Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitioner

vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS
UNION-BAGUIO (SIMACUB), respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then
Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration in
the case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of
Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB)" docketed as OS-
MA-A-7-119-89 (IRD Case No. 02-89 MED).

On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining
agent of all collectors of the Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the
Company").

The Company opposed the petition mainly on the ground that the union members are actually not employees but are
independent contractors as evidenced by the collection agency agreement which they signed.

The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members
and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed
it. The motion for reconsideration of the Secretary's resolution was denied. Hence, this petition in which the Company
alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in that:

a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of
employer-employee relationship is at issue;

b) the right of petitioner to due process was denied when the evidence of the union members' being commission
agents was disregarded by the Labor Secretary;

c) the public respondents patently erred in finding that there exists an employer-employee relationship;

d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees
but are independent contractors.

The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Company's
position that the union members are independent contractors. To prove that union members are employees, it is asserted
that they "perform the most desirable and necessary activities for the continuous and effective operations of the business
of the petitioner Company" (citing Article 280 of the Labor Code). They add that the termination of the agreement by the
petitioner pending the resolution of the case before the DOLE "only shows the weakness of petitioner's stand" and was
"for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to self-
organization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of the Omnibus
Rules Implementing the Labor Code, which defines job-contracting, they cannot legally qualify as independent contractors
who must be free from control of the alleged employer, who carry independent businesses and who have substantial
capital or investment in the form of equipment, tools, and the like necessary in the conduct of the business.

The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that
no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize for
purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are
generally considered in the determination of the employer-employee relationship; "(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
— although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976];
Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers,
Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity
Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).

The Collection Agency Agreement defines the relationship between the Company and each of the union members who
signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a
collecting agent" who is to be considered at all times as an independent contractor and not employee of the Company; (b)
collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent is paid his
compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on said
collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful
performance and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and
conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and renewable on a
yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly collection
performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless
the agent has a pending obligation or indebtedness in favor of the Company.

Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They
quote paragraph 2 which states that an agent shall utilize only receipt forms authorized and issued by the Company. They
also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as required a
report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly collection quota
required by the Company is deemed by respondents as a control measure over the means by which an agent is to
perform his services.

The nature of the relationship between a company and its collecting agents depends on the circumstances of each
particular relationship. Not all collecting agents are employees and neither are all collecting agents independent
contractors. The collectors could fall under either category depending on the facts of each case.

The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he
is explicitly described as such but also because the provisions permit him to perform collection services for the company
without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the
contents of the agreement, we rule in favor of the petitioner.

The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports
shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of
collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of
avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the
use of standard report forms as well as the regular time within which to submit a report of collection are intended to
facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only
with respect to the end result of the collection since the requirements regulate the things to be done after the performance
of the collection job or the rendition of the service.

The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to
encourage a collecting agent to report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives a
bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the
contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can
choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former
take control only over the amount of collection, which is a result of the job performed.

The respondents' contention that the union members are employees of the Company is based on selected provisions of
the Agreement but ignores the following circumstances which respondents never refuted either in the trial proceedings
before the labor officials nor in its pleadings filed before this Court.

1. The collection agents are not required to observe office hours or report to Singer's office everyday except,
naturally and necessarily, for the purpose of remitting their collections.

2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the
part of the collection agents from working elsewhere. Nor are these agents required to account for their time and
submit a record of their activity.
 3. The manner and method of effecting collections are left solely to the discretion of the collection agents without
any interference on the part of Singer.

4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts
assigned to them.

5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the
amounts of collection each of them make. They do not receive any commission if they do not effect any collection
even if they put a lot of effort in collecting. They are paid commission on the basis of actual collections.

6. The commissions earned by the collection agents are directly deducted by them from the amount of collections
they are able to effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8)

If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they
should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there seems
to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their position.

A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee
relationship between the Company and the collection agents cannot be sustained.

The plain language of the agreement reveals that the designation as collection agent does not create an employment
relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the
first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La
Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]). No such words as
"to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the required working
hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v.
Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA
924 [1967] which involved commission agents, this Court had the occasion to rule, thus:

We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly
approximates that of an independent contractor than that of an employee. The latter is paid for the labor he
performs, that is, for the acts of which such labor consists the former is paid for the result thereof . . . .

xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would
not necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by
the tangible results he produces."

Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame
imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See also Social
Security System v. Court of Appeals, 30 SCRA 210 [1969]).

The grounds specified in the contract for termination of the relationship do not support the view that control exists "for the
causes of termination thus specified have no relation to the means and methods of work that are ordinarily required of or
imposed upon employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra)

The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There
is nothing in the agreement which implies control by the Company not only over the end to be achieved but also over the
means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).

The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor
Code to have no basis. The definition that regular employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party
shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business)
even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in
an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining
the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form
a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in
dispute.

Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this
case.1âwphi1 Respondents assert that the said provision on job contracting requires that for one to be considered an
independent contractor, he must have "substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business." There is no showing that a collection
agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code
which provides:

Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall
be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.

xxx xxx xxx

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him." (p. 20)

It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer is
solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is proven that
there is a job-contracting situation.

The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner
itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the union members are not its
employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment relationship to the
jurisdiction of the DOLE which was faced with a dispute on an application for certification election.

The Court finds that since private respondents are not employees of the Company, they are not entitled to the
constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no
constitutional and legal basis for their "union" to be granted their petition for direct certification. This Court made this
pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra:

. . . The question of whether employer-employee relationship exists is a primordial consideration before extending
labor benefits under the workmen's compensation, social security, medicare, termination pay and labor relations
law. It is important in the determination of who shall be included in a proposed bargaining unit because, it is
the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees.
Failure to establish this juridical relationship between the union members and the employer affects the legality of
the union itself. It means the ineligibility of the union members to present a petition for certification election as well
as to vote therein . . . . (At p. 689)

WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order
of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED
and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining order issued by
the Court on December 21, 1989 is made permanent.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for members of golf clubs and
their guests in said clubs' courses or premises are the employees of such clubs and therefore within the compulsory
coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally, in three separate proceedings, all initiated by
or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present petition for review
was originally filed with the Social Security Commission (SSC) via petition of seventeen (17) persons who styled
themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits under the Social
Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association," with which
the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence that although
the petitioners were employees of the Manila Golf and Country Club, a domestic corporation, the latter had not registered
them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were pending; these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the
PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being titled
"Philippine Technical, Clerical, Commercial Association vs. Manila Golf and Country Club" and docketed
as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the petitioners therein
by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the
Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the
same labor organization, titled "Philippine Technical, Clerical, Commercial Employees Association
(PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran,
Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan,
a decision later affirmed on appeal by the National Labor Relations Commission on the ground that there
was no employer-employee relationship between the petitioning caddies and the respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in
substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as such to
the individual members and guests playing the Club's golf course and who themselves paid for such services; that as
such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which they
performed their work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security
coverage, avowedly coming to realize that indeed there was no employment relationship between them and the Club. The
case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two
holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3 ruling:

. . . that the caddy's fees were paid by the golf players themselves and not by respondent club. For
instance, petitioner Raymundo Jomok averred that for their services as caddies a caddy's Claim Stub
(Exh. "1-A") is issued by a player who will in turn hand over to management the other portion of the stub
known as Caddy Ticket (Exh. "1") so that by this arrangement management will know how much a caddy
will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on
his own in accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner
Jomok could not state any policy of respondent that directs the manner of caddying (TSN, pp. 76-77, July
23, 1980). While respondent club promulgates rules and regulations on the assignment, deportment and
conduct of caddies (Exh. "C") the same are designed to impose personal discipline among the caddies
but not to direct or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his
preference regardless of the respondent club's group rotation system and has the discretion on whether
or not to pay a caddy. As testified to by petitioner Llamar that their income depends on the number of
players engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends
credence to respondent's assertion that the caddies are never their employees in the absence of two
elements, namely, (1) payment of wages and (2) control or supervision over them. In this connection, our
Supreme Court ruled that in the determination of the existence of an employer-employee relationship, the
"control test" shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96
Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN Pictures
Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment Planning
Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as
bat unloader and helper, respectively, including their ground men, house and administrative personnel, a
situation indicative of the latter's concern with the rights and welfare of its employees under the SS law,
as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the
caddies merely intended to identify the holders as accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which could be withdrawn anytime for loss of confidence.
This gives us a reasonable ground to state that the defense posture of respondent that petitioners were
never its employees is well taken. 4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok.
After the appeal was docketed 5 and some months before decision thereon was reached and promulgated, Raymundo
Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National
Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra, on the precise
issue of the existence of employer-employee relationship between the respondent club and the
appellants, it being contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor
Relations, which "has not only become final but (has been) executed or (become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance. Nor,
it would appear, did it find any greater merit in the second alleged error. Although said Court reserved the appealed SSC
decision and declared Fermin Llamar an employee of the Manila Gold and Country Club, ordering that he be reported as
such for social security coverage and paid any corresponding benefits, 8 it conspicuously ignored the issue of res
adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's ruling in Investment
Planning Corporation of the Philippines vs. Social Security System, supra 9 and declared that upon the evidence, the
questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called "control test,"
establishment in the case — i.e., "whether the employer controls or has reserved the right to control the employee not
only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished," — the Club's control over the caddies encompassing:
 (a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of the
conduct that the caddy must observe, or avoid, when serving as such, any violation of any which could
subject him to disciplinary action, which may include suspending or cutting off his access to the club
premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number
which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the
Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an American
decision 10 to the effect that: "whether the club paid the caddies and afterward collected in the first instance, the caddies
were still employees of the club." This, no matter that the case which produced this ruling had a slightly different factual
cast, apparently having involved a claim for workmen's compensation made by a caddy who, about to leave the premises
of the club where he worked, was hit and injured by an automobile then negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now among
the mainways of the private respondent's defenses to the petition for review. Considered in the perspective of the
incidents just recounted, it illustrates as well as anything can, why the practice of forum-shopping justly merits censure
and punitive sanction. Because the same question of employer-employee relationship has been dragged into three
different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the resulting adjudications must
now be recognized as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-504-78), where the
decision of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was affirmed
by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter appealed according
to the private respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for
the same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was
afterwards affirmed by the NLRC itself on the ground that there existed no such relationship between the Club and the
private respondent. And, as if matters were not already complicated enough, the same respondent, with the support and
assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory social
security coverage with the Social Security Commission (SSC Case No. 5443), with the result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never
become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later
motion for early resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record before the
Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and been
affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA
being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect to wages,
hours of work, terms of employment, etc. 12 Whatever the truth about these opposing contentions, which the record before
the Court does not adequately disclose, the more controlling consideration would seem to be that, however, final it may
become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or
non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites
must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the merits; (3) the court
rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be between the two
cases identity of parties, identity of subject matter and identity of cause of action. 13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would
operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, "one
having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. . . . of which the party
seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and a
certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but
mere investigation of a non-adversary, fact-finding character, in which the investigating agency plays the
part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the
matter of their representation. The court enjoys a wide discretion in determining the procedure necessary
to insure the fair and free choice of bargaining representatives by the employees. 15
Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employer-employee
relationship between present petitioner and the private respondent, it would logically be that rendered in the compulsory
arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private
respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the
same Ministry of Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the National Labor
Relations Commission in an appeal taken by said respondent. 16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting
ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought them simultaneously,
as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may
not be applied to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it acted
correctly in doing so.

Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and employee between
petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily or
logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment, that
would make the respondent's services available to the members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc.
covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of the
caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services.
In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of
pursuing their occupation within the premises and grounds of whatever club they do their work in. For all that is made to
appear, they work for the club to which they attach themselves on sufference but, on the other hand, also without having
to observe any working hours, free to leave anytime they please, to stay away for as long they like. It is not pretended that
if found remiss in the observance of said rules, any discipline may be meted them beyond barring them from the premises
which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any
right to work on their part. All these considerations clash frontally with the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still
another indication of the latter's status as employees. It seems to the Court, however, that the intendment of such fact is
to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work and
compensation that an employer would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to
serve and being assigned instead the last number for the day. 17

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his
occupation in the premises of petitioner. He may work with any other golf club or he may seek
employment a caddy or otherwise with any entity or individual without restriction by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are not
required to render a definite number of hours of work on a single day. Even the group rotation of caddies
is not absolute because a player is at liberty to choose a caddy of his preference regardless of the
caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still find sufficient time
to work elsewhere. Under such circumstances, he may then leave the premises of petitioner and go to
such other place of work that he wishes (sic). Or a caddy who is on call for a particular day may
deliberately absent himself if he has more profitable caddying, or another, engagement in some other
place. These are things beyond petitioner's control and for which it imposes no direct sanctions on the
caddies. . . . 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it
being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila Golf and
Country Club and that petitioner is under no obligation to report him for compulsory coverage to the Social Security
System. No pronouncement as to costs.

SO ORDERED.
 SECOND DIVISION

[G.R. No. 87098. November 4, 1996]

ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
HON. LABOR ARBITER TEODORICO L. DOGELIO and BENJAMIN LIMJOCO, respondents.

DECISION
TORRES, JR., J.:

Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul and set aside the resolution of the
National Labor Relations Commission, Third Division, in NLRC Case No. RB IV-5158-76, dated December 28, 1988, the
dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then Labor Arbiter Teodorico L. Dogelio is
hereby AFFIRMED, and the instant appeal is hereby DISMISSED for lack of merit.

SO ORDERED.[1]

Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica and was
in charge of selling petitioners products through some sales representatives. As compensation, private respondent received
commissions from the products sold by his agents. He was also allowed to use petitioners name, goodwill and logo. It was,
however, agreed upon that office expenses would be deducted from private respondents commissions. Petitioner would
also be informed about appointments, promotions, and transfers of employees in private respondents district.
On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business. Then on October
30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the Department of Labor and Employment,
claiming for non-payment of separation pay and other benefits, and also illegal deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity) was not its
employee but an independent dealer authorized to promote and sell its products and in return, received commissions
therefrom. Limjoco did not have any salary and his income from the petitioner company was dependent on the volume of
sales accomplished.He also had his own separate office, financed the business expenses, and maintained his own
workforce. The salaries of his secretary, utility man, and sales representatives were chargeable to his commissions. Thus,
petitioner argued that it had no control and supervision over the complainant as to the manner and means he conducted his
business operations. The latter did not even report to the office of the petitioner and did not observe fixed office hours.
Consequently, there was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was assigned in the sales
department, and was earning an average of P4,000.00 monthly as his sales commission. He was under the supervision of
the petitioners officials who issued to him and his other personnel, memoranda, guidelines on company policies, instructions
and other orders. He was, however, dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result
thereof, Limjoco asserts that in accordance with the established company practice and the provisions of the collective
bargaining agreement, he was entitled to termination pay equivalent to one month salary, the unpaid benefits (Christmas
bonus, midyear bonus, clothing allowance, vacation leave, and sick leave), and the amounts illegally deducted from his
commissions which were then used for the payments of office supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an employee of the
petitioner company. Petitioner had control over Limjoco since the latter was required to make periodic reports of his sales
activities to the company. All transactions were subject to the final approval of the petitioner, an evidence that petitioner
company had active control on the sales activities. There was therefore, an employer-employee relationship and
necessarily, Limjoco was entitled to his claims. The decision also ordered petitioner company to pay the following:

1. To pay complainant his separation pay in the total amount of P16,000.00;

2. To pay complainant his unpaid Christmas bonus for three years or the amount of P12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or the total amount of P6,000.00;

4. To pay complainant his accrued vacation leave equivalent to 15 days per year of service, or the total amount of P6,000.00;

5. To pay complainant his unpaid clothing allowance in the total amount of P600.00; and

6. To pay complainant his accrued sick leave equivalent to 15 days per year of service or the total amount of P6,000.00.[2]

On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed decision. The
Commission opined that there was no evidence supporting the allegation that Limjoco was an independent contractor or
dealer. The petitioner still exercised control over Limjoco through its memoranda and guidelines and even prohibitions on
the sale of products other than those authorized by it. In short, the petitioner company dictated how and where to sell its
products. Aside from that fact, Limjoco passed the costs to the petitioner chargeable against his future commissions. Such
practice proved that he was not an independent dealer or contractor for it is required by law that an independent contractor
should have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in this petition
for certiorari and injunction with prayer for preliminary injunction. On April 3, 1989, this Court issued a temporary restraining
order enjoining the enforcement of the decision dated December 7, 1982.
The following are the arguments raised by the petitioner:
I

The respondent NLRC gravely abused its discretion in holding that appellants contention that appellee was an independent contractor
is not supported by evidence on record.

II

Respondent NLRC committed grave abuse of discretion in not passing upon the validity of the pronouncement of the respondent
Labor Arbiter granting private respondents claim for payment of Christmas bonus, Mid-year bonus, clothing allowance and the money
equivalent of accrued and unused vacation and sick leave.

The NLRC ruled that there existed an employer-employee relationship and petitioner failed to disprove this finding. We
do not agree.
In determining the existence of an employer-employee relationship the following elements must be present: 1) selection
and engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the power to control the employees
conduct. Of the above, control of employees conduct is commonly regarded as the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship.[3] Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the end to
be achieved, but also the manner and means to be used in reaching that end.[4]
The fact that petitioner issued memoranda to private respondents and to other division sales managers did not prove
that petitioner had actual control over them. The different memoranda were merely guidelines on company policies which
the sales managers follow and impose on their respective agents. It should be noted that in petitioners business of selling
encyclopedias and books, the marketing of these products was done through dealership agreements. The sales operations
were primarily conducted by independent authorized agents who did not receive regular compensations but only
commissions based on the sales of the products. These independent agents hired their own sales representatives, financed
their own office expenses, and maintained their own staff. Thus, there was a need for the petitioner to issue memoranda to
private respondent so that the latter would be apprised of the company policies and procedures. Nevertheless, private
respondent Limjoco and the other agents were free to conduct and promote their sales operations. The periodic reports to
the petitioner by the agents were but necessary to update the company of the latters performance and business income.
Private respondent was not an employee of the petitioner company. While it was true that the petitioner had fixed the
prices of the products for reason of uniformity and private respondent could not alter them, the latter, nevertheless, had free
rein in the means and methods for conducting the marketing operations. He selected his own personnel and the only reason
why he had to notify the petitioner about such appointments was for purpose of deducting the employees salaries from his
commissions. This he admitted in his testimonies, thus:
Q. Yes, in other words you were on what is known as P&L basis or profit and loss basis?
A. That is right.
 Q. If for an instance, just example your sales representative in any period did not produce any sales, you would
not get any money from Britannica, would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as division manager was merely making it easy for you to
concentrate all your effort in selling and you dont worry about accounting, isnt that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you merely hire that person and notify Britannica so that
Encyclopaedia Britannica will give the salaries and deduct it from your earnings, isnt that so?
A. In certain cases I just hired people previously employed by Encyclopaedia Britannica.
xxx
Q. In this Exhibit 2 you were informing Encyclopaedia Britannica that you have hired a certain person and you
were telling Britannica how her salary was going to be taken cared of, is it not?
A. Yes, sir.
Q. You said here, please be informed that we have appointed Miss Luz Villan as division trainer effective May 1,
1971 at P550.00 per month her salary will be chargeable to the Katipunan and Bayanihan Districts, signed
by yourself. What is the Katipunan and Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired this person and you should charge her salary to me, is
that right?
A. Yes, sir.[5]
Private respondent was merely an agent or an independent dealer of the petitioner. He was free to conduct his work
and he was free to engage in other means of livelihood. At the time he was connected with the petitioner company, private
respondent was also a director and later the president of the Farmers Rural Bank. Had he been an employee of the
company, he could not be employed elsewhere and he would be required to devote full time for petitioner. If private
respondent was indeed an employee, it was rather unusual for him to wait for more than a year from his separation from
work before he decided to file his claims. Significantly, when Limjoco tendered his resignation to petitioner on June 14,
1974, he stated, thus:

"Re: Resignation

I am resigning as manager of the EB Capitol Division effective 16 June 1974.

This decision was brought about by conflict with other interests which lately have increasingly required my personal attention. I feel
that in fairness to the company and to the people under my supervision I should relinquish the position to someone who can devote
full-time to the Division.

I wish to thank you for all the encouragement and assistance you have extended to me and to my group during my long association
with Britannica.

Evidently, Limjoco was aware of conflict with other interests which xxx have increasingly required my personal attention
(p. 118, Records). At the very least, it would indicate that petitioner has no effective control over the personal activities of
Limjoco, who as admitted by the latter had other conflict of interest requiring his personal attention.
In ascertaining whether the relationship is that of employer-employee or one of independent contractor, each case
must be determined by its own facts and all features of the relationship are to be considered. [6] The records of the case at
bar showed that there was no such employer-employee relationship.
As stated earlier, 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 and employee exists. [7] In fine,
there is nothing in the records to show or would indicate that complainant was under the control of the petitioner in respect
of the means and methods[8] in the performance of complainants work.
Consequently, private respondent is not entitled to the benefits prayed for.
 In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is hereby
REVERSED AND SET ASIDE.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 118086. December 15, 1997]

SUSAN G. CARUNGCONG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUN LIFE ASSURANCE
CO. OF CANADA, LANCE KEMP and MERTON DEVEZA, respondents.

DECISION
NARVASA, C.J.:

Susan Carungcong began her career in the insurance industry in 1974 as an agent of Sun Life Assurance Company
of Canada (hereinafter Sun Life). She signed an Agent Agreementwith Sun Life on September 10, 1974 (retroactive to June,
1974), [1] in virtue of which she was designated the latters agent to solicit applications for ** (its) insurance and annuity
policies.The contract set out in detail the terms and conditions particularly those concerning the commissions payable to
her under which her relationship with the company would be governed. This contract was superseded some five years later
when she signed two (2) new agreements, both dated July 1, 1979
The first, denominated Career Agents (or Unit Managers Agreement, dealt with such matters as the agents
commissions, his obligations, limitations on his authority, and termination of the agreement by death, or by written notice
with or without cause. It declared that the Agent shall be an independent contractor and none of the terms of ** (the )
Agreement shall be construed as creating an employer-employee relationship. [2]
The second was titled, MANAGERS Supplementary Agreement. Making explicit reference to the first (Agents [the Unit
Managers] Agreement) which became effective on the 1 st day of July, 1979, said second contract explicitly described as a
further agreement contained provisions regarding remuneration (overriding commissions in accordance with a fixed
schedule), limitation of authority, and termination of the agreement inter alia by written notice without cause.[3]
Subsequently, Carungcong and Sun Life executed another Agreement made and effective as of January 1, 1986 by
which the former was named New Business Manager with the function generally to manage a New Business Office
established by the ** (latter), ** to obtain applications for life insurance policies and other products offered by or distributed
through Sun Life and to perform such other duties in connection therewith as Sun Life may require from time to time. [4] The
Agreement governed such matters as the New Business Managers duties: limitations on authority; compensation;
expenses; termination of relation, by among others, notice in writing with or without cause. Like the Career Agents (or Unit
Managers) Agreement first signed by Carungcong, [5] this latest Agreement stressed that the New Business Manager in
performance of his duties defined herein, shall be considered an independent contractor and not ** an employee of Sun
Life, and that (u)nder no circumstance shall the New Business Manager and/or his employees be considered employees of
Sun Life.
Now, it appears that sometime in November, 1989, Ms. Eleizer Sibayan, Manager of Sun Lifes Internal Audit
Department, commenced an inquiry into the special fund availments of Carungcong and other New Business Managers;
this, allegedly because the Companys Vice President for Far East Asia, respondent Lance Kemp, had been receiving reports
of anomalies in relation thereto from unit managers and agents. [6] These special fund availments are governed by the
following portion of the Agreement of January 1, 1986 under the sub-head, New Business Managers Expenses, viz:

Sun Life agrees to reimburse the New Business Manager for actual reasonable expenses properly incurred in performing his duties as
New Business Manager provided such expenses are within the guidelines issued by Sun Life from time to time and are incurred for the
purposes of gaining or producing income and that they are accounted for in the manner established by Sun Life and made known to
the New Business Manager.

Such reimbursement by Sun Life of said expenses will be made only upon the submission by the New Business Manager of a
statement in form and content acceptable to Sun Life detailing said expenses attached receipts.

It also appears that Ms. Sibayan drew up a report (Summary of Availments) [7] after having examined and analyzed the
pertinent records, and interviewed the unit managers and agents mentioned in the receipts presented by Carungcong to
support her claims for reimbursement of expenses for 1987, 1988 and 1989. Thereafter, on January 4, 1990, and again on
January 10, 1990, Carungcong was confronted with and asked to explain the discrepancies set out in Sibayans report. On
January 11, 1990, she was given a letter signed by Metron V. Deveza, CLU, Director, Marketing, which advised of the
termination of her relationship with Sun Life, viz.: [8]
In our meeting with you yesterday we presented the charge of fraudulent reimbursement of the Branch Special Fund against
you. Accordingly, you admitted having said act.

For dishonesty, disloyalty and breach of your Agents Agreement and New Business Managers Agreement with Sun Life of Canada
dated June 10, 1974 and January 1, 1986, respectively, the Management has decided to terminate you as Agent and New Business
Manager of Sun Life of Canada effective immediately.

