G.R. No. 176169 - Nasi-Villar vs. People

The dispute involves the petitioner National Food Authority (NFA) and its Regional Director, Juanito M. David, versus the respondent MASADA Security Agency, Inc., represented by its Acting President & General Manager, Col. Edwin S. Espejo (Ret.).
MASADA Security Agency, Inc. entered into a one-year contract on September 17, 1996, to provide security services to various NFA offices, warehouses, and installations within Region I (covering Pangasinan, La Union, Abra, Ilocos Sur, and Ilocos Norte).
Upon the expiration of the initial contract, the parties extended its effectivity on a monthly basis under the same terms and conditions.

During the contract period, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage rate of security guards.
In view of these wage orders, MASADA Security Agency requested that NFA adjust the monthly contract rate to reflect not only the increase in the daily minimum wage but also correspondingly adjust wage-related benefits such as overtime pay, holiday pay, 13th month pay, rest day pay, SSS and Pag-ibig contributions, as well as administrative costs and contractor’s margin.
NFA approved the adjustment solely on the basis of the daily wage increase (computed by multiplying the mandated increase by 30 days), while it denied any adjustment for the ancillary wage-related benefits.

MASADA Security Agency pursued legal relief by filing a complaint before the Regional Trial Court of Quezon City, Branch 83 (Civil Case No. Q-01-43988), seeking recovery of amounts purportedly paid for wage-related benefits and the additional costs and margin.
At the pre-trial stage, the central issue raised was whether MASADA was entitled to recover from NFA the wage-related benefits of its security guards under the wage orders.
The trial court rendered a decision in favor of MASADA Security Agency on September 19, 2002, holding that NFA was liable to adjust the contract price pursuant to the wage orders, including the computation of benefits based on the increased minimum wage.
NFA, contending that it was bound only to pay the increase in the daily wage as limited by the contract clause, appealed the trial court's decision to the Court of Appeals.
The Court of Appeals dismissed NFA’s appeal on February 12, 2004, and subsequently denied its motion for reconsideration on April 30, 2004, prompting the instant petition for review under Rule 45.

The issue was contextualized within the provisions of Republic Act No. 6727 (Wage Rationalization Act), which, among other objectives, seeks to rationalize minimum wage determinations and improve productivity and workers’ welfare.
Section 6 of RA 6727, as well as the supporting wage orders issued by the Regional Tripartite Wages and Productivity Board (RTWPB), impose on principals or clients in service contracts (such as those for security services) the obligation to bear the prescribed increases in the statutory minimum wage for an eight-hour workday.
The service contract between NFA and MASADA Security Agency included a clause (Article IV.4) that stipulated any wage adjustment due to legislated increases should be limited exclusively to the increment prescribed in the wage orders.
Additional administrative guidelines, such as those in NFA Memorandum AO-98-03, reinforced that wage adjustments under the contract would be confined to the increased rate as specified in the applicable wage orders.

The proper remedy for NFA’s dispute with the trial court was recognized as a petition for review under Rule 45 before the Supreme Court because the dispute presented a pure question of law regarding statutory interpretation.
For the sake of justice, the Supreme Court considered the substantive merits of the case despite certain procedural technicalities, ultimately leading to the reversal of the Court of Appeals’ decision and the dismissal of MASADA Security Agency’s complaint at the trial level.

Whether the liability of principals under service contracts, pursuant to Section 6 of RA 6727 and corresponding wage orders, is limited solely to the increment in the statutory minimum wage for a standard eight-hour workday.
Whether NFA’s obligation to adjust the contract price should extend beyond the increased minimum wage to also cover wage-related benefits such as overtime pay, holiday pay, night shift differentials, SSS and Pag-ibig contributions, and additional administrative costs and margins.
Whether the trial court’s ruling, which imposed additional liabilities on NFA beyond the contractual and statutory provisions, should stand given the clear language of RA 6727 and the contractual stipulations agreed upon by the parties.