SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002, 14 affirmed
the Labor Arbiter’s decision.

Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002,16 the full
text of which reads:

The petition for certiorari faces outright dismissal.

The petition failed to allege facts constitutive of grave abuse of discretion on

the part of the public respondent amounting to lack of jurisdiction when the
NLRC affirmed the Labor Arbiter’s finding that petitioner Sunace
International Management Services impliedly consented to the extension of
the contract of private respondent Divina A. Montehermozo. It is undisputed
that petitioner was continually communicating with private respondent’s
foreign employer (sic). As agent of the foreign principal, "petitioner cannot
profess ignorance of such extension as obviously,  the act of the principal
extending complainant (sic) employment contract necessarily bound
it." Grave abuse of discretion is not present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE

COURSE and DISMISSED.17

SO ORDERED.

(Emphasis on words in capital letters in the original; emphasis on words in

small letters and underscoring supplied)

Its Motion for Reconsideration having been denied by the appellate court by
Resolution of January 14, 2004,18 Sunace filed the present petition for review
on certiorari.

The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that
Sunace knew of and impliedly consented to the extension of Divina’s 2-year
contract. It went on to state that "It is undisputed that [Sunace] was
continually communicating with [Divina’s] foreign employer." It thus
concluded that "[a]s agent of the foreign principal, ‘petitioner cannot profess
ignorance of such extension as obviously, the act of the principal extending
complainant (sic) employment contract necessarily bound it.’"

Contrary to the Court of Appeals finding, the alleged continuous

communication was with the Taiwanese broker Wang, not with the foreign
employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to
Sunace, the only basis of a finding of continuous communication,
reads verbatim:

xxxx

Regarding to Divina, she did not say anything about her saving in
police station. As we contact with her employer, she took back her
saving already last years. And they did not deduct any money from
her salary. Or she will call back her employer to check it again. If her
employer said yes! we will get it back for her.

Thank you and best regards.

(Sgd.)
Edmund Wang
President19

The finding of the Court of Appeals solely on the basis of the above-quoted

telefax message, that Sunace continually communicated with the foreign
"principal" (sic) and therefore was aware of and had consented to the
execution of the extension of the contract is misplaced. The message does
not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That
Sunace and the Taiwanese broker communicated regarding Divina’s
allegedly withheld savings does not necessarily mean that Sunace ratified
the extension of the contract. As Sunace points out in its Reply20 filed before
the Court of Appeals,

As can be seen from that letter communication, it was just an information

given to the petitioner that the private respondent had t[aken] already her
savings from her foreign employer and that no deduction was made on her
salary. It contains nothing about the extension or the petitioner’s consent
thereto.21

Parenthetically, since the telefax message is dated February 21, 2000, it is

safe to assume that it was sent to enlighten Sunace who had been directed,
by Summons issued on February 15, 2000, to appear on February 28, 2000
for a mandatory conference following Divina’s filing of the complaint on
February 14, 2000.

Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess ignorance of such
an extension as obviously, the act of its principal extending [Divina’s]
employment contract necessarily bound it,22

it too is a misapplication, a misapplication of the theory of imputed

knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent,

Sunace, to the principal, employer Xiong, not the other way around.23 The
knowledge of the principal-foreign employer cannot, therefore, be imputed
to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be

bound under the 2-year employment contract extension, it cannot be said to
be privy thereto. As such, it and its "owner" cannot be held solidarily liable
for any of Divina’s claims arising from the 2-year employment extension. As
the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs,
except in case where the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by provision of law. 24

Furthermore, as Sunace correctly points out, there was an implied

revocation of its agency relationship with its foreign principal when, after the
termination of the original employment contract, the foreign principal
directly negotiated with Divina and entered into a new and separate
employment contract in Taiwan. Article 1924 of the New Civil Code reading

The agency is revoked if the principal directly manages the business

entrusted to the agent, dealing directly with third persons.

thus applies.

In light of the foregoing discussions, consideration of the validity of the

Waiver and Affidavit of Desistance which Divina executed in favor of Sunace
is rendered unnecessary.

WHEREFORE, the petition is GRANTED. The challenged resolutions of the

Court of Appeals are hereby REVERSED and SET ASIDE. The complaint of
respondent Divina A. Montehermozo against petitioner is DISMISSED.

SO ORDERED.
 CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO DANTE O. TINGA

Associate Justice Asscociate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in

consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division

Chairman’s Attestation, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
1
 NLRC records, p. 18.
2
 Id. at 2.
3
 Id. at 5.
4
 Id. at 21-26.
5
 Id. at 52.
6
 Id. at 13-19.
7
 Id. at 28-34.
8
 Id. at 36-37.
9
 Photocopy of a telefax message of Taiwanese broker Wang to
Sunace, NLRC records, p. 26.
10
 NLRC records, pp. 55-56.
11
 Id. at 56-57 (citations omitted).
12
 Id. at 51-58.
13
 Id. at 57-58.
14
 Id. at 190-196.
15
 CA rollo, pp. 2-113.
16
 Penned by Associate Justice Ruben T. Reyes with Associate Justices
Remedios Salazar-Fernando and Edgardo F. Sundiam, concurring.
17
 CA rollo, pp. 115-116 (citations omitted).
18
 Id. at 154-157.
19
 Supra note 9.
20
 CA rollo, pp. 146-152.
21
 Id. at 148.
22
 Id. at 29, 116 and 157.
23
 Rovels Enterprises, Inc. v. Ocampo, G.R. No. 136821, October 17,
2002, 391 SCRA 176; vide Air France v. Court of Appeals, et al., 211
Phil. 601 (1983).
24
 Civil Code, Article 1311.