Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165881
April 19, 2006
OSCAR VILLAMARIA, JR. Petitioner,
vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the
Revised Rules of Court assailing the Decision1 and Resolution2 of
the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside
the Resolution3of the National Labor Relations Commission (NLRC)
in NCR-30-08-03247-00, which in turn affirmed the Decision 4of the
Labor Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with
a public utility franchise to operate along the Baclaran-Sucat route.
By 1995, Villamaria stopped assembling jeepneys and retained only
nine, four of which he operated by employing drivers on a "boundary
basis." One of those drivers was respondent Bustamante who drove
the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a
day to Villamaria as boundary and kept the residue of his daily
earnings as compensation for driving the vehicle. In August 1997,
Villamaria verbally agreed to sell the jeepney to Bustamante under
the "boundary-hulog scheme," where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante
would then become the owner of the vehicle and continue to drive
the same under Villamarias franchise. It was also agreed that
Bustamante would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled
"Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng BoundaryHulog"5 over the passenger jeepney with Plate No. PVU-660,
Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties
agreed that if Bustamante failed to pay the boundary-hulog for three
days, Villamaria Motors would hold on to the vehicle until
Bustamante paid his arrears, including a penalty of P50.00 a day; in

case Bustamante failed to remit the daily boundary-hulog for a period

of one week, the Kasunduan would cease to have legal effect and
Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the
vehicle without prior authority from Villamaria Motors. Thus,
Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle;
in case of failure to do so, any fine that may be imposed by
government authorities would be charged against his account.
Bustamante further obliged himself to pay for the cost of replacing
any parts of the vehicle that would be lost or damaged due to his
negligence. In case the vehicle sustained serious damage,
Bustamante was obliged to notify Villamaria Motors before
commencing repairs. Bustamante was not allowed to wear slippers,
short pants or undershirts while driving. He was required to be polite
and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more
days and was required to attend any meetings which may be called
from time to time. Aside from the boundary-hulog, Bustamante was
also obliged to pay for the annual registration fees of the vehicle and
the premium for the vehicles comprehensive insurance. Bustamante
promised to strictly comply with the rules and regulations imposed by
Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and
control of Villamaria. As agreed upon, he made daily remittances of
P550.00 in payment of the purchase price of the vehicle. Bustamante
failed to pay for the annual registration fees of the vehicle, but
Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective
boundary-hulog. This prompted Villamaria to serve a
"Paalala,"6 reminding them that under the Kasunduan, failure to pay
the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He
warned the drivers that the Kasunduan would henceforth be strictly
enforced and urged them to comply with their obligation to avoid
litigation.

On July 24, 2000, Villamaria took back the jeepney driven by

Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint 7 for Illegal
Dismissal against Villamaria and his wife Teresita. In his Position
Paper,8 Bustamante alleged that he was employed by Villamaria in
July 1996 under the boundary system, where he was required to
remit P450.00 a day. After one year of continuously working for them,
the spouses Villamaria presented the Kasunduan for his signature,
with the assurance that he (Bustamante) would own the jeepney by
March 2001 after paying P550.00 in daily installments and that he
would thereafter continue driving the vehicle along the same route
under the same franchise. He further narrated that in July 2000, he
informed the Villamaria spouses that the surplus engine of the
jeepney needed to be replaced, and was assured that it would be
done. However, he was later arrested and his drivers license was
confiscated because apparently, the replacement engine that was
installed was taken from a stolen vehicle. Due to negotiations with
the apprehending authorities, the jeepney was not impounded. The
Villamaria spouses took the jeepney from him on July 24, 2000, and
he was no longer allowed to drive the vehicle since then unless he
paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully
prayed that judgment be rendered ordering the respondents, jointly
and severally, the following:
1. Reinstate complainant to his former position without loss
of seniority rights and execute a Deed of Sale in favor of the
complainant relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the
amount of P400.00 a day and other benefits computed from
July 24, 2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00
and P180,000.00 for the expenses incurred by the
complainant in the repair and maintenance of the subject
jeep;
4. Ordering the respondents to refund the amount of One
Hundred (P100.00) Pesos per day counted from August 7,
1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than
P200,000.00;

6. Attorneys fee[s] of not less than 10% of the monetary

award.
Other just and equitable reliefs under the premises are also being
prayed for.9
In their Position Paper,10 the spouses Villamaria admitted the
existence of the Kasunduan, but alleged that Bustamante failed to
pay the P10,000.00 downpayment and the vehicles annual
registration fees. They further alleged that Bustamante eventually
failed to remit the requisite boundary-hulog of P550.00 a day, which
prompted them to issue the Paalaala. Instead of complying with his
obligations, Bustamante stopped making his remittances despite his
daily trips and even brought the jeepney to the province without
permission. Worse, the jeepney figured in an accident and its license
plate was confiscated; Bustamante even abandoned the vehicle in a
gasoline station in Sucat, Paraaque City for two weeks. When the
security guard at the gasoline station requested that the vehicle be
retrieved and Teresita Villamaria asked Bustamante for the keys,
Bustamante told her: "Di kunin ninyo." When the vehicle was finally
retrieved, the tires were worn, the alternator was gone, and the
battery was no longer working.
Citing the cases of Cathedral School of Technology v. NLRC 11 and
Canlubang Security Agency Corporation v. NLRC,12 the spouses
Villamaria argued that Bustamante was not illegally dismissed since
the Kasunduan executed on August 7, 1997 transformed the
employer-employee relationship into that of vendor-vendee. Hence,
the spouses concluded, there was no legal basis to hold them liable
for illegal dismissal. They prayed that the case be dismissed for lack
of jurisdiction and patent lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained
that the rulings of the Court in National Labor Union v.
Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free
Workers v. Abbas16 are germane to the issue as they define the
nature of the owner/operator-driver relationship under the boundary
system. He further reiterated that it was the Villamaria spouses who
presented the Kasunduan to him and that he conformed thereto only
upon their representation that he would own the vehicle after four
years. Moreover, it appeared that the Paalala was duly received by
him, as he, together with other drivers, was made to affix his

signature on a blank piece of paper purporting to be an "attendance

sheet."
On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of
the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as
the PAALALA, to prove their claim that complainant violated the
terms of their contract and afterwards abandoned the vehicle
assigned to him. As against the foregoing, [the] complaints (sic)
mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees.18
Bustamante appealed the decision to the NLRC, 19 insisting that the
Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages,
he kept only the excess of the boundary-hulog which he was
required to remit daily to Villamaria under the agreement.
Bustamante maintained that he remained an employee because he
was engaged to perform activities which were necessary or desirable
to Villamarias trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of
merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby
DISMISSED for reasons not stated in the Labor Arbiter's decision but
mainly on a jurisdictional issue, there being none over the subject
matter of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the complaint.
Bustamante filed a Motion for Reconsideration, which the NLRC
resolved to deny on May 30, 2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
I
IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT
STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY ON
JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING
JURISPRUDENCE WHEN IT DECLARED THAT THE

RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN

PETITIONER AND THE PRIVATE RESPONDENT WAS
DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE
MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of employeremployee and as such, the Labor Arbiter had jurisdiction over his
complaint. He further alleged that it is common knowledge that
operators of passenger jeepneys (including taxis) pay their drivers
not on a regular monthly basis but on commission or boundary basis,
or even the boundary-hulog system. Bustamante asserted that he
was dismissed from employment without any lawful or just cause and
without due notice.
For his part, Villamaria averred that Bustamante failed to adduce
proof of their employer-employee relationship. He further pointed out
that the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He
argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and
sale of jeepneys and not in the business of transporting passengers
for consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle
and were not the same fees as understood in the boundary system.
He added that the boundary-hulog plan was basically a scheme to
help the driver-buyer earn money and eventually pay for the unit in
full, and for the owner to profit not from the daily earnings of the
driver-buyer but from the purchase price of the unit sold. Villamaria
further asserted that the apparently restrictive conditions in the
Kasunduan did not mean that the means and method of driverbuyers conduct was controlled, but were mere ways to preserve the
vehicle for the benefit of both parties: Villamaria would be able to
collect the agreed purchase price, while Bustamante would be
assured that the vehicle would still be in good running condition even
after four years. Moreover, the right of vendor to impose certain
conditions on the buyer should be respected until full ownership of
the property is vested on the latter. Villamaria insisted that the
parallel circumstances obtaining in Singer Sewing Machine
Company v. Drilon24has analogous application to the instant issue.

In its Decision25 dated August 30, 2004, the CA reversed and set
aside the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned
resolutions of the NLRC must be, as they are hereby are,
REVERSED AND SET ASIDE, and judgment entered in favor of
petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante separation pay computed from
the time of his employment up to the time of termination
based on the prevailing minimum wage at the time of
termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to
pay petitioner Jerry Bustamante back wages computed from
the time of his dismissal up to March 2001 based on the
prevailing minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship
between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamarias exercise of
control over Bustamantes conduct in operating the jeepney is
inconsistent with the formers claim that he was not engaged in the
transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not
mentioned in the Kasunduan, it did not mean that Villamaria could
not exercise it. It explained that the existence of an employment
relationship did not depend on how the worker was paid but on the
presence or absence of control over the means and method of the
employees work. In this case, Villamarias directives (to drive
carefully, wear an identification card, don decent attire, park the
vehicle in his garage, and to inform him about provincial trips, etc.)
was a means to control the way in which Bustamante was to go
about his work. In view of Villamarias supervision and control as
employer, the fact that the "boundary" represented installment
payments of the purchase price on the jeepney did not remove the
parties employer-employee relationship.
While the appellate court recognized that a weeks default in paying
the boundary-hulog constituted an additional cause for terminating

Bustamantes employment, it held that the latter was illegally

dismissed. According to the CA, assuming that Bustamante failed to
make the required payments as claimed by Villamaria, the latter
nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither
submitted any police report to support his claim that the vehicle
figured in a mishap nor presented the affidavit of the gas station
guard to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004,
and filed, on September 17, 2004, a motion for reconsideration
thereof. The CA denied the motion in a Resolution 27 dated November
2, 2004, and Villamaria received a copy thereof on November 8,
2004.
Villamaria, now petitioner, seeks relief from this Court via petition for
review on certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess
or lack of jurisdiction in reversing the decision of the Labor Arbiter
and the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was
a combination of employer-employee and vendor-vendee
relationships. The terms and conditions of the Kasunduan clearly
state that he and respondent Bustamante had entered into a
conditional deed of sale over the jeepney; as such, their employeremployee relationship had been transformed into that of vendorvendee. Petitioner insists that he had the right to reserve his title on
the jeepney until after the purchase price thereof had been paid in
full.
In his Comment on the petition, respondent avers that the
appropriate remedy of petitioner was an appeal via a petition for
review on certiorari under Rule 45 of the Rules of Court and not a
special civil action of certiorari under Rule 65. He argues that
petitioner failed to establish that the CA committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in its decision,
as the said ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a
devious circumvention of the Labor Code of the Philippines.
Respondent insists that his juridical relationship with petitioner is that
of employer-employee because he was engaged to perform activities

which were necessary or desirable in the usual business of

petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to
resolve the merits of his petition.
We agree with respondents contention that the remedy of petitioner
from the CA decision was to file a petition for review on certiorari
under Rule 45 of the Rules of Court and not the independent action
of certiorari under Rule 65. Petitioner had 15 days from receipt of the
CA resolution denying his motion for the reconsideration within which
to file the petition under Rule 45.28 But instead of doing so, he filed a
petition for certiorari under Rule 65 on November 22, 2004, which did
not, however, suspend the running of the 15-day reglementary
period; consequently, the CA decision became final and executory
upon the lapse of the reglementary period for appeal. Thus, on this
procedural lapse, the instant petition stands to be dismissed. 29
It must be stressed that the recourse to a special civil action under
Rule 65 of the Rules of Court is proscribed by the remedy of appeal
under Rule 45. As the Court elaborated in Tomas Claudio Memorial
College, Inc. v. Court of Appeals:30
We agree that the remedy of the aggrieved party from a decision or
final resolution of the CA is to file a petition for review on certiorari
under Rule 45 of the Rules of Court, as amended, on questions of
facts or issues of law within fifteen days from notice of the said
resolution. Otherwise, the decision of the CA shall become final and
executory. The remedy under Rule 45 of the Rules of Court is a
mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review
is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a
petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying
the motion for reconsideration of the same. This is based on the
premise that in issuing the assailed decision and resolution, the CA
acted with grave abuse of discretion, amounting to excess or lack of
jurisdiction and there is no plain, speedy and adequate remedy in the
ordinary course of law. A remedy is considered plain, speedy and
adequate if it will promptly relieve the petitioner from the injurious
effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if

