Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge of the
Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN, SR., respondents.

Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision rendered by this
Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA 477) reviewing the appellate
court's conclusion that there exists an employer-employee relationship between the petitioner and its co-defendant
Funtecha. The Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds that the
latter was not an authorized driver for whose acts the petitioner shall be directly and primarily answerable, and that
Funtecha was merely a working scholar who, under Section 14, Rule X, Book III of the Rules and Regulations
Implementing the Labor Code is not considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the application of Article
2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner. The private respondents maintain
that under Article 2180 an injured party shall have recourse against the servant as well as the petitioner for whom, at
the time of the incident, the servant was performing an act in furtherance of the interest and for the benefit of the
petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the school
authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the Court
reconsiders its decision. We reinstate the Court of Appeals' decision penned by the late Justice Desiderio Jurado and
concurred in by Justices Jose C. Campos, Jr. and Serafin E. Camilon. Applying Civil Code provisions, the appellate
court affirmed the trial court decision which ordered the payment of the P20,000.00 liability in the Zenith Insurance
Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and P3,000.00 attorney's
fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner Filamer. He
was, in relation to the school, an employee even if he was assigned to clean the school premises for only two (2)
hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the
vehicle while the latter was on his way home one late afternoon. It is significant to note that the place where Allan
lives is also the house of his father, the school president, Agustin Masa. Moreover, it is also the house where
Funtecha was allowed free board while he was a student of Filamer Christian Institute.

Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp dangerous curb,
and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a fast moving
truck with glaring lights nearly hit them so that they had to swerve to the right to avoid a collision. Upon swerving, they
heard a sound as if something had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy
jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction against
vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p. 79) At
the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school. He further said
that there was no specific time for him to be off-duty and that after driving the students home at 5:00 in the afternoon,
he still had to go back to school and then drive home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is an act in
furtherance of the interest of the petitioner-school. Allan's job demands that he drive home the school jeep so he can
use it to fetch students in the morning of the next school day.
It is indubitable under the circumstances that the school president had knowledge that the jeep was routinely driven
home for the said purpose. Moreover, it is not improbable that the school president also had knowledge of Funtecha's
possession of a student driver's license and his desire to undergo driving lessons during the time that he was not in
his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely was not
having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his own" but ultimately,
for the service for which the jeep was intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1
D.L.R. 577, 80 ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance
Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in taking
over the steering wheel was one done for and in behalf of his employer for which act the petitioner-school cannot
deny any responsibility by arguing that it was done beyond the scope of his janitorial duties. The clause "within the
scope of their assigned tasks" for purposes of raising the presumption of liability of an employer, includes any act
done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time of
the infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the
employee driving the vehicle derived some benefit from the act, the existence of a presumptive liability of the
employer is determined by answering the question of whether or not the servant was at the time of the accident
performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926];
Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors its defense,
was promulgated by the Secretary of Labor and Employment only for the purpose of administering and enforcing the
provisions of the Labor Code on conditions of employment. Particularly, Rule X of Book III provides guidelines on the
manner by which the powers of the Labor Secretary shall be exercised; on what records should be kept; maintained
and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident physicians in the
employment coverage as far as compliance with the substantive labor provisions on working conditions, rest periods,
and wages, is concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The Court, thus, makes
the distinction and so holds that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for
damages instituted by an injured person during a vehicular accident against a working student of a school and
against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an alleged employee and
an alleged employer. It invokes a claim brought by one for damages for injury caused by the patently negligent acts of
a person, against both doer-employee and his employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule
on labor cannot be used by an employer as a shield to avoid liability under the substantive provisions of the Civil
Code.