Carungcong promptly instituted proceedings for vindication in the Arbitration Branch of the National Labor Relations
Commissions on January 16, 1990. There she succeeded in obtaining a favorable judgment. [9] Labor Arbiter Ernesto S.
Dinopol found that there existed an employer-employee relationship between her and Sun Life; ruled that she had been
illegally dismissed, thus entitled to reinstatement without loss of seniority rights and other benefits; and ordered Sun Life,
and its co-respondents Lance Kemp and Merton Deveza, [10] jointly and severally to pay her P12,475,973.25 as back
commissions, P8,000,000.00 as moral damages, P2,000,000.00 as exemplary damages, and P2,047,597.32 as attorneys
fees a total of P22,523,570.57. [11]
On appeal, the National Labor Relations Commission reversed the Arbiters judgment. It affirmed that no employment
relationship existed between Carungcong and Sun Life.Nevertheless, it awarded to her P2,696,252.00 as lost average
commission on the ground that during the appeal, she had neither been restored to work nor reinstated in
payroll. [12]However, the NLRC later eliminated this monetary award in a second decision promulgated on October 28, 1994
on the basis of a motion for reconsideration of Sun Life and its co-respondents. The NLRC declared itself without
competence to make such an award absent an employment relationship between the parties. [13]
Opting not to file a motion for reconsideration of the Commissions judgment, [14] Carungcong forthwith initiated the
special civil action of certiorari at bar (after obtaining an extension of time to do so), in which she seeks invalidation of the
Commissions decision of October 28, 1994, and consequent restoration of the Labor Arbiters awards.
Carungcong claims that although she was not, as new business manager, required either to account for her time or
perform her duties in a fixed manner, she was nonetheless an employee subject to the control and supervision of Sun Life
like any other managerial employee. She brands as ludicrous the accusation leveled against her, of having defrauded Sun
Life of the sum of P6,000.00, since her annual income at that time was in excess of P3,000.00. [15] She contends that the
accusation was a mere fabrication of her Unit Managers, Jorge Chua and Corazon de Mesa, who were promoted to Branch
Managers after termination of her employment, [16] and that she actually had no hand in the preparation of the vouchers
involved in the imputed anomaly, this task being entrusted to the branch office secretary, Lilet Ginete, selected and hired
by Sun Life.
She also contends that in dismissing her, Sun failed to observe procedural due process. She was not furnished with
copies of the audit report of her supposedly fraudulent use of her special fund availments, and was never afforded an
opportunity to be heard by Sun Life officials prior to termination of her employment. [17] She assails the decisions of the
NLRC as tainted with bias and grave abuse of discretion, particularly in ignoring the deluge of evidence adduced before the
labor arbiter.
On the other hand, Sun Life and its co-respondents argue that the challenged decisions were in fact precisely based
on Carungcongs so-called deluge of evidence, and thus cannot in any sense be deemed capricious, whimsical, arbitrary or
depotic. [18] They invoke the familiar rule that the findings of fact of administrative agencies are accorded respect, if not
indeed finality, by this Court. They assert that jurisprudence and Carungcongs admissions before the Labor Arbiter negate
the existence of an employment relationship: that in truth Carungcong was duly informed of the charge of fraud and
dishonesty, a charge supported by adequate proof; and that therefore the cancellation of the business relationship between
them and Carungcong was valid and legal, effected with due process and for just cause.
The facts involved in this case are laid bare in considerable detail and the issues identified and extensively discussed
by the parties, in their pleadings, namely: respondents Comment dated May 4, 1995; [19] petitioners Reply thereto dated
September 11, 1995; [20] respondents Rejoinder of October 31, 1995; [21] their Manifestation dated November 2, 1995,
submitting copies of their exhibits in the proceedings a quo; [22] Comment on the petition of the Office of the Solicitor General,
dated November 22, 1995 [23] -- in which it makes common cause with Carungcong; petitioners Sur-Rejoinder dated
December 11, 1995; [24] her Counter-Manifestation of December 11, 1995, submitting copies of her own exhibits in the
proceedings below; [25]respondents Reply (dated January 8, 1996) to the Comment of the Solicitor Generals Office; [26] the
Addendum to Respondents Comment, dated July 15, 1997; [27] and petitioners Reply to Private Respondents 'Addendum'
filed without leave of court, with Motion to Expunge **, dated July 30, 1997.[28]
The record does indeed disclose what Carungcong calls a deluge of evidence submitted by the parties before the
Labor Arbiter. Carungcong submitted two (2) affidavits of hers (Exhibits A and B) in lieu of her direct examination, and
numerous documents marked as Exhibits C to Z, inclusive, and from AA to ZZ, and again from AAA to EEE and EEE-1 (to
FFF and FFF-7) [29] Sun Life and its co-respondents in turn submitted more than thirty-eight (38) exhibits, including the
affidavits of five witnesses. [30] Facts are thereby established which the Court cannot ignore.
 As already mentioned, as Sun Lifes New Business Manager. Carungcong had the prerogative under her contract to
claim reimbursement "for actual reasonable expenses properly incurred in performing ** (her) duties **." Reimbursement
was to be made by Sun Life only upon ** (her) submission ** of a statement in form and content acceptable to Sun Life
detailing said expenses with attached receipts. Availing of this prerogative, Carungcong presented several statements of
reimbursable expenses (appending the corresponding receipts), on the strength of which she duly received full
reimbursement from Sun Life. These statements included claims for reimbursement for:
1) more than P30,000.00, representing the cost of prizes or awards ostensibly advanced by Susan Carungcong;
and
2) several sums of money, representing the cost of food and drinks shouldered by Carungcong for dinner or
snacks in various restaurants and on different dates to which she had supposedly invited agents of Sun Life,
namely: Jorge Chua, Unit Manager. Prosperity Unit; Corazon de Mesa. Dynamic Unit: Robert Tan. Royal Unit,
NNBO; Lucila L. Natividad. Samaritan Unit; Cristina J. Gloton, NNBO; Cynthia Suan; Zenaida B. Lim; Maynard
Granados.
The record reveals the fraudulent character of these claims, that is to say, the unclean hands with which Carungcong
has come to court. Her claims are categorically belied by no less than the eight (8) insurance managers and agents
specifically named by her in her supporting documents, about whose impartiality or credibility the Court has been cited to
no persuasive cause for doubt or misgiving. Jorge Chua [31] and Corazon de Mesa [32] deposed that as regards the special
fund raised by Carungcong for prizes, awards, and outings, they had in fact contributed thereto but the latter had made it
appear that she had raised and disbursed the entire fund by herself, and although she later obtained reimbursement therefor
in the sum of more than P30,000.00, she never returned to them what they had contributed.
Chua and de Mesa also denied Carungcongs claim that she had treated them to food and drinks on December 7, 1987
at Kimpura (the bill amounting to P570.90), at Jade Garden on January 20, 1988 (the bill being P734.16), or at Flavors &
Spices on November 5, 1988 (the bill coming to P420.66). [33] De Mesa also affirmed that contrary to Carungcongs claim,
she had not been treated by the latter at the Kamayan (the chit being in the sum of P1,099.71) or at Tropical Hut (the bill
being P378.50). [34]
Robert Tan belied Carungcongs claim that she had paid for their food or drinks at the Emerald Garden (the bill
presented being in the sum of P742.33) or at Sugarhouse (the bill being P220.02).[35]
Lucila L. Natividad also belied Carungcongs assertion that she had treated her at Flavours and Spices (the bill
being P834.48).[36]
So, too, Cristina J. Gloton gave the lie to Carungcongs claim that she had treated her at the Hotel Intercontinental (the
bill on one occasion being P559.98).[37]
Cynthia Suan denied having been entertained by Carungcong at the Manila Peninsula (the bill supposedly being in the
sum of P359.75).[38]
Zenaida B. Lim confirmed her earlier denial that Carungcong had paid for their snacks at Bing-Bings (the bill
being P182.40).[39]
Maynard Granados denied, among other things, that he was treated to dinner by Carungcong at the Hotel
Intercontinental on March 29, 1988 (the bill being supposedly P473.95).[40]
The record thus appears to establish adequate cause for Sun Life to terminate its relationship with Susan
Carungcong. Her attention was drawn to the perfidious nature of her claims for reimbursement; she was accorded an
opportunity to explain the same; she refused to do so.
Prescinding therefrom, the contracts she had willingly and knowingly signed with Sun Life [41] repeatedly and clearly
provided that said agreements were teminable by either party by written notice with or without cause. Her Career Agents
(or Unit Managers) Agreemen inter alia provided for termination of the agreement by death, or by written notice with or
without cause. [42] Her MANAGERS Supplementary Agreement, effective July 1, 1979, contained provisions regarding
termination of the agreement inter alia by written notice without cause. [43] A subsequent agreement by which she was
named Manager for New Business, dated January 1, 1986, similarly provided for termination of relation, by among others,
notice in writing with or without cause.
Noteworthy is that this last agreement of January 1, 1986 emphasized, like the Career Agents (or Unit Managers)
Agreement first signed by her, [44] that in performance of her duties defined herein. Carungcong would be considered an
independent contractor and not ** an employee of Sun Life, and that (u)nder no circumstance shall the New Business
Manager and/or his employees be considered employees of Sun Life.
It is germane to advert to the fact, which should by now be apparent, that Carungcong was not your ordinary run-of-
the-mill employee, nor even your average managerial employee or supervisor. Her stated annual income from her
occupation is impressive by any standards: in excess of P3,000,000.00, exclusive of overriding commissions. [45] Certainly,
she may not be likened to an ordinary person applying for employment, or an ordinary employee striving to keep his job,
under the moral dominance of the hiring entity or individual. By no means may Carungcong be considered as dealing, or
having dealt, with Sun Life from an inferior position, as a disadvantage, morally-dominated person. She must be deemed
as having transacted with Sun Lifes executives on more or less equal terms.
These considerations impel concurrence with the conclusions of the challenged decision and resolution of respondent
Commission which considered Carungcong an independent contractor, not an employee of Sun Life. It is significant that
this issue of the precise status of Carungcong as an independent contractor, evidently deemed decisive by respondent
Commission, was discussed by it at some length not once, but twice, first in its Decision of July 29, 1994, and then in its
second Decision of October 28, 1994 resolving the separate motions for reconsideration of the parties.
In the Decision of July 29, 1994, the Commissions said: [46]

A thorough review of the facts and evidence adduced on record compels us to rule in the negative (on the question of whether or not
complainant Carungcong is a regular employee of respondents).Complainant, to our considered view is not, contrary to the findings
erroneously made in the challenged decision below, a regular employee of respondents but an independent contractor.

Her contracts/ agreement since she started as insurance agent, then as unit manager and finally as business/branch manager expressly
say so. Besides, it cannot be gainsaid that complainant was never aware of the status as such, for indicated in the very face of her latest
contract is the fact that she was accorded all the chances she needed to seek professional and legal advice relative thereto before she
signed the said contract.

Indeed, as adverted to by herein respondents, the contracts/agreements entered into by the parties herein are the laws between the said
parties.

Moreover, it is true that complainant Carungcongs duties and functions derived from her then existing agreements/contracts were
made subject to rules and regulations issued by respondent company, and for that matter, have likewise been made subject of certain
limitations imposed by said respondent company. Nonetheless, these are not sufficient to accord the effect of establishing employer-
employee relationship absent in this case. This is so because the insurance business is not just any other ordinary business. It is one
that is imbued with public interest hence, it must be governed by rules and regulations of the state. The controls adverted to by
complainant are latent in the kind of business she is into and are mainly aimed at promoting the results the parties so desire and do not
necessarily create any employer-employee relationships, where the employers controls have to interfere in the methods and means by
which the employee would like to employ to arrive at the desired results.

This is not without any jurisprudential support as earlier pointed out by herein respondents. The Supreme Court in the case of
Insular Life Assurance Co., Ltd., versus National Labor Relations Commission and Melencio Basiao (179 SCRA 459) emphatically
discoursed in this wise:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control to fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular
relevance in the case of an enterprise affected with public interest and is on that account subject to regulation by the State with
respect, not only to the relations between insurer and insured but also to the internal affairs of the Insurance company. Rules and
regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is therefore usual and expected for an insurance company to promulgate a set of rules to guide its commission agents
in selling its policies that they may not run afoul of the law and what it requires or prohibits. (Underscoring supplied)

Complainant having admitted that she was free to work as she pleases, at the place and time she felt convenient for her to do so is not
unlike Melencio Basiao in the aforequoted case (supra) where in spite of the controls imposed by respondents, she suffered no
interference whatsoever in relation to the manner and methodology she used for her to achieve her desired results, this is clear from
her testimony given in this wise:

A. Yes, and as I said as a branch manager, we have no specific time to stay in the office because its either if I am not in the office, I
am monitoring my agents in the field or a unit manager I trained them in the field or recruit. (pp. 28-29, TSN, 31 May
1991. Underscoring supplied.)

For that matter, complainant Carungcong was never paid a fixed wage or salary but was mainly paid by commissions, depending on
the level and volume of her performance/production, the number of trained agents, when taken in and assigned to her, being
responsible for her added income as she gets a certain percentage from the said agents production as part of her commission.
 In the second judgment of October 28, 1994, [47] respondent Commission stressed the following points:

Arrayed against complainants arguments that she was respondents employee are her own admissions during the trial on the
merits. Said differently, her admissions completely diluted the supposed potency or her theory that an employer-employee relationship
existed. Complainant admitted that her renumerations were based on her levels of production (TSN, June 27, 1991, page 72 et.
seq.). She admitted she could solicit insurance anywhere or at any time she deemed convenient (TSN, May 31, 1991, page 33 et.
seq.). She never accounted for her working time (TSN, May 20, 1991, page 66 et seq.) or that daily working hours were never
applicable to her situation (TSN, May 20, 1991, page 75). She gave unequivocal testimony that she performed her duties as a New
Business Manager, i.e., monitoring, training, recruitment and sales, at her own time and convenience, at however she deemed
convenient, and with whomsoever she chose (TSN, May 31, 1991, page 35 et. seq., TSN, May 20, 1991, page 72, et seq.; TSN, May
31, 1991, page 321 et seq.; TSN, May 31, 1991, page 84 et. seq.). We cannot help but agree with respondents submission that, plainly,
complainant alone judged the elements of time, place and means in the performance of her duties and responsibilities.

Complainants theory of the case appears to be limited to pointing out that respondent company issued rules and regulations to which
she should conform. However, no showing has been made that such rules and regulations effectively and actually controlled or
restricted her choice of methods in performing her duties as New Business Manager. Without such proof, there can be no plausible
reason to believe that her contractual declaration that she was an independent contractor has been qualified.

Thus, we see no reason to deviate from our original conclusion that complainant was never respondents employee. Complainants
motion for reconsideration is, therefore, denied.

Of course, Carungcong disagrees with these dispositions. Quite possibly, others may share her opinion, and insist that
there was error in either the appreciation of the evidence or the choice of law or jurisprudence applied by the
Commission. But such errors of judgment as might be ascribed to the Commissions reasoned conclusions may not be
accorded so egregious a cast as to be fairly considered to constitute grave abuse of discretion meriting correction by the
extraordinary writ of certiorari,
It should be apparent that no whimsically, capriciousness, or want of logic or foundation may rationally be imputed to
NLRC in its marshalling and analysis of the evidence, its identification of the issues, in its assessment of the arguments
thereon, and its conclusions on the basis thereof. It is simply not possible in the premises to opine that grave abuse of
discretion was attendant on its challenged decisions.
WHEREFORE, the petition is DISMISSED, with costs against petitioner.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION
CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court of Appeals
in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the
findings of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for
lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement (Agreement) with the
Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP
and Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-
CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the
second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our
company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider
these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of
rescission of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
 JOSE Y. SONZA
President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment,
National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option
Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the parties to file
their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and
that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after
and as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex
4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V.
Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat
talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.[6] The
pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it stands to reason that
a talent as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement
of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a
radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance
with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his
engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, All these benefits are merely talent fees and other contractual
benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence
of employer-employee relationship. As held by the Supreme Court, The line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining
it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to
achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision
and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA
and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the
principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true
in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a
matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of
rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are
ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and
Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but
of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the
nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from
complainant-appellants Position Paper, his claims for compensation for services, 13 th month pay, signing bonus and travel allowance
against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his
claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant
bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus
consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).

Similarly, complainant is also entitled to be paid 13 th month pay based on an amount not lower than the amount he was receiving prior
to effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One
Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are
founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant
served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that
instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his complaint.Complainant-appellants claims being anchored on the alleged
breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor
law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi
Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN
is a factual question that is within the jurisdiction of the NLRC to resolve. [10] A special civil action for certiorari extends only
to issues of want or excess of jurisdiction of the NLRC. [11] Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRCs conclusion.[12] The Court of Appeals added that it could not
re-examine the parties evidence and substitute the factual findings of the NLRC with its own.[13]

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING. [14]

The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship
between a television and radio station and one of its talents. There is no case law stating that a radio and television program
host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On
the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings
of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. [15] Substantial
evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. [16] A party
cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of
evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law
has consistently held that the elements of an employer-employee 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 employee on
the means and methods by which the work is accomplished. [18] The last element, the so-called control test, is the most
important element.[19]

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, ABS-CBN 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 ABS-CBN 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[20] which the law automatically incorporates into every employer-employee contract.[21] Whatever
benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.[22]
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.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show
that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent
losses as provided under labor laws. [23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay Sonza shall
faithfully and completely perform each condition of this Agreement.[24] Even if it suffered severe business losses, ABS-CBN
could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that if it were true that complainant was really an employee, he would
merely resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement.SONZAs letter clearly bears this out.[26] However, the manner by which SONZA terminated his relationship with
ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status
as employee or independent contractor.
D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television program
host is an independent contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring
talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in
several theater and television productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry,
and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the equipment necessary to tape the show. Albertys argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the show.Others provided equipment
for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we
accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide
the equipment required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts with WIPR specifically
provided that WIPR hired her professional services as Hostess for the Program Desde Mi Pueblo. There is no evidence that WIPR
assigned Alberty tasks in addition to work related to these tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an independent
contractor.[29] This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and
control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well the less
control the hirer exercises, the more likely the worker is considered an independent contractor. [30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not
have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZAs
script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.[32] The clear
implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs
work.[33] ABS-CBN did not instruct SONZA how to perform his job.ABS-CBN merely reserved the right to modify the program
format and airtime schedule for more effective programming. [34] ABS-CBNs sole concern was the quality of the shows and
their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-
CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and
methods of SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss
or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in
full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-
CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered
his lines and appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited
only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay
SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the skills of the artists, it could only control
the result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the
equipment, crew and airtime are not the tools and instrumentalities SONZA needed to perform his job. What SONZA
principally needed were his talent or skills and the costumes necessary for his appearance. [38] Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since
ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the
airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an independent contractor. [40] SONZAs work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBNs control not only [over] his manner of work but also
the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering talents[41] of
ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as
its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of radio and television stations. Broadcasters
are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to
in the Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former.[43] In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules
are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it.[44]

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. [46] This practice is
not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

 SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-
CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that
MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is
ostensibly under the employ of the labor-only contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the principal responsible to the
employees of the labor-only contractor as if the principal itself directly hired or employed the employees. [48] These
circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do
not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA,
acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would
make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and
his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does
not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast
and television industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally
settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry
are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no
legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving
his counsel the opportunity to cross-examine these witnesses.SONZA brands these witnesses as incompetent to attest on
the prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and
irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the
submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may
have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. x x x

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage,
he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or
information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness. [50]
 The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.[51] The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right. [52] If
the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal
trial, unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before
a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules
obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents
like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor
to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution[53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of
labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his
right to contract as an independent contractor. An individual like an artist or talent has a right to render his services without
any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television
program hosts can render their services only as employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,[55] as amended by Republic Act
No. 8241,[56] treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject
to the 10% value-added tax (VAT) on services they render. Exempted from the VAT are those under an employer-employee
relationship.[57] This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual relationship are present as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for
breach of contract which is intrinsically a civil dispute cognizable by the regular courts. [58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R.
SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 124354. April 11, 2002]

ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of the minors, ROMMEL
RAMOS, ROY RODERICK RAMOS, and RON RAYMOND RAMOS, petitioners, vs. COURT OF APPEALS, DE
LOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and DR. PERFECTA GUTIERREZ, respondents.

RESOLUTION
KAPUNAN, J.:

Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr. Perfecta Gutierrez move for a reconsideration of
the Decision, dated December 29, 1999, of this Court holding them civilly liable for petitioner Erlinda Ramos comatose condition after
she delivered herself to them for their professional care and management.
For better understanding of the issues raised in private respondents respective motions, we will briefly restate the facts of the case
as follows:
Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was advised to undergo an operation for the
removal of a stone in her gall bladder (cholecystectomy). She was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation
on her. The operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De Los Santos Medical Center
(DLSMC). Since neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended
to them the services of Dr. Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30 in the morning of the following
day, petitioner Erlinda was already being prepared for operation. Upon the request of petitioner Erlinda, her sister-in-law, Herminda
Cruz, who was then Dean of the College of Nursing at the Capitol Medical Center, was allowed to accompany her inside the operating
room.
At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in touch with him by phone. Thereafter,
Dr. Gutierrez informed Cruz that the operation might be delayed due to the late arrival of Dr. Hosaka. In the meantime, the patient,
petitioner Erlinda said to Cruz, Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor.
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already wanted to pull out his wife from the
operating room. He met Dr. Garcia, who remarked that he was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the
hospital at around 12:10 in the afternoon, or more than three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas arrival. While she held the hand of Erlinda, Cruz saw
Dr. Gutierrez trying to intubate the patient. Cruz heard Dr. Gutierrez utter: ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan. Cruz noticed a bluish discoloration of Erlindas nailbeds on her left hand. She (Cruz) then heard Dr. Hosaka instruct
someone to call Dr. Calderon, another anesthesiologist. When he arrived, Dr. Calderon attempted to intubate the patient. The nailbeds
of the patient remained bluish, thus, she was placed in a trendelenburg position a position where the head of the patient is placed in a
position lower than her feet. At this point, Cruz went out of the operating room to express her concern to petitioner Rogelio that Erlindas
operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in trendelenburg position. At almost 3:00 in the
afternoon, she saw Erlinda being wheeled to the Intensive Care Unit (ICU). The doctors explained to petitioner Rogelio that his wife
had bronchospasm. Erlinda stayed in the ICU for a month. She was released from the hospital only four months later or on November
15, 1985.Since the ill-fated operation, Erlinda remained in comatose condition until she died on August 3, 1999.[1]
Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages against private respondents. After due trial,
the court a quo rendered judgment in favor of petitioners. Essentially, the trial court found that private respondents were negligent in
the performance of their duties to Erlinda. On appeal by private respondents, the Court of Appeals reversed the trial courts decision and
directed petitioners to pay their unpaid medical bills to private respondents.
Petitioners filed with this Court a petition for review on certiorari. The private respondents were then required to submit their
respective comments thereon. On December 29, 1999, this Court promulgated the decision which private respondents now seek to be
reconsidered. The dispositive portion of said Decision states:
WHEREFORE, the decision and resolution of the appellate court appealed from are hereby modified so as to award in favor of
petitioners, and solidarily against private respondents the following: 1) P1,352,000.00 as actual damages computed as of the date of
promulgation of this decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos expires or
miraculously survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each exemplary
damages and attorneys fees; and 5) the costs of the suit.[2]

In his Motion for Reconsideration, private respondent Dr. Hosaka submits the following as grounds therefor:
I

THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR WHEN IT HELD RESPONDENT DR.
HOSAKA LIABLE ON THE BASIS OF THE CAPTAIN-OF-THE-SHIP DOCTRINE.

II

THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT DR. HOSAKA LIABLE DESPITE
THE FACT THAT NO NEGLIGENCE CAN BE ATTRIBUTABLE TO HIM.

III

ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS LIABLE, THE HONORABLE
SUPREME COURT ERRED IN AWARDING DAMAGES THAT WERE CLEARLY EXCESSIVE AND WITHOUT
LEGAL BASIS.[3]

Private respondent Dr. Gutierrez, for her part, avers that:

A. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY OVERLOOKED THE FACT THAT THE
COURT OF APPEALS DECISION DATED 29 MAY 1995 HAD ALREADY BECOME FINAL AND EXECUTORY AS
OF 25 JUNE 1995, THEREBY DEPRIVING THIS HONORABLE COURT OF JURISDICTION OVER THE INSTANT
PETITION;

B. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY OVERLOOKED SEVERAL MATERIAL
FACTUAL CIRCUMSTANCES WHICH, IF PROPERLY CONSIDERED, WOULD INDUBITABLY LEAD TO NO
OTHER CONCLUSION BUT THAT PRIVATE RESPONDENT DOCTORS WERE NOT GUILTY OF ANY
NEGLIGENCE IN RESPECT OF THE INSTANT CASE;

B.1 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY DISCHARGED THE

BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF HER COMPLIANCE WITH THE
STANDARDS OF DUE CARE EXPECTED IN HER RESPECTIVE FIELD OF MEDICAL
SPECIALIZATION.
B.2 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY DISCHARGED THE
BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF HER HAVING SUCCESSFULLY
INTUBATED PATIENT ERLINDA RAMOS

C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED TOO MUCH RELIANCE ON THE
TESTIMONY OF PETITIONERS WITNESS HERMINDA CRUZ, DESPITE THE EXISTENCE OF SEVERAL
FACTUAL CIRCUMSTANCES WHICH RENDERS DOUBT ON HER CREDIBILITY

D. THE SUPREME COURT MAY HAVE INADVERTENTLY DISREGARDED THE EXPERT TESTIMONY OF DR.
JAMORA AND DRA. CALDERON

E. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY AWARDED DAMAGES TO

PETITIONERS DESPITE THE FACT THAT THERE WAS NO NEGLIGENCE ON THE PART OF RESPONDENT
DOCTOR.[4]

Private respondent De Los Santos Medical Center likewise moves for reconsideration on the following grounds:
I
 THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE INSTANT PETITION AS THE DECISION
OF THE HONORABLE COURT OF APPEALS HAD ALREADY BECOME FINAL AND EXECUTORY

II

THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN EMPLOYER-EMPLOYEE

[RELATIONSHIP] EXISTS BETWEEN RESPONDENT DE LOS SANTOS MEDICAL CENTER AND DRS. ORLINO
HOSAKA AND PERFECTA GUTIERREZ

III

THE HONORABLE SUPREME COURT ERRED IN FINDING THAT RESPONDENT DE LOS SANTOS MEDICAL
CENTER IS SOLIDARILY LIABLE WITH RESPONDENT DOCTORS

IV

THE HONORABLE SUPREME COURT ERRED IN INCREASING THE AWARD OF DAMAGES IN FAVOR OF
PETITIONERS.[5]

In the Resolution of February 21, 2000, this Court denied the motions for reconsideration of private respondents Drs. Hosaka and
Gutierrez. They then filed their respective second motions for reconsideration. The Philippine College of Surgeons filed its Petition-in-
Intervention contending in the main that this Court erred in holding private respondent Dr. Hosaka liable under the captain of the ship
doctrine. According to the intervenor, said doctrine had long been abandoned in the United States in recognition of the developments in
modern medical and hospital practice.[6] The Court noted these pleadings in the Resolution of July 17, 2000.[7]
On March 19, 2001, the Court heard the oral arguments of the parties, including the intervenor. Also present during the hearing
were the amicii curiae: Dr. Felipe A. Estrella, Jr., Consultant of the Philippine Charity Sweepstakes, former Director of the Philippine
General Hospital and former Secretary of Health; Dr. Iluminada T. Camagay, President of the Philippine Society of Anesthesiologists,
Inc. and Professor and Vice-Chair for Research, Department of Anesthesiology, College of Medicine-Philippine General Hospital,
University of the Philippines; and Dr. Lydia M. Egay, Professor and Vice-Chair for Academics, Department of Anesthesiology, College
of Medicine-Philippine General Hospital, University of the Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1. WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE FOR NEGLIGENCE;
2. WHETHER OR NOT DR. PERFECTA GUTIERREZ (ANESTHESIOLOGIST) IS LIABLE FOR NEGLIGENCE; AND
3. WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL CENTER) IS LIABLE FOR ANY ACT OF
NEGLIGENCE COMMITTED BY THEIR VISITING CONSULTANT SURGEON AND ANESTHESIOLOGIST. [8]
We shall first resolve the issue pertaining to private respondent Dr. Gutierrez. She maintains that the Court erred in finding her
negligent and in holding that it was the faulty intubation which was the proximate cause of Erlindas comatose condition. The following
objective facts allegedly negate a finding of negligence on her part: 1) That the outcome of the procedure was a comatose patient and
not a dead one; 2) That the patient had a cardiac arrest; and 3) That the patient was revived from that cardiac arrest. [9] In effect, Dr.
Gutierrez insists that, contrary to the finding of this Court, the intubation she performed on Erlinda was successful.
Unfortunately, Dr. Gutierrez claim of lack of negligence on her part is belied by the records of the case. It has been sufficiently
established that she failed to exercise the standards of care in the administration of anesthesia on a patient. Dr. Egay enlightened the
Court on what these standards are:

x x x What are the standards of care that an anesthesiologist should do before we administer anesthesia? The initial step is the
preparation of the patient for surgery and this is a pre-operative evaluation because the anesthesiologist is responsible for determining
the medical status of the patient, developing the anesthesia plan and acquainting the patient or the responsible adult particularly if we
are referring with the patient or to adult patient who may not have, who may have some mental handicaps of the proposed plans. We
do pre-operative evaluation because this provides for an opportunity for us to establish identification and personal acquaintance with
the patient. It also makes us have an opportunity to alleviate anxiety, explain techniques and risks to the patient, given the patient the
choice and establishing consent to proceed with the plan. And lastly, once this has been agreed upon by all parties concerned the
ordering of pre-operative medications. And following this line at the end of the evaluation we usually come up on writing,
documentation is very important as far as when we train an anesthesiologist we always emphasize this because we need records for
our protection, well, records. And it entails having brief summary of patient history and physical findings pertinent to anesthesia, plan,
organize as a problem list, the plan anesthesia technique, the plan post operative, pain management if appropriate, special issues for
this particular patient. There are needs for special care after surgery and if it so it must be written down there and a request must be
made known to proper authorities that such and such care is necessary. And the request for medical evaluation if there is an indication.
When we ask for a cardio-pulmonary clearance it is not in fact to tell them if this patient is going to be fit for anesthesia, the decision
to give anesthesia rests on the anesthesiologist. What we ask them is actually to give us the functional capacity of certain systems
which maybe affected by the anesthetic agent or the technique that we are going to use. But the burden of responsibility in terms of
selection of agent and how to administer it rest on the anesthesiologist.[10]