appeal is available, for the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive. The aggrieved
party is, likewise, barred from filing a petition for certiorari if the
remedy of appeal is lost through his negligence. A petition for
certiorari is an original action and does not interrupt the course of the
principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent
from further proceeding. A petition for certiorari must be based on
jurisdictional grounds because, as long as the respondent court
acted within its jurisdiction, any error committed by it will amount to
nothing more than an error of judgment which may be corrected or
reviewed only by appeal.31
However, we have also ruled that a petition for certiorari under Rule
65 may be considered as filed under Rule 45, conformably with the
principle that rules of procedure are to be construed liberally,
provided that the petition is filed within the reglementary period under
Section 2, Rule 45 of the Rules of Court, and where valid and
compelling circumstances warrant that the petition be resolved on its
merits.32 In this case, the petition was filed within the reglementary
period and petitioner has raised an issue of substance: whether the
existence of a boundary-hulog agreement negates the employeremployee relationship between the vendor and vendee, and, as a
corollary, whether the Labor Arbiter has jurisdiction over a complaint
for illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter
thereof, as well as, which court or agency of the government has
jurisdiction over the same, are determined by the material allegations
of the complaint in relation to the law involved and the character of
the reliefs prayed for, whether or not the complainant/plaintiff is
entitled to any or all of such reliefs.33 A prayer or demand for relief is
not part of the petition of the cause of action; nor does it enlarge the
cause of action stated or change the legal effect of what is
alleged.34 In determining which body has jurisdiction over a case, the
better policy is to consider not only the status or relationship of the
parties but also the nature of the action that is the subject of their
controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor
Arbiter exclusive original jurisdiction only over the following:

x x x (a) Except as otherwise provided under this Code, the Labor

Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wage, rates of pay,
hours of work, and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relationship, including those
of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or
implementation of collective bargaining agreements,
and those arising from the interpretation or
enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the
same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite.36 The jurisdiction of Labor
Arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which
can only be resolved by reference to the Labor Code, other labor
statutes or their collective bargaining agreement.37 Not every dispute
between an employer and employee involves matters that only the

Labor Arbiter and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. Actions between employers
and employees where the employer-employee relationship is merely
incidental is within the exclusive original jurisdiction of the regular
courts.38 When the principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case falls within
the exclusive jurisdiction of the Labor Arbiter and the NLRC even
though a claim for damages might be asserted as an incident to such
claim.39
We agree with the ruling of the CA that, under the boundary-hulog
scheme incorporated in the Kasunduan, a dual juridical relationship
was created between petitioner and respondent: that of employeremployee and vendor-vendee. The Kasunduan did not extinguish the
employer-employee relationship of the parties extant before the
execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan40 that the jeepney owner/operator-driver relationship under
the boundary system is that of employer-employee and not lessorlessee. This doctrine was affirmed, under similar factual settings, in
Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was
analogously applied to govern the relationships between auto-calesa
owner/operator and driver,43 bus owner/operator and
conductor,44 and taxi owner/operator and driver.45
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latters daily earnings are
remitted to the owner/operator less the excess of the boundary which
represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control
over the chattel leased but the lessee is still ultimately responsible
for the consequences of its use. The management of the business is
still in the hands of the owner/operator, who, being the holder of the
certificate of public convenience, must see to it that the driver follows
the route prescribed by the franchising and regulatory authority, and
the rules promulgated with regard to the business operations. The
fact that the driver does not receive fixed wages but only the excess
of the "boundary" given to the owner/operator is not sufficient to
change the relationship between them. Indubitably, the driver

performs activities which are usually necessary or desirable in the

usual business or trade of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00
daily to petitioner, an amount which represented the boundary of
petitioner as well as respondents partial payment (hulog) of the
purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as
his daily wage. Thus, the daily remittances also had a dual purpose:
that of petitioners boundary and respondents partial payment
(hulog) for the vehicle. This dual purpose was expressly stated in the
Kasunduan. The well-settled rule is that an obligation is not novated
by an instrument that expressly recognizes the old one, changes
only the terms of payment, and adds other obligations not
incompatible with the old provisions or where the new contract
merely supplements the previous one. 47 The two obligations of the
respondent to remit to petitioner the boundary-hulog can stand
together.
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the
agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall
prevail.48 The intention of the contracting parties should be
ascertained by looking at the words used to project their intention,
that is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.49 The parts and clauses
must be interpreted in relation to one another to give effect to the
whole. The legal effect of a contract is to be determined from the
whole read together.50
Under the Kasunduan, petitioner retained supervision and control
over the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG
IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya
ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng
TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay

bilang pampasada o pangangalakal sa malinis at maayos na

pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng
TAUHAN NG IKALAWANG PANIG sa mga bagay na
makapagdudulot ng kahihiyan, kasiraan o pananagutan sa
TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina
ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay
kinakailangang maglagay ng ID Card sa harap ng windshield
upang sa pamamagitan nito ay madaliang malaman kung
ang nagmamaneho ay awtorisado ng VILLAMARIA
MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang
[halaga ng] multa kung sakaling mahuli ang sasakyang ito
na hindi nakakabit ang ID card sa wastong lugar o anuman
kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG
ang materyales o piyesa na papalitan ng nasira o nawala ito
dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe
habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang
sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG,
ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag
ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin
mang Motor Shop na awtorisado ng VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG
PANIG sa panahon ng pamamasada na ang nagmamaneho
ay naka-tsinelas, naka short pants at nakasando lamang.
Dapat ang nagmamaneho ay laging nasa maayos ang
kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang
awtorisado niyang driver ay magpapakita ng magandang
asal sa mga pasaheros at hindi dapat magsasalita ng
masama kung sakali man may pasaherong pilosopo upang
maiwasan ang anumang kaguluhan na maaaring
kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY

HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng
tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS
ang may karapatang mangasiwa ng nasabing sasakyan
hanggang matugunan ang lahat ng responsibilidad. Ang
halagang dapat bayaran sa opisina ay may karagdagang
multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa
ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang
linggo ay nangangahulugan na ang kasunduang ito ay wala
ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan sa TAUHAN NG UNANG
PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang
bayad sa rehistro, comprehensive insurance taon-taon at
kahit anong uri ng aksidente habang ito ay hinuhulugan pa
sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong
dumalo sa pangkalahatang pagpupulong ng VILLAMARIA
MOTORS sa tuwing tatawag ang mga tagapangasiwa nito
upang maipaabot ang anumang mungkahi sa ikasusulong
ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa
sa lahat ng mga patakaran na magkakaroon ng pagbabago
o karagdagan sa mga darating na panahon at hindi magiging
hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS
sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi
magiging buwaya sa pasahero upang hindi kainisan ng
kapwa driver at maiwasan ang pagkakasangkot sa anumang
gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin
ang kalagayan lalo na sa umaga bago pumasada, at sa
hapon o gabi naman ay sisikapin mapanatili ang kalinisan
nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila
at aabutin ng dalawa o higit pang araw sa lalawigan ay
dapat lamang na ipagbigay alam muna ito sa VILLAMARIA
MOTORS upang maiwasan ang mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan

ang pakikipag-unahan sa kaninumang sasakyan upang
maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay
mayroon sasabihin sa VILLAMARIA MOTORS mabuti man
or masama ay iparating agad ito sa kinauukulan at iwasan
na iparating ito kung [kani-kanino] lamang upang maiwasan
ang anumang usapin. Magsadya agad sa opisina ng
VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong
galang at puso kong sinasang-ayunan at buong sikap na
pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and
respondent, as vendee, entered into a contract to sell the jeepney on
a daily installment basis of P550.00 payable in four years and that
petitioner would thereafter become its owner. A contract is one of
conditional sale, oftentimes referred to as contract to sell, if the
ownership or title over the
property sold is retained by the vendor, and is not passed to the
vendee unless and until there is full payment of the purchase price
and/or upon faithful compliance with the other terms and conditions
that may lawfully be stipulated.52 Such payment or satisfaction of
other preconditions, as the case may be, is a positive suspensive
condition, the failure of which is not a breach of contract, casual or
serious, but simply an event that would prevent the obligation of the
vendor to convey title from acquiring binding force. 53 Stated
differently, the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and
uncertain event so that if the suspensive condition does not take
place, the parties would stand as if the conditional obligation had
never existed.54 The vendor may extrajudicially terminate the
operation of the contract, refuse conveyance, and retain the sums or
installments already received, where such rights are expressly
provided for.55
Under the boundary-hulog scheme, petitioner retained ownership of
the jeepney although its material possession was vested in
respondent as its driver. In case respondent failed to make his
P550.00 daily installment payment for a week, the agreement would

be of no force and effect and respondent would have to return the

jeepney to petitioner; the employer-employee relationship would
likewise be terminated unless petitioner would allow respondent to
continue driving the jeepney on a boundary basis of P550.00 daily
despite the termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner
and respondent was not negated by the foregoing stipulation in the
Kasunduan, considering that petitioner retained control of
respondents conduct as driver of the vehicle. As correctly ruled by
the CA:
The exercise of control by private respondent over petitioners
conduct in operating the jeepney he was driving is inconsistent with
private respondents claim that he is, or was, not engaged in the
transportation business; that, even if petitioner was allowed to let
some other person drive the unit, it was not shown that he did so;
that the existence of an employment relation is not dependent on
how the worker is paid but on the presence or absence of control
over the means and method of the work; that the amount earned in
excess of the "boundary hulog" is equivalent to wages; and that the
fact that the power of dismissal was not mentioned in the Kasunduan
did not mean that private respondent never exercised such power, or
could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or
to wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for two
days of more, or to drive the unit carefully, etc. necessarily related to
control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing Machine
but National Labor Union since the latter case involved jeepney
owners/operators and jeepney drivers, and that the fact that the
"boundary" here represented installment payment of the purchase
price on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and
control by the employer.56
Neither is such juridical relationship negated by petitioners claim that
the terms and conditions in the Kasunduan relative to respondents
behavior and deportment as driver was for his and respondents
benefit: to insure that respondent would be able to pay the requisite
daily installment of P550.00, and that the vehicle would still be in

good condition despite the lapse of four years. What is primordial is

that petitioner retained control over the conduct of the respondent as
driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise,
and the rules and regulations of the Land Transportation Regulatory
Board are duly complied with. Moreover, in a business
establishment, an identification card is usually provided not just as a
security measure but to mainly identify the holder thereof as a bona
fide employee of the firm who issues it.57
As respondents employer, it was the burden of petitioner to prove
that respondents termination from employment was for a lawful or
just cause, or, at the very least, that respondent failed to make his
daily remittances of P550.00 as boundary. However, petitioner failed
to do so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected
in accordance with law. The just and authorized causes for
termination of employment are enumerated under Articles 282, 283
and 284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties
here, the default in the remittance of the boundary hulog for one
week or longer may be considered an additional cause for
termination of employment. The reason is because the Kasunduan
would be of no force and effect in the event that the purchaser failed
to remit the boundary hulog for one week. The Kasunduan in this
case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol
pa.
Moreover, well-settled is the rule that, the employer has the burden
of proving that the dismissal of an employee is for a just cause. The
failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper before
the Labor Arbiter, alleged that petitioner failed to pay the

miscellaneous fee of P10,000.00 and the yearly registration of the

unit; that petitioner also stopped remitting the "boundary hulog,"
prompting him (private respondent) to issue a "Paalala," which
petitioner however ignored; that petitioner even brought the unit to
his (petitioners) province without informing him (private respondent)
about it; and that petitioner eventually abandoned the vehicle at a
gasoline station after figuring in an accident. But private respondent
failed to substantiate these allegations with solid, sufficient proof.
Notably, private respondents allegation viz, that he retrieved the
vehicle from the gas station, where petitioner abandoned it,
contradicted his statement in the Paalala that he would enforce the
provision (in the Kasunduan) to the effect that default in the
remittance of the boundary hulog for one week would result in the
forfeiture of the unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng BOUNDARY HULOG
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan
particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng
wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin
na pong ipatutupad ang nasabing Kasunduan kayat aking pinaaalala
sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang
maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang
hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo
isasauli ang inyong sasakyan na hinuhulugan na ang mga
magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo
pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR."
If it were true that petitioner did not remit the boundary hulog for one
week or more, why did private respondent not forthwith take steps to

recover the unit, and why did he have to wait for petitioner to
abandon it?1avvphil.net
On another point, private respondent did not submit any police report
to support his claim that petitioner really figured in a vehicular
mishap. Neither did he present the affidavit of the guard from the gas
station to substantiate his claim that petitioner abandoned the unit
there.58
Petitioners claim that he opted not to terminate the employment of
respondent because of magnanimity is negated by his (petitioners)
own evidence that he took the jeepney from the respondent only on
July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
decision of the Court of Appeals in CA-G.R. SP No. 78720 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARESSANTIAGO
Associate Justice