There is evidence to show that there exists in the present case an extra-contractual obligation arising from the
negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a legal fiction, to other(s)
who are in a position to exercise an absolute or limited control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624
[1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's position in
order that the petitioner may be held responsible for his grossly negligent act, it being sufficient that the act of driving
at the time of the incident was for the benefit of the petitioner. Hence, the fact that Funtecha was not the school driver
or was not acting within the scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the
presumption juris tantum that there was negligence on its part either in the selection of a servant or employee, or in
the supervision over him. The petitioner has failed to show proof of its having exercised the required diligence of a
good father of a family over its employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the guidance of its
employees and the issuance of proper instructions intended for the protection of the public and persons with whom
the employer has relations through his employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix
Construction, v. Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the performance of any
act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would prohibit any
one of its employees from taking control over its vehicles if one is not the official driver or prohibiting the driver and
son of the Filamer president from authorizing another employee to drive the school vehicle. Furthermore, the
petitioner has failed to prove that it had imposed sanctions or warned its employees against the use of its vehicles by
persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by which Funtecha
drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence of evidence that the
petitioner had exercised the diligence of a good father of a family in the supervision of its employees, the law imposes
upon it the vicarious liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v.
Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate
Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability
of the employer is, under Article 2180, primary and solidary. However, the employer shall have recourse against the
negligent employee for whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant in the civil
case for damages. This is quite understandable considering that as far as the injured pedestrian, plaintiff Potenciano
Kapunan, was concerned, it was Funtecha who was the one driving the vehicle and presumably was one authorized
by the school to drive. The plaintiff and his heirs should not now be left to suffer without simultaneous recourse
against the petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner even for a
short while. For the purpose of recovering damages under the prevailing circumstances, it is enough that the plaintiff
and the private respondent heirs were able to establish the existence of employer-employee relationship between
Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of
his own but in furtherance of the business of his employer. A position of responsibility on the part of the petitioner has
thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED. The
decision of the respondent appellate court affirming the trial court decision is REINSTATED.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

 THIRD DIVISION

REPUBLIC OF THE G.R. No. 172101

PHILIPPINES, represented by the Present:
SOCIAL SECURITY
COMMISSION and SOCIAL YNARES-SANTIAGO,
SECURITY SYSTEM, J.,Chairperson,
Petitioners, AUSTRIA-MARTINEZ,
AZCUNA,
CHICO-NAZARIO, and
REYES, JJ.
- versus -

Promulgated:

ASIAPRO COOPERATIVE, November 23, 2007

Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure seeking to annul and set aside the
Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236,
dated 5 January 2006 and 20 March 2006, respectively, which annulled and set
aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-
15507-03, dated 17 February 2004[3] and 16 September 2004,[4] respectively,
thereby dismissing the petition-complaint dated 12 June 2003 filed by herein
petitioner Social Security System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-
judicial body authorized by law to resolve disputes arising under Republic Act No.
1161, as amended by Republic Act No. 8282.[5] Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other
hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose
cooperative created pursuant to Republic Act No. 6938 [6] and duly registered with
the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.[7]

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-

members. Under its by-laws, owners-members are of two categories, to wit: (1)
regular member, who is entitled to all the rights and privileges of membership; and
(2) associate member, who has no right to vote and be voted upon and shall be
entitled only to such rights and privileges provided in its by-laws. [8] Its primary
objectives are to provide savings and credit facilities and to develop other
livelihood services for its owners-members. In the discharge of the aforesaid
primary objectives, respondent cooperative entered into several Service
Contracts[9] with Stanfilco - a division of DOLE Philippines, Inc. and a company
based in Bukidnon. The owners-members do not receive compensation or wages
from the respondent cooperative. Instead, they receive a share in the service
surplus[10] which the respondent cooperative earns from different areas of trade it
engages in, such as the income derived from the said Service Contracts with
Stanfilco. The owners-members get their income from the service surplus
generated by the quality and amount of services they rendered, which is
determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the
owners-members of the respondent cooperative, who were assigned to Stanfilco
requested the services of the latter to register them with petitioner SSS as self-
employed and to remit their contributions as such. Also, to comply with Section
19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS
contributions of the said owners-members were equal to the share of both the
employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President

for Mindanao Division, Atty. Eddie A. Jara, sent a letter [11] to the respondent
cooperative, addressed to its Chief Executive Officer (CEO) and General Manager
Leo G. Parma, informing the latter that based on the Service Contracts it executed
with Stanfilco, respondent cooperative is actually a manpower contractor
supplying employees to Stanfilco and for that reason, it is an employer of its
owners-members working with Stanfilco.Thus, respondent cooperative should
register itself with petitioner SSS as an employer and make the corresponding
report and remittance of premium contributions in accordance with the Social
Security Law of 1997. On 9 October 2002,[12] respondent cooperative, through its
counsel, sent a reply to petitioner SSSs letter asserting that it is not an employer
because its owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002,[13] petitioner SSS sent a letter to respondent
cooperative ordering the latter to register as an employer and report its owners-
members as employees for compulsory coverage with the petitioner
SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition [14] before