The conduct of a preanesthetic/preoperative evaluation prior to an operation, whether elective or emergency, cannot be dispensed
with.[11] Such evaluation is necessary for the formulation of a plan of anesthesia care suited to the needs of the patient concerned.
Pre-evaluation for anesthesia involves taking the patients medical history, reviewing his current drug therapy, conducting physical
examination, interpreting laboratory data, and determining the appropriate prescription of preoperative medications as necessary to the
conduct of anesthesia.[12]
Physical examination of the patient entails not only evaluating the patients central nervous system, cardiovascular system and lungs
but also the upper airway. Examination of the upper airway would in turn include an analysis of the patients cervical spine mobility,
temporomandibular mobility, prominent central incisors, deceased or artificial teeth, ability to visualize uvula and the thyromental
distance.[13]
Nonetheless, Dr. Gutierrez omitted to perform a thorough preoperative evaluation on Erlinda. As she herself admitted, she saw
Erlinda for the first time on the day of the operation itself, one hour before the scheduled operation. She auscultated[14] the patients heart
and lungs and checked the latters blood pressure to determine if Erlinda was indeed fit for operation.[15] However, she did not proceed
to examine the patients airway. Had she been able to check petitioner Erlindas airway prior to the operation, Dr. Gutierrez would most
probably not have experienced difficulty in intubating the former, and thus the resultant injury could have been avoided. As we have
stated in our Decision:

In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first time on the day of the operation itself, on 17
June 1985. Before this date, no prior consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day of the
operation, respondent Dra. Gutierrez was unaware of the physiological make-up and needs of Erlinda. She was likewise not properly
informed of the possible difficulties she would face during the administration of anesthesia to Erlinda. Respondent Dra. Gutierrez act
of seeing her patient for the first time only an hour before the scheduled operative procedure was, therefore, an act of exceptional
negligence and professional irresponsibility. The measures cautioning prudence and vigilance in dealing with human lives lie at the
core of the physicians centuries-old Hippocratic Oath. Her failure to follow this medical procedure is, therefore, a clear indicia of her
negligence.[16]

Further, there is no cogent reason for the Court to reverse its finding that it was the faulty intubation on Erlinda that caused her
comatose condition. There is no question that Erlinda became comatose after Dr. Gutierrez performed a medical procedure on her. Even
the counsel of Dr. Gutierrez admitted to this fact during the oral arguments:
CHIEF JUSTICE:
Mr. Counsel, you started your argument saying that this involves a comatose patient?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
How do you mean by that, a comatose, a comatose after any other acts were done by Dr. Gutierrez or comatose before any
act was done by her?
ATTY. GANA:
No, we meant comatose as a final outcome of the procedure.
CHIEF JUSTICE:
Meaning to say, the patient became comatose after some intervention, professional acts have been done by Dr. Gutierrez?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
In other words, the comatose status was a consequence of some acts performed by D. Gutierrez?
ATTY. GANA:
 It was a consequence of the well, (interrupted)
CHIEF JUSTICE:
An acts performed by her, is that not correct?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
Thank you.[17]
What is left to be determined therefore is whether Erlindas hapless condition was due to any fault or negligence on the part of Dr.
Gutierrez while she (Erlinda) was under the latters care. Dr. Gutierrez maintains that the bronchospasm and cardiac arrest resulting in
the patients comatose condition was brought about by the anaphylactic reaction of the patient to Thiopental Sodium (pentothal). [18] In
the Decision, we explained why we found Dr. Gutierrez theory unacceptable. In the first place, Dr. Eduardo Jamora, the witness who
was presented to support her (Dr. Gutierrez) theory, was a pulmonologist. Thus, he could not be considered an authority on anesthesia
practice and procedure and their complications.[19]
Secondly, there was no evidence on record to support the theory that Erlinda developed an allergic reaction to pentothal. Dr.
Camagay enlightened the Court as to the manifestations of an allergic reaction in this wise:
DR. CAMAGAY:
All right, let us qualify an allergic reaction. In medical terminology an allergic reaction is something which is not usual response
and it is further qualified by the release of a hormone called histamine and histamine has an effect on all the organs of the body
generally release because the substance that entered the body reacts with the particular cell, the mass cell, and the mass cell
secretes this histamine. In a way it is some form of response to take away that which is not mine, which is not part of the
body. So, histamine has multiple effects on the body. So, one of the effects as you will see you will have redness, if you have
an allergy you will have tearing of the eyes, you will have swelling, very crucial swelling sometimes of the larynges which is
your voice box main airway, that swelling may be enough to obstruct the entry of air to the trachea and you could also have
contraction, constriction of the smaller airways beyond the trachea, you see you have the trachea this way, we brought some
visual aids but unfortunately we do not have a projector. And then you have the smaller airways, the bronchi and then eventually
into the mass of the lungs you have the bronchus. The difference is that these tubes have also in their walls muscles and this
particular kind of muscles is smooth muscle so, when histamine is released they close up like this and that phenomenon is
known as bronco spasm. However, the effects of histamine also on blood vessels are different. They dilate blood vessel open
up and the patient or whoever has this histamine release has hypertension or low blood pressure to a point that the patient may
have decrease blood supply to the brain and may collapse so, you may have people who have this.[20]
These symptoms of an allergic reaction were not shown to have been extant in Erlindas case. As we held in our Decision, no
evidence of stridor, skin reactions, or wheezing some of the more common accompanying signs of an allergic reaction appears on
record. No laboratory data were ever presented to the court.[21]
Dr. Gutierrez, however, insists that she successfully intubated Erlinda as evidenced by the fact that she was revived after suffering
from cardiac arrest. Dr. Gutierrez faults the Court for giving credence to the testimony of Cruz on the matter of the administration of
anesthesia when she (Cruz), being a nurse, was allegedly not qualified to testify thereon. Rather, Dr. Gutierrez invites the Courts attention
to her synopsis on what transpired during Erlindas intubation:
12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg) given by slow IV. 02 was started by mask. After
pentothal injection this was followed by IV injection of Norcuron 4mg. After 2 minutes 02 was given by positive
pressure for about one minute. Intubation with endotracheal tube 7.5 m in diameter was done with slight
difficulty (short neck & slightly prominent upper teeth) chest was examined for breath sounds & checked if
equal on both sides. The tube was then anchored to the mouth by plaster & cuff inflated. Ethrane 2% with 02 4
liters was given. Blood pressure was checked 120/80 & heart rate regular and normal 90/min.
12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was discontinued & 02 given alone. Cyanosis disappeared. Blood
pressure and heart beats stable.
12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous rales all over the chest. D_5%_H20 & 1 ampule
of aminophyline by fast drip was started. Still the cyanosis was persistent. Patient was connected to a cardiac
monitor. Another ampule of of [sic] aminophyline was given and solu cortef was given.
12:40 p.m. There was cardiac arrest. Extra cardiac massage and intercardiac injection of adrenalin was given & heart beat
reappeared in less than one minute. Sodium bicarbonate & another dose of solu cortef was given by
IV. Cyanosis slowly disappeared & 02 continuously given & assisted positive pressure. Laboratory exams done
(see results in chart).
 Patient was transferred to ICU for further management.[22]
From the foregoing, it can be allegedly seen that there was no withdrawal (extubation) of the tube. And the fact that the cyanosis
allegedly disappeared after pure oxygen was supplied through the tube proved that it was properly placed.
The Court has reservations on giving evidentiary weight to the entries purportedly contained in Dr. Gutierrez synopsis. It is
significant to note that the said record prepared by Dr. Gutierrez was made only after Erlinda was taken out of the operating room. The
standard practice in anesthesia is that every single act that the anesthesiologist performs must be recorded. In Dr. Gutierrez case, she
could not account for at least ten (10) minutes of what happened during the administration of anesthesia on Erlinda. The following
exchange between Dr. Estrella, one of the amicii curiae, and Dr. Gutierrez is instructive:
DR. ESTRELLA
You mentioned that there were two (2) attempts in the intubation period?
DR. GUTIERREZ
Yes.
Q There were two attempts. In the first attempt was the tube inserted or was the laryngoscope only inserted, which was inserted?
A All the laryngoscope.
Q All the laryngoscope. But if I remember right somewhere in the re-direct, a certain lawyer, you were asked that you did a first
attempt and the question was did you withdraw the tube? And you said you never withdrew the tube, is that right?
A Yes.
Q Yes. And so if you never withdrew the tube then there was no, there was no insertion of the tube during that first attempt. Now,
the other thing that we have to settle here is when cyanosis occurred, is it recorded in the anesthesia record when the
cyanosis, in your recording when did the cyanosis occur?
A (sic)
Q Is it a standard practice of anesthesia that whatever you do during that period or from the time of induction to the time that you
probably get the patient out of the operating room that every single action that you do is so recorded in your anesthesia
record?
A I was not able to record everything I did not have time anymore because I did that after the, when the patient was about to leave
the operating room. When there was second cyanosis already that was the (interrupted)
Q When was the first cyanosis?
A The first cyanosis when I was (interrupted)
Q What time, more or less?
A I think it was 12:15 or 12:16.
Q Well, if the record will show you started induction at 12:15?
A Yes, Your Honor.
Q And the first medication you gave was what?
A The first medication, no, first the patient was oxygenated for around one to two minutes.
Q Yes, so, that is about 12:13?
A Yes, and then, I asked the resident physician to start giving the pentothal very slowly and that was around one minute.
Q So, that is about 12:13 no, 12:15, 12:17?
A Yes, and then, after one minute another oxygenation was given and after (interrupted)
Q 12:18?
A Yes, and then after giving the oxygen we start the menorcure which is a relaxant. After that relaxant (interrupted)
Q After that relaxant, how long do you wait before you do any manipulation?
A Usually you wait for two minutes or three minutes.
Q So, if our estimate of the time is accurate we are now more or less 12:19, is that right?
A Maybe.
Q 12:19. And at that time, what would have been done to this patient?
A After that time you examine the, if there is relaxation of the jaw which you push it downwards and when I saw that the patient
was relax because that monorcure is a relaxant, you cannot intubate the patient or insert the laryngoscope if it is not keeping
him relax. So, my first attempt when I put the laryngoscope on I saw the trachea was deeply interiorly. So, what I did ask
mahirap ata ito ah. So, I removed the laryngoscope and oxygenated again the patient.
Q So, more or less you attempted to do an intubation after the first attempt as you claimed that it was only the laryngoscope that
was inserted.
A Yes.
Q And in the second attempt you inserted the laryngoscope and now possible intubation?
A Yes.
Q And at that point, you made a remark, what remark did you make?
A I said mahirap ata ito when the first attempt I did not see the trachea right away. That was when I (interrupted)
Q That was the first attempt?
A Yes.
Q What about the second attempt?
A On the second attempt I was able to intubate right away within two to three seconds.
Q At what point, for purposes of discussion without accepting it, at what point did you make the comment na mahirap ata to
intubate, mali ata ang pinasukan
A I did not say mali ata ang pinasukan I never said that.
Q Well, just for the information of the group here the remarks I am making is based on the documents that were forwarded to me
by the Supreme Court. That is why for purposes of discussion I am trying to clarify this for the sake of enlightenment. So, at
what point did you ever make that comment?
A Which one, sir?
Q The mahirap intubate ito assuming that you (interrupted)
A Iyon lang, that is what I only said mahirap intubate (interrupted)
Q At what point?
A When the first attempt when I inserted the laryngoscope for the first time.
Q So, when you claim that at the first attempt you inserted the laryngoscope, right?
A Yes.
Q But in one of the recordings somewhere at the, somewhere in the transcript of records that when the lawyer of the other party try
to inquire from you during the first attempt that was the time when mayroon ba kayong hinugot sa tube, I do not remember
the page now, but it seems to me it is there. So, that it was on the second attempt that (interrupted)
A I was able to intubate.
Q And this is more or less about what time 12:21?
A Maybe, I cannot remember the time, Sir.
Q Okay, assuming that this was done at 12:21 and looking at the anesthesia records from 12:20 to 12:30 there was no recording of
the vital signs. And can we presume that at this stage there was already some problems in handling the patient?
A Not yet.
Q But why are there no recordings in the anesthesia record?
A I did not have time.
Q Ah, you did not have time, why did you not have time?
 A Because it was so fast, I really (at this juncture the witness is laughing)
Q No, I am just asking. Remember I am not here not to pin point on anybody I am here just to more or less clarify certainty more
ore less on the record.
A Yes, Sir.
Q And so it seems that there were no recording during that span of ten (10) minutes. From 12:20 to 12:30, and going over your
narration, it seems to me that the cyanosis appeared ten (10) minutes after induction, is that right?
A Yes.
Q And that is after induction 12:15 that is 12:25 that was the first cyanosis?
A Yes.
Q And that the 12:25 is after the 12:20?
A We cannot (interrupted)
Q Huwag ho kayong makuwan, we are just trying to enlighten, I am just going over the record ano, kung mali ito kuwan eh di
ano. So, ganoon po ano, that it seems to me that there is no recording from 12:20 to 12:30, so, I am just wondering why there
were no recordings during the period and then of course the second cyanosis, after the first cyanosis. I think that was the time
Dr. Hosaka came in?
A No, the first cyanosis (interrupted).[23]
We cannot thus give full credence to Dr. Gutierrez synopsis in light of her admission that it does not fully reflect the events that
transpired during the administration of anesthesia on Erlinda. As pointed out by Dr. Estrella, there was a ten-minute gap in Dr. Gutierrez
synopsis, i.e., the vital signs of Erlinda were not recorded during that time. The absence of these data is particularly significant because,
as found by the trial court, it was the absence of oxygen supply for four (4) to five (5) minutes that caused Erlindas comatose condition.
On the other hand, the Court has no reason to disbelieve the testimony of Cruz. As we stated in the Decision, she is competent to
testify on matters which she is capable of observing such as, the statements and acts of the physician and surgeon, external appearances
and manifest conditions which are observable by any one. [24] Cruz, Erlindas sister-in-law, was with her inside the operating
room.Moreover, being a nurse and Dean of the Capitol Medical Center School of Nursing at that, she is not entirely ignorant of anesthetic
procedure. Cruz narrated that she heard Dr. Gutierrez remark, Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang
tiyan. She observed that the nailbeds of Erlinda became bluish and thereafter Erlinda was placed in trendelenburg position. [25] Cruz
further averred that she noticed that the abdomen of Erlinda became distended. [26]
The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack of oxygen or abnormal hemoglobin in the
blood) and enlargement of the stomach of Erlinda indicate that the endotracheal tube was improperly inserted into the esophagus instead
of the trachea. Consequently, oxygen was delivered not to the lungs but to the gastrointestinal tract. This conclusion is supported by the
fact that Erlinda was placed in trendelenburg position. This indicates that there was a decrease of blood supply to the patients brain. The
brain was thus temporarily deprived of oxygen supply causing Erlinda to go into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any negligence in the administration of anesthesia and
in the use of an endotracheal tube. As was noted in our Decision, the instruments used in the administration of anesthesia, including the
endotracheal tube, were all under the exclusive control of private respondents Dr. Gutierrez and Dr. Hosaka. [27] In Voss vs.
Bridwell,[28]which involved a patient who suffered brain damage due to the wrongful administration of anesthesia, and even before the
scheduled mastoid operation could be performed, the Kansas Supreme Court applied the doctrine of res ipsa loquitur, reasoning that the
injury to the patient therein was one which does not ordinarily take place in the absence of negligence in the administration of an
anesthetic, and in the use and employment of an endotracheal tube. The court went on to say that [o]rdinarily a person being put under
anesthesia is not rendered decerebrate as a consequence of administering such anesthesia in the absence of negligence. Upon these facts
and under these circumstances, a layman would be able to say, as a matter of common knowledge and observation, that the consequences
of professional treatment were not as such as would ordinarily have followed if due care had been exercised. [29] Considering the
application of the doctrine of res ipsa loquitur, the testimony of Cruz was properly given credence in the case at bar.
For his part, Dr. Hosaka mainly contends that the Court erred in finding him negligent as a surgeon by applying the Captain-of-
the-Ship doctrine.[30] Dr. Hosaka argues that the trend in United States jurisprudence has been to reject said doctrine in light of the
developments in medical practice. He points out that anesthesiology and surgery are two distinct and specialized fields in medicine and
as a surgeon, he is not deemed to have control over the acts of Dr. Gutierrez. As anesthesiologist, Dr. Gutierrez is a specialist in her field
and has acquired skills and knowledge in the course of her training which Dr. Hosaka, as a surgeon, does not possess.[31] He states further
that current American jurisprudence on the matter recognizes that the trend towards specialization in medicine has created situations
where surgeons do not always have the right to control all personnel within the operating room, [32] especially a fellow specialist.[33]
Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,[34] which involved a suit filed by a patient who lost his voice
due to the wrongful insertion of the endotracheal tube preparatory to the administration of anesthesia in connection with the laparotomy
to be conducted on him. The patient sued both the anesthesiologist and the surgeon for the injury suffered by him. The Supreme Court
of Appeals of West Virginia held that the surgeon could not be held liable for the loss of the patients voice, considering that the surgeon
did not have a hand in the intubation of the patient. The court rejected the application of the Captain-of-the-Ship Doctrine, citing the
fact that the field of medicine has become specialized such that surgeons can no longer be deemed as having control over the other
personnel in the operating room. It held that [a]n assignment of liability based on actual control more realistically reflects the actual
relationship which exists in a modern operating room. [35] Hence, only the anesthesiologist who inserted the endotracheal tube into the
patients throat was held liable for the injury suffered by the latter.
This contention fails to persuade.
That there is a trend in American jurisprudence to do away with the Captain-of-the-Ship doctrine does not mean that this Court
will ipso facto follow said trend. Due regard for the peculiar factual circumstances obtaining in this case justify the application of the
Captain-of-the-Ship doctrine. From the facts on record it can be logically inferred that Dr. Hosaka exercised a certain degree of, at the
very least, supervision over the procedure then being performed on Erlinda.
First, it was Dr. Hosaka who recommended to petitioners the services of Dr. Gutierrez. In effect, he represented to petitioners that
Dr. Gutierrez possessed the necessary competence and skills. Drs. Hosaka and Gutierrez had worked together since 1977. Whenever
Dr. Hosaka performed a surgery, he would always engage the services of Dr. Gutierrez to administer the anesthesia on his patient.[36]
Second, Dr. Hosaka himself admitted that he was the attending physician of Erlinda. Thus, when Erlinda showed signs of cyanosis,
it was Dr. Hosaka who gave instructions to call for another anesthesiologist and cardiologist to help resuscitate Erlinda. [37]
Third, it is conceded that in performing their responsibilities to the patient, Drs. Hosaka and Gutierrez worked as a team. Their
work cannot be placed in separate watertight compartments because their duties intersect with each other. [38]
While the professional services of Dr. Hosaka and Dr. Gutierrez were secured primarily for their performance of acts within their
respective fields of expertise for the treatment of petitioner Erlinda, and that one does not exercise control over the other, they were
certainly not completely independent of each other so as to absolve one from the negligent acts of the other physician.
That they were working as a medical team is evident from the fact that Dr. Hosaka was keeping an eye on the intubation of the
patient by Dr. Gutierrez, and while doing so, he observed that the patients nails had become dusky and had to call Dr. Gutierrezs attention
thereto. The Court also notes that the counsel for Dr. Hosaka admitted that in practice, the anesthesiologist would also have to observe
the surgeons acts during the surgical process and calls the attention of the surgeon whenever necessary [39] in the course of the
treatment. The duties of Dr. Hosaka and those of Dr. Gutierrez in the treatment of petitioner Erlinda are therefore not as clear-cut as
respondents claim them to be. On the contrary, it is quite apparent that they have a common responsibility to treat the patient, which
responsibility necessitates that they call each others attention to the condition of the patient while the other physician is performing the
necessary medical procedures.
It is equally important to point out that Dr. Hosaka was remiss in his duty of attending to petitioner Erlinda promptly, for he arrived
more than three (3) hours late for the scheduled operation. The cholecystectomy was set for June 17, 1985 at 9:00 a.m., but he arrived at
DLSMC only at around 12:10 p.m. In reckless disregard for his patients well being, Dr. Hosaka scheduled two procedures on the same
day, just thirty minutes apart from each other, at different hospitals. Thus, when the first procedure (protoscopy) at the Sta. Teresita
Hospital did not proceed on time, Erlinda was kept in a state of uncertainty at the DLSMC.
The unreasonable delay in petitioner Erlindas scheduled operation subjected her to continued starvation and consequently, to the
risk of acidosis,[40] or the condition of decreased alkalinity of the blood and tissues, marked by sickly sweet breath, headache, nausea
and vomiting, and visual disturbances.[41] The long period that Dr. Hosaka made Erlinda wait for him certainly aggravated the anxiety
that she must have been feeling at the time. It could be safely said that her anxiety adversely affected the administration of anesthesia
on her. As explained by Dr. Camagay, the patients anxiety usually causes the outpouring of adrenaline which in turn results in high
blood pressure or disturbances in the heart rhythm:
DR. CAMAGAY:
x x x Pre-operative medication has three main functions: One is to alleviate anxiety. Second is to dry up the secretions
and Third is to relieve pain. Now, it is very important to alleviate anxiety because anxiety is associated with the outpouring of
certain substances formed in the body called adrenalin. When a patient is anxious there is an outpouring of adrenalin which
would have adverse effect on the patient. One of it is high blood pressure, the other is that he opens himself to disturbances in
the heart rhythm, which would have adverse implications. So, we would like to alleviate patients anxiety mainly because he
will not be in control of his body there could be adverse results to surgery and he will be opened up; a knife is going to open
up his body. x x x[42]
Dr. Hosaka cannot now claim that he was entirely blameless of what happened to Erlinda. His conduct clearly constituted a breach
of his professional duties to Erlinda:
CHIEF JUSTICE:
 Two other points. The first, Doctor, you were talking about anxiety, would you consider a patient's stay on the operating table
for three hours sufficient enough to aggravate or magnify his or her anxiety?
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
In other words, I understand that in this particular case that was the case, three hours waiting and the patient was already on
the operating table (interrupted)
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
Would you therefore conclude that the surgeon contributed to the aggravation of the anxiety of the patient?
DR. CAMAGAY:
That this operation did not take place as scheduled is already a source of anxiety and most operating tables are very narrow
and that patients are usually at risk of falling on the floor so there are restraints that are placed on them and they are never,
never left alone in the operating room by themselves specially if they are already pre-medicated because they may not be
aware of some of their movement that they make which would contribute to their injury.
CHIEF JUSTICE:
In other words due diligence would require a surgeon to come on time?
DR. CAMAGAY:
I think it is not even due diligence it is courtesy.
CHIEF JUSTICE:
Courtesy.
DR. CAMAGAY:
And care.
CHIEF JUSTICE:
Duty as a matter of fact?
DR. CAMAGAY:
Yes, Your Honor.[43]
Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled operation of petitioner Erlinda is violative, not only of
his duty as a physician to serve the interest of his patients with the greatest solicitude, giving them always his best talent and skill,[44] but
also of Article 19 of the Civil Code which requires a person, in the performance of his duties, to act with justice and give everyone his
due.
Anent private respondent DLSMCs liability for the resulting injury to petitioner Erlinda, we held that respondent hospital is
solidarily liable with respondent doctors therefor under Article 2180 of the Civil Code[45] since there exists an employer-employee
relationship between private respondent DLSMC and Drs. Gutierrez and Hosaka:

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While
consultants are not, technically employees, x x x 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. x x x[46]

DLSMC however contends that applying the four-fold test in determining whether such a relationship exists between it and the
respondent doctors, the inescapable conclusion is that DLSMC cannot be considered an employer of the respondent doctors.
It has been consistently held that in determining whether an employer-employee relationship exists between the parties, the
following elements must be present: (1) selection and engagement of services; (2) payment of wages; (3) the power to hire and fire; and
(4) the power to control not only the end to be achieved, but the means to be used in reaching such an end. [47]
 DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but rather, accredits the latter and
grants him or her the privilege of maintaining a clinic and/or admitting patients in the hospital upon a showing by the consultant that he
or she possesses the necessary qualifications, such as accreditation by the appropriate board (diplomate), evidence of fellowship and
references.[48] Second, it is not the hospital but the patient who pays the consultants fee for services rendered by the latter.[49] Third, a
hospital does not dismiss a consultant; instead, the latter may lose his or her accreditation or privileges granted by the
hospital.[50] Lastly, DLSMC argues that when a doctor refers a patient for admission in a hospital, it is the doctor who prescribes the
treatment to be given to said patient. The hospitals obligation is limited to providing the patient with the preferred room accommodation,
the nutritional diet and medications prescribed by the doctor, the equipment and facilities necessary for the treatment of the patient, as
well as the services of the hospital staff who perform the ministerial tasks of ensuring that the doctors orders are carried out strictly.[51]
After a careful consideration of the arguments raised by DLSMC, the Court finds that respondent hospitals position on this issue
is meritorious. There is no employer-employee relationship between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC
solidarily liable for the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to membership in DLSMCs medical staff as active or
visiting consultant is first decided upon by the Credentials Committee thereof, which is composed of the heads of the various specialty
departments such as the Department of Obstetrics and Gynecology, Pediatrics, Surgery with the department head of the particular
specialty applied for as chairman. The Credentials Committee then recommends to DLSMC's Medical Director or Hospital
Administrator the acceptance or rejection of the applicant physician, and said director or administrator validates the committee's
recommendation.[52] Similarly, in cases where a disciplinary action is lodged against a consultant, the same is initiated by the department
to whom the consultant concerned belongs and filed with the Ethics Committee consisting of the department specialty heads. The
medical director/hospital administrator merely acts as ex-officio member of said committee.
Neither is there any showing that it is DLSMC which pays any of its consultants for medical services rendered by the latter to their
respective patients. Moreover, the contract between the consultant in respondent hospital and his patient is separate and distinct from
the contract between respondent hospital and said patient. The first has for its object the rendition of medical services by the consultant
to the patient, while the second concerns the provision by the hospital of facilities and services by its staff such as nurses and laboratory
personnel necessary for the proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by petitioner Erlinda was due to a failure on the part of respondent
DLSMC to provide for hospital facilities and staff necessary for her treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for the injury suffered by petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to petitioners in view of the supervening event of
petitioner Erlindas death. In the assailed Decision, the Court awarded actual damages of One Million Three Hundred Fifty Two
Thousand Pesos (P1,352,000.00) to cover the expenses for petitioner Erlindas treatment and care from the date of promulgation of the
Decision up to the time the patient expires or survives.[53] In addition thereto, the Court awarded temperate damages of One Million Five
Hundred Thousand Pesos (P1,500,000.00) in view of the chronic and continuing nature of petitioner Erlindas injury and the certainty of
further pecuniary loss by petitioners as a result of said injury, the amount of which, however, could not be made with certainty at the
time of the promulgation of the decision. The Court justified such award in this manner:

Our rules on actual or compensatory damages generally assume that at the time of litigation, the injury suffered as a consequence of an
act of negligence has been completed and that the cost can be liquidated.However, these provisions neglect to take into account those
situations, as in this case, where the resulting injury might be continuing and possible future complications directly arising from the
injury, while certain to occur, are difficult to predict.

In these cases, the amount of damages which should be awarded, if they are to adequately and correctly respond to the injury caused,
should be one which compensates for pecuniary loss incurred and proved, up to the time of trial; and one which would meet pecuniary
loss certain to be suffered but which could not, from the nature of the case, be made with certainty. In other words, temperate damages
can and should be awarded on top of actual or compensatory damages in instances where the injury is chronic and continuing. And
because of the unique nature of such cases, no incompatibility arises when both actual and temperate damages are provided for. The
reason is that these damages cover two distinct phases.

As it would not be equitableand certainly not in the best interests of the administration of justicefor the victim in such cases to
constantly come before the courts and invoke their aid in seeking adjustments to the compensatory damages previously
awardedtemperate damages are appropriate. The amount given as temperate damages, though to a certain extent speculative, should
take into account the cost of proper care.

In the instant case, petitioners were able to provide only home-based nursing care for a comatose patient who has remained in that
condition for over a decade. Having premised our award for compensatory damages on the amount provided by petitioners at the onset
of litigation, it would be now much more in step with the interests of justice if the value awarded for temperate damages would allow
petitioners to provide optimal care for their loved one in a facility which generally specializes in such care. They should not be
compelled by dire circumstances to provide substandard care at home without the aid of professionals, for anything less would be
grossly inadequate. Under the circumstances, an award of P1,500,000.00 in temperate damages would therefore be reasonable. [54]

However, subsequent to the promulgation of the Decision, the Court was informed by petitioner Rogelio that petitioner Erlinda
died on August 3, 1999.[55] In view of this supervening event, the award of temperate damages in addition to the actual or compensatory
damages would no longer be justified since the actual damages awarded in the Decision are sufficient to cover the medical expenses
incurred by petitioners for the patient. Hence, only the amounts representing actual, moral and exemplary damages, attorneys fees and
costs of suit should be awarded to petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from liability arising from the injury suffered by petitioner
Erlinda Ramos on June 17, 1985;
(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are hereby declared to be solidarily liable for the injury
suffered by petitioner Erlinda on June 17, 1985 and are ordered to pay petitioners

(a) P1,352,000.00 as actual damages;

(b) P2,000,000.00 as moral damages;

(c) P100,000.00 as exemplary damages;

(d) P100,000.00 as attorneys fees; and

(e) the costs of the suit.