MA. ALICIA AUSTRIAMARTINEZ

Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice
C E R TI F I CATI O N
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
SECOND DIVISION
G.R. No. 142293
February 27, 2003
VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING
CORPORATION, and SBT1 TRUCKING
CORPORATION, petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT,
respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision 2 of
the Court of Appeals dated February 29, 2000, in CA-G.R. SP
No. 52671, affirming with modification the decision 3 of the
National Labor Relations Commission promulgated on June
20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also
pray for the reinstatement of the decision4 of the Labor
Arbiter in NLRC NCR Case No. 00-09-06717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot5 started
working as a truck helper for petitioners family-owned
trucking business named Vicente Sy Trucking. In 1965, he
became a truck driver of the same family business, renamed
T. Paulino Trucking Service, later 6Bs Trucking Corporation
in 1985, and thereafter known as SBT Trucking Corporation
since 1994. Throughout all these changes in names and for
36 years, private respondent continuously served the
trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been
incurring absences as he was suffering from various
ailments. Particularly causing him pain was his left thigh,
which greatly affected the performance of his task as a
driver. He inquired about his medical and retirement
benefits with the Social Security System (SSS) on April 25,

1994, but discovered that his premium payments had not

been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994.
On May 27th, he was medically examined and treated for
EOR, presleyopia, hypertensive retinopathy G II (Annexes
"G-5" and "G-3", pp. 48, 104, respectively),6 HPM, UTI,
Osteoarthritis (Annex "G-4", p. 105),7 and heart enlargement
(Annex G, p. 107).8 On said grounds, Belen Paulino of the
SBT Trucking Service management told him to file a formal
request for extension of his leave. At the end of his weeklong absence, Sahot applied for extension of his leave for
the whole month of June, 1994. It was at this time when
petitioners allegedly threatened to terminate his
employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was
facing dismissal if he refused to work, But he could not retire
on pension because petitioners never paid his correct SSS
premiums. The fact remained he could no longer work as his
left thigh hurt abominably. Petitioners ended his dilemma.
They carried out their threat and dismissed him from work,
effective June 30, 1994. He ended up sick, jobless and
penniless.
On September 13, 1994, Sahot filed with the NLRC NCR
Arbitration Branch, a complaint for illegal dismissal,
docketed as NLRC NCR Case No. 00-09-06717-94. He prayed
for the recovery of separation pay and attorneys fees
against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino,
Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs
Trucking and SBT Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking
business in the 1950s but denied employing helpers and
drivers. They contend that private respondent was not
illegally dismissed as a driver because he was in fact
petitioners industrial partner. They add that it was not until
the year 1994, when SBT Trucking Corporation was

established, and only then did respondent Sahot become an

employee of the company, with a monthly salary that
reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1,
1994, Sahot went on leave and was not able to report for
work for almost seven days. On June 1, 1994, Sahot asked
permission to extend his leave of absence until June 30,
1994. It appeared that from the expiration of his leave,
private respondent never reported back to work nor did he
file an extension of his leave. Instead, he filed the complaint
for illegal dismissal against the trucking company and its
owners.
Petitioners add that due to Sahots refusal to work after the
expiration of his authorized leave of absence, he should be
deemed to have voluntarily resigned from his work. They
contended that Sahot had all the time to extend his leave or
at least inform petitioners of his health condition. Lastly,
they cited NLRC Case No. RE-4997-76, entitled "Manuelito
Jimenez et al. vs. T. Paulino Trucking Service," as a defense
in view of the alleged similarity in the factual milieu and
issues of said case to that of Sahots, hence they are in pari
material and Sahots complaint ought also to be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter
Ariel Cadiente Santos, ruled that there was no illegal
dismissal in Sahots case. Private respondent had failed to
report to work. Moreover, said the Labor Arbiter, petitioners
and private respondent were industrial partners before
January 1994. The Labor Arbiter concluded by ordering
petitioners to pay "financial assistance" of P15,000 to Sahot
for having served the company as a regular employee since
January 1994 only.
On appeal, the National Labor Relations Commission
modified the judgment of the Labor Arbiter. It declared that
private respondent was an employee, not an industrial
partner, since the start. Private respondent Sahot did not

abandon his job but his employment was terminated on

account of his illness, pursuant to Article 2849 of the Labor
Code. Accordingly, the NLRC ordered petitioners to pay
private respondent separation pay in the amount of
P60,320.00, at the rate of P2,080.00 per year for 29 years of
service.
Petitioners assailed the decision of the NLRC before the
Court of Appeals. In its decision dated February 29, 2000,
the appellate court affirmed with modification the judgment
of the NLRC. It held that private respondent was indeed an
employee of petitioners since 1958. It also increased the
amount of separation pay awarded to private respondent to
P74,880, computed at the rate of P2,080 per year for 36
years of service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with
MODIFICATION. SB Trucking Corporation is hereby directed
to pay complainant Jaime Sahot the sum of SEVENTY-FOUR
THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as
and for his separation pay.10
Hence, the instant petition anchored on the following
contentions:
I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE
QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION
THE DECISION OF NATIONAL LABOR RELATIONS
COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT
AT NAUGHT ARTICLE 402 OF THE CIVIL CODE.11
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME
COURT RULING THAT THE NATIONAL LABOR RELATIONS
COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE
LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION
TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE
WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT
UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL
REGION (305 SCRA 233).12

