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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

118892 March 11, 1998 FILIPINAS BROADCASTING NETWORK, INC., vs. NATIONAL LABOR RELATIONS COMMISSION and SIMEON MAPA JR., respondents. PANGANIBAN, J.: As a rule, factual findings of the NLRC are binding on this Court. However, when the findings of the NLRC and the labor arbiter are contradictory, this Court may review questions of fact. Where the evidence clearly shows the absence of an employer-employee relationship, a claim for unpaid wages, thirteenth month pay, holiday and rest pay and other employment benefits must necessarily fail. The Case Before us is a petition for certiorari assailing the April 29, 1994 Decision of the National Labor Relations Commission, 1 in Case No. 05-08-0034892, entitled "Simeon M. Mapa Jr., v. DZRC Radio Station." The dispositive portion of the challenged Decision reads: WHEREFORE, premises considered, the appealed decision is set aside, and a new judgement is entered, declaring that complainant is an employee of respondent and is entitled to his claims for the payment of his services from March 11, 1990 to January 16, 1992.
2

Petitioner also impugns the November 9, 1994 Resolution 3 of the NLRC denying the motion for reconsideration. The October 13, 1993 decision of the labor arbiter, 4 which the NLRC reversed and set aside, disposed as follows: This Arbitration Branch, based on the facts and circumstances established by the parties in this case is inclined to believe that complainant Simeon M. Mapa, Jr., had not been an employee of the respondent DZRC Radio Station before February 16, 1992. 5 He was but a volunteer reporter when accommodated to air his report on the respondent radio station as his application for employment with the respondent as field reporter had not been accepted yet or approved before February, 1992. There was no employer-employee relations that existed between the complainant and the respondent since March 11, 1990 until February 16, 1992. The complainant is not entitled to his claim for any salaries,

premium pay for holiday and rest day, holiday pay and 13th month pay against the respondent DZRC Radio Station/Salvio Fortuno. WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered dismissing the complaint in this case for lack of merit. 6 The Facts Version of Private Respondent Petitioner and private respondent submitted different versions of the facts. The facts as viewed by private respondent are as follows: 7 The complainant (herein private respondent) began to work for the respondent as a radio reporter starting March 11, 1990. On May 14, 1990, upon being informed by then respondent's Station Manager, Mr. Plaridel Brocales, that complainant's employment with respondent is being blocked by Ms. Brenda Bayona of DZGB, complainant's previous employer, the said complainant took a leave of absence. In the first week of June, 1990, the respondent thru Mr. Antonio Llarena, then an employee of the respondent, asked the complainant to return to work even as he was assured that his salaries will be paid to him already. Thus, the complainant continued to work for the respondent since then. On September 5, 1991, again the complainant took a leave of absence because of his desperation over the failure of respondent to make good its promise of payment of salaries. He was reinstated on January 16, 1992 and resigned on February 27, 1992 when he decided to run for an elective office in the town of Daraga, Albay. Unfortunately, the respondent paid salary to the complainant only for the period from January 16, 1992 up to February 27, 1992. Respondent did not pay the complainant for all the services rendered by the latter from March 11, 1990 up to January 16, 1992. As may be gleaned from its memorandum, 8 petitioner's version of the facts is as follows: 1. On or before April 1990, Mapa was dismissed from his employment with PBN-DZGB Legaspi. At this time, Mapa filed a case for illegal dismissal against PBN-DZGB Legaspi docketed as RAV V Case No. 05-04-00120-90 entitled "Simeon Mapa, Jr. v. People's Broadcasting Network-DZGB Legaspi, Jorge Bayona and Arturo Osia"; 2. On or about May 1990, Mapa sought employment from DZRC as a radio reporter. However, DZRC required of private respondent the submission of a clearance from

his former employer. Otherwise, his application would not be acted upon; 3. On May 14, 1990, Mapa was informed by DZRC's then station manager, Mr. Plaridel "Larry" Brocales, that his application for employment was "being blocked by Ms. Brenda Bayona of DZGB, Mapa's former employer." This fact is supported by Mapa's position paper before the Honorable Labor Arbiter . . . ; 4. Taking pity on Mapa and pending the issuance of the clearance from PBN-DZGB Legaspi, Mr. Larry Brocales granted the request of Mapa to be accommodated only as a volunteer reporter of DZRC on a part-time basis. As a volunteer reporter, Mapa was not to be paid wages as an employee of DZRC but he was permitted to find sponsors whose business establishments will be advertised every time he goes on the air. Most importantly, Mapa's only work consisted of occasional newsbits or on-the-spot reporting of incidents or newsworthy occurrences, which was very seldom. 5. Mapa's friends, who were also in the same situation as he was, declared in an affidavit dated June 10, 1993 that: WE, ALLAN ALMARIO and ELMER ANONUEVO, of legal age, single, with postal address at Washington Drive, Legaspi City, under oath, depose and state: 1. We personally know Simeon "Jun" Mapa, a former volunteer reporter at DZRC just like us; 2. As volunteer reporters we know that we will not receive any salary or allowance from DZRC because our work was purely voluntary; 3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishment we mention[ed] every after field report was made by us; 4. The management did not require or oblige us to render a report. We were on our own. We ma[d]e or render[ed] a report as we [saw] fit; 5. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month (each). xxx xxx xxx 6. Having no radio gadgets to begin with, DZRC loaned Mapa the necessary equipment such as handheld radios and reporting gadgets. Mapa was to do occasional reporting only, i.e., a few minutes each day at an irregular time period at Mapa's own convenience. Mapa advertised his sponsors and pocketed the payment of

these sponsors for his advertising services. In addition, DZRC had no control over the manner by [sic] which he was to make his reports. Nor were the said reports subject to editing by DZRC; 7. In an Affidavit dated June 10, 1993 executed by one of Mapa's sponsors, the same reads as follows: I, CARLITO V. BAYLON, of legal age, married, resident of Dona Maria Subdivision, Daraga, Albay, under oath, depose and state: 1. I am a lawyer by profession. At the same time, I am owner of "Kusina ni Manoy" a restaurant situated in Daraga, Albay; 2. I personally know Simeon "Jun" Mapa. Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me that, he will not be receiving any salary from DZRC[;] hence, he was soliciting my support; 3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant every time he renders a report on the air; 4. My sponsorship lasted for about (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program. xxx xxx xxx 8. On November 7, 1990, in his testimony against his former employer, Mapa declared under oath, to wit: ATTY. LOBRIGO: On paragraph 14 of the same affidavit it states and I quote: 13. Having been left with an empty stomach, I was compelled to apply for employment with another radio station. On March 11, 1990, I applied for employment with DZRC. Unfortunately, my application would not yet be acted [upon] favorably because of the malicious and oppressive imputations to me by my former employer. My question is what is now the status of your employment with DZRC? WITNESS: I am at present on a volunteer status because my former employer at DZGB did not give me clearance and I am required to submit that clearance to DZRC. (Emphasis supplied).