SO ORDERED.
 SECOND DIVISION

ANGELITO L. LAZARO, G.R. No. 138254

Proprietor of Royal Star
Marketing, Present:
Petitioner,
PUNO,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO,
SOCIAL SECURITY COMMISSION, Members. ROSALINA LAUDATO, SOCIAL
SECURITY SYSTEM and THE
HONORABLE COURT OF
APPEALS,
Respondents. Promulgated:

July 30, 2004

x-------------------------------------x

DECISION

TINGA, J.:

Before us is a Petition for Review under Rule 45, assailing the Decision[1] of the Court of Appeals Fifteenth
Division[2] in CA-G.R. Sp. No. 40956, promulgated on 20 November 1998, which affirmed two rulings of the
Social Security Commission (SSC) dated 8 November 1995 and 24 April 1996.

Private respondent Rosalina M. Laudato (Laudato) filed a petition before the SSC for social security coverage
and remittance of unpaid monthly social security contributions against her three (3) employers. Among the
respondents was herein petitioner Angelito L. Lazaro (Lazaro), proprietor of Royal Star Marketing (Royal Star),
which is engaged in the business of selling home appliances.[3] Laudato alleged that despite her employment as
sales supervisor of the sales agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed during
the said period, to report her to the SSC for compulsory coverage or remit Laudatos social security
contributions.[4]

Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she was a mere sales
agent whom he paid purely on commission basis. Lazaro also maintained that Laudato was not subjected to
definite hours and conditions of work. As such, Laudato could not be deemed an employee of Royal Star. [5]

After the parties submitted their respective position papers, the SSC promulgated a Resolution[6] dated 8
November 1995 ruling in favor of Laudato. [7] Applying the control test, it held that Laudato was an employee of
Royal Star, and ordered Royal Star to pay the unremitted social security contributions of Laudato in the amount
of Five Thousand Seven Pesos and Thirty Five Centavos (P5,007.35), together with the penalties totaling Twenty
Two Thousand Two Hundred Eighteen Pesos and Fifty Four Centavos (P22,218.54). In addition, Royal Star was
made liable to pay damages to the SSC in the amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven
Centavos (P15,680.07) for not reporting Laudato for social security coverage, pursuant to Section 24 of the
Social Security Law.[8]

After Lazaros Motion for Reconsideration before the SSC was denied,[9] Lazaro filed a Petition for Review with the
Court of Appeals. Lazaro reiterated that Laudato was merely a sales agent who was paid purely on commission
basis, not included in the company payroll, and who neither observed regular working hours nor accomplished
time cards.

In its assailed Decision, the Court of Appeals noted that Lazaros arguments were a reprise of those already
presented before the SSC.[10]Moreover, Lazaro had not come forward with particulars and specifics in his petition
to show that the Commissions ruling is not supported by substantial evidence.[11] Thus, the appellate court
affirmed the finding that Laudato was an employee of Royal Star, and hence entitled to coverage under the
Social Security Law.

Before this Court, Lazaro again insists that Laudato was not qualified for social security coverage, as she was
not an employee of Royal Star, her income dependent on a generation of sales and based on commissions. [12] It
is argued that Royal Star had no control over Laudatos activities, and that under the so-called control test,
Laudato could not be deemed an employee. [13]

It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the
determination of employer-employee relationship warrants the application of the control test, that is, whether
the employer controls or has reserved the right to control the employee, not only as to the result of the work
done, but also as to the means and methods by which the same is accomplished. [14] The SSC, as sustained by
the Court of Appeals, applying the control test found that Laudato was an employee of Royal Star. We find no
reversible error.

Lazaros arguments are nothing more but a mere reiteration of arguments unsuccessfully posed before two
bodies: the SSC and the Court of Appeals. They likewise put to issue factual questions already passed upon
twice below, rather than questions of law appropriate for review under a Rule 45 petition. The determination of
an employer-employee relationship depends heavily on the particular factual circumstances attending the
professional interaction of the parties. The Court is not a trier of facts[15] and accords great weight to the factual
findings of lower courts or agencies whose function is to resolve factual matters. [16]
 Lazaros arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato
was paid by way of commission does not preclude the establishment of an employer-employee
relationship. In Grepalife v. Judico,[17] the Court upheld the existence of an employer-employee relationship
between the insurance company and its agents, despite the fact that the compensation that the agents on
commission received was not paid by the company but by the investor or the person insured. [18] The relevant
factor remains, as stated earlier, whether the "employer" controls or has reserved the right to control the
"employee" not only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished.[19]

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an
employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat,[20] the employer similarly denied the existence of an
employer-employee relationship, as the claimant according to it, was a supervisor on commission basis who did
not observe normal hours of work. This Court declared that there was an employer-employee relationship,
noting that [the] supervisor, although compensated on commission basis, [is] exempt from the observance of
normal hours of work for his compensation is measured by the number of sales he makes. [21]

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a
sales supervisor and not a mere agent.[22] As such, Laudato oversaw and supervised the sales agents of the
company, and thus was subject to the control of management as to how she implements its policies and its end
results. We are disinclined to reverse this finding, in the absence of countervailing evidence from Lazaro and
also in light of the fact that Laudatos calling cards from Royal Star indicate that she is indeed a sales supervisor.

The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial

evidence. The SSC examined the cash vouchers issued by Royal Star to Laudato, [23] calling cards of Royal Star
denominating Laudato as a Sales Supervisor of the company,[24] and Certificates of Appreciation issued by Royal
Star to Laudato in recognition of her unselfish and loyal efforts in promoting the company.[25] On the other
hand, Lazaro has failed to present any convincing contrary evidence, relying instead on his bare assertions. The
Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSCs ruling was not
supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita
Lazaro, General Manager of Royal Star, directing that no commissions were to be given on all main office sales
from walk-in customers and enjoining salesmen and sales supervisors to observe this new policy. [26] The
Memorandum evinces the fact that, contrary to Lazaros claim, Royal Star exercised control over its sales
supervisors or agents such as Laudato as to the means and methods through which these personnel performed
their work.
 Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v. Court of Appeals[27] that
a person who works for another at his own pleasure, subject to definite hours or conditions of work, and is
compensated according to the result of his effort is not an employee. [28]The citation is odd for Lazaro to rely
upon, considering that in the cited case, the Court affirmed the employee-employer relationship between a sales
agent and the cigarette firm whose products he sold. [29] Perhaps Lazaro meant instead to cite our 1969 ruling
in the similarly-titled case of Social Security System v. Court of Appeals,[30] also cited in the later eponymous
ruling, whose disposition is more in accord with Lazaros argument.

Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the question
whether jockeys were considered employees of the Manila Jockey Club, the Court noted that the jockeys were
actually subjected to the control of the racing steward, whose authority in turn was defined by the Games and
Amusements Board.[31] Moreover, the jockeys choice as to which horse to mount was subject to mutual
agreement between the horse owner and the jockey, and beyond the control of the race club. [32] In the case at
bar, there is no showing that Royal Star was similarly precluded from exerting control or interference over the
manner by which Laudato performed her duties. On the contrary, substantial evidence as found by the SSC
and the Court of Appeals have established the element of control determinative of an employer-employee
relationship. We affirm without hesitation.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated 20
November 1998 is AFFIRMED. Costs against petitioner.

SO ORDERED.
 THIRD DIVISION

[G.R. No. 157214. June 7, 2005]

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE VERA, respondent.

DECISION
GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision[1] and the 13
February 2003 Resolution[2] of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by
the National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of
communication services and allied activities, while respondent Ricardo De Vera is a physician by profession whom petitioner
enlisted to attend to the medical needs of its employees. At the crux of the controversy is Dr. De Veras status vis a
vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,[3] offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in industrial medicine, to include the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions of employees
applying for sick leave of absence and subsequently issuing proper certification, and all matters referred which are
medical in nature.

The parties agreed and formalized respondents proposal in a document denominated as RETAINERSHIP
CONTRACT[4] which will be for a period of one year subject to renewal, it being made clear therein that respondent will
cover the retainership the Company previously had with Dr. K. Eulau and that respondents retainer fee will be at P4,000.00
a month. Said contract was renewed yearly.[5] The retainership arrangement went on from 1981 to 1994 with changes in
the retainers fee. However, for the years 1995 and 1996, renewal of the contract was only made verbally.
The turning point in the parties relationship surfaced in December 1996 when Philcom, thru a letter [6] bearing on the
subject boldly written as TERMINATION RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the
latters retainers contract with the Company effective at the close of business hours of December 31, 1996 because
management has decided that it would be more practical to provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was designated as a company physician on retainer basis for reasons
allegedly known only to Philcom. He likewise professed that since he was not conversant with labor laws, he did not give
much attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly salary plus fringe
benefits, like any other regular employees of Philcom.
 On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision [7] dismissing De Veras
complaint for lack of merit, on the rationale that as a retained physician under a valid contract mutually agreed upon by the
parties, De Vera was an independent contractor and that he was not dismissed but rather his contract with [PHILCOM]
ended when said contract was not renewed after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision[8] dated 23 October 2000, reversed (the word used is
modified) that of the Labor Arbiter, on a finding that De Vera is Philcoms regular employee and accordingly directed the
company to reinstate him to his former position without loss of seniority rights and privileges and with full backwages from
the date of his dismissal until actual reinstatement. We quote the dispositive portion of the decision:

WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former position without
loss of seniority rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as
follows:

Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.

With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001, [9] Philcom then
went to the Court of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of the labor
arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as such award had no basis in fact and
in law.
On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying that of the NLRC by deleting the award
of traveling allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:

WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED. The award
of traveling allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private respondent shall be paid
separation pay computed at one (1) month salary for every year of service computed from the time private respondent commenced his
employment in 1981 up to the actual payment of the backwages and separation pay. The awards of backwages and 13 th month pay
STAND.

SO ORDERED.

In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February
2003.[11]
Hence, Philcoms present recourse on its main submission that -

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION AND RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB
CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.

We GRANT.
 Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the
Court of Appeals. There are instances, however, where the Court departs from this rule and reviews findings of fact so that
substantial justice may be served. The exceptional instances are where:

xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of
fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both
appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of
facts are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in
the petitioners main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record. [12]

As we see it, the parties respective submissions revolve on the primordial issue of whether an employer-employee
relationship exists between petitioner and respondent, the existence of which is, in itself, a question of fact[13] well within the
province of the NLRC. Nonetheless, given the reality that the NLRCs findings are at odds with those of the labor arbiter, the
Court, consistent with its ruling in Jimenez vs. National Labor Relations Commission,[14] is constrained to look deeper into
the attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,[15] the Court, in determining the existence of an employer-employee relationship, has
invariably adhered to the four-fold test, to wit: [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 employees conduct, or the so-called control test, considered to
be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what
his duties would be in offering his services to petitioner. This is borne by no less than his 15 May 1981 letter [16] which, in
full, reads:

May 15, 1981

Mrs. Adela L. Vicente

Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila

Madam:

I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I have the
necessary qualifications, training and experience required by such position and I am confident that I can serve the best interests of
your employees, medically.

My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine which includes
the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to
employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and subsequently issuing proper certification, and all matters referred
which are medical in nature.

On the subject of compensation for the services that I propose to render to the corporation, you may state an offer based on your belief
that I can very well qualify for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit acceptance, I remain

Very truly yours,

(signed)
RICARDO V. DE VERA, M.D.

Significantly, the foregoing letter was substantially the basis of the labor arbiters finding that there existed no employer-
employee relationship between petitioner and respondent, in addition to the following factual settings:

The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed letter to the
respondent dated April 21, 1982 attached as Annex G to the respondents Reply and Rejoinder. Quoting the pertinent portion of said
letter:

To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best interests of both
the present and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during which period I can devote
ample time to both groups depending upon the urgency of the situation. I shall readjust my private schedule to be available for the
herein proposed extended hours, should you consider this proposal.

As regards compensation for the additional time and services that I shall render to the employees, it is dependent on your evaluation of
the merit of my proposal and your confidence on my ability to carry out efficiently said proposal.

The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and seeking additional
compensation for said extension. This shows that the respondent PHILCOM did not have control over the schedule of the complainant
as it [is] the complainant who is proposing his own schedule and asking to be paid for the same. This is proof that the complainant
understood that his relationship with the respondent PHILCOM was a retained physician and not as an employee. If he were an
employee he could not negotiate as to his hours of work.

The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position paper, is
claiming that he is not conversant with the law and did not give much attention to his job title- on a retainer basis. But the same
complainant admits in his affidavit that his service for the respondent was covered by a retainership contract [which] was renewed
every year from 1982 to 1994. Upon reading the contract dated September 6, 1982, signed by the complainant himself (Annex C of
Respondents Position Paper), it clearly states that is a retainership contract. The retainer fee is indicated thereon and the duration of
the contract for one year is also clearly indicated in paragraph 5 of the Retainership Contract. The complainant cannot claim that he
was unaware that the contract was good only for one year, as he signed the same without any objections. The complainant also
accepted its renewal every year thereafter until 1994. As a literate person and educated person, the complainant cannot claim that he
does not know what contract he signed and that it was renewed on a year to year basis. [17]

The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner,
he never was included in its payroll; was never deducted any contribution for remittance to the Social Security System
(SSS); and was in fact subjected by petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance
with the National Internal Revenue Code, matters which are simply inconsistent with an employer-employee relationship. In
the precise words of the labor arbiter:

xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS deductions were
made on his remuneration or that the respondent was deducting the 10% tax for his fees and he surely would have complained about
them if he had considered himself an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider
the SSS payments important and thus make sure they would be paid. The complainant never bothered to ask the respondent to remit
his SSS contributions. This clearly shows that the complainant never considered himself an employee of PHILCOM and thus,
respondent need not remit anything to the SSS in favor of the complainant.[18]

Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill petitioner for his monthly professional fees. [19] It simply runs against
the grain of common experience to imagine that an ordinary employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually vested on both. Either may terminate
the arrangement at will, with or without cause.[20]
Finally, remarkably absent from the parties arrangement is the element of control, whereby the employer has reserved
the right to control the employee not only as to the result of the work done but also as to the means and methods by which
the same is to be accomplished.[21]
 Here, petitioner had no control over the means and methods by which respondent went about performing his work at
the company premises. He could even embark in the private practice of his profession, not to mention the fact that
respondents work hours and the additional compensation therefor were negotiated upon by the parties.[22] In fine, the parties
themselves practically agreed on every terms and conditions of respondents engagement, which thereby negates the
element of control in their relationship. For sure, respondent has never cited even a single instance when petitioner
interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that
respondent is petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondents written retainer contract was renewed annually from 1981 to 1994 and the
alleged renewal for 1995 and 1996, when it was allegedly terminated, was verbal.

Article 280 of the Labor code (sic) provides:

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to perform 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.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee
who has rendered at least one (1) year of service, whether such is continuous or broken, shall be considered a regular with
respect to the activity in which he is employed and his employment shall continue while such activity exists.

Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and
desirability of a physician in a company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a
physician depending on the number of employees and in the case at bench, in petitioners case, as found by public respondent,
petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer,
more so, that he rendered service for at least one year, such employee shall be considered as a regular employee. Private respondent
herein has been with petitioner since 1981 and his employment was not for a specific project or undertaking, the period of which was
pre-determined and neither the work or service of private respondent seasonal. (Emphasis by the CA itself).

We disagree to the foregoing ratiocination.

The appellate courts premise that regular employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this case. For, we take it that any agreement may provide
that one party shall render services for and in behalf of another, no matter how necessary for the latters business, even
without being hired as an employee. This set-up is precisely true in the case of an independent contractorship as well as
in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the yardstick for
determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds
of employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship
is in dispute.[23]
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor
Code, and argues that he satisfies all the requirements thereunder. The provision relied upon reads:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any locality with
free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two
hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of a
graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of
this Article;
 (b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or
emergency hospital with one bed capacity for every one hundred (100) employees when the number of employees
exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of
the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the
case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged
on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and
dental treatment and attendance in case of emergency.

Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-
hazardous workplaces, the employer may engage the services of a physician on retained basis. As correctly observed by
the petitioner, while it is true that the provision requires employers to engage the services of medical practitioners in certain
establishments depending on the number of their employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees,[24] adding that the law, as written, only requires the employer to
retain, not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2)
hours.[25]
Respondent takes no issue on the fact that petitioners business of telecommunications is not hazardous in nature. As
such, what applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the
services of a physician and dentist on retained basis, subject to such regulations as the Secretary of Labor may prescribe.
The successive retainership agreements of the parties definitely hue to the very statutory provision relied upon by
respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where
the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it
that the mandate is obeyed.[26] As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in non-
hazardous establishments to engage on retained basis the service of a dentist or physician. Nowhere does the law provide
that the physician or dentist so engaged thereby becomes a regular employee. The very phrase that they may be engaged
on retained basis, revolts against the idea that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as
shown by their various retainership contracts, so can petitioner put an end, with or without cause, to their retainership
agreement as therein provided.[27]
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice
requirement prior to termination, the same was not complied with by petitioner when it terminated on 17 December 1996
the verbally-renewed retainership agreement, effective at the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties, [28] that execution of the NLRC decision had
already been made at the NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had already
been garnished and released to respondent despite the previous Status Quo Order [29] issued by this Court. To all intents
and purposes, therefore, the 60-day notice requirement has become moot and academic if not waived by the respondent
himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET
ASIDE. The 21 December 1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
 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 Decision1 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 Decision2 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 ABS-CBN 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 ½

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½

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. 7Instead 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 full-time 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 Employee’s Identification Card and salary vouchers are hereto attached as
follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employee’s 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 Employee’s 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 Employee’s 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 Employee’s 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 PA’s 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 Attorney’s 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 respondent’s 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 attorney’s 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 petitioner’s motion for reconsideration, the CA denied the same in a Resolution 17 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 LATTER’S 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 party’s 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 petitioner’s 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 petitioner’s 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 223 21 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 petitioner’s 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 petitioner’s 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 one’s 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 Arbiter’s 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 Arbiter’s 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.
Respondent’s 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, petitioner’s contention that respondents are considered as its talents, hence, not
regular employees of the broadcasting company. Petitioner’s 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" worker’s 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 petitioner’s 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.41We 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 employer-employee relationship exists.

Petitioner’s 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 SONZA’S services to co-host its television and radio programs because of SONZA’S 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 respondent’s
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, ABS-CBN 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 ABS-CBN 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-CBN’s 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.

SONZA’s 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 SONZA’S 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 petitioner’s 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 respondent’s 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 non-member 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 CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.
 FIRST DIVISION

ANGELINA FRANCISCO, G.R. No. 170087

Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,

Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, KASEI CORPORATION,

SEIICHIRO TAKAHASHI, TIMOTEO

ACEDO, DELFIN LIZA, IRENE

BALLESTEROS, TRINIDAD LIZA Promulgated:

and RAMON ESCUETA,

Respondents.

August 31, 2006

x ---------------------------------------------------------------------------------------- x

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 CA-G.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 NLRC-NCR 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 13 th 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 employer-employee 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.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 142625 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 Obstetrics-Gynecology 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 damages15 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 200221 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 200224 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 Hospital31applicable
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 employer-employee 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 x 40(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. 44This
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 200259 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. 64Petitioners 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 cross-matching, 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.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 146881 February 5, 2007

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,

vs.
DR. DEAN N. CLIMACO, Respondent.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals 1 promulgated on July 7, 2000, and its
Resolution promulgated on January 30, 2001, denying petitioner’s motion for reconsideration. The Court of Appeals ruled
that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.

Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue
of a Retainer Agreement that stated:

WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is
accepting such engagement upon terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree
as follows:

1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988.
The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written notice
to the other.

2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at
PESOS: Three Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may charge professional fee for
hospital services rendered in line with his specialization. All payments in connection with the Retainer Agreement
shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the Expanded
Withholding Tax System. In the event the withholding tax rate shall be increased or decreased by appropriate
laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to such laws.

3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties and
obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and made an
integral part of this Retainer Agreement.

4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and
Employment shall be followed.

5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury
inflicted on, harm done against or damage caused upon the employee of the COMPANY or their dependents
during the course of his examination, treatment or consultation, if such injury, harm or damage was committed
through professional negligence or incompetence or due to the other valid causes for action.

6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m.
to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the
COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety and
Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2)
hours a day in the COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number
 of employees. It is further understood that the DOCTOR shall be on call at all times during the other workshifts to
attend to emergency case[s];

7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this
contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee as may
be due him at the time of termination.2

The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the
Retainer Agreement, provided:

A. OBJECTIVE

These objectives have been set to give full consideration to [the] employees’ and dependents’ health:

1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.

2. To protect employees from any occupational health hazard by evaluating health factors related to working
conditions.

3. To encourage employees [to] maintain good personal health by setting up employee orientation and education
on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident prevention and personnel
safety.

4. To evaluate other matters relating to health such as absenteeism, leaves and termination.

5. To give family planning motivations.

B. COVERAGE

1. All employees and their dependents are embraced by this program.

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations, family
planning, physical fitness and athletic programs and other activities such as group health education program,
safety and first aid classes, organization of health and safety committees.

3. Periodically, this program will be reviewed and adjusted based on employees’ needs.

C. ACTIVITIES

1. Annual Physical Examination.

2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental health
hazards.

7. Give family planning motivations.

8. Coordinate with Personnel Department regarding physical fitness and athletic programs.

9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31,
1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner company concluding their retainership
agreement effective 30 days from receipt thereof.

It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner
company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter 5 to the Personnel Officer of
Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise stated that respondent must receive all the
benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant
Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who referred the
inquiry to the Legal Service of the DOLE, Manila. In his letter 7 dated May 18, 1993, Director Dennis P. Ancheta, Legal
Service, DOLE, stated that he believed that an employer-employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-fold"
test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact.
Hence, termination disputes or money claims arising from employer-employee relations exceeding P5,000 may be filed
with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.

An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of
SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the
legal staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular
company doctor and that he was, therefore, subject to social security coverage.

Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a
regular employee. The management refused to do so.

On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular
employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th Month
Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed
as RAB Case No. 06-02-10138-94.

While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from
petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted
respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City. The case was
docketed as RAB Case No. 06-04-10177-95.

In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the
power of control over respondent’s performance of his duties, and recognized as valid the Retainer Agreement between
the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in the first case, RAB Case No. 06-02-10138-94.
The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition
as a regular employee.

SO ORDERED.11

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB
Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-
02-10138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.

Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.

In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It
declared that no employer-employee relationship existed between petitioner company and respondent based on the
provisions of the Retainer Agreement which contract governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution 14 promulgated on August 7, 1998.

Respondent filed a petition for review with the Court of Appeals.

In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed
between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished.

The Court of Appeals held:

The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical Plan
which was made an integral part of the retainer agreements, coupled with the actual services rendered by the petitioner,
would show that all the elements of the above test are present.

First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a physician and
the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its
power to hire the services of petitioner.

Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three
Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five Hundred on the latest
contract. This would represent the element of payment of wages.

Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. "The said
term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice to the
other." (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it later on did,
and this could be done for no particular reason, the sole requirement being the former’s compliance with the 30-day notice
requirement.

Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that
is, control, over the conduct of petitioner in the latter’s performance of his duties as a doctor for the company.

It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the
Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the petitioner
must render service to the company is laid down.

We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and activities to be
observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an
integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are likewise
controlled and determined by the company. Petitioner is subject to definite hours of work, and due to this, he performs his
duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.

In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety Committee. The minutes
of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant physician, as
among those comprising the committee.

It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter was
not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying that "petitioner was
not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo, page 228). We believe that if
the "control test" would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we could
declare that an entity exercises control over another’s activities only in instances where the latter is directed by the former
on each and every stage of performance of the particular activity. Anything less than that would be tantamount to no
control at all.

To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case
where the objectives and activities were laid out, and the specific time for performing them was fixed by the controlling
party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six
years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in
Article 28016 of the Labor Code stating that "any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed, and his employment shall continue while such activity exists." Further, it held that the termination of
respondent’s services without any just or authorized cause constituted illegal dismissal.

In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and was effected in a
wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28,
1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in applying
the law to the established facts, and are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers,
Phils.. Inc. is hereby ordered to:

1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was
withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the
petitioner separation pay equivalent to one (1) month’s salary for every year of service rendered, computed at the
rate of his salary at the time he was dismissed, plus backwages.

2. Pay petitioner moral damages in the amount of P50,000.00.

3. Pay petitioner exemplary damages in the amount of P50,000.00.

4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner
became a regular employee (one year from effectivity date of employment) until the time of actual payment.

SO ORDERED.17

Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.

In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its
Decision failed to mention whether respondent was a full-time or part-time regular employee. It also questioned how the
benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him
considering that such benefits were given only to regular employees who render a full day’s work of not less that eight
hours. It was admitted that respondent is only required to work for two hours per day.

The Court of Appeals clarified that respondent was a "regular part-time employee and should be accorded all the
proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA." It sustained its
decision on all other matters sought to be reconsidered.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

The issues are:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE
SUPREME COURT ON THE MATTER.

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN
IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO
THE RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES.
 3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS
EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE
RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL
WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.

6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR
PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME
EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.

7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO
MORAL AND EXEMPLARY DAMAGES.

The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The
resolution of the main issue will determine whether the termination of respondent’s employment is illegal.

The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold test:
(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, or the so-called "control test," considered to be the most important element.18

The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no
employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that
petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter
reasoned that the Comprehensive Medical Plan, which contains the respondent’s objectives, duties and obligations, does
not tell respondent "how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients,
employees of [petitioner] company, in each case." He likened this case to that of Neri v. National Labor Relations
Commission,19 which held:

In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by
FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds
received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure
that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines
merely to ensure that the end result was achieved, but did not control the means and methods by which respondent
performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power
of control that the contract provides that respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes
of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during
emergency cases did not make him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular
employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to be at
respondent company’s premises, he is not at all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant
maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them
accordingly -- and if it is an employee of respondent company who is attended to by him for special treatment that needs
hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to stay in the
employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for his own
purpose. Such is not the prevailing situation here.1awphi1.net

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not
amount to such control, but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship
upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as
a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated
that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a
period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination of the Retainership
Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of
respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and
SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National
Labor Relations Commission are REINSTATED.

No costs.
 Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

LOLITA LOPEZ, G.R. No. 155731

Petitioner,

Present:

YNARES-SANTIAGO, J.,

- versus - Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

BODEGA CITY (Video-Disco REYES, JJ.

Kitchen of the Philippines) and/or

ANDRES C. TORRES-YAP, Promulgated:

Respondents. September 3, 2007

x------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 18, 2002 Decision [1] of the
Court of Appeals (CA) in CA-G.R. SP No. 66861, dismissing the petition for certiorari filed before it and affirming the Decision of the
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 00-03-01729-95; and its Resolution dated October 16,
2002,[2] denying petitioners Motion for Reconsideration. The NLRC Decision set aside the Decision of the Labor Arbiter finding that
Lolita Lopez (petitioner) was illegally dismissed by Bodega City and/or Andres C. Torres-Yap (respondents).

Respondent Bodega City (Bodega City) is a corporation duly registered and existing under and by virtue of the laws of the Republic of
the Philippines, while respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the lady keeper
of Bodega City tasked with manning its ladies comfort room.

In a letter signed by Yap dated February 10, 1995, petitioner was made to explain why the concessionaire agreement between her
and respondents should not be terminated or suspended in view of an incident that happened on February 3, 1995, wherein petitioner
was seen to have acted in a hostile manner against a lady customer of Bodega City who informed the management that she saw
petitioner sleeping while on duty.

In a subsequent letter dated February 25, 1995, Yap informed petitioner that because of the incident that happened on February 3,
1995, respondents had decided to terminate the concessionaire agreement between them.