III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY
RESPONDENT SBT TRUCKING CORPORATION.13
Three issues are to be resolved: (1) Whether or not an
employer-employee relationship existed between petitioners
and respondent Sahot; (2) Whether or not there was valid
dismissal; and (3) Whether or not respondent Sahot is
entitled to separation pay.
Crucial to the resolution of this case is the determination of
the first issue. Before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.14
Petitioners invoke the decision of the Labor Arbiter Ariel
Cadiente Santos which found that respondent Sahot was not
an employee but was in fact, petitioners industrial
partner.15 It is contended that it was the Labor Arbiter who
heard the case and had the opportunity to observe the
demeanor and deportment of the parties. The same
conclusion, aver petitioners, is supported by substantial
evidence.16 Moreover, it is argued that the findings of fact of
the Labor Arbiter was wrongly overturned by the NLRC when
the latter made the following pronouncement:
We agree with complainant that there was error committed
by the Labor Arbiter when he concluded that complainant
was an industrial partner prior to 1994. A computation of the
age of complainant shows that he was only twenty-three
(23) years when he started working with respondent as
truck helper. How can we entertain in our mind that a
twenty-three (23) year old man, working as a truck helper,
be considered an industrial partner. Hence we rule that
complainant was only an employee, not a partner of
respondents from the time complainant started working for
respondent.17
Because the Court of Appeals also found that an employeremployee relationship existed, petitioners aver that the

appellate courts decision gives an "imprimatur" to the

"illegal" finding and conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an
industrial partner of petitioners. There was no written
agreement, no proof that he received a share in petitioners
profits, nor was there anything to show he had any
participation with respect to the running of the business. 18
The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the
employees conduct. The most important element is the
employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means
and methods to accomplish it.19
As found by the appellate court, petitioners owned and
operated a trucking business since the 1950s and by their
own allegations, they determined private respondents
wages and rest day.20 Records of the case show that private
respondent actually engaged in work as an employee.
During the entire course of his employment he did not have
the freedom to determine where he would go, what he
would do, and how he would do it. He merely followed
instructions of petitioners and was content to do so, as long
as he was paid his wages. Indeed, said the CA, private
respondent had worked as a truck helper and driver of
petitioners not for his own pleasure but under the latters
control.
Article 176721 of the Civil Code states that in a contract of
partnership two or more persons bind themselves to
contribute money, property or industry to a common fund,
with the intention of dividing the profits among
themselves.22 Not one of these circumstances is present in
this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not

contribute money, property or industry for the purpose of

engaging in the supposed business. There is no proof that
he was receiving a share in the profits as a matter of course,
during the period when the trucking business was under
operation. Neither is there any proof that he had actively
participated in the management, administration and
adoption of policies of the business. Thus, the NLRC and the
CA did not err in reversing the finding of the Labor Arbiter
that private respondent was an industrial partner from 1958
to 1994.
On this point, we affirm the findings of the appellate court
and the NLRC. Private respondent Jaime Sahot was not an
industrial partner but an employee of petitioners from 1958
to 1994. The existence of an employer-employee
relationship is ultimately a question of fact23 and the
findings thereon by the NLRC, as affirmed by the Court of
Appeals, deserve not only respect but finality when
supported by substantial evidence. Substantial evidence is
such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.24
Time and again this Court has said that "if doubt exists
between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the
latter."25 Here, we entertain no doubt. Private respondent
since the beginning was an employee of, not an industrial
partner in, the trucking business.
Coming now to the second issue, was private respondent
validly dismissed by petitioners?
Petitioners contend that it was private respondent who
refused to go back to work. The decision of the Labor Arbiter
pointed out that during the conciliation proceedings,
petitioners requested respondent Sahot to report back for
work. However, in the same proceedings, Sahot stated that
he was no longer fit to continue working, and instead he
demanded separation pay. Petitioners then retorted that if

Sahot did not like to work as a driver anymore, then he

could be given a job that was less strenuous, such as
working as a checker. However, Sahot declined that
suggestion. Based on the foregoing recitals, petitioners
assert that it is clear that Sahot was not dismissed but it
was of his own volition that he did not report for work
anymore.
In his decision, the Labor Arbiter concluded that:
While it may be true that respondents insisted that
complainant continue working with respondents despite his
alleged illness, there is no direct evidence that will prove
that complainants illness prevents or incapacitates him
from performing the function of a driver. The fact remains
that complainant suddenly stopped working due to boredom
or otherwise when he refused to work as a checker which
certainly is a much less strenuous job than a driver. 26
But dealing the Labor Arbiter a reversal on this score the
NLRC, concurred in by the Court of Appeals, held that:
While it was very obvious that complainant did not have any
intention to report back to work due to his illness which
incapacitated him to perform his job, such intention cannot
be construed to be an abandonment. Instead, the same
should have been considered as one of those falling under
the just causes of terminating an employment. The
insistence of respondent in making complainant work did
not change the scenario.
It is worthy to note that respondent is engaged in the
trucking business where physical strength is of utmost
requirement (sic). Complainant started working with
respondent as truck helper at age twenty-three (23), then as
truck driver since 1965. Complainant was already fifty-nine
(59) when the complaint was filed and suffering from
various illness triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to
show by substantial evidence that the termination was for

lawful cause and validly made.28 Article 277(b) of the Labor

Code puts the burden of proving that the dismissal of an
employee was for a valid or authorized cause on the
employer, without distinction whether the employer admits
or does not admit the dismissal.29 For an employees
dismissal to be valid, (a) the dismissal must be for a valid
cause and (b) the employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to
terminate an employee on the ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer
may terminate the services of an employee who has been
found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health
as well as the health of his co-employees: xxx
However, in order to validly terminate employment on this
ground, Book VI, Rule I, Section 8 of the Omnibus
Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the
employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health
or to the health of his co-employees, the employer shall not
terminate his employment unless there is a certification by
competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a
period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the
period, the employer shall not terminate the employee but
shall ask the employee to take a leave. The employer shall
reinstate such employee to his former position immediately
upon the restoration of his normal health. (Italics supplied).
As this Court stated in Triple Eight integrated Services, Inc.
vs. NLRC,31 the requirement for a medical certificate under
Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of

the employees illness and thus defeat the public policy in

the protection of labor.
In the case at bar, the employer clearly did not comply with
the medical certificate requirement before Sahots dismissal
was effected. In the same case of Sevillana vs. I.T.
(International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of
the employee rests on the employer, the latter should
likewise bear the burden of showing that the requisites for a
valid dismissal due to a disease have been complied with. In
the absence of the required certification by a competent
public health authority, this Court has ruled against the
validity of the employees dismissal. It is therefore
incumbent upon the private respondents to prove by the
quantum of evidence required by law that petitioner was not
dismissed, or if dismissed, that the dismissal was not illegal;
otherwise, the dismissal would be unjustified. This Court will
not sanction a dismissal premised on mere conjectures and
suspicions, the evidence must be substantial and not
arbitrary and must be founded on clearly established facts
sufficient to warrant his separation from work.32
In addition, we must likewise determine if the procedural
aspect of due process had been complied with by the
employer.
From the records, it clearly appears that procedural due
process was not observed in the separation of private
respondent by the management of the trucking company.
The employer is required to furnish an employee with two
written notices before the latter is dismissed: (1) the notice
to apprise the employee of the particular acts or omissions
for which his dismissal is sought, which is the equivalent of a
charge; and (2) the notice informing the employee of his
dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his
defense.33 These, the petitioners failed to do, even only for