See p. 2 of Position Paper of DZRC before the Labor Arbiter and pp. 4-5 of the Transcript of Stenographer Notes dated November 7, 1990, attached and marked as Annex "F" and Annex "F-1 ", Petition for Certiorari; 9. It cannot be overstressed that Mapa's application for employment could not have been acted upon because of the lack of the pre-requisite clearance. 10. Lacking in sponsors, Mapa soon failed to provide petitioner with newsbits, finding it unprofitable to continue since he had no available sources of funding. Sometime in September 1991, Mapa quit his part-time endeavor with DZRC, as attested to by the Office of Supervisor/Traffic Manager Ignacio Casi in an Affidavit dated June 10, 1992, to wit: 1. I am the Office Supervisor/Traffic Manager of DZRCAM; 2. Sometime in May, 1990 Simeon "Jun" Mapa went to my office inside our radio station. He asked me if he could be accommodated as Radio Reporter of DZRC, as he was dismissed from DZGB. I referred him to Larry Brocales, our Station Manager then; 3. Larry Brocales told Jun Mapa that he cannot be accommodated because he has no clearance from DZGB. Jun Mapa, almost teary eyed, pleaded to Larry Brocales that he be accommodated as volunteer reporter, that is, he will not receive any salary but that he intimated that he be allowed to look for sponsors whose business establishment, for a fee, will have to be mentioned after every report is made. Larry Brocales took pity on Jun Mapa and accommodated him; 4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit; 5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him;. 6. Being the Office Supervisor, I know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak; 7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them. (Emphasis supplied). (See Annex "G", Petition for Certiorari);

11. Subsequently, Mapa sent a letter dated October 7, 1991 to Ms. Diana C. Gozum, General Manager of petitioner FBN. In the said letter, Mapa wrote and admitted that: I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM. May I inform you that since the submission of such application I worked until September 6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter. With this, I respectfully wish to follow up my application for recognition. May I also inform you that the case I have with my previous job with the other company has commenced. Attached herewith is my resume. I am once again submitting myself for an interview with your office at a time convenient to you. Thank you. (See Annex "H", Petition for Certiorari); 12. Reacting to the letter mentioned in the immediately preceding paragraph, DZRC favorably acted upon the application of Mapa and accepted him as a radio reporter on January 16, 1992; 13. On February 27, 1992, Mapa resigned as a radio reporter in order to run for an elective office in the May 1992 elections and was paid all his salaries and benefits for the period of his employment commencing from January 16, 1992 until February 27, 1992; 14. Having no work to do and no employment in sight, Mapa filed a complaint against FBN-DZRC on August 1992, claiming the payment of salaries, premium pay, holiday pay as well as 13th month pay for the period 28 February 1990 until January 16, 1992; On October 13, 1993, Labor Arbiter Emeterio Ranola dismissed the complaint for lack of merit, finding that no employer-employee relationship existed between Mapa and DZRC during the period March 11, 1990 to February 16, 1992. 9 Findings of the NLRC In holding that there was an employer-employee relationship, the NLRC set aside the labor arbiter's findings: In his appeal, complainant insists that there was an employer-employee relationship between him and the respondent. In support of his contention, he cites the payroll for February 16 to 29, 1992, the ID card issued to him as employee and regular reporter by the respondent: [sic] the program schedules of DZRC

showing the regular program of the station indicating his name: [sic] the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was] a regular reporter under his supervision and the list of reporting gadgets issued to regular reporter. The existence of employer employee relationship is determined by the following elements, namely: 1) selection and engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the power to control employees' conduct although the latter is the most important element. (Rosario Brothers, Inc. vs. Ople, 131 SCRA 72) Considering the totality of the evidence adduced by the parties, we are of the opinion that the complainant is a regular reporter of the respondent. Firstly, the work of the complainant is being supervised by the program supervisor of the respondent; secondly, the complainant uses the reporting gadgets of the respondent. Thirdly, he has no reporting gadgets of his own; Fourthly, the program schedule is prepared by the respondent; and Lastly, he was paid salary for the period from February 16 to 29, 1992 and covered under the Social Security System. There is no showing in the record that his work from February 16, 1992 was different from his work before said period. 10 The NLRC subsequently denied petitioner's motion for reconsideration 11 on November 9, 1994. 12 Hence, this petition. 13 Issue Petitioner alleges that Public Respondent NLRC committed grave abuse of discretion as follows: 14 I . . . in declaring Mapa as an employee of petitioner before January 16, 1992. The test of an employeremployee relationship was erroneously applied to the facts of this case. II . . . in disregarding significant facts which clearly and convincingly show that the private respondent was not an employee of the petitioner before 16 January 1992. In the main, the issue in this case is whether private respondent was an employee of petitioner for the period March 11, 1990 to January 15, 1992. The Court's Ruling The petition is meritorious. Main Issue: Private Respondent Was Not an Employee

During the Period in Controversy As a rule, the NLRC's findings are accorded great respect, even finality, by this Court. This rule, however, is not without qualification. This Court held Jimenez v. NLRC 15: The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave abuse of discretion. 16 As a rule, this Court does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from the consideration that the Court is essentially not a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the facts is necessary since the factual findings of the NLRC and the labor arbiter are at odds with each other. 17 In the present case, a review of the factual findings of the public respondent is in order, for said findings differ from those of the labor arbiter. 18 Worse, the facts alleged by the private respondent and relied upon by the public respondent do not prove an employer-employee relationship. 19 In this light, we will review and overrule the findings of the NLRC. The following are generally considered in the determination of the existence of an employer-employee relationship: (1) the manner of selection and engagement, (2) the payment of wages, (3) the presence or absence of the power of dismissal, and (4) the presence or absence of the power of control; of these four, the last one is the most important. 20 Engagement and Payment of Wages Let us consider the circumstances of the private respondent's engagement in DZRC before January 16, 1992. Petitioner did not act on his application for employment as a radio reporter because private respondent admittedly failed to present a clearance from his former employer. Nevertheless, private respondent "volunteered" his services, knowing that he would not be paid wages, and that he had to rely on financial sponsorships of business establishments that would be advertised in his reports. In other words, private respondent willingly acted as a volunteer reporter, fully cognizant that he was not an employee and that he would not receive any compensation directly from the petitioner, but only from his own advertising sponsors. The nature of private respondent's engagement is evident from the affidavit of Allan Almario and Elmer Anonuevo who served under identical circumstances. The two affirmed the following: 1. We personally know Simeon "Jun" Mapa, a volunteer reporter at DZRC just like us;

2. As volunteer reporters we know [sic] that we will not receive any salary or allowance from DZRC because our work was purely voluntary; 3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishments we mention every after [sic] field report was made by us; xxx xxx xxx 4. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month. 21 The above statement is corroborated by Carlito Baylon, one of private respondent's advertising sponsors. In his affidavit dated June 10, 1993, he averred: 2. I personally know Simeon "Jun" Mapa. Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me that, he will not be receiving any salary from DZRC[,] hence, he was soliciting my support; 3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant everytime he renders a report on the air; 4. My sponsorship lasted for about five (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program. 22 Indeed, private respondent himself admitted that he worked under the said circumstances. The bio-data sheet signed by Mapa himself, in which he acknowledged that he was not an employee, states in part: Work experiences: DWGW Reporter/Newscaster 1970-1980 DZGB Reporter 1983-1990 DZRC Reporter 1990-1991 for free not recognized due to no appointment. 23 (Emphasis supplied.) In his letter dated October 7, 1991, which he sent to the general manager of Filipinas Broadcasting Network (owner of DZRC), Mapa again acknowledged in the following words that he was not an employee: I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM. May I inform you that since the submission of such application I worked until September 6, 1991 for free of