On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Capital Region, Quezon City, a complaint for illegal
dismissal against respondents contending that she was dismissed from her employment without cause and due process.

In their answer, respondents contended that no employer-employee relationship ever existed between them and petitioner; that the
latters services rendered within the premises of Bodega City was by virtue of a concessionaire agreement she entered into with
respondents.

The complaint was dismissed by the Labor Arbiter for lack of merit. However, on appeal, the NLRC set aside the order of dismissal and
remanded the case for further proceedings. Upon remand, the case was assigned to a different Labor Arbiter. Thereafter, hearings
were conducted and the parties were required to submit memoranda and other supporting documents.

On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner was an employee of respondents and that the
latter illegally dismissed her.[3]

Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a Resolution, the dispositive portion of which reads
as follows:

WHEREFORE, premises duly considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED, and
in its stead, a new one entered DISMISSING the above-entitled case for lack of merit.[4]
Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution, but the NLRC denied the same.

Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the CA promulgated the presently assailed Decision
dismissing her special civil action forcertiorari. Petitioner moved for reconsideration but her motion was denied.

Hence, herein petition based on the following grounds:

1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS
COMMISSION DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE LABOR
ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY DISMISSED BY PRIVATE RESPONDENTS.

2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE
OF PRIVATE RESPONDENTS.[5]

Petitioner contends that it was wrong for the CA to conclude that even if she did not sign the document evidencing the
concessionaire agreement, she impliedly accepted and thus bound herself to the terms and conditions contained in the said
agreement when she continued to perform the task which was allegedly specified therein for a considerable length of
time. Petitioner claims that the concessionaire agreement was only offered to her during her tenth year of service and after she
organized a union and filed a complaint against respondents. Prior to all these, petitioner asserts that her job as a lady keeper was
a task assigned to her as an employee of respondents.

Petitioner further argues that her receipt of a special allowance from respondents is a clear evidence that she was an employee of
the latter, as the amount she received was equivalent to the minimum wage at that time.

Petitioner also contends that her identification card clearly shows that she was not a concessionaire but an employee of
respondents; that if respondents really intended the ID card issued to her to be used simply for having access to the premises of
Bodega City, then respondents could have clearly indicated such intent on the said ID card.

Moreover, petitioner submits that the fact that she was required to follow rules and regulations prescribing appropriate conduct
while she was in the premises of Bodega City is clear evidence of the existence of an employer-employee relationship between her
and petitioners.
On the other hand, respondents contend that the present petition was filed for the sole purpose of delaying the proceedings of
the case; the grounds relied upon in the instant petition are matters that have been exhaustively discussed by the NLRC and the
CA; the present petition raises questions of fact which are not proper in a petition for review on certiorari under Rule 45 of the
Rules of Court; the respective decisions of the NLRC and the CA are based on evidence presented by both parties; petitioners
compliance with the terms and conditions of the proposed concessionaire contract for a period of three years is evidence of her
implied acceptance of such proposal; petitioner failed to present evidence to prove her allegation that the subject concessionaire
agreement was only proposed to her in her 10th year of employment with respondent company and after she organized a union
and filed a labor complaint against respondents; petitioner failed to present competent documentary and testimonial evidence to
prove her contention that she was an employee of respondents since 1985.

The main issue to be resolved in the present case is whether or not petitioner is an employee of respondents.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. [6]

While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorari of CA
decisions,[7] there are well-recognized exceptions to this rule, as in this case, when the factual findings of the NLRC as affirmed by
the CA contradict those of the Labor Arbiter.[8] In that event, it is this Courts task, in the exercise of its equity jurisdiction, to re-
evaluate and review the factual issues by looking into the records of the case and re-examining the questioned findings.[9]

It is a basic rule of evidence that each party must prove his affirmative allegation. [10] If he claims a right granted by law, he must
prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his
opponent.[11]

The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be successful
if no evidence of such matters were given.[12]

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid
cause.[13] However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.[14]

In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee of respondent, it is
incumbent upon petitioner to prove the employee-employer relationship by substantial evidence.[15]
 The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no cogent reason to depart
from their findings.

The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp.,[16] to wit:

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold
test, namely: (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. The so-called control test is commonly regarded as the most crucial and determinative indicator of
the presence or absence of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the
end achieved, but also the manner and means to be used in reaching that end. [17]

To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an allowance for five
(5) days.[18] The CA did not err when it held that a solitary petty cash voucher did not prove that petitioner had been receiving salary
from respondents or that she had been respondents employee for 10 years.

Indeed, if petitioner was really an employee of respondents for that length of time, she should have been able to present salary
vouchers or pay slips and not just a single petty cash voucher. The Court agrees with respondents that petitioner could have easily
shown other pieces of evidence such as a contract of employment, SSS or Medicare forms, or certificates of withholding tax on
compensation income; or she could have presented witnesses to prove her contention that she was an employee of
respondents. Petitioner failed to do so.

Anent the element of control, petitioners contention that she was an employee of respondents because she was subject to their
control does not hold water.

Petitioner failed to cite a single instance to prove that she was subject to the control of respondents insofar as the manner in which
she should perform her job as a lady keeper was concerned.

It is true that petitioner was required to follow rules and regulations prescribing appropriate conduct while within the premises
of Bodega City. However, this was imposed upon petitioner as part of the terms and conditions in the concessionaire agreement
embodied in a 1992 letter of Yap addressed to petitioner, to wit:

January 6, 1992
Dear Ms. Lolita Lopez,

The new owners of Bodega City, 1121 Food Service Corporation offers to your goodself the
concessionaire/contract to provide independently, customer comfort services to assist users of the ladies comfort
room of the Club to further enhance its business, under the following terms and conditions:

1. You will provide at your own expense, all toilet supplies, useful for the purpose, such as toilet papers, soap, hair
pins, safety pins and other related items or things which in your opinion is beneficial to the services you will
undertake;

2. For the entire duration of this concessionaire contract, and during the Clubs operating hours, you shall maintain
the cleanliness of the ladies comfort room. Provided, that general cleanliness, sanitation and physical maintenance
of said comfort rooms shall be undertaken by the owners of Bodega City;

3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking. More importantly,
you shall always observe utmost courtesy in dealing with the persons/individuals using said comfort room and shall
refrain from doing acts that may adversely affect the goodwill and business standing of Bodega City;

4. All remunerations, tips, donations given to you by individuals/persons utilizing said comfort rooms and/or guests
of Bodega City shall be waived by the latter to your benefit provided however, that if concessionaire receives tips or
donations per day in an amount exceeding 200% the prevailing minimum wage, then, she shall remit fifty percent
(50%) of said amount to Bodega City by way of royalty or concession fees;

5. This contract shall be for a period of one year and shall be automatically renewed on a yearly basis unless notice
of termination is given thirty (30) days prior to expiration. Any violation of the terms and conditions of this contract
shall be a ground for its immediate revocation and/or termination.

6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or
1121 FoodService Corporation and your goodself, as you are an independent contractor who has represented to us
that you possess the necessary qualification as such including manpower compliment, equipment, facilities, etc. and
that any person you may engage or employ to work with or assist you in the discharge of your undertaking shall be
solely your own employees and/or agents.

1121 FoodService Corporation

Bodega City

By:

(Sgd.) ANDRES C. TORRES-YAP

Conforme:
 _______________

LOLITA LOPEZ[19]

Petitioner does not dispute the existence of the letter; neither does she deny that respondents offered her the subject concessionaire
agreement. However, she contends that she could not have entered into the said agreement with respondents because she did not
sign the document evidencing the same.

Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.[20] For
a contract, to arise, the acceptance must be made known to the offeror.[21] Moreover, the acceptance of the thing and the cause, which
are to constitute a contract, may be express or implied as can be inferred from the contemporaneous and subsequent acts of the
contracting parties.[22] A contract will be upheld as long as there is proof of consent, subject matter and cause; it is generally obligatory
in whatever form it may have been entered into.[23]
In the present case, the Court finds no cogent reason to disregard the findings of both the CA and the NLRC that while petitioner did
not affix her signature to the document evidencing the subject concessionaire agreement, the fact that she performed the tasks
indicated in the said agreement for a period of three years without any complaint or question only goes to show that she has given
her implied acceptance of or consent to the said agreement.

Petitioner is likewise estopped from denying the existence of the subject concessionaire agreement. She should not, after enjoying
the benefits of the concessionaire agreement with respondents, be allowed to later disown the same through her allegation that
she was an employee of the respondents when the said agreement was terminated by reason of her violation of the terms and
conditions thereof.

The principle of estoppel in pais applies wherein -- by ones acts, representations or admissions, or silence when one ought to speak
out -- intentionally or through culpable negligence, induces another to believe certain facts to exist and to rightfully rely and act on
such belief, so as to be prejudiced if the former is permitted to deny the existence ofthose facts.[24]

Moreover, petitioner failed to dispute the contents of the affidavit [25] as well as the testimony[26] of Felimon Habitan (Habitan), the
concessionaire of the mens comfort room ofBodega City, that he had personal knowledge of the fact that petitioner was the
concessionaire of the ladies comfort room of Bodega City.

Petitioner also claims that the concessionaire agreement was offered to her only in her 10th year of service, after she organized a union
and filed a complaint against respondents.However, petitioner's claim remains to be an allegation which is not supported by any
evidence. It is a basic rule in evidence that each party must prove his affirmative allegation,[27] that mere allegation is not evidence.[28]
The Court is not persuaded by petitioners contention that the Labor Arbiter was correct in concluding that there existed an employer-
employee relationship between respondents and petitioner. A perusal of the Decision[29] of the Labor Arbiter shows that his only
basis for arriving at such a conclusion are the bare assertions of petitioner and the fact thatthe latter did not sign the letter of Yap
containing the proposed concessionaire agreement. However, as earlier discussed, this Court finds no error in the findings of the NLRC
and the CA that petitioner is deemed as having given her consent to the said proposal when she continuously performed the tasks
indicated therein for a considerable length of time.For all intents and purposes, the concessionaire agreement had been perfected.

Petitioner insists that her ID card is sufficient proof of her employment. In Domasig v. National Labor Relations Commission,[30] this
Court held that the complainants ID card and the cash vouchers covering his salaries for the months indicated therein were substantial
evidence that he was an employee of respondents, especially in light of the fact that the latter failed to deny said evidence. This is not
the situation in the present case. The only evidence presented by petitioner as proof of her alleged employment are her ID card and
one petty cash voucher for a five-day allowance which were disputed by respondents.

As to the ID card, it is true that the words EMPLOYEES NAME appear printed below petitioners name.[31] However, she failed
to dispute respondents evidence consisting of Habitans testimony,[32] that he and the other contractors of Bodega City such as the
singers and band performers, were also issued the same ID cards for the purpose of enabling them to enter the premises
of Bodega City.

The Court quotes, with approval, the ruling of the CA on this matter, to wit:

Nor can petitioners identification card improve her cause any better. It is undisputed that non-employees, such
as Felimon Habitan, an admitted concessionaire, musicians, singers and the like at Bodega City are also issued
identification cards. Given this premise, it appears clear to Us that petitioner's I.D. Card is incompetent proof of an
alleged employer-employee relationship between the herein parties. Viewed in the context of this case, the card is
at best a passport from management assuring the holder thereof of his unmolested access to the premises
of Bodega City.[33]

With respect to the petty cash voucher, petitioner failed to refute respondents claim that it was not given to her for services rendered
or on a regular basis, but simply granted as financial assistance to help her temporarily meet her familys needs.

Hence, going back to the element of control, the concessionaire agreement merely stated that petitioner shall maintain the
cleanliness of the ladies comfort room and observe courtesy guidelines that would help her obtain the results they wanted to
achieve. There is nothing in the agreement which specifies the methods by which petitioner should achieve these results. Respondents
did not indicate the manner in which she should go about in maintaining the cleanliness of the ladies comfort room. Neither did
respondents determine the means and methods by which petitioner could ensure the satisfaction of respondent companys
customers. In other words, petitioner was given a free hand as to how she would perform her job as a lady keeper. In fact, the last
paragraph of the concessionaire agreement even allowed petitioner to engage persons to work with or assist her in the discharge of
her functions.[34]

Moreover, petitioner was not subjected to definite hours or conditions of work. The fact that she was expected to maintain the
cleanliness of respondent companys ladies comfort room during Bodega Citys operating hours does not indicate that her performance
of her job was subject to the control of respondents as to make her an employee of the latter.Instead, the requirement that she had
to render her services while Bodega City was open for business was dictated simply by the very nature of her undertaking, which was
to give assistance to the users of the ladies comfort room.

In Consulta v. Court of Appeals,[35] this Court held:

It should, however, be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that gives untrammeled freedom to the party hired
and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it.[36]

Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present in the instant
case.

It has been established that there has been no employer-employee relationship between respondents and petitioner. Their
contractual relationship was governed by the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not
dismissed by respondents. Instead, as shown by the letter of Yap to her dated February 15, 1995,[37] their contractual relationship was
terminated by reason of respondents' termination of the subject concessionaire agreement, which was in accordance with the
provisions of the agreement in case of violation of its terms and conditions.

In fine, the CA did not err in dismissing the petition for certiorari filed before it by petitioner.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED. Costs against
petitioner.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 176484 November 25, 2008

CALAMBA MEDICAL CENTER, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS AND
MERCEDITHA*LANZANAS, respondents.

DECISION

CARPIO MORALES, J.:

The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses
Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995,
respectively, as part of its team of resident physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts,
respondents were paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were also given a
percentage share out of fees charged for out-patient treatments, operating room assistance and discharge billings, in
addition to their fixed monthly retainer.2

The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul
Desipeda (Dr. Desipeda). And they were issued identification cards 3 by petitioner and were enrolled in the Social Security
System (SSS).4 Income taxes were withheld from them.5

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a
telephone conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension
telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the low "census" or admission of patients to the
hospital.6

Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a
Memorandum of March 7, 1998 reading:

As a Licensed Resident Physician employed in Calamba Medical Center since several years ago, the
hospital management has committed upon you utmost confidence in the performance of duties pursuant thereto.
This is the reason why you were awarded the privilege to practice in the hospital and were entrusted hospital
functions to serve the interest of both the hospital and our patients using your capability for independent
judgment.

Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details
of which are contained in the hereto attached affidavit of witness.

You are therefore given 24 hours to explain why no disciplinary action should be taken against you.

Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension
effective upon receipt hereof.7 (Emphasis, italics and underscoring supplied)

Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work
schedule after sending her husband Dr. Lanzanas the memorandum, 8 nor inform her the reason therefor, albeit she was
later informed by the Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures.9

Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998,10 admitted that he spoke with Miscala over the
phone but that their conversation was taken out of context by Dr. Trinidad.

On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to unresolved grievances over
terms and conditions of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension13 before the National Labor Relations
Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal
dismissal.14

In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor
dispute to the NLRC for compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union
officers and employees of petitioner pending resolution of the labor dispute.15

In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all
union officers and members to return-to-work "on or April 23, 1998, except those employees that were already terminated
or are serving disciplinary actions." Dr. Desipeda thus ordered the officers and members of the union to "report for work
as soon as possible" to the hospital's personnel officer and administrator for "work scheduling, assignments and/or re-
assignments."

Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds
therefor his failure to report back to work despite the DOLE order and his supposed role in the striking union, thus:

On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical Director
implementing the Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,--you still did
not report for work [sic].

You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be
unlawfully participating as member in the rank-and-file union's concerted activities despite knowledge that your
position in the hospital is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out
your orders using your independent judgment) which participation is expressly prohibited by the New Labor Code
and which prohibition was sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis and italics
in the original; underscoring partly in the original and partly supplied)

For these reasons as grounds for termination, you are hereby terminated for cause from employment
effective today, April 25, 1998, without prejudice to further action for revocation of your license before the
Philippine [sic] Regulations [sic] Commission.17 (Emphasis and underscoring supplied)

Dr. Lanzanas thus amended his original complaint to include illegal dismissal.18 His and Dr. Merceditha's complaints were
consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.

By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of
jurisdiction upon a finding that there was no employer-employee relationship between the parties, the fourth requisite or
the "control test" in the determination of an employment bond being absent.

On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:

WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full
backwages; separation pay of one month salary for every year of service in lieu of reinstatement; moral damages
of P500,000.00 each; exemplary damages of P250,000.00 each plus ten percent (10%) of the total award as
attorney's fees.

SO ORDERED.21

Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.

The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's petition and set aside the NLRC ruling.
However, upon a subsequent motion for reconsideration filed by respondents, it reinstated the NLRC decision in an
Amended Decision23 dated September 26, 2006 but tempered the award to each of the spouses of moral and exemplary
damages to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees.

In finding the existence of an employer-employee relationship between the parties, the appellate court held:

x x x. While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's
patients, the petitioner has not denied nor explained why its Medical Director still has the direct supervision and
 control over the respondents. The fact is the petitioner's Medical Director still has to approve the schedule of
duties of the respondents. The respondents stressed that the petitioner's Medical Director also
issues instructions or orders to the respondents relating to the means and methods of performing their
duties, i.e. admission of patients, manner of characterizing cases, treatment of cases, etc., and may even
overrule, review or revise the decisions of the resident physicians. This was not controverted by the
petitioner. The foregoing factors taken together are sufficient to constitute the fourth element, i.e. control test,
hence, the existence of the employer-employee relationship. In denying that it had control over the respondents,
the petitioner alleged that the respondents were free to put up their own clinics or to accept other retainership
agreement with the other hospitals. But, the petitioner failed to substantiate the allegation with substantial
evidence. (Emphasis and underscoring supplied)24

The appellate court thus declared that respondents were illegally dismissed.

x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation
in union activities, specifically in joining the strike and failing to observe the return-to-work order issued by the
Secretary of Labor. Yet, the petitioner did not adduce any piece of evidence to show that respondent Ronaldo
indeed participated in the strike. x x x.

In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant
Ronaldo has given rise to the presumption that her sympat[hies] are likewise with her husband" as a ground for
her dismissal is unacceptable. Such is not one of the grounds to justify the termination of her
employment.25 (Underscoring supplied)

The fallo of the appellate court's decision reads:

WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30,
2004, is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:

WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated
September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the
MODIFICATION that the moral and exemplary damages are reduced to P100,000.00 each
and P50,000.00 each, respectively.

SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)

Preliminarily, the present petition calls for a determination of whether there exists an employer-employee
relationship27 between petitioner and the spouses-respondents.

Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its
twice-a-week reporting arrangement with respondents who are free to practice their profession elsewhere the rest of the
week. And it invites attention to the uncontroverted allegation that respondents, aside from their monthly retainers, were
entitled to one-half of all suturing, admitting, consultation, medico-legal and operating room assistance fees.28 These
circumstances, it stresses, are clear badges of the absence of any employment relationship between them.

This Court is unimpressed.

Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both
the means and the details of the process by which the physician is to accomplish his task. 29

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 is compensated according to the result of his efforts and not the amount thereof, the element of
control is absent.30

As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical
director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed
under pain of administrative sanctions.

That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the
operating room, or any department or ward for that matter, respondents' work is monitored through its nursing
supervisors, charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no
operations can be undertaken in those areas. For control test to apply, it is not essential for the employer to actually
supervise the performance of duties of the employee, it being enough that it has the right to wield the power.31

With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them
and petitioner as this merely mirrors additional form or another form of compensation or incentive similar to what
commission-based employees receive as contemplated in Article 97 (f) of the Labor Code, thus:

"Wage" paid to any employee shall mean the remuneration or earning, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. x x x (Emphasis and underscoring supplied),

Respondents were in fact made subject to petitioner-hospital's Code of Ethics,32 the provisions of which cover
administrative and disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against
persons, property and the hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the
identification cards it issued them, the payslips33 and BIR W-2 (now 2316) Forms which reflect their status as employees,
and the classification as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare
(Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS Law 34 is premised on the
existence of an employer-employee relationship,35 except in cases of compulsory coverage of the self-employed. It would
be preposterous for an employer to report certain persons as employees and pay their SSS premiums as well as their
wages if they are not its employees.36

And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7,
1998 memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination letter indicating
respondent Lanzanas' employment status.

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee
relationship exists between the resident physicians and the training hospitals, unless there is a training agreement
between them, and the training program is duly accredited or approved by the appropriate government agency. In
respondents' case, they were not undergoing any specialization training. They were considered non-training general
practitioners,37 assigned at the emergency rooms and ward sections.

Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were
illegally dismissed.

Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the
Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:

xxxx

In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner
are supervisors, namely x x x Rolando Lanzonas [sic] x x x.

A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that
except for the contention that these employees allegedly supervise, they do not however recommend any
managerial action. At most, their job is merely routinary in nature and consequently, they cannot be considered
supervisory employees.

They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the
union] is seeking to represent in the instant case.38 (Emphasis and underscoring supplied)

xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest.
In labor disputes adversely affecting the continued operation of a hospital, Article 263(g) of the Labor Code provides:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–

xxxx

(g) x x x x

x x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an effective
skeletal workforce of medical and other health personnel, whose movement and services shall be unhampered
and unrestricted, as are necessary to insure the proper and adequate protection of the life and health of its
patients, most especially emergency cases, for the duration of the strike or lockout. In such cases, the Secretary
of Labor and Employment is mandated to immediately assume, within twenty-four hours from knowledge of the
occurrence of such strike or lockout, jurisdiction over the same or certify to the Commission for compulsory
arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the
Commission, under pain of immediate disciplinary action, including dismissal or loss of employment
status or payment by the locking-out employer of backwages, damages and other affirmative relief, even
criminal prosecution against either or both of them.

x x x x (Emphasis and underscoring supplied)

An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers,
whether a corresponding return-to-work order had been issued.39 The DOLE Secretary in fact issued a return-to-work
Order, failing to comply with which is punishable by dismissal or loss of employment status.40

Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in order to justify
immediate dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however, there is
nothing in the records that would bear out Dr. Lanzanas' actual participation in the strike. And the medical director's
Memorandum41 of April 22, 1998 contains nothing more than a general directive to all union officers and members to
return-to-work. Mere membership in a labor union does not ipso facto mean participation in a strike.

Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given
any work schedule42 was not refuted by petitioner. Petitioner in fact never released any findings of its supposed
investigation into Dr. Lanzanas' alleged "inimical acts."

Petitioner thus failed to observe the two requirements,before dismissal can be effected ─ notice and hearing ─ which
constitute essential elements of the statutory process; the first to apprise the employee of the particular acts or omissions
for which his dismissal is sought, and the second to inform the employee of the employer's decision to dismiss him. 43 Non-
observance of these requirements runs afoul of the procedural mandate.44

The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was
apprised of the reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain his side.
His was a "termination upon receipt" situation. While he was priorly made to explain on his telephone conversation with
Miscala,45 he was not with respect to his supposed participation in the strike and failure to heed the return-to-work order.

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause
and without observance of due process. In fact, petitioner never proferred any valid cause for her dismissal except its view
that "her marriage to [Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and that
when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload by the medical doctor, he was
presumed to be speaking for himself [and] for his wife Merceditha."46

Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that.
Its termination of her employment on the basis of her conjugal relationship is not analogous to

any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no matter how strong, cannot
substitute for factual findings carefully established through orderly procedure. 48
The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case.
There is thus no gainsaying that her dismissal was both substantively and procedurally infirm.

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" 49 including therein the names of
respondents. Consider the following portions of Dr. Merceditha's Memorandum of Appeal:

3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which
[was] procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said
list is precisely to harass Complainant and malign her good name and reputation. This is not only unprofessional,
but runs smack of oppression as CMC is trying permanently deprived [sic] Complainant of her livelihood by
ensuring that she is barred from practicing in other hospitals.

4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of public
knowledge that she was dismissed from work. Complainant came from a reputable and respected family, her
father being a retired full Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all
professionals, her brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family protection [sic]
to protect. She likewise has a professional reputation to protect, being a licensed physician. Both her personal
and professional reputation were damaged as a result of the unlawful acts of the respondents. 50

While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate
such listing and to circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely lists obtained by one
Dr. Ernesto Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the
same time a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board action.51 (Emphasis and
underscoring supplied)

The circulation of such list containing names of alleged union members intended to prevent employment of workers for
union activities similarly constitutes unfair labor practice, thereby giving a right of action for damages by the employees
prejudiced.52

A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as
exemplary damages were correctly awarded,53 the award of attorney's fees should be reinstated.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that
the award by the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is
reinstated. In all other aspects, the decision of the appellate court is affirmed.

SO ORDERED.
 Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

MARTICIO SEMBLANTE and DUBRICK G.R. No. 196426

PILAR,

Petitioners,
Present:

- versus - CARPIO,* J.

VELASCO, JR., Chairperson,

BRION,**

COURT OF APPEALS, 19THDIVISION, now SPECIAL PERALTA, and

FORMER 19TH DIVISION, GALLERA DE MANDAUE / SERENO,*** JJ.
SPOUSES VICENTE and MARIA LUISA LOOT,

Respondents.

Promulgated:

August 15, 2011

x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the Decision [1] and
Resolution[2] dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA
affirmed the October 18, 2006 Resolution[3] of the National Labor Relations Commission (NLRC), Fourth Division (now Seventh
Division), in NLRC Case No. V-000673-2004.
 Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by respondents-spouses
Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador and sentenciador, respectively,
of the cockpit sometime in 1993.

As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders the start of
the cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit. Meanwhile, as
the sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocksÕ physical condition and capabilities
to continue the cockfight, and eventually declares the result of the cockfight. [4]

For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP 8,000 per month,
while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every week,
excluding monthly derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight,
or until the early hours of the morning depending on the needs of the cockpit. Petitioners had both been issued employeesÕ
identification cards[5] that they wear every time they report for duty. They alleged never having incurred any infraction and/or violation
of the cockpit rules and regulations.

On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of respondents, and
were informed of the termination of their services effective that date. This prompted petitioners to file a complaint for illegal dismissal
against respondents.

In answer, respondents denied that petitioners were their employees and alleged that they were associates of respondentsÕ
independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time or day and they are free to
decide for themselves whether to report for work or not on any cockfighting day. In times when there are few cockfights in Gallera de
Mandaue, petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued identification
cards to indicate that they were free from the normal entrance fee and to differentiate them from the general public. [6]

In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents
as they performed work that was necessary and indispensable to the usual trade or business of respondents for a number of years.
The Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to pay petitioners their backwages
and separation pay.[7]

RespondentsÕ counsel received the Labor ArbiterÕs Decision on September 14, 2004. And within the 10-day appeal period, he
filed the respondentsÕ appeal with the NLRC on September 24, 2004, but without posting a cash or surety bond equivalent to the
monetary award granted by the Labor Arbiter.[8]
 It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution [9] dated
August 25, 2005, the NLRC denied the appeal for its non-perfection.

Subsequently, however, the NLRC, acting on respondentsÕ Motion for Reconsideration, reversed its Resolution on the
postulate that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial compliance with the
rules. The NLRC held in its Resolution of October 18, 2006 that there was no employer-employee relationship between petitioners
and respondents, respondents having no part in the selection and engagement of petitioners, and that no separate individual contract
with respondents was ever executed by petitioners.[10]

Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007, petitioners
went to the CA on a petition for certiorari. In support of their petition, petitioners argued that the NLRC gravely abused its discretion
in entertaining an appeal that was not perfected in the first place. On the other hand, respondents argued that the NLRC did not
commit grave abuse of discretion, since they eventually posted their appeal bond and that their appeal was so meritorious warranting
the relaxation of the rules in the interest of justice.[11]

In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-takers in a
cockfight need to have the kind of expertise that is characteristic of the game to interpret messages conveyed by mere gestures.
Hence, petitioners are akin to independent contractors who possess unique skills, expertise, and talent to distinguish them from
ordinary employees. Further, respondents did not supply petitioners with the tools and instrumentalities they needed to perform
work. Petitioners only needed their unique skills and talents to perform their job as masiador and sentenciador.[12] The CA held:

In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor
cases. In this case, the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the
case at bench which warrants a relaxation of the bond requirement as a condition for perfecting the appeal. This
case is highly meritorious that propels this Court not to strictly apply the rules and thus prevent a grave injustice
from being done.