record purposes. What management did was to threaten the

employee with dismissal, then actually implement the threat
when the occasion presented itself because of private
respondents painful left thigh.
All told, both the substantive and procedural aspects of due
process were violated. Clearly, therefore, Sahots dismissal
is tainted with invalidity.
On the last issue, as held by the Court of Appeals,
respondent Jaime Sahot is entitled to separation pay. The
law is clear on the matter. An employee who is terminated
because of disease is entitled to "separation pay equivalent
to at least one month salary or to one-half month salary for
every year of service, whichever is greater xxx." 34Following
the formula set in Art. 284 of the Labor Code, his separation
pay was computed by the appellate court at P2,080 times
36 years (1958 to 1994) or P74,880. We agree with the
computation, after noting that his last monthly salary was
P4,160.00 so that one-half thereof is P2,080.00. Finding no
reversible error nor grave abuse of discretion on the part of
appellate court, we are constrained to sustain its decision.
To avoid further delay in the payment due the separated
worker, whose claim was filed way back in 1994, this
decision is immediately executory. Otherwise, six percent
(6%) interest per annum should be charged thereon, for any
delay, pursuant to provisions of the Civil Code.
WHEREFORE, the petition is DENIED and the decision of
the Court of Appeals dated February 29, 2000 is AFFIRMED.
Petitioners must pay private respondent Jaime Sahot his
separation pay for 36 years of service at the rate of one-half
monthly pay for every year of service, amounting to
P74,880.00, with interest of six per centum (6%) per annum
from finality of this decision until fully paid.
Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., no part

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and
CECILIO G. INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA
J. DIOSANA (Labor Arbiter, Department of Labor and
Employment, National Capital Region), SANDIGAN NG
MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its
members, JACINTO GARCIANO, ALFREDO C. BASCO,
VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L.
ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO,
VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO,
LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN
A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA
ALCOCEBA and MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed
by private respondents against herein petitioners assails the
decision of respondent National Labor Relations Commission
in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng
Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Makati Haberdashery and/or Toppers Makati, et al." and
NLRC CASE No. 2-428-85 entitled "Sandigan Ng

Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.

Toppers Makati, et al.", affirming the decision of the Labor
Arbiter who jointly heard and decided aforesaid cases,
finding: (a) petitioners guilty of illegal dismissal and ordering
them to reinstate the dismissed workers and (b) the
existence of employer-employee relationship and granting
respondent workers by reason thereof their various
monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have
been working for petitioner Makati Haberdashery, Inc. as
tailors, seamstress, sewers, basters (manlililip) and
"plantsadoras". They are paid on a piece-rate basis except
Maria Angeles and Leonila Serafina who are paid on a
monthly basis. In addition to their piece-rate, they are given
a daily allowance of three (P 3.00) pesos provided they
report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30
a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday and
during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a
labor organization of the respondent workers, filed a
complaint docketed as NLRC NCR Case No. 7-2603-84 for (a)
underpayment of the basic wage; (b) underpayment of living
allowance; (c) non-payment of overtime work; (d) nonpayment of holiday pay; (e) non-payment of service
incentive pay; (f) 13th month pay; and (g) benefits provided
for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84,
private respondent Dioscoro Pelobello left with Salvador
Rivera, a salesman of petitioner Haberdashery, an open
package which was discovered to contain a "jusi" barong
tagalog. When confronted, Pelobello replied that the same
was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the

design of petitioner Haberdashery. But in the afternoon,

when again questioned about said barong, Pelobello and
Zapata denied ownership of the same. Consequently a
memorandum was issued to each of them to explain on or
before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial
and in direct competition with the business of the
company. 2 Both respondents allegedly did not submit their
explanation and did not report for work. 3 Hence, they were
dismissed by petitioners on February 4, 1985. They
countered by filing a complaint for illegal dismissal docketed
as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered
judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR
Case No. 2-428-85 finding respondents guilty of illegal
dismissal and ordering them to reinstate Dioscoro Pelobello
and Casimiro Zapata to their respective or similar positions
without loss of seniority rights, with full backwages from July
4, 1985 up to actual reinstatement. The charge of unfair
labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims
for underpayment re violation of the minimum wage law is
hereby ordered dismissed for lack of merit.
Respondents are hereby found to have violated the decrees
on the cost of living allowance, service incentive leave pay
and the 13th Month Pay. In view thereof, the economic
analyst of the Commission is directed to compute the
monetary awards due each complainant based on the
available records of the respondents retroactive as of three
years prior to the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the
NLRC. The latter on March 30, 1988 affirmed said decision

but limited the backwages awarded the Dioscoro Pelobello

and Casimiro Zapata to only one (1) year. 6
After their motion for reconsideration was denied,
petitioners filed the instant petition raising the following
issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN
PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY
CLAIMS DESPITE THE FINDING THAT THEY ARE NOT
ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY
DISMISSED. 7
The first issue which is the pivotal issue in this case is
resolved in favor of private respondents. We have
repeatedly held in countless decisions that the test of
employer-employee relationship is four-fold: (1) the
selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct. It is the so called
"control test" that is the most important element. 8 This
simply means the determination of whether the employer
controls or has reserved the right to control the employee
not only as to the result of the work but also as to the
means and method by which the same is to be
accomplished. 9
The facts at bar indubitably reveal that the most important
requisite of control is present. As gleaned from the
operations of petitioner, when a customer enters into a
contract with the haberdashery or its proprietor, the latter
directs an employee who may be a tailor, pattern maker,

sewer or "plantsadora" to take the customer's

measurements, and to sew the pants, coat or shirt as
specified by the customer. Supervision is actively
manifested in all these aspects the manner and quality of
cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident
in this memorandum issued by Assistant Manager Cecilio B.
Inocencio, Jr. dated May 30, 1981 addressed to Topper's
Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the
undersigned Roger Valderama, Ruben Delos Reyes and Ofel
Bautista. Other than this person (sic) must ask permission to
the above mentioned before giving orders or instructions to
the tailors.
B. Before accepting the job orders tailors must check the
materials, job orders, due dates and other things to
maximize the efficiency of our production. The materials
should be checked (sic) if it is matched (sic) with the
sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one
day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your
supervisors. If you have many due dates for certain day,
advise Ruben or Ofel at once so that they can make
necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending
on customs (sic) must ask first or must advise the tailors
regarding the due dates so that we can eliminate what we
call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor
inside our shop, consult with me at once settle the problem.
Fighting inside the shop is strictly prohibited. Any tailor
violating this memorandum will be subject to disciplinary
action.
For strict compliance. 10