services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter. With this, I respectfully wish to follow up my application for recognition. [Emphasis supplied.] There is no indication that these two admissions were made under duress. Indeed, private respondent himself did not dispute their voluntariness or veracity. It is clear that he rendered services knowing that he was not an employee. Aware that he would not be paid wages, he described himself as a "volunteer reporter" who was, as evident from his letter, hoping for "the chance to be recognized as a regular reporter." In fact, petitioner acted favorably on this letter and accepted his application as an employee effective on January 16, 1992. Power of Dismissal Likewise, the evidence on record shows that petitioner did not exercise the power to dismiss private respondent during the period in question. In September 1991, Private Respondent Mapa ceased acting as a volunteer reporter, not because he was fired, but because he stopped sending his reports. Ignacio Casi, Office Supervisor of DZRC, declared in his affidavit that Mapa told him that "he [was] quitting already because his sponsors were no longer paying him of [ sic] his monthly contract with them." Mapa did not controvert this statement. In fact, his aforesaid letter of October 17, 1991 expressed his hope of being "given the chance to be recognized as a regular reporter." Private respondent's attitude in said letter is inconsistent with the notion that he had been dismissed. Mapa Was Not Subject to Control of Petitioner The most crucial test the control test demonstrates all too clearly the absence of an employer-employee relationship. No one at the DZRC had the power to regulate or control private respondents' activities or inputs. Unlike the regular reporters, he was not subject to any supervision by petitioner or its officials. Regular reporters "are required by the petitioner to adhere to a program schedule which delineates the time when they are to render their reports, as well as the topic to be reported upon. The substance of their reports are [sic] oftentimes screened by the station prior to [their] actual airing. In contrast, volunteer reporters are never given such a program schedule but are merely advised to inform the station of the reports they would make from time to time." 24 Indeed, DZRC, the petitioner's radio station, exercised no editorial rights over his reports. He had no fixed day or time for making his reports; in fact, he was not required to report anything at all. Whether he would air anything depended entirely on him and his convenience. The absence of petitioner's control over private respondent is manifest from the sworn statement of the traffic manager of petitioner, Ignacio Casi, who deposed in part:

xxx xxx xxx 4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit; 5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him; 6. Being the Office Supervisor, I Know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak; 7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them. In Encyclopedia Britannica (Philippines) Inc., v. NLRC, 25 we reiterated that there could be no employer-employee relationship where "the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work[;] and in turn is compensated according to the result of his efforts and not the, amount thereof, we should not find that the relationship of employer-employee exists." In the present case, private respondent worked at his "own pleasure and [was] not subject to definite hours or conditions of work." "Evidence" Found by NLRC Not Applicable In its two-page 26 holding that there was an employer-employee relationship, the NLRC relied on the following: (1) the payroll for February 16 to 29, 1992, (2) the ID card issued to him as employee and regular reporter by the respondent, (3) the program schedules of DZRC showing the regular program of the station indicating his name: (4) the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was] under his supervision, and (5) the list of reporting gadgets issued to regular reporter. Other than the items enumerated above, no other document was considered by the NLRC. In other words, its conclusion was based solely on these alleged pieces of evidence. It dearly committed grave abuse of discretion in its factual findings, because all the above documents relate to the period January 16, 1992 to February 28, 1992 and not to the period March 11, 1990 to January 15, 1992 which are the inclusive dates in controversy.

The payroll 27 from February 16, 1992 to February 27, 1992 does not demonstrate that private respondent was an employee prior to said period. Lest it be forgotten, the question in this case pertains to the status of private respondent from March 11, 1990 to January 15, 1992. The said payroll may prove that private respondent was an employee during said days in February 1992, but not for the period which is the subject of the present controversy. Furthermore, neither the identification cards nor the SSS number printed at the back thereof indicate the date of issuance. Likewise, the SSS number does not show that he was a member during the period in controversy; much less, that he became so by reason of his employment with petitioner. Similarly inapplicable is the program schedule 28 which allegedly showed the regular program of the station and indicated the name of private respondent as an employee. The document is a mere photocopy of a typewritten schedule. There is absolutely no indicium of its authenticity. Moreover, it is undated; hence, it does not indicate whether such schedule pertained to the period in dispute, that is, March 11, 1990 to January 15, 1992. Worse, the heading thereof was entitled "Radio DZRC Programming Proposal. [emphasis supplied]" A proposal is "put forth merely for consideration and acceptance." 29 It cannot, by itself, prove that such program was implemented and that private respondent acted as an employee of petitioner. Neither does the list of returned gadgets support the conclusion of the NLRC. It must be stressed that such gadgets were essential to enable the private respondent to access the specific radio frequency and facilities of the radio station. Being exclusive properties of the radio station, such, gadgets could not have been purchased, as they were not commercially available. In any event, the list of returned gadgets was dated February 27, 1992 again, a date not in controversy. Such document, by itself, does not prove that private respondent was an employee from March 20, 1990 to January 15, 1992. The affidavit of Antonio Llarena 30, an employee of DZRC, stating that the private respondent was under his supervision, is vague, even misleading; it declared merely that Llarena was "in charge" of said respondent. Such language could not be construed to mean that he exercised supervision and control over private respondent. Indubitably the NLRC based its findings of employer-employee relationship from the circumstances attendant when the private respondent was already a regular employee. Uncontroverted is the statement that the private respondent was a regular employee from January 16, 1992 to February 28, 1992, for which period he received all employee benefits. But such period, it must be stressed again, is not covered by private respondent's complaint. In sum, the evidence, which Public Respondent NLRC, relies upon, does not justify the reversal of the labor arbiter's ruling which, in turn,

we find amply supported by the records. Clearly, private respondent was not an employee during the period in question. WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution are hereby SET ASIDE. The Order of the Labor Arbiter dated October 13, 1993 dismissing the case for lack of merit is hereby REINSTATED. No costs. SO ORDERED. David, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 170087 August 31, 2006 ANGELINA FRANCISCO, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents. DECISION YNARES-SANTIAGO, J.: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CAG.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRCNCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal. In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5 Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6 In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7 For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8 In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her

replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9 Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10 On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company. 11 Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter. Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the companys employees. 12 Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation. To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners latest employer was Seiji Corporation. 13 The Labor Arbiter found that petitioner was illegally dismissed, thus: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. finding complainant an employee of respondent corporation; 2. declaring complainants dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation: a. Backwages 10/2001 07/2002 275,000.00 (27,500 x 10 mos.) b. Salary Differentials (01/2001 09/2001) 22,500.00 c. Housing Allowance (01/2001 07/2002) 57,000.00 d. Midyear Bonus 2001 27,500.00 e. 13th Month Pay 27,500.00 f. 10% share in the profits of Kasei Corp. from 1996-2001 361,175.00 g. Moral and exemplary damages 100,000.00 h. 10% Attorneys fees 87,076.50 P957,742.50 If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay. SO ORDERED. 14 On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads: PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows: 1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002; 2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted; 3) The award of 10% attorneys fees shall be based on salary differential award only; 4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED. SO ORDERED. 15 On appeal, the Court of Appeals reversed the NLRC decision, thus: WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal. SO ORDERED. 16 The appellate court denied petitioners motion for reconsideration, hence, the present recourse. The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by substantial evidence. 17 We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship. However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the employers power to control the employee with respect to the means and methods by which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity. The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship. This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latters employment. The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employeremployee relationship based on an analysis of the totality of economic circumstances of the worker. Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, 22 such as:

(1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. 23 The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer. By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement. Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation. 27 It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latters line of business. In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers covering

petitioners salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent. We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship. Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company. 30 The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation. Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution.
33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished. The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment. In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development. WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year. SO ORDERED. CONSUELO YNARES-SANTIAGO Associate Justice WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice Chairperson MA. ALICIA AUSTRIAROMEO J. CALLEJO, SR. MARTINEZ Associate Justice Associate Justice MINITA V. CHICO-NAZARIO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, 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 Courts Division. ARTEMIO V. PANGANIBAN Chief Justice