As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employer-employee
exists between the petitioners and the private respondents [constrain] the relaxation of the rules. In this regard,
we find no grave abuse attributable to the administrative body.

xxxx

Petitioners are duly licensed ÒmasiadorÓ and ÒsentenciadorÓ in the cockpit owned by Lucia Loot.
Cockfighting, which is a part of our cultural heritage, has a peculiar set of rules. It is a game based on the fighting
ability of the game cocks in the cockpit. The referees and bet-takers need to have that kind of expertise that is
 characteristic of the cockfight gambling who can interpret the message conveyed even by mere gestures. They
ought to have the talent and skill to get the bets from numerous cockfighting aficionados and decide which cockerel
to put in the arena. They are placed in that elite spot where they can control the game and the crowd. They are not
given salaries by cockpit owners as their compensation is based on the ÒarribaÓ. In fact, they can offer their
services everywhere because they are duly licensed by the GAB. They are free to choose which cockpit arena to
enter and offer their expertise. Private respondents cannot even control over the means and methods of the
manner by which they perform their work. In this light, they are akin to independent contractors who possess
unique skills, expertise and talent to distinguish them from ordinary employees.

Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed
to perform their work. Petitioners only needed their talent and skills to be a ÒmasiadorÓ and ÒsentenciadorÓ. As
such, they had all the tools they needed to perform their work. (Emphasis supplied.)

The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the CA committed
a reversible error in entertaining an appeal, which was not perfected in the first place.

Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the
Decision of the Labor Arbiter.[13] Article 223 of the Labor Code provides:

Article 223. Appeal. Ñ Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed
to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or
orders. Such appeal may be entertained only on any of the following grounds:

xxxx

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the
amount equivalent to the monetary award in the judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on, and excused the
late posting of, the appeal bond when there are strong and compelling reasons for the liberality, [14] such as the prevention of
miscarriage of justice extant in the case[15] or the special circumstances in the case combined with its legal merits or the amount and
the issue involved.[16] After all, technical rules cannot prevent courts from exercising their duties to determine and settle, equitably
and completely, the rights and obligations of the parties.[17] This is one case where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the other hand, that
petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold test of employment We have
repeatedly mentioned in countless decisions: (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 employeeÕs conduct, which is the most important element. [18]

As found by both the NLRC and the CA, respondents had no part in petitionersÕ selection and management; [19] petitionersÕ
compensation was paid out of the arriba(which is a percentage deducted from the total bets), not by petitioners;[20] and petitioners
performed their functions as masiador and sentenciador free from the direction and control of respondents.[21] In the conduct of
their work, petitioners relied mainly on their Òexpertise that is characteristic of the cockfight gambling,Ó[22] and were never given by
respondents any tool needed for the performance of their work. [23]

Respondents, not being petitionersÕ employers, could never have dismissed, legally or illegally, petitioners, since
respondents were without power or prerogative to do so in the first place. The rule on the posting of an appeal bond cannot defeat
the substantive rights of respondents to be free from an unwarranted burden of answering for an illegal dismissal for which they were
never responsible.

Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from the records
of this case.[24] After all, the primary objective of our laws is to dispense justice and equity, not the contrary.

WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010 Resolution of the CA, and
the October 18, 2006 Resolution of the NLRC.

SO ORDERED.
 SECOND DIVISION

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, G.R. No. 178827

Petitioners,

Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO MORALES,

NACHURA,*

BRION, and

PERALTA,** JJ.

SHANGRI-LAS MACTAN ISLAND RESORT and DR.

JESSICA J.R. PEPITO,
Promulgated:
Respondents.
March 4, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996, respectively, by
Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort (Shangri-la)
in Cebu of which she was a retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-
RAB No. VII) a complaint[1] for regularization, underpayment of wages, non-payment of holiday pay, night shift differential and
13th month pay differential against respondents, claiming that they are regular employees of Shangri-la. The case was docketed as RAB
Case No. 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via
Memorandum of Agreement (MOA)[2] pursuant to Article 157 of the Labor Code, as amended.
 Respondent doctor for her part claimed that petitioners were already working for the previous retained physicians of Shangri-
la before she was retained by Shangri-la; and that she maintained petitioners services upon their request.

By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of Shangri-la. The Arbiter
thus ordered Shangri-la to grant them the wages and benefits due them as regular employees from the time their services were
engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work which is
necessary and desirable to Shangri-las business; that they observe clinic hours and render services only to Shangri-las guests and
employees; that payment for their salaries were recommended to Shangri-las Human Resource Department (HRD); that respondent
doctor was Shangri-las in-house physician, hence, also an employee; and that the MOA between Shangri-la and respondent doctor
was an insidious mechanism in order to circumvent [the doctors] tenurial security and that of the employees under her.

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the non-award to them of
some of the benefits they were claiming.

By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors appeal and dismissed petitioners complaint
for lack of merit, it finding that no employer-employee relationship exists between petitioner and Shangri-la. In so deciding, the NLRC
held that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as what is required under Article 157
is that the employer should provide the services of medical personnel to its employees, but nowhere in said article is a provision that
nurses are required to be employed; that contrary to the finding of the Arbiter, even if Article 280 states that if a worker performs
work usually necessary or desirable in the business of the employer, he cannot be automatically deemed a regular employee; and that
the MOA amply shows that respondent doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her
own nurses and other clinic personnel.

Brushing aside petitioners contention that since their application for employment was addressed to Shangri-la, it was really
Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for employment were made by persons
who are not parties to the case and were not shown to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitioners wages were
recommended by Shangri-las HRD did not prove that it was Shangri-la which pays their wages. It thus credited respondent doctors
explanation that the recommendations for payment were based on the billings she prepared for salaries of additional nurses during
Shangri-las peak months of operation, in accordance with the retainership agreement, the guests payments for medical services having
been paid directly to Shanrgi-la.
 Petitioners thereupon brought the case to the Court of Appeals which, by Decision[5] of May 22, 2007, affirmed the NLRC
Decision that no employer-employee relationship exists between Shangri-la and petitioners. The appellate court concluded that all
aspects of the employment of petitioners being under the supervision and control of respondent doctor and since Shangri-la is not
principally engaged in the business of providing medical or healthcare services, petitioners could not be regarded as regular employees
of Shangri-la.

Petitioners motion for reconsideration having been denied by Resolution [6] of July 10, 2007, they interposed the present
recourse.

Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered nurse, apart
from a physician, hence, their engagement should be deemed as regular employment, the provisions of the MOA notwithstanding;
and that the MOA is contrary to public policy as it circumvents tenurial security and, therefore, should be struck down as being void ab
initio. At most, they argue, the MOA is a mere job contract.

And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business permit and no
business name registration, which is contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and Regulations of
the Labor Code on sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in substantial
capital, the clinic having been set-up and already operational when she took over as retained physician; that respondent doctor has
no control over how the clinic is being run, as shown by the different orders issued by officers of Shangri-la forbidding her from
receiving cash payments and several purchase orders for medicines and supplies which were coursed thru Shangri-las Purchasing
Manager, circumstances indubitably showing that she is not an independent contractor but a mere agent of Shangri-la.

In its Comment,[7] Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for being
inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises factual issues, such as the validity of
the MOA, which were never raised during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article
157 of the Labor Code does not make it mandatory for a covered establishment to employ health personnel; that the services of nurses
is not germane nor indispensable to its operations; and that respondent doctor is a legitimate individual independent contractor who
has the power to hire, fire and supervise the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the provisions
on permissible job contracting of the Labor Code, as amended.
 The Court holds that, contrary to petitioners postulation, Art. 157 does not require the engagement of full-time nurses as
regular employees of a company employing not less than 50 workers. Thus, the Article provides:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds

fifty (50) but not more than two hundred (200) except when the employer does not

maintain hazardous workplaces, in which case the services of a graduate first-aider shall

be provided for the protection of the workers, where no registered nurse is available. The

Secretary of Labor shall provide by appropriate regulations the services that shall be

required where the number of employees does not exceed fifty (50) and shall determine

by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not
more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a
dental clinic, and an infirmary or emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who
cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-
time basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking
is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations
as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and
attendance in case of emergency. (Emphasis and underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to furnish its employees with
the services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means that it
should provide or make available such medical and allied services to its employees, not necessarily to hire or employ a service
provider. As held in Philippine Global Communications vs. De Vera:[8]
 x x x while it is true that the provision requires employers to engage the services of
medical practitioners in certain establishments depending on the number of their
employees, nothing is there in the law which says that medical practitioners so engaged be
actually hired as employees, adding that the law, as written, only requires the employer to
retain, not employ, a part-time physician who needed to stay in the premises of the non-hazardous
workplace for two (2) hours. (Emphasis and underscoring supplied)

The term full-time in Art. 157 cannot be construed as referring to the type of employment of the person engaged to provide
the services, for Article 157 must not be read alongside Art. 280[9] in order to vest employer-employee relationship on the employer
and the person so engaged. So De Vera teaches:

x x x For, we take it that any agreement may provide that one party shall render services
for and in behalf of another, no matter how necessary for the latters business, even without being
hired as an employee. This set-up is precisely true in the case of an independent contractorship
as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate
court, is not the yardstick for determining the existence of an employment relationship. As it is,
the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual.
x x x[10] (Emphasis and underscoring supplied)

The phrase services of a full-time registered nurse should thus be taken to refer to the kind of services that the nurse will render in
the companys premises and to its employees, not the manner of his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections of DOLE
Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are
met:

(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually employed.
 (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by considering the following
determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required;
the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision
of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control
of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the mode, manner and terms of
payment.[11]

On the other hand, existence of an employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means;
and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration.[12]

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily prove that
respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of medical services to
its employees is required under Art. 157, which are not directly related to Shangri-las principal business operation of hotels and
restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and other
benefits of the staff[13]; group life, group personal accident insurance and life/death insurance[14] for the staff with minimum benefit
payable at 12 times the employees last drawn salary, as well as value added taxes and withholding taxes, sourced from her P60,000.00
monthly retainer fee and 70% share of the service charges from Shangri-las guests who avail of the clinic services. It is unlikely that
respondent doctor would report petitioners as workers, pay their SSS premium as well as their wages if they were not indeed her
employees.[15]

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, Clinic Policies
and Employee Manual[16] claimed to have been prepared by respondent doctor exists, to which petitioners gave their
conformity[17] and in which they acknowledged their co-terminus employment status. It is thus presumed that said document, and not
the employee manual being followed by Shangri-las regular workers, governs how they perform their respective tasks and
responsibilities.
 Contrary to petitioners contention, the various office directives issued by Shangri-las officers do not imply that it is Shangri-
las management and not respondent doctor who exercises control over them or that Shangri-la has control over how the doctor and
the nurses perform their work. The letter[18] addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes
giving instructions regarding the replenishment of emergency kits is, at most, administrative in nature, related as it is to safety matters;
while the letter[19] dated May 17, 2004 from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from receiving
cash payments from the resorts guests is a matter of financial policy in order to ensure proper sharing of the proceeds, considering
that Shangri-la and respondent doctor share in the guests payments for medical services rendered. In fine, as Shangri-la does not
control how the work should be performed by petitioners, it is not petitioners employer.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and the Resolution
dated July 10, 2007 are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORA

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 167622 June 29, 2010

GREGORIO V. TONGKO, Petitioner,

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents.

RESOLUTION

BRION, J.:

This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life
Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found
that an employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered Manulife
to pay Tongko backwages and separation pay for illegal dismissal.

The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated,
simply for purposes of clarity.

The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July
1, 1977, under a Career Agent’s Agreement (Agreement) that provided:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed
or interpreted as creating an employer-employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company directly to the policyholder.

xxxx

The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by
giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall
be construed for any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party
fifteen (15) days notice in writing.2

Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard
of knowledge and competency in the sale of Manulife’s products, satisfactory to Manulife and sufficient to meet the
volume of the new business, required by his Production Club membership.3

The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In
1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager.4

Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the
beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared
his gross business income and deducted his business expenses to arrive at his taxable business income. Manulife
withheld the corresponding 10% tax on Tongko’s earnings.5

In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent
Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the
October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:

The first step to transforming Manulife into a big league player has been very clear – to increase the number of agents to
at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined
the organization. Since then, however, substantial changes have taken place in the organization, as these have been
influenced by developments both from within and without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’ meeting
earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior agency leaders what
more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where
evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today,
continues to remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management,
were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-
one), it was not clear that we were proceeding in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings
you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused
as to the directions the company was taking. For this reason, I sought a meeting with everyone in your management
team, including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting
held at the 7/F Conference room last 18 October.

xxxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table
before the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you to name Malou Samson as a source of the same, an
allegation that Malou herself denied at our meeting and in your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along,
that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency
development objectives!

Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."

xxxx

All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the
Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will
make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less
money" did not refer to you but the way you argued this point had us almost believing that you were spouting the gospel of
truth when you were not. x x x

xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction
that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency
growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you
feel "may not be your cup of tea."

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The
above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North.
I will hold you solely responsible for meeting the objectives of these remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you.
But you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We
are meeting tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone
will be dealt with accordingly.6

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Management’s avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now
issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter. 7

Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC)
Arbitration Branch. He essentially alleged – despite the clear terms of the letter terminating his Agency Agreement – that
he was Manulife’s employee before he was illegally dismissed. 8

Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question
of illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the
need to determine the validity of the termination of the relationship.

A. Tongko’s Case for Employment Relationship

Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00, regardless of
production levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager,
he was given a travel and entertainment allowance of P36,000.00 per year in addition to his overriding commissions; he
was tasked with numerous administrative functions and supervisory authority over Manulife’s employees, aside from
merely selling policies and recruiting agents for Manulife; and he recommended and recruited insurance agents subject to
vetting and approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he
was not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City
– for which he never paid any rental. Manulife provided the office equipment he used, including tables, chairs, computers
and printers (and even office stationery), and paid for the electricity, water and telephone bills. As Regional Sales
Manager, Tongko additionally asserts that he was required to follow at least three codes of conduct.9

B. Manulife’s Case – Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of
varying amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained
through an agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents
under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all
commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as such—
i.e., he availed of tax deductions such as ordinary and necessary trade, business and professional expenses to which a
business is entitled.

Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he was not its employee as
characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10

The Conflicting Rulings of the Lower Tribunals

The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC
reversed the labor arbiter’s decision on appeal; it found the existence of an employer-employee relationship and
concluded that Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter’s decision
that no employer-employee relationship existed between Tongko and Manulife.

Our Decision of November 7, 2008

In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed
between Tongko and Manulife. We concluded that Tongko is Manulife’s employee for the following reasons:

1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an
employee of an insurance company; if evidence exists showing that the company promulgated rules or
regulations that effectively controlled or restricted an insurance agent’s choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would be present. The determination of the
existence of an employer-employee relationship is thus on a case-to-case basis depending on the evidence on
record.

2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the
following indicators:

2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct,
and the Financial Code of Conduct Agreement;

2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions
as Tongko, showed that they performed administrative duties that established employment with
Manulife;12 and

2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’
letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary
means to sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his
employment with Manulife.

The Motion for Reconsideration

Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:

1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review only to
the issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions between the CA and the NLRC decisions as confined only to that
on "control"; (c) grossly failing to consider the findings and conclusions of the CA on the majority of the material
evidence, especially [Tongko’s] declaration in his income tax returns that he was a "business person" or "self-
employed"; and (d) allowing [Tongko] to repudiate his sworn statement in a public document.

2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the
legal relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and
policy context of contract law vis-à-vis labor law.

3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test
other than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and
grossly misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more
material evidence to support its conclusion that there is "control."

4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the
Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and
contravenes through judicial legislation, the constitutional prohibition against impairment of contracts under Article
III, Section 10 of the Constitution.

5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which
should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee
relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent
Manulife to pay Petitioner backwages, separation pay, nominal damages and attorney’s fees. 13

THE COURT’S RULING

A. The Insurance and the Civil Codes;

the Parties’ Intent and Established
Industry Practices

We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set
in the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted
to "Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the insurance
company and how they are governed by the Code and regulated by the Insurance Commission.

The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the Insurance Code, the Labor Code and
the Civil Code – have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly
reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship for
purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the present
case and to add to the uncertainties that now exist in considering the legal relationship between the insurance company
and its "agents."

The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship.
The Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist
in a principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-
agent relationship, especially in cases where the company-representative relationship in the insurance industry is an
agency.

a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in
the insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of persons
shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the
business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers,
among other provisions, provide:

Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission
or other compensation to any person for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter
provided.

No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner x x x The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant
and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his
discretion.1avvphi1.net

Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a policy or contract of insurance to or from such company or
offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section
and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is
subject.

The application for an insurance agent’s license requires a written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving moral turpitude. 14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an
insurance company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized
the agent to receive payment on the company’s behalf.15 Section 361 further prohibits the offer, negotiation, or collection
of any amount other than that specified in the policy and this covers any rebate from the premium or any special favor or
advantage in the dividends or benefit accruing from the policy.

Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the
parameters of the authority granted under the license and under the contract with the principal. Other than the need for a
license, the agent is limited in the way he offers and negotiates for the sale of the company’s insurance products, in his
collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as elements of control that attend an employment relationship
governed by the Labor Code.

On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter."16 While this is a very broad
definition that on its face may even encompass an employment relationship, the distinctions between agency and
employment are sufficiently established by law and jurisprudence.

Generally, the determinative element is the control exercised over the one rendering service. The employer controls the
employee both in the results and in the means and manner of achieving this result. The principal in an agency
relationship, on the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned
task based on the parameters outlined in the pertinent laws.

Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license
and for the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority to
Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the company’s agency practices and
usages, duly accepted by the agent in carrying out the agency. 18 By authority of the Insurance Code, an insurance agency
is for compensation,19 a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary. 20 Other
than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for
the execution of the agency.21 By implication at least under Article 1994 of the Civil Code, the principal can appoint two or
more agents to carry out the same assigned tasks,22 based necessarily on the specific instructions and directives given to
them.

With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in
accordance with the instructions of the principal."23 This provision is pertinent for purposes of the necessary control that
the principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude
into the labor law concept of control so that minute consideration of the facts is necessary. A related article is Article 1891
of the Civil Code which binds the agent to render an account of his transactions to the principal.

B. The Cited Case

The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an employer-employee relationship.24 The Dissenting
Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v.
National Labor Relations Commission (second Insular case) 25 to support the view that Tongko is Manulife’s employee. On
the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations
Commission (AFPMBAI case)26 to support its allegation that Tongko was not its employee.

A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all
fours with the present case; the uniqueness of the factual situation of the present case prevents it from being directly and
readily cast in the mold of the cited cases. These cited cases are themselves different from one another; this difference
underscores the need to read and quote them in the context of their own factual situations.

The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular
Life cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a
subsequent management contract that superseded the original agency contract between the insurance company and its
agent. Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly
superseded the Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The
Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz
brothers, as these were enumerated in their contracts, we concluded that the company practically dictated the manner by
which the Ruiz brothers were to carry out their jobs. Finally, the second Insular Life case dealt with the implications of de
los Reyes’ appointment as acting unit manager which, like the subsequent contracts in the Carungcong and the Grepalife
cases, was clearly defined under a subsequent contract. In all these cited cases, a determination of the presence of the
Labor Code element of control was made on the basis of the stipulations of the subsequent contracts.

In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document
extant and submitted as evidence in the present case is the Agreement – a pure agency agreement in the Civil Code
context similar to the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while
Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996,
no formal contract regarding these undertakings appears in the records of the case. Any such contract or agreement, had
there been any, could have at the very least provided the bases for properly ascertaining the juridical relationship
established between the parties.

These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases,
should therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.

C. Analysis of the Evidence

c.1. The Agreement

The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties’ relations
until the Agreement’s termination in 2001. This Agreement stood for more than two decades and, based on the records of
the case, was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties’
relationship up to the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms.

By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure,
the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; as
the dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law that
is for the courts to determine. At the same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the Agreement, and
they were governed by this understanding throughout their relationship. At the very least, the provision on the absence of
employer-employee relationship between the parties can be an aid in considering the Agreement and its implementation,
and in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in this case because this intent is not
illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice,
an agency relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its
express terms, is in accordance with the Insurance Code model when it provided for a principal-agent relationship, and
thus cannot lightly be set aside nor simply be considered as an agreement that does not reflect the parties’ true intent.
This intent, incidentally, is reinforced by the system of compensation the Agreement provides, which likewise is in
accordance with the production-based sales commissions the Insurance Code provides.

Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his relationship with
Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko
essentially remained an agent, but moved up in this role through Manulife’s recognition that he could use other agents
approved by Manulife, but operating under his guidance and in whose commissions he had a share. For want of a better
term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly
tasked with the selling of Manulife insurance.

Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if
Tongko’s compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes
of crediting him with his share in the commissions the agents under his wing generated. As an agent who was recruiting
and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in
the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received
greater reimbursements for his expenses and was even allowed to use Manulife facilities in his interactions with the
agents, all of whom were, in the strict sense, Manulife agents approved and certified as such by Manulife with the
Insurance Commission.

That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that
results from the reading of the Agreement (the only agreement on record in this case) and his continuing role thereunder
as sales agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself attested to
as his role as Regional Sales Manager. To be sure, this interpretation could have been contradicted if other agreements
had been submitted as evidence of the relationship between Manulife and Tongko on the latter’s expanded undertakings.
In the absence of any such evidence, however, this reading – based on the available evidence and the applicable
insurance and civil law provisions – must stand, subject only to objective and evidentiary Labor Code tests on the
existence of an employer-employee relationship.

In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties’
relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s occupation was to sell
Manulife’s insurance policies and products. Both parties acquiesced with the terms and conditions of the Agreement.
Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous commissions.

Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife
insurance products since he invariably declared himself a business or self-employed person in his income tax
returns. This consistency with, and action made pursuant to the Agreement were pieces of evidence that were
never mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could, at the
very least, serve as Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally
significant because he certified under oath the amount he earned as gross business income, claimed business
deductions, leading to his net taxable income. This should be evidence of the first order that cannot be brushed aside by a
mere denial. Even on a layman’s view that is devoid of legal considerations, the extent of his annual income alone renders
his claimed employment status doubtful. 27

Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel – a
legal and equitable concept28 – necessarily must come into play. Tongko’s previous admissions in several years of tax
returns as an independent agent, as against his belated claim that he was all along an employee, are too diametrically
opposed to be simply dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states that Tongko was
forced to declare himself a business or self-employed person by Manulife’s persistent refusal to recognize him as its
employee.29 Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since
no evidence in fact exists on this point in the records of the case. In fact, what the evidence shows is Tongko’s full
conformity with, and action as, an independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated
any employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should
not be considered in the determination of the backwages and separation pay that should be given to him. This part of the
dissent is correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his relationship
with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his
capacity as a manager. Thus, the dissent concluded that Tongko’s backwages should only be with respect to his role as
Manulife’s manager.

The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support
of the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal
reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion
would cause the insurance industry that, by the law’s own design, operated along the lines of principal-agent relationship
in the sale of insurance.

c.2. Other Evidence of Alleged Control

A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this
designation meant. This also holds true for Tongko’s appointment as branch manager in 1990, and as Regional Sales
Manager in 1996. The best evidence of control – the agreement or directive relating to Tongko’s duties and
responsibilities – was never introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife
had practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under
his wing. As discussed below, the alleged directives covered by de Dios’ letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and the other sales groups to realign with in their own
selling activities. This is the reality that the parties’ presented evidence consistently tells us.

What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in
the sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of
labor law control as the law and jurisprudence teach us.

As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to ensure ethical business practice in the industry.

The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a
manner consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of labor
law control. Foremost among these are the directives that the principal may impose on the agent to achieve the assigned
tasks, to the extent that they do not involve the means and manner of undertaking these tasks. The law likewise obligates
the agent to render an account; in this sense, the principal may impose on the agent specific instructions on how an
account shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can be
imposed through rules and regulations without intruding into the labor law concept of control for purposes of employment.

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the
rules and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas and
can determine how many agents, with specific territories, ought to be employed to achieve the company’s objectives.
These are management policy decisions that the labor law element of control cannot reach. Our ruling in these respects in
the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s
codes of conduct,30 all of which do not intrude into the insurance agents’ means and manner of conducting their sales and
only control them as to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor
law concept of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law
control; thus, Tongko as manager, but not as insurance agent, became Manulife’s employee. It drew this conclusion from
what the other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and managerial
functions) and after comparing these statements with the managers in Grepalife. The dissent compared the control
exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case
exercised over their employees by presenting the following matrix: 31

Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors

- to render or recommend prospective agents
to be licensed, trained and contracted to sell
Manulife products and who will be part of my
Unit
- to coordinate activities of the agents under
[the managers’] Unit in [the agents’] daily,
weekly and monthly selling activities, making
sure that their respective sales targets are met;
- to conduct periodic training sessions for [the]
agents to further enhance their sales skill; and
- to assist [the] agents with their sales activities discharge the functions of absentee debit agents,
by way of joint fieldwork, consultations and
one-on-one evaluation and analysis of
particular accounts
- train understudies for the position of district
manager
- properly account, record and document the
company’s funds, spot-check and audit the work of
the zone supervisors, x x x follow up the
submission of weekly remittance reports of the
debit agents and zone supervisors
- direct and supervise the sales activities of the
debit agents under him, x x x undertake and
spot-check the record of debit agents, and insure
proper documentation of sales and collections of
debit agents.

Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s additional roles in
Manulife’s sales operations on the contractual relationship between them.

To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulife’s authority over Tongko and the performance of his end of the relationship with Manulife.
We could not deny though that Tongko remained, first and foremost, an insurance agent, and that his additional role as
Branch Manager did not lessen his main and dominant role as insurance agent; this role continued to dominate the
relations between Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion
cannot be denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977
Agreement, a distinction the present case has with the contractual changes made in the second Insular Life case.
Tongko’s results-based commissions, too, attest to the primacy he gave to his role as insurance sales agent.

The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:

 the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the agents’ daily,
weekly, and monthly selling activities, making sure that their respective sales targets are met.
 the District Manager’s duty in Grepalife is to properly account, record, and document the company's funds, spot-
check and audit the work of the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for the position of district managers, and
maintain his quota of sales (the failure of which is a ground for termination).
 the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements," undertake and discharge the functions
of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.

These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and
pre-determined; in the present case, the operative words are the "sales target," the methodology being left undefined
except to the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of
control; the standard only essentially describes what a Branch Manager is – the person in the lead who orchestrates
activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by
Manulife; it is simply a statement of a branch manager’s role in relation with his agents from the point of view of Manulife
whose business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative functions, is the selective
citation of the portions supportive of an employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought out: 32

1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;

1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;

xxxx

6. I have my own staff that handles the day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx

9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.

These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily
yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.

Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of
his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on
how Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to
expand coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-
and-method control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded
business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An
important point to note here is that Tongko was not supervising regular full-time employees of Manulife engaged in the
running of the insurance business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife
through the same Agreement that he had with Manulife, all the while sharing in these agents’ commissions through his
overrides. This is the lead agent concept mentioned above for want of a more appropriate term, since the title of Branch
Manager used by the parties is really a misnomer given that what is involved is not a specific regular branch of the
company but a corps of non-employed agents, defined in terms of covered territory, through which the company sells
insurance. Still another point to consider is that Tongko was not even setting policies in the way a regular company
manager does; company aims and objectives were simply relayed to him with suggestions on how these objectives can
be reached through the expansion of a non-employee sales force.

Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in Tongko’s case, to be
unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on
results, not on the means and manner of selling – a matter for Tongko and his agents to determine and an area into which
Manulife had not waded. Undeniably, de Dios’ letter contained a directive to secure a competent assistant at Tongko’s
own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method
of operating and supervising the group of agents within his delineated territory. More than anything else, the "directive"
was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko’s perceived weakness
in delivering results could be remedied. It was a solution, with an eye on results, for a consistently underperforming group;
its obvious intent was to save Tongko from the result that he then failed to grasp – that he could lose even his own status
as an agent, as he in fact eventually did.

The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-
employee relationship in the management system established. These were: exclusivity of service, control of assignments
and removal of agents under the private respondent’s unit, and furnishing of company facilities and materials as well as
capital described as Unit Development Fund. All these are obviously absent in the present case. If there is a commonality
in these cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the
Insurance Code.

As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales agency role that
recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete evidence that corresponds to the
following questions:

 as lead agent, what were Tongko’s specific functions and the terms of his additional engagement;
 was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he
received from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency contract; and
 to what extent does Manulife control the means and methods of Tongko’s role as lead agent?