From this memorandum alone, it is evident that petitioner

has reserved the right to control its employees not only as
to the result but also the means and methods by which the
same are to be accomplished. That private respondents are
regular employees is further proven by the fact that they
have to report for work regularly from 9:30 a.m. to 6:00 or
7:00 p.m. and are paid an additional allowance of P 3.00
daily if they report for work before 9:30 a.m. and which is
forfeited when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees,
necessarily the argument that they are independent
contractors must fail. As established in the preceding
paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary
were subject to the control of petitioners from the beginning
of their tasks to their completion. Unlike independent
contractors who generally rely on their own resources, the
equipment, tools, accessories, and paraphernalia used by
private respondents are supplied and owned by petitioners.
Private respondents are totally dependent on petitioners in
all these aspects.
Coming now to the second issue, there is no dispute that
private respondents are entitled to the Minimum Wage as
mandated by Section 2(g) of Letter of Instruction No. 829,
Rules Implementing Presidential Decree No. 1614 and
reiterated in Section 3(f), Rules Implementing Presidential
Decree 1713 which explicitly states that, "All employees
paid by the result shall receive not less than the applicable
new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established
by the Secretary of Labor. ..." 12 No such rate has been
established in this case.
But all these notwithstanding, the question as to whether or
not there is in fact an underpayment of minimum wages to
private respondents has already been resolved in the

decision of the Labor Arbiter where he stated: "Hence, for

lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage,
their claims for underpayment re violation of the Minimum
Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must
perforce fall." 13
The records show that private respondents did not appeal
the above ruling of the Labor Arbiter to the NLRC; neither
did they file any petition raising that issue in the Supreme
Court. Accordingly, insofar as this case is concerned, that
issue has been laid to rest. As to private respondents, the
judgment may be said to have attained finality. For it is a
well-settled rule in this jurisdiction that "an appellee who
has not himself appealed cannot obtain from the appellate
court-, any affirmative relief other than the ones granted in
the decision of the court below. " 14
As a consequence of their status as regular employees of
the petitioners, they can claim cost of living allowance. This
is apparent from the provision defining the employees
entitled to said allowance, thus: "... All workers in the private
sector, regardless of their position, designation or status,
and irrespective of the method by which their wages are
paid. " 15
Private respondents are also entitled to claim their 13th
Month Pay under Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to
all employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission,
boundary, or task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the
time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the

employer shall be covered by this issuance insofar as such

workers are concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to
Minimum Wage, COLA and 13th Month Pay, they are not
entitled to service incentive leave pay because as piece-rate
workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof,
they fall under one of the exceptions stated in Section 1(d),
Rule V, Implementing Regulations, Book III, Labor Code. For
the same reason private respondents cannot also claim
holiday pay (Section 1(e), Rule IV, Implementing
Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public
respondents have misread the evidence, for it does show
that a violation of the employer's rules has been committed
and the evidence of such transgression, the copied barong
tagalog, was in the possession of Pelobello who pointed to
Zapata as the owner. When required by their employer to
explain in a memorandum issued to each of them, they not
only failed to do so but instead went on AWOL (absence
without official leave), waited for the period to explain to
expire and for petitioner to dismiss them. They thereafter
filed an action for illegal dismissal on the far-fetched ground
that they were dismissed because of union activities.
Assuming that such acts do not constitute abandonment of
their jobs as insisted by private respondents, their blatant
disregard of their employer's memorandum is undoubtedly
an open defiance to the lawful orders of the latter, a
justifiable ground for termination of employment by the
employer expressly provided for in Article 283(a) of the
Labor Code as well as a clear indication of guilt for the
commission of acts inimical to the interests of the employer,
another justifiable ground for dismissal under the same
Article of the Labor Code, paragraph (c). Well established in
our jurisprudence is the right of an employer to dismiss an

employee whose continuance in the service is inimical to the

employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of
private respondents was submitted gave no credence to
their version and found their excuses that said barong
tagalog was the one they got from the embroiderer for the
Assistant Manager who was investigating them,
unbelievable.
Under the circumstances, it is evident that there is no illegal
dismissal of said employees. Thus, We have ruled that:
No employer may rationally be expected to continue in
employment a person whose lack of morals, respect and
loyalty to his employer, regard for his employer's rules, and
appreciation of the dignity and responsibility of his office,
has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for
the rights and welfare of the working class, is meet and
proper. That in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writings should be
resolved in the former's favor, is not an unreasonable or
unfair rule. But that disregard of the employer's own rights
and interests can be justified by that concern and solicitude
is unjust and unacceptable. (Stanford Microsystems, Inc. v.
NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the
employer.17 More importantly, while the Constitution is
committed to the policy of social justice and the protection
of the working class, it should not be supposed that every
labor dispute will automatically be decided in favor of
labor. 18
Finally, it has been established that the right to dismiss or
otherwise impose discriplinary sanctions upon an employee
for just and valid cause, pertains in the first place to the

employer, as well as the authority to determine the

existence of said cause in accordance with the norms of due
process. 19
There is no evidence that the employer violated said norms.
On the contrary, private respondents who vigorously insist
on the existence of employer-employee relationship,
because of the supervision and control of their employer
over them, were the very ones who exhibited their lack of
respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner

Haberdashery had valid grounds to terminate the services of
private respondents.
WHEREFORE, the decision of the National Labor Relations
Commission dated March 30, 1988 and that of the Labor
Arbiter dated June 10, 1986 are hereby modified. The
complaint filed by Pelobello and Zapata for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 is dismissed for
lack of factual and legal bases. Award of service incentive
leave pay to private respondents is deleted.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.