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 164156 September 26, 2006 ABS-CBN BROADCASTING CORPORATION, petitioner, vs. MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents. DECISION CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision 2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees. The Antecedents Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television and radio stations, whose operations revolve around the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by the National Telecommunications Commission. Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABSCBN employees identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks and duties: a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN; b) Coordinate, arrange personalities for air interviews; c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports; d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints; e) Assist, anchor program interview, etc; and f) Record, log clerical reports, man based control radio. 4 Their respective working hours were as follows: Name Time No. of Hours 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7

8:00 A.M.-12:00 noon 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs. 9:00 A.M.-6:00 P.M. (WF) 9 hrs. 4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5 The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo Lastimosa. On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA. 6 On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the studio technician. Thus, their revised schedule and other assignments would be as follows: Monday Saturday 4:30 A.M. 8:00 A.M. Marlene Nazareno. Miss Nazareno will then be assigned at the Research Dept. From 8:00 A.M. to 12:00 4:30 P.M. 12:00 MN Jennifer Deiparine Sunday 5:00 A.M. 1:00 P.M. Jennifer Deiparine 1:00 P.M. 10:00 P.M. Joy Sanchez Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa. On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers. Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents received a copy of the Order on May 16, 2001. 7 Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For Resolution. 8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations: 1. Complainants were engaged by respondent ABS-CBN as regular and fulltime employees for a continuous period of more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000.

Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached as follows, thus: I. Jennifer Deiparine: Exhibit "A" - ABS-CBN Employees Identification Card Exhibit "B", - ABS-CBN Salary Voucher from Nov. Exhibit "B-1" & 1999 to July 2000 at P4,000.00 Exhibit "B-2" Date employed: September 15, 1995 Length of service: 5 years & nine (9) months II. Merlou Gerzon - ABS-CBN Employees Identification Card Exhibit "C" Exhibit "D" Exhibit "D-1" & Exhibit "D-2" - ABS-CBN Salary Voucher from March 1999 to January 2001 at P4,000.00 Date employed: September 1, 1995 Length of service: 5 years & 10 months III. Marlene Nazareno Exhibit "E" - ABS-CBN Employees Identification Card Exhibit "E" - ABS-CBN Salary Voucher from Nov. Exhibit "E-1" & 1999 to December 2000 Exhibit :E-2" Date employed: April 17, 1996 Length of service: 5 years and one (1) month IV. Joy Sanchez Lerasan Exhibit "F" - ABS-CBN Employees Identification Card Exhibit "F-1" - ABS-CBN Salary Voucher from Aug. Exhibit "F-2" & 2000 to Jan. 2001 Exhibit "F-3" Exhibit "F-4" - Certification dated July 6, 2000 Acknowledging regular status of Complainant Joy Sanchez Lerasan Signed by ABS-CBN Administrative Officer May Kima Hife Date employed: April 15, 1998 Length of service: 3 yrs. and one (1) month9 Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus: WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling defendants to pay complainants the following: 1. One Hundred Thousand Pesos (P100,000.00) each and by way of moral damages; 2. Minimum wage differential;

3. Thirteenth month pay differential; 4. Unpaid service incentive leave benefits; 5. Sick leave; 6. Holiday pay; 7. Premium pay; 8. Overtime pay; 9. Night shift differential. Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a condition precedent for their admission into the existing union and collective bargaining unit of respondent company where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom. Complainants pray for such other reliefs as are just and equitable under the premises.10 For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program or a particular production. They are considered in the industry as "program employees" in that, as distinguished from regular or station employees, they are basically engaged by the station for a particular or specific program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are updated from time to time, and are thus made the basis to determine the programs to which they shall later be called on to assist. The program assignments of complainants were as follows: a. Complainant Nazareno assists in the programs: 1) Nagbagang Balita (early morning edition) 2) Infor Hayupan 3) Arangkada (morning edition) 4) Nagbagang Balita (mid-day edition) b. Complainant Deiparine assists in the programs: 1) Unzanith 2) Serbisyo de Arevalo 3) Arangkada (evening edition) 4) Balitang K (local version) 5) Abante Subu 6) Pangutana Lang c. Complainant Gerzon assists in the program: 1) On Mondays and Tuesdays: (a) Unzanith (b) Serbisyo de Arevalo (c) Arangkada (evening edition) (d) Balitang K (local version) (e) Abante Sugbu

(f) Pangutana Lang 2) On Thursdays Nagbagang Balita 3) On Saturdays (a) Nagbagang Balita (b) Info Hayupan (c) Arangkada (morning edition) (d) Nagbagang Balita (mid-day edition) 4) On Sundays: (a) Siesta Serenata (b) Sunday Chismisan (c) Timbangan sa Hustisya (d) Sayri ang Lungsod (e) Haranahan11 Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama talents in other productions. As program employees, a PAs engagement is coterminous with the completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be assigned to new programs upon the cancellation of one program and the commencement of another. As such program employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law.12 Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since respondents were not covered by the bargaining unit. On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads: WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay complainants as follows: I - Merlou A. Gerzon P12,025.00 II - Marlyn Nazareno 12,025.00 III - Jennifer Deiparine 12,025.00 IV - Josephine Sanchez Lerazan 12,025.00 _________ P48,100.00 plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00). Respondent Veneranda C. Sy is absolved from any liability. SO ORDERED.13 However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to interpret and apply the

agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code. Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001. For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal. In its appeal, petitioner alleged the following: 1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more than thirty (30) calendar days; 2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law; 3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the ground that the same is a prohibited pleading; 4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent; 5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave pay and salary differential; and 6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees.14 On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads: WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows: 1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows: a. Deiparine, Jennifer - P 716,113.49 b. Gerzon, Merlou - 716,113.49 c. Nazareno, Marlyn - 716,113.49 d. Lerazan, Josephine Sanchez - 413,607.75 Total - P 2,561,948.22 2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their rice subsidy in the CBA, broken down as follows: a. Deiparine, Jennifer - 60 Sacks b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks d. Lerazan, Josephine Sanchez - 53 Sacks Total 233 Sacks; and 3. To grant to the complainants all the benefits of the CBA after 30 September 2002. SO ORDERED.15 The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents motion to refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of respondents claim does not depend upon the interpretation of the CBA. The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission. 16 Petitioner filed a motion for reconsideration, which the NLRC denied. Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to respondents under the CBA although they are not members of the appropriate bargaining unit. On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is not a ground to strike out the paper from the records, much less dismiss a complaint. Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular employees who perform tasks

necessary and desirable in the usual trade and business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees. Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution17 dated June 16, 2004. Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error: 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND RESOLUTION. 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES. 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18 Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously. Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained finality and can no longer be set aside. Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be given due course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it out from the records or dismiss the complaint. We find no merit in the petition. We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be

given due course if greater injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed. 19 The Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial justice and equity.20 In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of the Labor Code a liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.22 We have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman.23 Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties. 24 We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint.26 Likewise, there is simply no truth to petitioners assertion that it was denied due process when the Labor Arbiter admitted respondents position paper without requiring it to file a comment before admitting said position paper. The essence of due process in administrative proceedings is simply an opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiters admission of respondents position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous employers of the employees right to security of tenure by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular employment defined therein. 28 We quote with approval the following pronouncement of the NLRC: The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process.

That while suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice. Respondents suggestion, betrays its notion of prolonging, rather than promoting the early resolution of the case. Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states: "A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the arbitration branch of origin." the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides: "In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process." The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001). "In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53). The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are given the opportunities to submit position papers.