The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above.
But strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The
concrete evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal
affidavits have been marked and submitted as evidence.

Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the
existence of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the present
case, even if such relationship only refers to Tongko’s additional functions. While a rough deduction can be made, the
answer will not be fully supported by the substantial evidence needed.

Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife’s
control over Tongko’s contractual duties points to the absence of any employer-employee relationship between Tongko
and Manulife. In the context of the established evidence, Tongko remained an agent all along; although his subsequent
duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no
evidence of means-and-manner control.

This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously
assume conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role of
agent and employee while doing the same task is a novel one in our jurisprudence, which must be viewed with caution
especially when it is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales’
dissent,33 borrowed from both the Grepalife and the second Insular Life cases, to support the duality approach of the
Decision of November 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual situations, the
issues they decided and the totality of the rulings in these cases – and cannot yield the conclusions that the dissenting
opinions drew.

The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone supervisor and district
manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract
of engagements, they were considered Grepalife’s employees. This did not mean, however, that they were simultaneously
considered agents as well as employees of Grepalife; the Court’s ruling never implied that this situation existed insofar as
the Ruiz brothers were concerned. The Court’s statement – the Insurance Code may govern the licensing requirements
and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor
standards and labor relations – simply means that when an insurance company has exercised control over its agents so
as to make them their employees, the relationship between the parties, which was otherwise one for agency governed by
the Civil Code and the Insurance Code, will now be governed by the Labor Code. The reason for this is simple – the
contract of agency has been transformed into an employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an
illegal termination dispute involving parties who had two contracts – first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit manager (a
management contract). Both the Insular Life and the labor arbiter were one in the position that both were agency
contracts. The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the
labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We
never said in this case though that the insurance agent had effectively assumed dual personalities for the simple reason
that the agency contract has been effectively superseded by the management contract. The management contract
provided that if the appointment was terminated for any reason other than for cause, the acting unit manager would be
reverted to agent status and assigned to any unit.

The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the
existence of an employer-employee relationship should be resolved in favor of the existence of the relationship. 34This
observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt
exists in the "implementation and application" of the Labor Code and its implementing rules; it does not apply where no
doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment relationship by the
quantum of evidence the Labor Code requires.

On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state
that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with
controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent
suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.

In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a
ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an
employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency
and contracts.

WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7,

2008, GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, and G.R. No. 179428

LORIANO D. DALUYON,

Petitioners, Present:

CARPIO, J.,

Chairperson,

- versus - NACHURA,

PERALTA,

ABAD, and

MENDOZA, JJ.

AVELINO REGUALOS, Promulgated:

Respondent.
January 26, 2011

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in their boundary obligations reasonable? The Court of Appeals
(CA) answered the question in the affirmative in its Decision [1] dated December 14, 2006 and Resolution dated July 16, 2007. In this
petition for review on certiorari, we take a second look at the issue and determine whether the situation at bar merits the relaxation
of the application of the said policy.
 Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano D. Daluyon (Daluyon) were employed
by respondent Avelino Regualos under a boundary agreement, as drivers of his jeepneys. In November 2001, they filed separate
complaints[2] for illegal dismissal against respondent who barred them from driving the vehicles due to deficiencies in their boundary
payments.

Caong was hired by respondent in September 1998 and became a permanent driver sometime in 2000. In July 2001, he was
assigned a brand- new jeepney for a boundary fee of P550.00 per day. He was suspended on October 9-15, 2001 for failure to remit
the full amount of the boundary. Consequently, he filed a complaint for illegal suspension. Upon expiration of the suspension period,
he was readmitted by respondent, but he was reassigned to an older jeepney for a boundary fee of P500.00 per day. He claimed that,
on November 9, 2001, due to the scarcity of passengers, he was only able to remit P400.00 to respondent. On November 11, 2001, he
returned to work after his rest day, but respondent barred him from driving because of the deficiency in the boundary payment. He
pleaded with respondent but to no avail.[3]

Tresquio was employed by respondent as driver in August 1996. He became a permanent driver in 1997. In 1998, he was
assigned to drive a new jeepney for a boundary fee of P500.00 per day. On November 6, 2001, due to the scarcity of passengers, he
was only able to remit P450.00. When he returned to work on November 8, 2001 after his rest day, he was barred by respondent
because of the deficiency of P50.00. He pleaded with respondent but the latter was adamant. [4]

On the other hand, Daluyon started working for respondent in March 1998. He became a permanent driver in July 1998. He
was assigned to a relatively new jeepney for a boundary fee of P500.00 per day. On November 7, 2001, due to the scarcity of
passengers, he was only able to pay P470.00 to respondent. The following day, respondent barred him from driving his jeepney. He
pleaded but to no avail.[5]

During the mandatory conference, respondent manifested that petitioners were not dismissed and that they could drive
his jeepneys once they paid their arrears. Petitioners, however, refused to do so.

Petitioners averred that they were illegally dismissed by respondent without just cause. They maintained that respondent
did not comply with due process requirements before terminating their employment, as they were not furnished notice apprising
them of their infractions and another informing them of their dismissal. Petitioners claimed that respondents offer during the
mandatory conference to reinstate them was an insincere afterthought as shown by the warning given by respondent that, if they fail
to remit the full amount of the boundary yet again, they will be barred from driving the jeepneys. Petitioners questioned respondents
policy of automatically dismissing the drivers who fail to remit the full amount of the boundary as it allegedly (a) violates their right to
due process; (b) does not constitute a just cause for dismissal; (c) disregards the reality that there are days when they could not raise
the full amount of the boundary because of the scarcity of passengers.

In his Position Paper, respondent alleged that petitioners were lessees of his vehicles and not his employees; hence, the Labor
Arbiter had no jurisdiction. He claimed that he noticed that some of his lessees, including petitioners, were not fully paying the daily
rental of his jeepneys. In a list which he attached to the Position Paper, it was shown that petitioners had actually incurred arrears
since they started working. The list showed that Caongs total arrears amounted to P10,315.00, that of Tresquio was P10,760.00, while
that of Daluyon was P6,890.00. He made inquiries and discovered that his lessees contracted loans with third parties and used the
income of the jeepneys in paying the loans. Thus, on November 4, 2001, he gathered all the lessees in a meeting and informed them
that, effective November 5, 2001, those who would fail to fully pay the daily rental would not be allowed to rent a jeepney on the
following day. He explained to them that the jeepneys were acquired on installment basis, and that he was paying the monthly
amortizations through the lease income. Most of the lessees allegedly accepted the condition and paid their arrears. Petitioners,
however, did not settle their arrears. Worse, their remittances were again short of the required boundary fee. Petitioner Daluyons
rent payment was short of P20.00 on November 5, 2001 and P80.00 on November 7, 2001. On November 6, 2001, it was Tresquio who
incurred an arrear of P100.00. On November 7 and 9, 2001, petitioner Caong was in arrear of P50.00 and P100.00, respectively.
Respondent stressed that, during the mandatory conference, he manifested that he would renew his lease with petitioners if they
would pay the arrears they incurred during the said dates.[6]

On March 31, 2003, the Labor Arbiter decided the case in favor of respondent, thus:

WHEREFORE, judgment is hereby rendered, DISMISSING the above-entitled cases for lack of merit. However,
respondent Regualos is directed to accept back complainants Caong, Tresquio and Daluyon, as regular drivers of his
passenger jeepneys, after complainants have paid their respective arrearages they have incurred in the remittance
of their respective boundary payments, in the amount of P150.00, P100.00 and P100.00. Complainants, if still
interested to work as drivers, are hereby ordered to report to respondent Regualos within fifteen (15) days from the
finality of this decision. Otherwise, failure to do so means forfeiture of their respective employments.

Other claims of complainants are dismissed for lack of merit.

SO ORDERED.[7]

According to the Labor Arbiter, an employer-employee relationship existed between respondent and petitioners. The latter were not
dismissed considering that they could go back to work once they have paid their arrears. The Labor Arbiter opined that, as a disciplinary
measure, it is proper to impose a reasonable sanction on drivers who cannot pay their boundary payments. He emphasized that
respondent acquired the jeepneys on loan or installment basis and relied on the boundary payments to comply with his monthly
amortizations.[8]

Petitioners appealed the decision to the National Labor Relations Commission (NLRC). In its resolution [9] dated March 31,
2004, the NLRC agreed with the Labor Arbiter and dismissed the appeal. It also denied petitioners motion for reconsideration. [10]
Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision[11] dated December 14, 2006, the CA found no grave abuse of discretion on the part of the NLRC. According to
the CA, the employer-employee relationship of the parties has not been severed, but merely suspended when respondent refused to
allow petitioners to drive the jeepneys while there were unpaid boundary obligations. The CA pointed out that the fact that it was
within the power of petitioners to return to work is proof that there was no termination of employment. The condition that petitioners
should first pay their arrears only for the period of November 5-9, 2001 before they can be readmitted to work is neither impossible
nor unreasonable if their total unpaid boundary obligations and the need to sustain the financial viability of the employers
enterprisewhich would ultimately redound to the benefit of the employeesare taken into consideration.[12]

The CA went on to rule that petitioners were not denied their right to due process. It pointed out that the case does not involve a
termination of employment; hence, the strict application of the twin-notice rule is not warranted. According to the CA, what is
important is that petitioners were given the opportunity to be heard. The meeting conducted by respondent on November 4, 2001
served as sufficient notice to petitioners. During the said meeting, respondent informed his employees, including petitioners, to strictly
comply with the policy regarding remittances and warned them that they would not be allowed to take out the jeepneys if they did
not remit the full amount of the boundary. [13]

Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the motion in its Resolution dated July 16, 2007.[14]

Petitioners are now before this Court resolutely arguing that they were illegally dismissed by respondent, and that such
dismissal was made in violation of the due process requirements of the law.

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible error, but grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of respondent. Mere abuse of discretion is not enough. It must be shown that public respondent
exercised its power in an arbitrary or despotic manner by reason of passion or personal hostility, and this must be so patent and so
gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law.[15]
 As correctly held by the CA, petitioners failed to establish that the NLRC committed grave abuse of discretion in affirming the
Labor Arbiters ruling, which is supported by the facts on record.

It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system
is that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in
excess of the so-called boundary that they pay to the owner/operator is not sufficient to negate the relationship between them as
employer and employee.[16]

The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from employment but merely
suspended pending payment of their arrears. Findings of fact of the CA, particularly where they are in absolute agreement with those
of the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon this Court so long as
they are supported by substantial evidence.[17]

We have no reason to deviate from such findings. Indeed, petitioners suspension cannot be categorized as dismissal,
considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and
petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears. As it
was, the suspension dragged on for years because of petitioners stubborn refusal to pay. It would have been different if petitioners
complied with the condition and respondent still refused to readmit them to work. Then there would have been a clear act of dismissal.
But such was not the case. Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent.

Respondents policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable under
the circumstances. Respondent explained that he noticed that his drivers were getting lax in remitting their boundary payments and,
in fact, herein petitioners had already incurred a considerable amount of arrears. He had to put a stop to it as he also relied on these
boundary payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their obstinacy, petitioners,
on the days immediately following the implementation of the policy, incurred deficiencies in their boundary remittances.

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of
employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted,
upon erring employees. This is a management prerogative. Indeed, the manner in which management conducts its own affairs to
achieve its purpose is within the managements discretion. The only limitation on the exercise of management prerogative is that the
policies, rules, and regulations on work-related activities of the employees must always be fair and reasonable, and the corresponding
penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction. [18]
 Petitioners argue that the policy is unsound as it does not consider the times when passengers are scarce and the drivers are
not able to raise the amount of the boundary.

Petitioners concern relates to the implementation of the policy, which is another matter. A company policy must be
implemented in such manner as will accord social justice and compassion to the employee. In case of noncompliance with the company
policy, the employer must consider the surrounding circumstances and the reasons why the employee failed to comply. When the
circumstances merit the relaxation of the application of the policy, then its noncompliance must be excused.

In the present case, petitioners merely alleged that there were only few passengers during the dates in question. Such excuse
is not acceptable without any proof or, at least, an explanation as to why passengers were scarce at that time. It is simply a bare
allegation, not worthy of belief. We also find the excuse unbelievable considering that petitioners incurred the shortages on separate
days, and it appears that only petitioners failed to remit the full boundary payment on said dates.

Under a boundary scheme, the driver remits the boundary, which is a fixed amount, to the owner/operator and gets to earn
the amount in excess thereof. Thus, on a day when there are many passengers along the route, it is the driver who actually benefits
from it. It would be unfair then if, during the times when passengers are scarce, the owner/operator will be made to suffer by not
getting the full amount of the boundary. Unless clearly shown or explained by an event that irregularly and negatively affected the
usual number of passengers within the route, the scarcity of passengers should not excuse the driver from paying the full amount of
the boundary.

Finally, we sustain the CAs finding that petitioners were not denied the right to due process. We thus quote with approval its
discussion on this matter:

Having established that the case at bench does not involve termination of employment, We find that the
strict, even rigid, application of the twin-notice rule is not warranted.

But the due process safeguards are nonetheless still available to petitioners.

Due process is not a matter of strict or rigid or formulaic process. The essence of due process is simply the
opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain ones side or an
opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial-type hearing is not at
all times and in all instances essential, as the due process requirements are satisfied where the parties are afforded
fair and reasonable opportunity to explain their side of the controversy at hand. x x x.

xxxx
 In the case at bench, private respondent, upon finding that petitioners had consistently failed to remit the
full amount of the boundary, conducted a meeting on November 4, 2001 informing them to strictly comply with the
policy regarding their remittances and warned them to discontinue driving if they still failed to remit the full amount
of the boundary.[19]

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated December 14, 2006 and
Resolution dated July 16, 2007 are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

ATOK BIG WEDGE COMPANY, INC., G.R. No. 169510

Petitioner,
Present:

CARPIO,* J.,
- versus - VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.
Promulgated:
JESUS P. GISON,
Respondent. August 8, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision[1] dated May 31, 2005 of the Court of

Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution[2] dated August 23, 2005 denying petitioners motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by petitioner

Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a consultant

on retainer basis, respondent assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal

surface occupants within the area covered by the company's mineral claims. Respondent was likewise tasked to perform liaison work

with several government agencies, which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the

management to discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee

of P3,000.00 a month,[3] which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer

agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

 Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social

Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent

considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint[4] with the SSS against petitioner

for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum[5] advising respondent

that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are no longer

necessary.

On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair labor practice, underpayment of wages, non-

payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional

Arbitration Branch (RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case

was docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co.,
Inc., or Atok for brevity, approached him and asked him if he can help the companys problem involving the 700
million pesos crop damage claims of the residents living at the minesite of Atok. He participated in a series of dialogues
conducted with the residents. Mr. Torres offered to pay him P3,000.00 per month plus representation expenses. It was
also agreed upon by him and Torres that his participation in resolving the problem was temporary and there will be
no employer-employee relationship between him and Atok. It was also agreed upon that his compensation, allowances
and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded
the only passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok
and the crop damage claimants. Unfortunately, Atoks representatives, including him, were virtually held hostage by
the irate claimants who demanded on the spot payment of their claims. He was able to convince the claimants to
release the company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade.
While Atok was prosecuting its case with the claimants, another case erupted involving its partner, Benguet
Corporation. After Atok parted ways with Benguet Corporation, some properties acquired by the partnership and some
receivables by Benguet Corporation was the problem. He was again entangled with documentation, conferences,
meetings, planning, execution and clerical works. After two years, the controversy was resolved and Atok received its
share of the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atoks
accountabilities with Benguet Corporation in the amount of P900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was
relieved of the burden of paying 700 million pesos. In between attending the problems of the crop damage issue, he
was also assigned to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the
Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to
take charge of some liaison matters and public relations in Baguio and Benguet Province, and to report regularly to
Atoks office in Manila to attend meetings and so he had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already
entitled to the benefits due an employee under the law, but management ignored his requests. However, he continued
 to avail of his representation expenses and reimbursement of company-related expenses. He also enjoyed the privilege
of securing interest free salary loans payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer and
legal assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his
registration with the SSS. His request was again ignored and so he filed a complaint with the SSS. After filing his
complaint with the SSS, respondents terminated his services. [7]

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito

rendered a Decision[8] ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent,

the Labor Arbiter dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution[9] affirming the decision of the Labor Arbiter. Respondent

filed a Motion for Reconsideration, but it was denied in the Resolution[10] dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and

resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following

issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable
Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint
of Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when
it affirmed the said Decision.[11]

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal

portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations
Commission dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE. Private
respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former
or equivalent position without loss of seniority rights and to pay him full backwages, inclusive of allowances and other
benefits or their monetary equivalent computed from the time these were withheld from him up to the time of his
actual and effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation
of backwages, allowances and other benefits due to petitioner.Costs against private respondent Atok Big Wedge
Company Incorporated.

SO ORDERED.[12]
 In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have

overlooked Article 280 of the Labor Code, [13] or the provision which distinguishes between two kinds of employees, i.e., regular and

casual employees. Applying the provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse of

one year from his employment. Considering also that respondent had been performing services for the petitioner for eleven years,

respondent is entitled to the rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's employment would only be

temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover,

although respondent may have waived his right to attain a regular status of employment when he agreed to perform these tasks on a

temporary employment status, still, it was the law that recognized and considered him a regular employee after his first year of rendering

service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE
COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING
THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF
DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED
ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF
LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE
EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY
DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE
SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL. [14]

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the

Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in

rendering the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an

employer-employee relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-
employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a

casual employee from a regular employee for purposes of determining the rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing

that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v.

NLRC,[15] the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper

vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict

observance of the doctrine on hierarchy of courts as the appropriate forum for the relief desired. [16] This Court not being a trier of facts,

the resolution of unclear or ambiguous factual findings should be left to the CA as it is procedurally equipped for that purpose. From

the decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may

be resorted to by the parties. Hence, respondent's resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and

that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by

substantial evidence.[17] Being a question of fact, the determination whether such a relationship exists between petitioner and respondent

was well within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should

have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to

wit: (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, or the so-called "control test."[18] Of these four, the last one is the most important.[19] The so-called

control test is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee

relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed

reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end. [20]
 Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other

things, respondent was not required to report everyday during regular office hours of petitioner. Respondent's monthly retainer fees were

paid to him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent

would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the

freedom to accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not

control the manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of

the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner hired

him in a limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent's

Position Paper:[21]

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the
amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the
complainant that his participation on this particular problem of Atok will be temporary since the problem was
then contemplated to be limited in nature, hence, there will be no employer-employee relationship between him
and Atok. Complainant agreed on this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related expenses will be processed and paid
through disbursement vouchers;[22]

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he agreed

to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he became a

regular employee of the petitioner based on his contention that the temporary aspect of his job and its limited nature could not have

lasted for eleven years unless some time during that period, he became a regular employee of the petitioner by continually performing

services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The appellate

court's premise that regular employees are those who perform activities which are desirable and necessary for the business of the

employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of

another, no matter how necessary for the latter's business, even without being hired as an employee.[23] Hence, respondent's length of

service and petitioner's repeated act of assigning respondent some tasks to be performed did not result to respondent's entitlement to the

rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be considered

as a regular employee of petitioner.Article 280 of the Labor Code, in which the lower court used to buttress its findings that respondent

became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not

the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to

join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute. [24] It is,

therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-employee relationship

exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's services by

the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages,

allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals

in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the

National Labor Relations Commission are REINSTATED.

SO ORDERED.
 SECOND DIVISION

JOSE MEL BERNARTE, G.R. No. 192084

Petitioner,

Present:

- versus - CARPIO, J., Chairperson,

BRION,

DEL CASTILLO,*

PEREZ, and

SERENO, JJ.

PHILIPPINE BASKETBALL

ASSOCIATION (PBA), JOSE

EMMANUEL M. EALA, and Promulgated:

PERRY MARTINEZ,

Respondents. September 14, 2011

x-----------------------------------------------------------------------------------------x

DECISION

CARPIO, J.:

The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP
No. 105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the
decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of
respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the
motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the
leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which
was from February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a
half month contract for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not
be renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded
Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On
March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On
May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the
assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003.
The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December
2003. After the lapse of the latter period, PBA decided not to renew their contracts.
 Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of
retainer were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were
fixed.4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages
and attorneys fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby
ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay
complainants:

JOSE MEL RENATO GUEVARRA

BERNARTE

1. backwages from January 1, 2004

up to the finality of this Decision,
which to date is P211,250.00
P536,250.00

100,000.00
2. moral damages 100,000.00
50,000.00

3. exemplary damages 50,000.00

4. 10% attorneys fees 68,625.00 36,125.00

TOTAL P754,875.00 P397,375.00

or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the NLRCs decision
reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31,
2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter.
The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated
August 26, 2008 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents
complaint before the Labor Arbiter is DISMISSED.

SO ORDERED.10

The Court of Appeals Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the
means and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in
officiating basketball games for the illogical reason that said acts refer only to the referees skills. How could a skilled referee
perform his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the Contracts of Retainer
show that petitioners have control over private respondents.
 xxxx

Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents repeated hiring
made them regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was
illegally dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for failure of respondents
to appeal with the NLRC within the reglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of respondents to appeal
with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiters decision was constructively served on
respondents as early as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way beyond
the reglementary period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days
from the date of first notice of the post master. In this case three notices were issued by the post office, the last being on 1 August
2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents the Postmasters Certification to prove
constructive service of the Labor Arbiters decision on respondents. The Postmaster certified:
xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry
notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005,
respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month
retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7,
page1, column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is complete
upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete
upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster,
whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon
receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration
of five days from the date the addressee received the first notice of the postmaster. 13

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by
the addressee.15 Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is
incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.16

The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the
notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that
the notice was actually delivered.17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices
issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by
respondents, negating petitioners claim of constructive service of the Labor Arbiters decision on respondents. The Postmasters
Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the
post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and
receipt by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiters decision
on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal was considered in
the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on
the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and
remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the
province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between
the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (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 employee on the means and methods by which the work is accomplished. The so-called control test is the most important
indicator of the presence or absence of an employer-employee relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays petitioner a retainer
fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioners
violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent
contractor and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the
performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents
classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least
one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate
referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the
referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during
the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any
basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the
court according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and
conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will
blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity
of the professional basketball league. As correctly observed by the Court of Appeals, how could a skilled referee perform his job
without blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls? 20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one
of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of
the former. The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-
rating television and radio programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case
fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. 22

We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the
playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot
control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of
petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for
work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and
they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are
withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is
required to report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no
deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees
salaries. These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of
respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is
an independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As
such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:
 Generally, if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved,
but also as to details by which the result is achieved, an employer/employee relationship is likely to exist. The Court must be
careful to distinguish between control[ling] the conduct of another party contracting party by setting out in detail his
obligations consistent with the freedom of contract, on the one hand, and the discretionary control an employer daily
exercises over its employees conduct on the other.

Yonan asserts that the Federation closely supervised his performance at each soccer game he officiated by giving him an
assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that
the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather
evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an
employee. There is no question that parties retaining independent contractors may judge the performance of those contractors
to determine if the contractual relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority,
under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification
standards and procedures like the Federations registration and training requirements does not create an employer/employee
relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor
status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x xHere, it is undisputed that soccer
refereeing, especially at the professional and international level, requires a great deal of skill and natural
ability. Yonan asserts that it was the Federations training that made him a top referee, and that suggests he was an employee.
Though substantial training supports an employment inference, that inference is dulled significantly or negated when the
putative employers activity is the result of a statutory requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School
Athletic Association (TSSAA), so the players vicarious liability claim against the association should be dismissed. In finding that the
umpire is an independent contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member
schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond
the framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and
method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a
hired party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is
to perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the
contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal.
Conversely, if PBA decides to discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory
services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-
renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal
of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.
 Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

CESAR C. LIRIO, doing business under the name and G.R. No. 169757
style of CELKOR AD SONICMIX,

Petitioner,
Present:

VELASCO, JR., J., Chairperson,

PERALTA,
- versus -
ABAD,

PEREZ,* and

MENDOZA, JJ.

Promulgated:
WILMER D. GENOVIA,

Respondent.
November 23, 2011

x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated August 4,
2005 and its Resolution dated September 21, 2005, denying petitioners motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor Arbiter with
modification, finding that respondent is an employee of petitioner, and that respondent was illegally dismissed and entitled to the
payment of backwages and separation pay in lieu of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad Sonicmix
Recording Studio for illegal dismissal, non-payment of commission and award of moral and exemplary damages.
 In his Position Paper,[1] respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio manager
by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage and operate Celkor and to
promote and sell the recording studio's services to music enthusiasts and other prospective clients. He received a monthly salary
of P7,000.00. They also agreed that he was entitled to an additional commission of P100.00 per hour as recording technician whenever
a client uses the studio for recording, editing or any related work. He was made to report for work from Monday to Friday from 9:00
a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but most of the time, he still rendered eight hours of work or more.
All the employees of petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time
record to avoid paying the employees overtime pay.

Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him about
his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner
asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would draft a contract to assure respondent of
his compensation for such services. As agreed upon, the additional services that respondent would render included composing and
arranging musical scores only, while the technical aspect in producing the album, such as digital editing, mixing and sound engineering
would be performed by respondent in his capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed
respondent that his work on the album as composer and arranger would only be done during his spare time, since his other work as
studio manager was the priority. Respondent then started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer and
arranger of the album. Petitioner verbally assured him that he would be duly compensated. By mid-November 2001, respondent finally
finished the compositions and musical arrangements of the songs to be included in the album. Before the month ended, the lead and
back-up vocals in the ten (10) songs were finally recorded and completed. From December 2001 to January 2002, respondent, in his
capacity as studio manager, worked on digital editing, mixing and sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with
various radio stations, malls, publishers, record companies and manufacturers, record bars and other outlets in preparation for the
promotion of the said album. By early February 2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs
and cassette tapes, was tapped to do the job. The carrier single of the album, which respondent composed and arranged, was finally
aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and arranger
of the album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in the music industry,
respondent did not deserve a high compensation, and he should be thankful that he was given a job to feed his family. Petitioner informed
respondent that he was entitled only to 20% of the net profit, and not of the gross sales of the album, and that the salaries he received
and would continue to receive as studio manager of Celkor would be deducted from the said 20% net profit share. Respondent objected
and insisted that he be properly compensated. On March 14, 2002, petitioner verbally terminated respondents services, and he was
instructed not to report for work.
 Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was
conducted before he was terminated, in violation of his constitutional right to due process. Having worked for more than six months,
he was already a regular employee. Although he was a so called studio manager, he had no managerial powers, but was merely an
ordinary employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation pay,
backwages and overtime pay; and that he be awarded unpaid commission in the amount of P2,000.00 for services rendered as a studio
technician as well as moral and exemplary damages.

Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by
petitioner,[2] and Petty Cash Vouchers[3] evidencing receipt of payroll payments by respondent from Celkor.

In defense, petitioner stated in his Position Paper[4] that respondent was not hired as studio manager, composer, technician or
as an employee in any other capacity of Celkor. Respondent could not have been hired as a studio manager, since the recording studio
has no personnel except petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN
Star Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he decided to produce an album for
his daughter and established a recording studio, which he named Celkor Ad Sonicmix Recording Studio. He looked for a
composer/arranger who would compose the songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to
respondent, who claimed to be an amateur composer, an arranger with limited experience and musician without any formal musical
training. According to petitioner, respondent had no track record as a composer, and he was not known in the field of music.
Nevertheless, after some discussion, respondent verbally agreed with petitioner to co-produce the album based on the following terms
and conditions: (1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the
songs; (3) respondent shall act as composer and arranger of all the lyrics and the music of the five songs he already composed and the
revival songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner was entitled to 60% of the net profit, while
respondent and Celine Mei Lirio were each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw advances
of P7,000.00 a month, which shall be deductible from his share of the net profits and only until such time that the album has been
produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that respondent was
just an amateur composer with no track record whatsoever in the music industry, had no definite source of income, had limited experience
as an arranger, had no knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach him how to use
the studio equipment; that petitioner would shoulder all the expenses of production and provide the studio and equipment as well as his
knowledge in the use thereof; and Celine Mei Lirio would sing the songs. They embarked on the production of the album on or about
the third week of August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal
partnership under Article 1767[5] of the New Civil Code, since they agreed to contribute money, property or industry to a common
fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and manner by which
respondent composed or arranged the songs, except on the result thereof. Respondent reported to the recording studio between 10:00
a.m. and 12:00 noon. Hence, petitioner contended that no employer-employee relationship existed between him and the respondent, and
there was no illegal dismissal to speak of.
 On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision, [6] finding that an employer-employee
relationship existed between petitioner and respondent, and that respondent was illegally dismissed. The dispositive portion of the
decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING

STUDIO and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee
and, consequently, ORDERING said respondents:

1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until
finality of this decision and, in lieu of reinstatement, to [pay] his separation pay of one (1)
month pay per year of service reckoned from [the] date of hire on August 15, 2001 until
finality of this decision, which as of date amounts to full backwages total of
145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00 + 1/12 thereof as 13th month pay
of P11,083.33 + SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x 1.58
yrs.=P1,695.27); separation pay of P22,750.00 (P7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of P2,000.00;

3) To pay him moral and exemplary damages in the combined amount of P75,000.00.