petitioner SSC against the respondent cooperative and Stanfilco praying that the
respondent cooperative or, in the alternative, Stanfilco be directed to register as an
employer and to report respondent cooperatives owners-members as covered
employees under the compulsory coverage of SSS and to remit the necessary
contributions in accordance with the Social Security Law of 1997. The same was
docketed as SSC Case No. 6-15507-03.Respondent cooperative filed its Answer
with Motion to Dismiss alleging that no employer-employee relationship exists
between it and its owners-members, thus, petitioner SSC has no jurisdiction over
the respondent cooperative. Stanfilco, on the other hand, filed an Answer with
Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to

Dismiss filed by the respondent cooperative. The respondent cooperative moved
for the reconsideration of the said Order, but it was likewise denied in another
Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion

for Extension of Time to File a Petition for Review before the Court of
Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it
was no longer filing a Petition for Review. In its place, respondent cooperative
filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP
No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein

petitioner] SSC were issued with grave abuse of discretion amounting to a
(sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it

has jurisdiction over the petition a quo, considering that it
failed to first resolve the issue of the existence of an
employer-employee relationship between [respondent]
cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to
coverage, benefits, contributions, and related matters, it is
respectfully submitted that [petitioner] SSC may only
assume jurisdiction in cases where there is no dispute as to
the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal
issue of employer-employee relationship raised in
[respondents] Motion to Dismiss can be preliminarily
resolved through summary hearings prior to the hearing on
the merits. However, any inquiry beyond a preliminary
determination, as what [petitioner SSC] wants to
accomplish, would be to encroach on the jurisdiction of the
National Labor Relations Commission [NLRC], which is
the more competent body clothed with power to resolve
issues relating to the existence of an employment
relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take

cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation

of the Labor Law but is a multi-purpose cooperative
created pursuant to Republic Act No. 6938 and composed
of owners-members, not employees.
B. The rights and obligations of the owners-members of
[respondent] cooperative are derived from their
Membership Agreements, the Cooperatives By-Laws, and
Republic Act No. 6938, and not from any contract of
employment or from the Labor Laws. Moreover, said
 owners-members enjoy rights that are not consistent with
being mere employees of a company, such as the right to
participate and vote in decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the
owners-members of [respondent] cooperative are not paid
any compensation income.[15] (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the

petition filed by the respondent cooperative. The decretal portion of the Decision
reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17

February 2004] and [16 September 2004], are ANNULLEDand SET ASIDE and
a new one is entered DISMISSING the petition-complaint dated [12 June 2003]
of [herein petitioner] Social Security System.[16]
Aggrieved by the aforesaid Decision, petitioner SSS moved for a
reconsideration, but it was denied by the appellate court in its Resolution dated 20
March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court
of Appeals erred in not finding that the SSC has jurisdiction over the subject
matter and it has a valid basis in denying respondents Motion to Dismiss. The
said issue is supported by the following arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint

filed before it by the [petitioner SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the

jurisdiction of petitioner SSC after invoking its jurisdiction by filing
an [A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in
denying respondent [cooperatives] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of

fact where presentation of evidence is necessary.

V. There is an employer-employee relationship between [respondent

cooperative] and its [owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed
before it by petitioner SSS as it involved an issue of whether or not a worker is
entitled to compulsory coverage under the SSS Law. Petitioners avow that Section
5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly
confers upon petitioner SSC the power to settle disputes on compulsory coverage,
benefits, contributions and penalties thereon or any other matter related
thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is
compulsory upon all employees. Thus, when petitioner SSS filed a petition-
complaint against the respondent cooperative and Stanfilco before the petitioner
SSC for the compulsory coverage of respondent cooperatives owners-members as
well as for collection of unpaid SSS contributions, it was very obvious that the
subject matter of the aforesaid petition-complaint was within the expertise and
jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need
to determine the existence of an employer-employee relationship between the
respondent cooperative and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-
complaint. Considering that the principal relief sought in the said petition-
complaint has to be resolved by reference to the Social Security Law and not to the
Labor Code or other labor relations statutes, therefore, jurisdiction over the same
solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperatives

Motion to Dismiss grounded on the alleged lack of employer-employee
relationship does not constitute grave abuse of discretion on the part of petitioner
SSC because the latter has the authority and power to deny the same. Moreover,
the existence of an employer-employee relationship is a question of fact where
presentation of evidence is necessary. Petitioners also maintain that the respondent
cooperative is already estopped from assailing the jurisdiction of the petitioner
SSC because it has already filed its Answer before it, thus, respondent cooperative
has already submitted itself to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship

between the respondent cooperative and its owners-members. The respondent
cooperative is the employer of its owners-members considering that it undertook to
provide services to Stanfilco, the performance of which is under the full and sole
control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members

own the cooperative, thus, no employer-employee relationship can arise between
them. The persons of the employer and the employee are merged in the owners-
members themselves.Likewise, respondent cooperatives owners-members even
requested the respondent cooperative to register them with the petitioner SSS as
self-employed individuals. Hence, petitioner SSC has no jurisdiction over the
petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly

ruled that petitioner SSC acted with grave abuse of discretion when it assumed
jurisdiction over the petition-complaint without determining first if there was an
employer-employee relationship between the respondent cooperative and its
owners-members. Respondent cooperative claims that the question of whether an
employer-employee relationship exists between it and its owners-members is a
legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped

from assailing the jurisdiction of petitioner SSC simply because it filed an Answer
with Motion to Dismiss, especially where the issue of jurisdiction is raised at the
very first instance and where the only relief being sought is the dismissal of the
petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized
into:

I. Whether the petitioner SSC has jurisdiction over the petition-

complaint filed before it by petitioner SSS against the respondent
cooperative.

II. Whether the respondent cooperative is estopped from assailing the

jurisdiction of petitioner SSC since it had already filed an Answer
with Motion to Dismiss before the said body.

Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act

No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with
respect to coverage, benefits, contributions and penalties thereon or any other
matter related thereto, shall be cognizable by the Commission, x x
x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure
states:

Section 1. Jurisdiction. Any dispute arising under the Social Security Act with
respect to coverage, entitlement of benefits, collection and settlement of
contributions and penalties thereon, or any other matter related thereto, shall
be cognizable by the Commission after the SSS through its President, Manager
or Officer-in-charge of the Department/Branch/Representative Office concerned
had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the
compulsory coverage of the SSS is well within the exclusive domain of the
petitioner SSC. It is important to note, though, that the mandatory coverage under
the SSS Law is premised on the existence of an employer-employee
relationship[17] except in cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set
up in the Answer or in the Motion to Dismiss, determine which court has
jurisdiction over an action; otherwise, the question of jurisdiction would
depend almost entirely upon the defendant.[18] Moreover, it is well-settled
that once jurisdiction is acquired by the court, it remains with it until the full
termination of the case.[19] The said principle may be applied even to quasi-judicial
bodies.
 In this case, the petition-complaint filed by the petitioner SSS before the
petitioner SSC against the respondent cooperative and Stanfilco alleges that the
owners-members of the respondent cooperative are subject to the compulsory
coverage of the SSS because they are employees of the respondent
cooperative. Consequently, the respondent cooperative being the employer of its
owners-members must register as employer and report its owners-members as
covered members of the SSS and remit the necessary premium contributions in
accordance with the Social Security Law of 1997. Accordingly, based on the
aforesaid allegations in the petition-complaint filed before the petitioner SSC, the
case clearly falls within its jurisdiction. Although the Answer with Motion to
Dismiss filed by the respondent cooperative challenged the jurisdiction of the
petitioner SSC on the alleged lack of employer-employee relationship between
itself and its owners-members, the same is not enough to deprive the petitioner
SSC of its jurisdiction over the petition-complaint filed before it. Thus, the
petitioner SSC cannot be faulted for initially assuming jurisdiction over the
petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship

between the respondent cooperative and its owners-members was put in issue and
considering that the compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC to determine if there
is really an employer-employee relationship that exists between the respondent
cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not
within the exclusive jurisdiction of the National Labor Relations Commission
(NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor
Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE
COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.[20]

Although the aforesaid provision speaks merely of claims for Social Security, it
would necessarily include issues on the coverage thereof, because claims are
undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining
the coverage of the Social Security System is explicitly excluded from the
jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is
primarily charged with the duty of settling disputes arising under the Social
Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner

SSS involved the issue of compulsory coverage of the owners-members of the
respondent cooperative, this Court agrees with the petitioner SSC when it declared
in its Order dated 17 February 2004 that as an incident to the issue of compulsory
coverage, it may inquire into the presence or absence of an employer-employee
relationship without need of waiting for a prior pronouncement or submitting the
issue to the NLRC for prior determination. Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by the
separate statutes creating them, petitioner SSC has the authority to inquire into the
relationship existing between the worker and the person or entity to whom he
renders service to determine if the employment, indeed, is one that is excepted by
the Social Security Law of 1997 from compulsory coverage.[21]

Even before the petitioner SSC could make a determination of the existence
of an employer-employee relationship, however, the respondent cooperative
already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to
the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof,
the petitioner SSC became a party to the said Petition for Certioraripursuant to
Section 5(b)[22] of Republic Act No. 8282. The appellate court ruled in favor of the
respondent cooperative by declaring that the petitioner SSC has no jurisdiction
over the petition-complaint filed before it because there was no employer-
employee relationship between the respondent cooperative and its owners-
members. Resultantly, the petitioners SSS and SSC, representing the Republic of
the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Courts power of review,

the Court is not a trier of facts and the findings of fact of the Court of Appeals are
conclusive and binding on the Court,[23] said rule is not without exceptions. There
are several recognized exceptions[24] in which factual issues may be resolved by
this Court. One of these exceptions finds application in this present case which is,
when the findings of fact are conflicting. There are, indeed, conflicting findings
espoused by the petitioner SSC and the appellate court relative to the existence of
employer-employee relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oft-repeated rule that
factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the

following elements are considered: (1) the selection and engagement of the
workers; (2) the payment of wages by whatever means; (3) the power of dismissal;
and (4) the power to control the workers conduct, with the latter assuming primacy
in the overall consideration.[25] 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. [26] The power of
control refers to the existence of the power and not necessarily to the actual
exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right
to wield that power.[27] All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the

respondent cooperative which has the exclusive discretion in the selection and
engagement of the owners-members as well as its team leaders who will be
assigned at Stanfilco.[28]Second. Wages are defined as 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 service rendered or to be rendered.[29] In this case,
the weekly stipends or the so-called shares in the service surplus given by the
respondent cooperative to its owners-members were in reality wages, as the same
were equivalent to an amount not lower than that prescribed by existing labor laws,
rules and regulations, including the wage order applicable to the area and industry;
or the same shall not be lower than the prevailing rates of wages. [30] It cannot be
doubted then that those stipends or shares in the service surplus are indeed wages,
because these are given to the owners-members as compensation in rendering
services to respondent cooperatives client, Stanfilco. Third. It is also stated in the
above-mentioned Service Contracts that it is the respondent cooperative which has
the power to investigate, discipline and remove the owners-members and its
team leaders who were rendering services at Stanfilco.[31] Fourth. As earlier
opined, of the four elements of the employer-employee relationship, the control
test is the most important. In the case at bar, it is the respondent cooperative
which has the sole control over the manner and means of performing the
services under the Service Contracts with Stanfilco as well as the means and
methods of work.[32] Also, the respondent cooperative is solely and entirely
responsible for its owners-members, team leaders and other representatives at
Stanfilco.[33] All these clearly prove that, indeed, there is an employer-employee
relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent

cooperative and Stanfilco expressly provide that there shall be no employer-
employee relationship between the respondent cooperative and its owners-
members.[34] This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship

actually exists between the respondent cooperative and its owners-members. The
four elements in the four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must not be allowed to deny
its employment relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly repudiating it
in a contract, when the terms and surrounding circumstances show
otherwise. The employment status of a person is defined and prescribed by
law and not by what the parties say it should be.[35]

It is settled that the contracting parties may establish such stipulations,

clauses, terms and conditions as they want, and their agreement would have the
force of law between them. However, the agreed terms and conditions must not
be contrary to law, morals, customs, public policy or public order.[36] The
Service Contract provision in question must be struck down for being contrary to
law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who
are also its owners-members, by the Social Security Law.
 This Court is not unmindful of the pronouncement it made in Cooperative
Rural Bank of Davao City, Inc. v. Ferrer-Calleja[37] wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary

business concern, being run either by persons, partnerships, or corporations. Its
owners and/or members are the ones who run and operate the business while the
others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-

owner thereof cannot invoke the right to collective bargaining for certainly
an owner cannot bargain with himself or his co-owners. In the opinion
of August 14, 1981 of the Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative have no right to
form or join labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative.