"Due process requirements are satisfied where the parties are given the opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737). Thus, the respondent was not deprived of its Constitutional right to due process of law.29 We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not regular employees of the broadcasting company. Petitioners claim that the functions performed by the respondents are not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record. Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial evidence.30 The question of whether respondents are regular or project employees or independent contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions of production assistants working in the Philippine broadcasting industry. We agree with respondents contention that where a person has rendered at least one year of service, regardless of the nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary appointment is not indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor Code provides: ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular employee: The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its

performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. 32 As elaborated by this Court in Magsalin v. National Organization of Working Men:33 Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade. But, although the work to be performed is only for a specific project or seasonal, where a person thus engaged has been performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity to the business or trade of the employer. The employment of such person is also then deemed to be regular with respect to such activity and while such activity exists. 34 Not considered regular employees are "project employees," the completion or termination of which is more or less determinable at the time of employment, such as those employed in connection with a particular construction project, and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity performed and while such activity actually exists. It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other productions during their free time are not conclusive of the nature of their employment. Respondents cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees. They are regular employees who perform several different duties under the control and direction of ABS-CBN executives and supervisors. Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are employed.35

The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation to the particular trade or business taking into account all the circumstances, and in some cases the length of time of its performance and its continued existence.36 It is obvious that one year after they were employed by petitioner, respondents became regular employees by operation of law.37 Additionally, respondents cannot be considered as project or program employees because no evidence was presented to show that the duration and scope of the project were determined or specified at the time of their engagement. Under existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. Second, the term project may also refer to a particular job or undertaking that is not within the regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times.38 The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employees were engaged for that project. 39 In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability of such services to petitioners business or trade. 40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual trade or business of the employer.41 We note further that petitioner did not report the termination of respondents employment in the particular "project" to the Department of Labor and Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation from work, using the prescribed form on employees termination/ dismissals/suspensions.42 As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings, petitioner classified respondents as program employees, and in later pleadings, independent

contractors. Program employees, or project employees, are different from independent contractors because in the case of the latter, no employeremployee relationship exists. Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and not a regular employee: A. Selection and Engagement of Employee ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent contractorship." Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABSCBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee. In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element. B. Payment of Wages ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABSCBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract." All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship. SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAS unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the

salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship. The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.44 In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven. First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them because they were merely hired through petitioners personnel department just like any ordinary employee. Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent contractual relationship. Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on the petitioner for continued work. Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation that respondents are independent contractors. The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative to the employer, does not furnish an independent business or professional service, such work is a regular employment of such employee and not an independent contractor.45 The Court will peruse beyond any such agreement to examine the facts that typify the parties actual relationship. 46 It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular employees of petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as project employees by petitioner: x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as production assistants of petitioner are regular employees. The monetary award is not considered as claims involving the interpretation or implementation of the collective bargaining agreement. The reason why production assistants were excluded from the said agreement is precisely because they were classified and treated as project employees by petitioner. As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but the nature of the activities

performed by such employee in relation to the particular business or trade of the employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is therefore not proper. Finding said private respondents as regular employees and not as mere project employees, they must be accorded the benefits due under the said Collective Bargaining Agreement. A collective bargaining agreement is a contract entered into by the union representing the employees and the employer. However, even the nonmember employees are entitled to the benefits of the contract. To accord its benefits only to members of the union without any valid reason would constitute undue discrimination against non-members. A collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner.48 Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the laborer." IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 76582 are AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, ChicoNazario, J.J., concur.

G.R. No. 142625

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION December 19, 2006

ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY, ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners, vs. CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J. DUMLAO, respondents. DECISION CARPIO, J.: The Case This petition for review1 assails the 6 February 1998 Decision2 and 21 March 2000 Resolution3 of the Court of Appeals in CA-G.R. CV No. 45641. The Court of Appeals affirmed in toto the 22 November 1993 Decision4 of the Regional Trial Court of Manila, Branch 33, finding Dr. Oscar Estrada solely liable for damages for the death of his patient, Corazon Nogales, while absolving the remaining respondents of any liability. The Court of Appeals denied petitioners' motion for reconsideration. The Facts Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourth month of pregnancy or as early as December 1975. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure and development of leg edema5 indicating preeclampsia,6 which is a dangerous complication of pregnancy.7 Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon and Rogelio Nogales ("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her immediate admission to the Capitol Medical Center ("CMC"). On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the written admission request8 of Dr. Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed and signed the "Consent on Admission and Agreement" 9 and "Admission Agreement."10 Corazon was then brought to the labor room of the CMC. Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internal examination of Corazon. Dr. Uy then called up Dr. Estrada to notify him of her findings. Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valium to be administered immediately by intramuscular injection. Dr. Estrada later ordered the start of intravenous administration of syntocinon admixed with dextrose, 5%, in lactated Ringers' solution, at the rate of eight to ten micro-drops per minute. According to the Nurse's Observation Notes,12 Dr. Joel Enriquez ("Dr. Enriquez"), an anesthesiologist at CMC, was notified at 4:15 a.m. of

Corazon's admission. Subsequently, when asked if he needed the services of an anesthesiologist, Dr. Estrada refused. Despite Dr. Estrada's refusal, Dr. Enriquez stayed to observe Corazon's condition. At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m., Corazon's bag of water ruptured spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m., Corazon started to experience convulsions. At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate. At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured condition. Consequently, the baby had to be intubated and resuscitated by Dr. Enriquez and Dr. Payumo. At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazon's blood pressure dropped from 130/80 to 60/40 within five minutes. There was continuous profuse vaginal bleeding. The assisting nurse administered hemacel through a gauge 19 needle as a side drip to the ongoing intravenous injection of dextrose. At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took approximately 30 minutes for the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr. Lacson"), to comply with Dr. Estrada's order and deliver the blood. At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the ObstetricsGynecology Department of the CMC, was apprised of Corazon's condition by telephone. Upon being informed that Corazon was bleeding profusely, Dr. Espinola ordered immediate hysterectomy. Rogelio was made to sign a "Consent to Operation."13 Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by an ambulance, arrived at the CMC about an hour later or at 9:00 a.m. He examined the patient and ordered some resuscitative measures to be administered. Despite Dr. Espinola's efforts, Corazon died at 9:15 a.m. The cause of death was "hemorrhage, post partum." 14 On 14 May 1980, petitioners filed a complaint for damages 15 with the Regional Trial Court16 of Manila against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the death of Corazon. Petitioners mainly contended that defendant physicians and CMC personnel were negligent in the treatment and management of Corazon's condition. Petitioners charged CMC with negligence in the selection and supervision of defendant physicians and hospital staff. For failing to file their answer to the complaint despite service of summons, the trial court declared Dr. Estrada, Dr. Enriquez, and Nurse Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their