Other monetary claims of complainant are dismissed for lack of merit. [7]

The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome respondents positive assertion
and documentary evidence proving that petitioner hired respondent as his employee. [8]

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The dispositive
portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from
is REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of merit. [9]

The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC agreed
that respondent was able to prove that he received gross pay less deduction and net pay, with the corresponding Certification of
Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved
with substantial evidence that he was selected and engaged by petitioner, that petitioner had the power to dismiss him, and that they had
the power to control him not only as to the result of his work, but also as to the means and methods of accomplishing his work.

Respondents motion for reconsideration was denied by the NLRC in a Resolution9 dated December 14, 2004.
 Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision[10] reversing and setting aside the resolution of the NLRC, and
reinstating the decision of the Labor Arbiter, with modification in regard to the award of commission and damages. The Court of Appeals
deleted the award of commission, and moral and exemplary damages as the same were not substantiated. The dispositive portion of the
Court of Appeals decision reads:

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and
December 14, 2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated October 31, 2003
of the Labor Arbiter is REINSTATED, with the modification that the awards of commission and damages
are deleted.[11] (Emphasis supplied.)

Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution [12] dated September
21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will prosper
only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part of the NLRC.[13] However,
petitioner contends that the Court of Appeals decided the case not in accordance with law and applicable rulings of this Court as petitioner
could not find any portion in the Decision of the Court of Appeals ruling that the NLRC acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review
an error of judgment by the NLRC raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure. Moreover, petitioner contends that it was error on the part of the Court of Appeals to review the finding of facts of the NLRC
on whether there exists an employer-employee relationship between the parties.

Petitioners argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari under Rule
65 of the Rules of Court filed before the Court of Appeals in accordance with the decision of the Court in St. Martin Funeral Home v.
NLRC,[14] which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to
the Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance
of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired. [15]

The Court of Appeals stated in its decision that the issue it had to resolve was whether or not the public respondent [NLRC]
committed grave abuse of discretion when it declared that no employer-employee relationship exists between the petitioner and the
private respondents, since the petitioner failed to prove such fact by substantial evidence.[16]
Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action
for certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. [17] By grave abuse of discretion is meant
such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically.[18]
 The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is material to or
decisive of the controversy; and it cannot make this determination without looking into the evidence of the parties. [19] Necessarily, the
appellate court can only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically,
or arbitrarily disregarded by the NLRC, in relation to all other evidence on record. [20] Thus, contrary to the contention of petitioner, the
Court of Appeals can review the finding of facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely
abused its discretion in finding that no employer-employee relationship existed between petitioner and respondent. [21]

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF

DISCRETION IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF
ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE

OF DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
THE PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE

OF DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS
AS AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE
RESPONDENTS.[22]

Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by way
of any document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter that petitioner failed
to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiters finding, thus:

In this case, complainant's evidence is substantial enough to prove the employment relationship that on
August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate the recording studio
and to promote and sell its services to music enthusiasts and clients, proven by his receipt for this purpose from said
respondent a fixed monthly compensation of P7,000.00, with commission of P100.00 per hour when serving as
recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points to
complainant's hiring as employee so that the case comes within the purview of our jurisdiction on labor disputes
between an employer and an employee. x x x.
Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion
thereto, in the face of complainant's evidence, constitute but a self-serving assertion, without probative value, a
mere invention to justify the illegal dismissal.
xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal
to respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the album which he
composed and arranged during his free time and, moreover, that salaries which he received would be deducted
therefrom, which obviously, soured the relations from the point of view of respondent Lirio. [23]

Hence, based on the finding above and the doctrine 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, [24] the Court of Appeals reversed the resolution of the NLRC and
reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals was remiss in not stating it in definite terms,
it is implied that the Court of Appeals found that the NLRC gravely abused its discretion in finding that no employer-employee
relationship existed between petitioner and respondent based on the evidence on record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in accordance
with law, or whether or not the Court of Appeals erred in reversing and setting aside the decision of the NLRC, and reinstating the
decision of the Labor Arbiter with modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not ironclad. [25] Where
the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, in this case, the NLRC,
this Court is constrained to review the factual findings of the Court of Appeals. [26]

Before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship existed
between petitioner and respondent.[27]

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.[28]

It is settled that no particular form of evidence is required to prove the existence of an employer-employee relationship.[29] Any
competent and relevant evidence to prove the relationship may be admitted.[30]

In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as
follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by petitioner,[31] which
showed that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of
the month) with the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers,[32]showing
the amounts he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages
of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to the existence of the power.[33] It
is not essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient that the former has a
right to wield the power.[34] Nevertheless, petitioner stated in his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner certainly had the power to check on the progress and work of
respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership. Such claim was not
supported by any written agreement. The Court notes that in the payroll dated July 31, 2001 to March 15, 2002, [35] there were deductions
from the wages of respondent for his absence from work, which negates petitioners claim that the wages paid were advances for
respondents work in the partnership. In Nicario v. National Labor Relations Commission,[36] the Court held:

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements
and writing should be resolved in the formers favor. The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to
give maximum aid and protection of labor. This rule should be applied in the case at bar, especially since the evidence
presented by the private respondent company is not convincing. x x x[37]

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed that an
employer-employee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause
and validly made.[38] Article 277 (b) of the Labor Code[39] 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. [40] 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.[41] Procedural due process requires the employer 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. [42] Petitioner failed to comply with these legal requirements; hence, the Court of Appeals
correctly affirmed the Labor Arbiters finding that respondent was illegally dismissed, and entitled to the payment of backwages, and
separation pay in lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated August 4,
2005, and its Resolution dated September 21, 2005, are AFFIRMED.

No costs.
 Republic of the Philippines
Supreme Court
Baguio City
FIRST DIVISION

CHARLIE JAO, G.R. No. 163700

Petitioner,
Present:

CORONA, C.J., Chairperson,

- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

BCC PRODUCTS SALES INC., Promulgated:

and TERRANCE TY, April 18, 2012
Respondents.
x----------------------------------------------------------------------------------------- x

DECISION

BERSAMIN, J.:

The issue is whether petitioner was respondents employee or not. Respondents denied an employer-employee relationship with
petitioner, who insisted the contrary.

Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court of Appeals (CA)
on February 27, 2004,[1] finding no employee-employer relationship between him and respondents, thereby reversing the ruling by the
National Labor Relations Commission (NLRC) to the effect that he was the employee of respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent Terrance Ty (Ty), employed him as
comptroller starting from September 1995 with a monthly salary of P20,000.00 to handle the financial aspect of BCCs business;[2] that
on October 19,1995, the security guards of BCC, acting upon the instruction of Ty, barred him from entering the premises of BCC where
he then worked; that his attempts to report to work in November and December 12, 1995 were frustrated because he continued to be
barred from entering the premises of BCC;[3] and that he filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement
with full backwages, non-payment of wages, damages and attorneys fees.[4]

Respondents countered that petitioner was not their employee but the employee of Sobien Food Corporation (SFC), the major creditor
and supplier of BCC; and that SFC had posted him as its comptroller in BCC to oversee BCCs finances and business operations and to
look after SFCs interests or investments in BCC. [5]
 Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996,[6] the NLRC vacated the ruling and remanded
the case for further proceedings.[7]Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a new decision on September 20, 2001,
dismissing petitioners complaint for want of an employer-employee relationship between the parties.[8] Petitioner appealed
the September 20, 2001 decision of Labor Arbiter Mayor.

On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayors decision, and declaring that petitioner had
been illegally dismissed. It ordered the payment of unpaid salaries, backwages and 13 th month pay, separation pay and attorneys
fees.[9] Respondents moved for the reconsideration of the NLRC decision, but their motion for reconsideration was denied on September
30, 2002.[10] Thence, respondents assailed the NLRC decision on certiorari in the CA.

Ruling of the CA

On February 27, 2004, the CA promulgated its assailed decision, [11] holding:
After a judicious review of the records vis--vis the respective posturing of the contending parties, we agree with the
finding that no employer-employee relationship existed between petitioner BCC and the private respondent. On this
note, the conclusion of the public respondent must be reversed for being issued with grave abuse of discretion.

Etched in an unending stream of cases are the four (4) standards in determining the existence of an employer-employee
relationship, namely, (a) the manner of selection and engagement of the putative employee; (b) the mode of payment
of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control of the putative
employees conduct. Of these powers the power of control over the employees conduct is generally regarded as
determinative of the existence of the relationship.

Apparently, in the case before us, all these four elements are absent. First, there is no proof that the services of the
private respondent were engaged to perform the duties of a comptroller in the petitioner company. There is no proof
that the private respondent has undergone a selection procedure as a standard requisite for employment, especially
with such a delicate position in the company. Neither is there any proof of his appointment nor is there any showing
that the parties entered into an employment contract, stipulating thereof that he will receive P20,000.00/month salary
as comptroller, before the private respondent commenced with his work as such. Second, as clearly established on
record, the private respondent was not included in the petitioner companys payroll during the time of his alleged
employment with the former. True, the name of the private respondent Charlie Jao appears in the payroll however it
does not prove that he has received his remuneration for his services. Notably, his name was not among the employees
who will receive their salaries as represented by the payrolls. Instead, it appears therein as a comptroller who is
authorized to approve the same. Suffice it to state that it is rather obscure for a certified public accountant doing the
functions of a comptroller from September 1995 up to December 1995 not to receive his salary during the said
period. Verily, such scenario does not conform with the usual and ordinary experience of man. Coming now to the
most controlling factor, the records indubitably reveal the undisputed fact that the petitioner company did not have
nor did not exercise the power of control over the private respondent. It did not prescribe the manner by which the
work is to be carried out, or the time by which the private respondent has to report for and leave from work. As already
stated, the power of control is such an important factor that other requisites may even be disregarded. In Sevilla v.
Court of Appeals, the Supreme Court emphatically held, thus:

The control test, under which the person for whom the services are rendered reserves the right to
direct not only the end to be achieved but also the means for reaching such end, is generally relied
on by the courts.

We have carefully examined the evidence submitted by the private respondent in the formal offer of evidence and
unfortunately, other than the bare assertions of the private respondent which he miserably failed to substantiate, we
find nothing therein that would decisively indicate that the petitioner BCC exercised the fundamental power of control
over the private respondent in relation to his employmentnot even the ID issued to the private respondent and the
affidavits executed by Bertito Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest the
existence of employer-employee relationship as intimated by the NLRC. On the contrary, it would appear that the said
sworn statement provided a substantial basis to support the contention that the private respondent worked at the
petitioner BCC as SFCs representative, being its major creditor and supplier of goods and merchandise. Moreover, as
clearly pointed out by the petitioner in his Reply to the private respondents Comment, it is unnatural for SFC to still
 employ the private respondent to oversee and supervise collections of account receivables due SFC from its customers
or clients like the herein petitioner BCC on a date later than December, 1995 considering that a criminal complaint
has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal certainty that employee-
employer relationship existed between the parties. On the other hand, it was clearly shown by the petitioner that it
neither exercised control nor supervision over the conduct of the private respondents employment. Hence, the
allegation that there is employer-employee relationship must necessarily fail.

Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public
respondent NLRC dated July 31, 2002 and the Resolution dated September 30, 2002are REVERSED and SET
ASIDE. Accordingly, the decision of the Labor Arbiter dated September 20, 2001 is hereby REINSTATED.

SO ORDERED.

After the CA denied petitioners motion for reconsideration on May 14, 2004,[12] he filed a motion for extension to file petition for review,
which the Court denied through the resolution dated July 7, 2004 for failure to render an explanation on why the service of copies of the
motion for extension on respondents was not personally made. [13] The denial notwithstanding, he filed his petition for review
on certiorari. The Court denied the petition on August 18, 2004 in view of the denial of the motion for extension of time and the
continuing failure of petitioner to render the explanation as to the non-personal service of the petition on respondents.[14] However, upon
a motion for reconsideration, the Court reinstated the petition for review on certiorari and required respondents to comment.[15]

Issue

The sole issue is whether or not an employer-employee relationship existed between petitioner and BCC. A finding on the
existence of an employer-employee relationship will automatically warrant a finding of illegal dismissal, considering that respondents
did not state any valid grounds to dismiss petitioner.

Ruling

The petition lacks merit.

The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of factual findings cannot be done
by the Court acting on a petition for review on certiorari because the Court is not a trier of facts but reviews only questions of law. Nor
may the Court be bound to analyze and weigh again the evidence adduced and considered in the proceedings below.[16] This rule is not
absolute, however, and admits of exceptions. For one, the Court may look into factual issues in labor cases when the factual findings of
the Labor Arbiter, the NLRC, and the CA are conflicting. [17]

Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among such adjudicating offices
compels the Courts exercise of its authority to review and pass upon the evidence presented and to draw its own conclusions therefrom.

To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID) issued to him stating his name
and his position as comptroller, and bearing his picture, his signature, and the signature of Ty; (b) a payroll of BCC for the period of
October 1-15, 1996 that petitioner approved as comptroller; (c) various bills and receipts related to expenditures of BCC bearing the
signature of petitioner; (d) various checks carrying the signatures of petitioner and Ty, and, in some checks, the signature of petitioner
alone; (e) a court order showing that the issuing court considered petitioners ID as proof of his employment with BCC; (f) a letter of
petitioner dated March 1, 1997 to the Department of Justice on his filing of a criminal case for estafa against Ty for non-payment of
wages; (g) affidavits of some employees of BCC attesting that petitioner was their co-employee in BCC; and (h) a notice of raffle dated
December 5, 1995 showing that petitioner, being an employee of BCC, received the notice of raffle in behalf of BCC. [18]

Respondents denied that petitioner was BCCs employee. They affirmed that SFC had installed petitioner as its comptroller in BCC to
oversee and supervise SFCs collections and the account of BCC to protect SFCs interest; that their issuance of the ID to petitioner was
only for the purpose of facilitating his entry into the BCC premises in relation to his work of overseeing the financial operations of BCC
for SFC; that the ID should not be considered as evidence of petitioners employment in BCC;[19] that petitioner executed an affidavit in
March 1996,[20] stating, among others, as follows:

1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed by,
Sobien Food Corporation with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I have
been entrusted by my employer to oversee and supervise collections on account of receivables due SFC
from its customers or clients; for instance, certain checks due and turned over by one of SFCs customers
is BCC Product Sales, Inc., operated or run by one Terrance L. Ty, (President and General manager),
pursuant to, or in accordance with, arrangements or agreement thereon; such arrangement or agreement
is duly confirmed by said Terrance Ty, as shown or admitted by him in a public instrument executed therefor,
particularly par. 2 of that certain Counter-Affidavit executed and subscribed on December 11, 1995, xerox copy
of which is hereto attached, duly marked as Annex A and made integral part hereof.

3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were delivered to, or
turned over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my reputation or to cause me dishonor as
well as to impute unto myself the commission of a crime, state in another public instrument executed therefor in
that:

3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely without
any authority from BCC and the same were reportedly turned over by said Mr. Jao to a person who is
not an agent or is not authorized representative of BCC.

xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex B and made integral part
hereof. (emphasis supplied)

and that the affidavit constituted petitioners admission of the arrangement or agreement between BCC and SFC for the latter to appoint
a comptroller to oversee the formers operations.

Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee relationship between
him and respondents because it had been executed in March 1996, or after his employment with respondents had been terminated on
December 12, 1995; and that the affidavit referred to his subsequent employment by SFC following the termination of his employment
by BCC.[21]

We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the Labor Arbiter to the
effect that the affidavit actually supported the contention that petitioner had really worked in BCC as SFCs representative. It does seem
more natural and more believable that petitioners affidavit was referring to his employment by SFC even while he was reporting to BCC
as a comptroller in behalf of SFC. As respondents pointed out, it was implausible for SFC to still post him to oversee and supervise the
collections of accounts receivables due from BCC beyond December 1995 if, as he insisted, BCC had already illegally dismissed him
and had even prevented him from entering the premises of BCC. Given the patent animosity and strained relations between him and
respondents in such circumstances, indeed, how could he still efficiently perform in behalf of SFC the essential responsibility to oversee
and supervise collections at BCC? Surely, respondents would have vigorously objected to any arrangement with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in his own affidavit dated
December 11, 1995 to the effect that petitioner had illegally appropriated some checks without authority from BCC.[22] Petitioner thereby
sought to show that he had the authority to receive the checks pursuant to the arrangements between SFC and BCC. This showing would
aid in fending off the criminal charge respondents filed against him arising from his mishandling of the checks. Naturally, the
circumstances petitioner adverted to in his March 1996 affidavit concerned those occurring before December 11, 1995, the same period
when he actually worked as comptroller in BCC.

Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner offered as a rebuttal
witness, lent credence to respondents denial of petitioners employment. So declared in that affidavit, among others, that he had known
petitioner for being earlier his retained accountant having his own office but did not hold office in SFCs premises; that Ty had approached
him (So) looking for an accountant or comptroller to be employed by him (Ty) in [BCCs] distribution business of SFCs general
merchandise, and had later asked him on his opinion about petitioner; and that he (So) had subsequently learned that Ty had already
employed [petitioner] as his comptroller as of September 1995.[23]

The statements of So really supported respondents position in that petitioners association with SFC prior to his supposed
employment by BCC went beyond mere acquaintance with So. That So, who had earlier merely retained petitioner as his accountant,
thereafter employed petitioner as a retained accountant after his supposed illegal dismissal by BCC raised a doubt as to his employment
by BCC, and rather confirmed respondents assertion of petitioner being an employee of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the Court has consistently looked for the
following incidents, to wit: (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 employee on the means and methods by which the work is accomplished. The last element, the
so-called control test, is the most important element.[24]

Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly employed by BCC that
debunked his claim against respondents.

It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver some 158 checks to
SFC. Considering that he contested respondents challenge by pointing to the existing arrangements between BCC and SFC, it should be
clear that respondents did not exercise the power of control over him, because he thereby acted for the benefit and in the interest of SFC
more than of BCC.
In addition, petitioner presented no document setting forth the terms of his employment by BCC. The failure to present such agreement
on terms of employment may be understandable and expected if he was a common or ordinary laborer who would not jeopardize his
employment by demanding such document from the employer, but may not square well with his actual status as a highly educated
professional.

Petitioners admission that he did not receive his salary for the three months of his employment by BCC, as his complaint for
illegal dismissal and non-payment of wages[25] and the criminal case for estafa he later filed against the respondents for non-payment of
wages[26] indicated, further raised grave doubts about his assertion of employment by BCC. If the assertion was true, we are puzzled
how he could have remained in BCCs employ in that period of time despite not being paid the first salary of P20,000.00/month.
Moreover, his name did not appear in the payroll of BCC despite him having approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the insincerity of petitioners assertion
of employment by BCC. In the petition for review on certiorari, he averred that he had been barred from entering the premises of BCC
on October 19, 1995,[27] and thus was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had been illegally
dismissed on December 12, 1995 when respondents security guards barred him from entering the premises of BCC,[28] causing him to
bring his complaint only on December 29, 1995, and after BCC had already filed the criminal complaint against him. The wide gap
between October 19, 1995 and December 12, 1995 cannot be dismissed as a trivial inconsistency considering that the several incidents
affecting the veracity of his assertion of employment by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioners claim, we need not dwell at length on the other proofs he presented, like the
affidavits of some of the employees of BCC, the ID, and the signed checks, bills and receipts. Suffice it to be stated that such other
proofs were easily explainable by respondents and by the aforestated circumstances showing him to be the employee of SFC, not of
BCC.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 153511 July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in his capacity as the
President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On August 9, 1999,
respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive leave
pay, and 13111 month pay. He prayed for attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.1

Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from September 1992
with an initial rate of P400.00/night that was given to him after each night’s performance; that his rate had increased to
P750.00/night; and that during his employment, he could not choose the time of performance, which had been fixed from
7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant manager had required him
to conform with the venue’s motif; that he had been subjected to the rules on employees’ representation checks and chits,
a privilege granted to other employees; that on July 9, 1999, the management had notified him that as a cost-cutting
measure his services as a pianist would no longer be required effective July 30, 1999; that he disputed the excuse,
insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of his
employment made him bring his complaint.2

In its defense, petitioner denied the existence of an employer-employee relationship with respondent, insisting that he had
been only a talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop for three hours/day on two days
each week; and stated that the economic crisis that had hit the country constrained management to dispense with his
services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had
no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our finding is
in the negative. The finding finds support in the service contract dated September 1, 1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third paragraph,
page 4), the picture would not change because of the admission by complainant in his letter dated October 8, 1996
(Annex "C") that what he was receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular employees of
the hotel who are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work was to be accomplished,
there is no employer-employee relationship between the parties xxx.
xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001. 5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be asked is,
are those elements present in this case?

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of control that is
more decisive.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work, he was supervised and
controlled by respondent’s restaurant manager who at certain times would require him to perform only tagalog songs or
music, or wear barong tagalog to conform with Filipiniana motif of the place and the time of his performance is fixed by the
respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his
performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of the petitioner
was in furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for private respondents, he had been converted into a regular
employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which is
recognized by law under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx. 7

Issues

In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF HIS
SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE REINSTATEMENT OF ROA
TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR
EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE
OF AN EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.
 III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE LEAVE AND
OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN
THE PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO. 023404-2000 OF
THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER
HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE LABOR
ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR
RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS IMPROPER SINCE
IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS CLEARLY IMPROPER
AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI
UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION OR
LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT
PRESENT IN THE CASE AT BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the CA was
the proper recourse; and into two substantive issues, namely: (a) whether or not respondent was an employee of
petitioner; and (b) if respondent was petitioner’s employee, whether he was validly terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondent’s petition for certiorari was improper as a remedy against the NLRC due to its raising
mainly questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the decision of
the NLRC may raise factual issues, and the CA may then review the decision of the NLRC and pass upon such factual
issues in the process.8 The power of the CA to review factual issues in the exercise of its original jurisdiction to issue writs
of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which pertinently provides that the CA "shall have the
power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual
issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new
trials or further proceedings."

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship existed between the parties.

The issue of whether or not an employer-employee relationship existed between petitioner and respondent is essentially a
question of fact.9 The factors that determine the issue include who has the power to select the employee, who pays the
employee’s wages, who has the power to dismiss the employee, and who exercises control of the methods and results by
which the work of the employee is accomplished.10 Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove the relationship may be admitted, 11 a
finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a conclusion. 12

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. However, where,
like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of
the CA, on the other hand, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-
evaluate the factual issues and to look into the records of the case and re-examine the questioned findings.13

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He was undeniably employed
as a pianist in petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his services were
terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated
September 1, 1992 with respondent. This is true, notwithstanding petitioner’s insistence that respondent had only offered
his services to provide live music at petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really
transpired was a negotiation of his rate and time of availability. The power of selection was firmly evidenced by, among
others, the express written recommendation dated January 12, 1998 by Christine Velazco, petitioner’s restaurant
manager, for the increase of his remuneration.14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines and
governs an employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors,
like the nature of the work the employee has been called upon to perform, are also considered. The law affords protection
to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be
ignored when the employer utilizes the stipulation to deprive the employee of his security of tenure. The inequality that
characterizes employer-employee relations generally tips the scales in favor of the employer, such that the employee is
often scarcely provided real and better options.15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that were not
included in the definition of wage under the Labor Code; and that such talent fees were but the consideration for the
service contract entered into between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a week.
Such rate of remuneration was later increased to P750.00 upon restaurant manager Velazco’s recommendation. There is
no denying that the remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality
of the music he played during the hours of performance each night, taking into account the prevailing rate for similar
talents in the entertainment industry.16

Respondent’s remuneration, albeit denominated as talent fees, was still considered as included in the term wage in the
sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Anent this,
Article 97(f) of the Labor Code clearly states:

xxx wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer
to the employee.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioner’s hotel. Petitioner cannot
use the service contract to rid itself of the consequences of its employment of respondent. There is no denying that
whatever amounts he received for his performance, howsoever designated by petitioner, were his wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama, 17 every employer is
required to pay his employees by means of a payroll, which should show in each case, among others, the employee’s rate
of pay, deductions made from such pay, and the amounts actually paid to the employee. Yet, petitioner did not present the
payroll of its employees to bolster its insistence of respondent not being its employee.

That respondent worked for less than eight hours/day was of no consequence and did not detract from the CA’s finding on
the existence of the employer-employee relationship. In providing that the " normal hours of work of any employee shall
not exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of number of hours as "normal hours
of work" but did not prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most significant determinant of
the existence of an employer-employee relationship.18 This is the so-called control test, and is premised on whether the
person for whom the services are performed reserves the right to control both the end achieved and the manner and
means used to achieve that end.19

Petitioner submits that it did not exercise the power of control over respondent and cites the following to buttress its
submission, namely: (a) respondent could beg off from his nightly performances in the restaurant for other engagements;
(b) he had the sole prerogative to play and perform any musical arrangements that he wished; (c) although petitioner,
through its manager, required him to play at certain times a particular music or song, the music, songs, or arrangements,
including the beat or tempo, were under his discretion, control and direction; (d) the requirement for him to wear barong
Tagalog to conform with the Filipiniana motif of the venue whenever he performed was by no means evidence of control;
(e) petitioner could not require him to do any other work in the restaurant or to play the piano in any other places, areas,
or establishments, whether or not owned or operated by petitioner, during the three hour period from 7:00 pm to 10:00
pm, three to six times a week; and (f) respondent could not be required to sing, dance or play another musical instrument.

A review of the records shows, however, that respondent performed his work as a pianist under petitioner’s supervision
and control. Specifically, petitioner’s control of both the end achieved and the manner and means used to achieve that
end was demonstrated by the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three
to six times a week;

b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to perform only Tagalog songs or music, or to wear
barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees’ representation check and chits, a privilege granted to other
employees.

Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties by the
employee, for it sufficed that the employer has the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of
Discipline, and that the power to terminate the working relationship was mutually vested in the parties, in that either party
might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of his service
because of the present business or financial condition of petitioner20 showed that the latter had the power to dismiss him
from employment.21

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent losses, the conclusion that
his termination was by reason of retrenchment due to an authorized cause under the Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a
management prerogative resorted to by employers to avoid or to minimize business losses. On this matter, Article 283 of
the Labor Code states:

Article 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. xxx. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil abuse,
namely:

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and

(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be
proved by sufficient and convincing evidence.22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting standard of
proof would render too easy the abuse of retrenchment as a ground for termination of services of employees. 23

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer.
Here, petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondent’s termination was due to its "present business/financial condition." This
bare statement fell short of the norm to show a valid retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment.1âwphi1 The employer
must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert
such losses. Thus, by its failure to present sufficient and convincing evidence to prove that retrenchment was necessary,
respondent’s termination due to retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement to his
former job no longer feasible. If that should be true, then petitioner should instead pay to him separation pay at the rate of
one. month pay for every year of service computed from September 1992 (when he commenced to work for the
petitioners) until the finality of this decision, and full backwages from the time his compensation was withheld until the
finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals
promulgated on February 11, 2002, subject to the modification that should reinstatement be no longer feasible, petitioner
shall pay to respondent separation pay of one month for every year of service computed from September 1992 until the
finality of this decision, and full backwages from the time his compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.