However, in so far as it involves cooperatives with employees who are not

members or co-owners thereof, certainly such employees are entitled to exercise
the rights of all workers to organization, collective bargaining, negotiations and
others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present
case. The declaration made by the Court in the aforesaid case was made in the
context of whether an employee who is also an owner-member of a cooperative
can exercise the right to bargain collectively with the employer who is the
cooperative wherein he is an owner-member. Obviously, an owner-member cannot
bargain collectively with the cooperative of which he is also the owner because an
owner cannot bargain with himself. In the instant case, there is no issue regarding
an owner-members right to bargain collectively with the cooperative. The question
involved here is whether an employer-employee relationship can exist between the
cooperative and an owner-member. In fact, a closer look at Cooperative Rural
Bank of Davao City, Inc. will show that it actually recognized that an owner-
member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon

its registration with the Cooperative Development Authority.[38] It has its Board of
Directors, which directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management of its affairs. [39] With
that, a cooperative can be likened to a corporation with a personality separate and
distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee
relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had
registered itself with the Cooperative Development Authority, as evidenced by its
Certificate of Registration No. 0-623-2460.[40] In its by-laws,[41] its Board of
Directors directs, controls, and supervises the business and manages the property
of the respondent cooperative. Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its owners-
members as a whole. Therefore, it is completely logical that the respondent
cooperative, as a juridical person represented by its Board of Directors, can enter
into an employment with its owners-members.

In sum, having declared that there is an employer-employee relationship

between the respondent cooperative and its owners-member, we conclude that the
petitioner SSC has jurisdiction over the petition-complaint filed before it by the
petitioner SSS. This being our conclusion, it is no longer necessary to discuss the
issue of whether the respondent cooperative was estopped from assailing the
jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is

hereby GRANTED. The Decision and the Resolution of the Court of Appeals
in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively,
are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC
dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The
petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint
filed before it by the petitioner SSS as regards the compulsory coverage of the
respondent cooperative and its owners-members. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ADOLFO S. AZCUNA

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice
 ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