respective answers denying and opposing the allegations in the complaint. Subsequently, trial ensued. After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 finding Dr. Estrada solely liable for damages. The trial court ruled as follows: The victim was under his pre-natal care, apparently, his fault began from his incorrect and inadequate management and lack of treatment of the pre-eclamptic condition of his patient. It is not disputed that he misapplied the forceps in causing the delivery because it resulted in a large cervical tear which had caused the profuse bleeding which he also failed to control with the application of inadequate injection of magnesium sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even failed to notice the erroneous administration by nurse Dumlao of hemacel by way of side drip, instead of direct intravenous injection, and his failure to consult a senior obstetrician at an early stage of the problem. On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao and CMC, the Court finds no legal justification to find them civilly liable. On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal physician of Corazon Nogales. She can only make suggestions in the manner the patient maybe treated but she cannot impose her will as to do so would be to substitute her good judgment to that of Dr. Estrada. If she failed to correctly diagnose the true cause of the bleeding which in this case appears to be a cervical laceration, it cannot be safely concluded by the Court that Dra. Villaflor had the correct diagnosis and she failed to inform Dr. Estrada. No evidence was introduced to show that indeed Dra. Villaflor had discovered that there was laceration at the cervical area of the patient's internal organ. On the part of nurse Dumlao, there is no showing that when she administered the hemacel as a side drip, she did it on her own. If the correct procedure was directly thru the veins, it could only be because this was what was probably the orders of Dr. Estrada. While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the Department of Obstetrics and Gynecology who attended to the patient Mrs. Nogales, it was only at 9:00 a.m. That he was able to reach the hospital because of typhoon Didang (Exhibit 2). While he was able to give prescription in the manner Corazon Nogales may be treated, the prescription was based on the information given to him by phone and he acted on the basis of facts as presented to him, believing in good faith that such is the correct remedy. He was not with Dr. Estrada when the patient was brought to the hospital at 2:30 o'clock a.m. So, whatever errors that Dr. Estrada committed on the patient before 9:00 o'clock a.m. are certainly the errors of Dr. Estrada and cannot be the mistake of Dr.

Noe Espinola. His failure to come to the hospital on time was due to fortuitous event. On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not incumbent upon him to call the attention of Dr. Estrada, Dra. Villaflor and also of Nurse Dumlao on the alleged errors committed by them. Besides, as anesthesiologist, he has no authority to control the actuations of Dr. Estrada and Dra. Villaflor. For the Court to assume that there were errors being committed in the presence of Dr. Enriquez would be to dwell on conjectures and speculations. On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the blood bank of the CMC. The Court cannot accept the theory of the plaintiffs that there was delay in delivering the blood needed by the patient. It was testified, that in order that this blood will be made available, a laboratory test has to be conducted to determine the type of blood, cross matching and other matters consistent with medical science so, the lapse of 30 minutes maybe considered a reasonable time to do all of these things, and not a delay as the plaintiffs would want the Court to believe. Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was sued because of her alleged failure to notice the incompetence and negligence of Dr. Estrada. However, there is no evidence to support such theory. No evidence was adduced to show that Dra. Rosa Uy as a resident physician of Capitol Medical Center, had knowledge of the mismanagement of the patient Corazon Nogales, and that notwithstanding such knowledge, she tolerated the same to happen. In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand or participation in the selection or hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as attending physician[s] of the deceased. In other words, the two (2) doctors were not employees of the hospital and therefore the hospital did not have control over their professional conduct. When Mrs. Nogales was brought to the hospital, it was an emergency case and defendant CMC had no choice but to admit her. Such being the case, there is therefore no legal ground to apply the provisions of Article 2176 and 2180 of the New Civil Code referring to the vicarious liability of an employer for the negligence of its employees. If ever in this case there is fault or negligence in the treatment of the deceased on the part of the attending physicians who were employed by the family of the deceased, such civil liability should be borne by the attending physicians under the principle of "respondeat superior". WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr. Estrada of Number 13 Pitimini St. San Francisco del Monte, Quezon City civilly liable to pay plaintiffs: 1) By way of actual damages in the amount of P105,000.00; 2) By way of

moral damages in the amount of P700,000.00; 3) Attorney's fees in the amount of P100,000.00 and to pay the costs of suit. For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the other defendants, the complaint is hereby ordered dismissed. While the Court looks with disfavor the filing of the present complaint against the other defendants by the herein plaintiffs, as in a way it has caused them personal inconvenience and slight damage on their name and reputation, the Court cannot accepts [sic] however, the theory of the remaining defendants that plaintiffs were motivated in bad faith in the filing of this complaint. For this reason defendants' counterclaims are hereby ordered dismissed. SO ORDERED.18 Petitioners appealed the trial court's decision. Petitioners claimed that aside from Dr. Estrada, the remaining respondents should be held equally liable for negligence. Petitioners pointed out the extent of each respondent's alleged liability. On 6 February 1998, the Court of Appeals affirmed the decision of the trial court.19 Petitioners filed a motion for reconsideration which the Court of Appeals denied in its Resolution of 21 March 2000.20 Hence, this petition. Meanwhile, petitioners filed a Manifestation dated 12 April 2002 21 stating that respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao "need no longer be notified of the petition because they are absolutely not involved in the issue raised before the [Court], regarding the liability of [CMC]." 22 Petitioners stressed that the subject matter of this petition is the liability of CMC for the negligence of Dr. Estrada.23 The Court issued a Resolution dated 9 September 2002 24 dispensing with the requirement to submit the correct and present addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated that with the filing of petitioners' Manifestation, it should be understood that they are claiming only against respondents CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their respective comments. Petitioners are foregoing further claims against respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming the decision of the Regional Trial Court. Accordingly, the decision of the Court of Appeals, affirming the trial court's judgment, is already final as against Dr. Oscar Estrada. Petitioners filed a motion for reconsideration25 of the Court's 9 September 2002 Resolution claiming that Dr. Enriquez, Dr. Villaflor and Nurse Dumlao were notified of the petition at their counsels' last known addresses. Petitioners reiterated their imputation of negligence on these respondents. The Court denied petitioners' Motion for Reconsideration in its 18 February 2004 Resolution.26 The Court of Appeals' Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld the trial court's ruling. The Court of Appeals rejected petitioners' view that the doctrine in Darling v. Charleston Community Memorial Hospital27 applies to this case. According to the Court of Appeals, the present case differs from the Darling case since Dr. Estrada is an independent contractor-physician whereas the Darling case involved a physician and a nurse who were employees of the hospital. Citing other American cases, the Court of Appeals further held that the mere fact that a hospital permitted a physician to practice medicine and use its facilities is not sufficient to render the hospital liable for the physician's negligence.28 A hospital is not responsible for the negligence of a physician who is an independent contractor.29 The Court of Appeals found the cases of Davidson v. Conole30 and Campbell v. Emma Laing Stevens Hospital31 applicable to this case. Quoting Campbell, the Court of Appeals stated that where there is no proof that defendant physician was an employee of defendant hospital or that defendant hospital had reason to know that any acts of malpractice would take place, defendant hospital could not be held liable for its failure to intervene in the relationship of physician-patient between defendant physician and plaintiff. On the liability of the other respondents, the Court of Appeals applied the "borrowed servant" doctrine considering that Dr. Estrada was an independent contractor who was merely exercising hospital privileges. This doctrine provides that once the surgeon enters the operating room and takes charge of the proceedings, the acts or omissions of operating room personnel, and any negligence associated with such acts or omissions, are imputable to the surgeon.32 While the assisting physicians and nurses may be employed by the hospital, or engaged by the patient, they normally become the temporary servants or agents of the surgeon in charge while the operation is in progress, and liability may be imposed upon the surgeon for their negligent acts under the doctrine of respondeat superior.33 The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physician of his wife, any liability for malpractice must be Dr. Estrada's sole responsibility. While it found the amount of damages fair and reasonable, the Court of Appeals held that no interest could be imposed on unliquidated claims or damages. The Issue Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr. Estrada. The resolution of this issue rests, on the other hand, on the ascertainment of the relationship between Dr. Estrada and CMC. The Court also believes that a determination of the extent of liability of the other respondents is inevitable to finally and completely dispose of the present controversy. The Ruling of the Court The petition is partly meritorious. On the Liability of CMC

Dr. Estrada's negligence in handling the treatment and management of Corazon's condition which ultimately resulted in Corazon's death is no longer in issue. Dr. Estrada did not appeal the decision of the Court of Appeals which affirmed the ruling of the trial court finding Dr. Estrada solely liable for damages. Accordingly, the finding of the trial court on Dr. Estrada's negligence is already final. Petitioners maintain that CMC is vicariously liable for Dr. Estrada's negligence based on Article 2180 in relation to Article 2176 of the Civil Code. These provisions pertinently state: Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. xxxx Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. Similarly, in the United States, a hospital which is the employer, master, or principal of a physician employee, servant, or agent, may be held liable for the physician's negligence under the doctrine of respondeat superior.34 In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit patients at CMC, should be liable for Dr. Estrada's malpractice. Rogelio claims that he knew Dr. Estrada as an accredited physician of CMC, though he discovered later that Dr. Estrada was not a salaried employee of the CMC.35 Rogelio further claims that he was dealing with CMC, whose primary concern was the treatment and management of his wife's condition. Dr. Estrada just happened to be the specific person he talked to representing CMC.36 Moreover, the fact that CMC made Rogelio sign a Consent on Admission and Admission Agreement37 and a Consent to Operation printed on the letterhead of CMC indicates that CMC considered Dr. Estrada as a member of its medical staff. On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it admitted Corazon because her physical condition then was classified an emergency obstetrics case. 38 CMC alleges that Dr. Estrada is an independent contractor "for whose actuations CMC would be a total stranger." CMC maintains that it had no

control or supervision over Dr. Estrada in the exercise of his medical profession. The Court had the occasion to determine the relationship between a hospital and a consultant or visiting physician and the liability of such hospital for that physician's negligence in Ramos v. Court of Appeals,39 to wit: In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises. Doctors who apply for "consultant" slots, visiting or attending, are required to submit proof of completion of residency, their educational qualifications; generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital administration or by a review committee set up by the hospital who either accept or reject the application. This is particularly true with respondent hospital. After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physician's performance as a specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is normally politely terminated. In other words, private hospitals, hire, fire and exercise real control over their attending and visiting "consultant" staff. While "consultants" are not, technically employees, a point which respondent hospital asserts in denying all responsibility for the patient's condition, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employeremployee relationship in effect exists between hospitals and their attending and visiting physicians. This being the case, the question now arises as to whether or not respondent hospital is solidarily liable with respondent doctors for petitioner's condition. The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180 of the Civil Code which considers a person accountable not only for his own acts but

also for those of others based on the former's responsibility under a relationship of patria potestas. x x x40 (Emphasis supplied) While the Court in Ramos did not expound on the control test, such test essentially determines whether an employment relationship exists between a physician and a hospital based on the exercise of control over the physician as to details. Specifically, the employer (or the hospital) must have the right to control both the means and the details of the process by which the employee (or the physician) is to accomplish his task.41 After a thorough examination of the voluminous records of this case, the Court finds no single evidence pointing to CMC's exercise of control over Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no showing that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff privileges at CMC, such fact alone did not make him an employee of CMC.42 CMC merely allowed Dr. Estrada to use its facilities43 when Corazon was about to give birth, which CMC considered an emergency. Considering these circumstances, Dr. Estrada is not an employee of CMC, but an independent contractor. The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an independent contractor-physician. In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception to this principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital.44 This exception is also known as the "doctrine of apparent authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the Illinois Supreme Court explained the doctrine of apparent authority in this wise: [U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the negligent acts of a physician providing care at the hospital, regardless of whether the physician is an independent contractor, unless the patient knows, or should have known, that the physician is an independent contractor. The elements of the action have been set out as follows: "For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence." The element of "holding out" on the part of the hospital does not require an express representation by the hospital that the person alleged to be negligent is an employee. Rather, the element is

satisfied if the hospital holds itself out as a provider of emergency room care without informing the patient that the care is provided by independent contractors. The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to provide complete emergency room care, rather than upon a specific physician. The doctrine of apparent authority essentially involves two factors to determine the liability of an independent-contractor physician. The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry whether the hospital acted in a manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital. 47 In this regard, the hospital need not make express representations to the patient that the treating physician is an employee of the hospital; rather a representation may be general and implied.48 The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code provides that "[t]hrough estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon." Estoppel rests on this rule: "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it." 49 In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an employee or agent of CMC. CMC cannot now repudiate such authority. First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr. Estrada. Upon Dr. Estrada's request for Corazon's admission, CMC, through its personnel, readily accommodated Corazon and updated Dr. Estrada of her condition. Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazon's admission and supposed hysterectomy, CMC asked Rogelio to sign release forms, the contents of which reinforced Rogelio's belief that Dr. Estrada was a member of CMC's medical staff. 50 The Consent on Admission and Agreement explicitly provides: KNOW ALL MEN BY THESE PRESENTS: I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being the father/mother/brother/sister/spouse/relative/ guardian/or person in custody of Ma. Corazon, and representing his/her family, of my own volition and free will, do consent and submit said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to as Physician) for cure, treatment, retreatment, or emergency measures, that the Physician, personally or by and through the Capitol Medical

Center and/or its staff, may use, adapt, or employ such means, forms or methods of cure, treatment, retreatment, or emergency measures as he may see best and most expedient; that Ma. Corazon and I will comply with any and all rules, regulations, directions, and instructions of the Physician, the Capitol Medical Center and/or its staff; and, that I will not hold liable or responsible and hereby waive and forever discharge and hold free the Physician, the Capitol Medical Center and/or its staff, from any and all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said cure, treatment, or retreatment, or emergency measures or intervention of said physician, the Capitol Medical Center and/or its staff. x x x x51 (Emphasis supplied) While the Consent to Operation pertinently reads, thus: I, ROGELIO NOGALES, x x x, of my own volition and free will, do consent and submit said CORAZON NOGALES to Hysterectomy, by the Surgical Staff and Anesthesiologists of Capitol Medical Center and/or whatever succeeding operations, treatment, or emergency measures as may be necessary and most expedient; and, that I will not hold liable or responsible and hereby waive and forever discharge and hold free the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its staff, from any and all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said operation or operations, treatment, or emergency measures, or intervention of the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its staff. 52 (Emphasis supplied) Without any indication in these consent forms that Dr. Estrada was an independent contractor-physician, the Spouses Nogales could not have known that Dr. Estrada was an independent contractor. Significantly, no one from CMC informed the Spouses Nogales that Dr. Estrada was an independent contractor. On the contrary, Dr. Atencio, who was then a member of CMC Board of Directors, testified that Dr. Estrada was part of CMC's surgical staff.53 Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr. Espinola, who was then the Head of the Obstetrics and Gynecology Department of CMC, gave the impression that Dr. Estrada as a member of CMC's medical staff was collaborating with other CMC-employed specialists in treating Corazon. The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.54 The records show that the Spouses Nogales relied upon a perceived employment relationship with CMC in accepting Dr. Estrada's services. Rogelio testified that he and his wife specifically chose Dr. Estrada to handle

Corazon's delivery not only because of their friend's recommendation, but more importantly because of Dr. Estrada's "connection with a reputable hospital, the [CMC]."55 In other words, Dr. Estrada's relationship with CMC played a significant role in the Spouses Nogales' decision in accepting Dr. Estrada's services as the obstetrician-gynecologist for Corazon's delivery. Moreover, as earlier stated, there is no showing that before and during Corazon's confinement at CMC, the Spouses Nogales knew or should have known that Dr. Estrada was not an employee of CMC. Further, the Spouses Nogales looked to CMC to provide the best medical care and support services for Corazon's delivery. The Court notes that prior to Corazon's fourth pregnancy, she used to give birth inside a clinic. Considering Corazon's age then, the Spouses Nogales decided to have their fourth child delivered at CMC, which Rogelio regarded one of the best hospitals at the time.56 This is precisely because the Spouses Nogales feared that Corazon might experience complications during her delivery which would be better addressed and treated in a modern and big hospital such as CMC. Moreover, Rogelio's consent in Corazon's hysterectomy to be performed by a different physician, namely Dr. Espinola, is a clear indication of Rogelio's confidence in CMC's surgical staff. CMC's defense that all it did was "to extend to [Corazon] its facilities" is untenable. The Court cannot close its eyes to the reality that hospitals, such as CMC, are in the business of treatment. In this regard, the Court agrees with the observation made by the Court of Appeals of North Carolina in Diggs v. Novant Health, Inc.,57 to wit: "The conception that the hospital does not undertake to treat the patient, does not undertake to act through its doctors and nurses, but undertakes instead simply to procure them to act upon their own responsibility, no longer reflects the fact. Present day hospitals, as their manner of operation plainly demonstrates, do far more than furnish facilities for treatment. They regularly employ on a salary basis a large staff of physicians, nurses and internes [sic], as well as administrative and manual workers, and they charge patients for medical care and treatment, collecting for such services, if necessary, by legal action. Certainly, the person who avails himself of 'hospital facilities' expects that the hospital will attempt to cure him, not that its nurses or other employees will act on their own responsibility." x x x (Emphasis supplied) Likewise unconvincing is CMC's argument that petitioners are estopped from claiming damages based on the Consent on Admission and Consent to Operation. Both release forms consist of two parts. The first part gave CMC permission to administer to Corazon any form of recognized medical treatment which the CMC medical staff deemed advisable. The second part of the documents, which may properly be described as the releasing part, releases CMC and its employees "from any and all claims" arising from or by reason of the treatment and operation.

The documents do not expressly release CMC from liability for injury to Corazon due to negligence during her treatment or operation. Neither do the consent forms expressly exempt CMC from liability for Corazon's death due to negligence during such treatment or operation. Such release forms, being in the nature of contracts of adhesion, are construed strictly against hospitals. Besides, a blanket release in favor of hospitals "from any and all claims," which includes claims due to bad faith or gross negligence, would be contrary to public policy and thus void. Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only mitigate liability depending on the circumstances.58 When a person needing urgent medical attention rushes to a hospital, he cannot bargain on equal footing with the hospital on the terms of admission and operation. Such a person is literally at the mercy of the hospital. There can be no clearer example of a contract of adhesion than one arising from such a dire situation. Thus, the release forms of CMC cannot relieve CMC from liability for the negligent medical treatment of Corazon. On the Liability of the Other Respondents Despite this Court's pronouncement in its 9 September 2002 59 Resolution that the filing of petitioners' Manifestation confined petitioners' claim only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed their comments, the Court deems it proper to resolve the individual liability of the remaining respondents to put an end finally to this more than two-decade old controversy. a) Dr. Ely Villaflor Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazon's bleeding and to suggest the correct remedy to Dr. Estrada. 60 Petitioners assert that it was Dr. Villaflor's duty to correct the error of Nurse Dumlao in the administration of hemacel. The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesium sulfate. However, this was after informing Dr. Estrada that Corazon was no longer in convulsion and that her blood pressure went down to a dangerous level.61 At that moment, Dr. Estrada instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from 10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's allegation, Dr. Villaflor's defense remains uncontroverted. Dr. Villaflor's act of administering a lower dosage of magnesium sulfate was not out of her own volition or was in contravention of Dr. Estrada's order. b) Dr. Rosa Uy Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada on the incorrect dosage of magnesium sulfate administered by Dr. Villaflor; (2) to take corrective measures; and (3) to correct Nurse Dumlao's wrong method of hemacel administration. The Court believes Dr. Uy's claim that as a second year resident physician then at CMC, she was merely authorized to take the clinical history and physical examination of Corazon.62 However, that routine internal examination did not ipso facto make Dr. Uy liable for the errors committed by

Dr. Estrada. Further, petitioners' imputation of negligence rests on their baseless assumption that Dr. Uy was present at the delivery room. Nothing shows that Dr. Uy participated in delivering Corazon's baby. Further, it is unexpected from Dr. Uy, a mere resident physician at that time, to call the attention of a more experienced specialist, if ever she was present at the delivery room. c) Dr. Joel Enriquez Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao about their errors. 63 Petitioners insist that Dr. Enriquez should have taken, or at least suggested, corrective measures to rectify such errors. The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise is definitely not obstetrics and gynecology. As such, Dr. Enriquez was not expected to correct Dr. Estrada's errors. Besides, there was no evidence of Dr. Enriquez's knowledge of any error committed by Dr. Estrada and his failure to act upon such observation. d) Dr. Perpetua Lacson Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazon needed.64 Petitioners claim that Dr. Lacson was remiss in her duty of supervising the blood bank staff. As found by the trial court, there was no unreasonable delay in the delivery of blood from the time of the request until the transfusion to Corazon. Dr. Lacson competently explained the procedure before blood could be given to the patient.65 Taking into account the bleeding time, clotting time and crossmatching, Dr. Lacson stated that it would take approximately 45-60 minutes before blood could be ready for transfusion.66 Further, no evidence exists that Dr. Lacson neglected her duties as head of the blood bank. e) Dr. Noe Espinola Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy without determining the underlying cause of Corazon's bleeding. Dr. Espinola should have first considered the possibility of cervical injury, and advised a thorough examination of the cervix, instead of believing outright Dr. Estrada's diagnosis that the cause of bleeding was uterine atony. Dr. Espinola's order to do hysterectomy which was based on the information he received by phone is not negligence. The Court agrees with the trial court's observation that Dr. Espinola, upon hearing such information about Corazon's condition, believed in good faith that hysterectomy was the correct remedy. At any rate, the hysterectomy did not push through because upon Dr. Espinola's arrival, it was already too late. At the time, Corazon was practically dead. f) Nurse J. Dumlao In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals, Fourth Circuit, held that to recover, a patient complaining of injuries allegedly resulting when the nurse negligently injected medicine to him intravenously instead of intramuscularly had to show that (1) an intravenous injection constituted a

lack of reasonable and ordinary care; (2) the nurse injected medicine intravenously; and (3) such injection was the proximate cause of his injury. In the present case, there is no evidence of Nurse Dumlao's alleged failure to follow Dr. Estrada's specific instructions. Even assuming Nurse Dumlao defied Dr. Estrada's order, there is no showing that side-drip administration of hemacel proximately caused Corazon's death. No evidence linking Corazon's death and the alleged wrongful hemacel administration was introduced. Therefore, there is no basis to hold Nurse Dumlao liable for negligence. On the Award of Interest on Damages The award of interest on damages is proper and allowed under Article 2211 of the Civil Code, which states that in crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.68 WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent Capitol Medical Center vicariously liable for the negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual damages and P700,000 as moral damages should each earn legal interest at the rate of six percent (6%) per annum computed from the date of the judgment of the trial court. The Court affirms the rest of the Decision dated 6 February 1998 and Resolution dated 21 March 2000 of the Court of Appeals in CA-G.R. CV No. 45641. SO ORDERED. Quisumbing, J., Chairperson, Carpio Morales, Tinga, and Velasco, Jr., JJ., concur.