[1]
Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate Justices Godardo A. Jacinto and Vicente Q.
Roxas, concurring; rollo, pp. 63-74.
[2]
Id. at 61-62.
[3]
Penned by Commissioner Sergio R. Ortiz-Luis, Jr.; id. at 116-119.
[4]
Id. at 146-149.
[5]
Otherwise known as Social Security Act of 1997, which was approved on 1 May 1997.
[6]
Otherwise known as Cooperative Code of the Philippines, which was enacted on 10 March 1990.
[7]
CA rollo, p. 63.
[8]
Section 2, Asiapro Cooperative Amended By-Laws, CA rollo, p. 68.
[9]
Id. at 126-130, 444-449.
[10]
It represents the amount given to respondent cooperatives owners-members for rendering services to the client of
respondent cooperative, like Stanfilco. Such amount shall not be lower than the prevailing rates of wages.
[11]
Rollo, pp. 75-76.
[12]
Id. at 82-86.
[13]
Id. at 87-88.
[14]
Id. at 89-97.
[15]
Rollo, pp. 66-68.
[16]
Id. at 74.
[17]
Social Security System v. Court of Appeals, 401 Phil. 132, 141 (2000).
[18]
Abacus Securities Corporation v. Ampil, G.R. No. 160016, 27 February 2006, 483 SCRA 315, 339.
[19]
Philrock, Inc. v. Construction Industry Arbitration Commission, 412 Phil. 236, 246 (2001).
[20]
Article 217(a)(6) of the Labor Code of the Philippines.
[21]
Rollo, p. 117.
[22]
SEC. 5. Settlement of Disputes. (a) x x x.
(b) x x x. The Commission shall be deemed to be a party to any judicial action involving any such decision, and may
be represented by an attorney employed by the Commission, by the Solicitor General or any public
prosecutor.
[23]
Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.
[24]
Recognized exceptions to this rule are: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the
issues of the case, or its findings are contrary to the admissions of both the appellee and the appellant; (7)
when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when
the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion (Langkaan Realty Development, Inc. v. United
Coconut Planters Bank, 400 Phil. 1349, 1356 (2000); Nokom v. National Labor Relations Commissions,
390 Phil. 1228, 1243 (2000); Commissioner of Internal Revenue v. Embroidery and Garments Industries
(Phils.), Inc., 364 Phil. 541, 546-547 (1999); Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283
(1998); Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.)
[25]
Jo v. National Labor Relations Commission, 381 Phil. 428, 435 (2000).
[26]
Chavez v. National Labor Relations Commission, G.R. No. 146530, 17 January 2005, 448 SCRA 478, 490.
[27]
Jo v. National Labor Relations Commission, supra note 25.
[28]
7. SELECTION, ENGAGEMENT, DISCHARGE. The Cooperative shall have the exclusive discretion in the
acceptance, engagement, investigation and discipline and removal of its owner-members and team
leaders. (Service Contract, CA rollo, p. 458).
[29]
ART. 97(f) of the Labor Code.
[30]
4. COOPERATIVES RESPONSIBILITIES. The Cooperative shall have the following responsibilities:
x x x x.
4.3. The Cooperative shall pay the share of the service surplus due to its owner-members assigned to the Client x x
x. However, the amount of the share of the service surplus of the owner-members x x x shall be in an
amount not lower than existing labor laws, rules and regulations, including the wage order applicable to the
area and industry. x x x. (CA rollo, pp. 457-458).
[31]
Id.
[32]
1. SCOPE OF SERVICE. x x x.
x x x. The Cooperative shall have sole control over the manner and means of performing the subject services under
this Contract and shall complete the services in accordance with its own means and methods of work, in
keeping with the Clients standards. (Id. at 456).
[33]
3. RELATIONSHIP OF THE PARTIES. x x x. The Cooperative shall be solely and entirely responsible for its
owner-members, team leaders and other representatives. (Id. at 457).
[34]
3. RELATIONSHIP OF THE PARTIES. It is hereby agreed that there shall be no employer-employee
relationship between the Cooperative and its owners-members x x x. (Id).
[35]
Chavez v. National Labor Relations Commission, supra note 26 at 493; Lopez v. Metropolitan Waterworks and
Sewerage System, G.R. No. 154472, 30 June 2005, 462 SCRA 428, 445-446.
[36]
Art. 1306, Civil Code of the Philippines; Philippine National Bank v. Cabansag, G.R. No. 157010, 21 June 2005,
460 SCRA 514, 533.
[37]
G.R. No. L-77951, 26 September 1988, 165 SCRA 725, 732-733.
[38]
ART. 16. Registration. - A cooperative formed or organized under this Code acquires juridical personality from
the date the Cooperative Development Authority issues a certificate of registration under its official seal. x
x x. (Republic Act No. 6938).
[39]
ART. 38. Composition of the Board of Directors. - The conduct and management of the affairs of a cooperative
shall be vested in a board of directors x x x.
ART. 39. Powers of the Board of Directors. - The board of directors shall direct and supervise the business, manage
the property of the cooperative and may, by resolution, exercise all such powers of the cooperative as are
not reserved for the general assembly under this Code and the by-laws. (Id.).
[40]
CA rollo, p. 63.
[41]
Id. at 68-78.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 109704 January 17, 1995

ALFREDO B. FELIX, petitioner,

vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in his capacity as
Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE
COMMISSION, respondents.

KAPUNAN, J.:

Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to the general
reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of
the National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the
constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid
reorganization.

In Mendoza vs. Quisumbing and the consolidated cases involving the reorganization of various government
1

departments and agencies we held:

We are constrained to set aside the reorganizations embodied in these consolidated petitions
because the heads of departments and agencies concerned have chosen to rely on their own
concepts of unlimited discretion and "progressive" ideas on reorganization instead of showing that
they have faithfully complied with the clear letter and spirit of the two Constitutions and the statutes
affecting reorganization.2

In De Guzman vs. CSC , we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias that a valid
3 4

abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that "if the
abolition is void, the incumbent is deemed never to have ceased to hold office," in sustaining therein petitioner's right
to the position she held prior to the reorganization.

The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal from a permanent
position in the National Center for Mental Health as a result of the reorganization of the Department of Health was
void.

However, a closer look at the facts surrounding the instant petition leads us to a different conclusion.

After passing the Physician's Licensure Examinations given by the Professional Regulation Commission in June of
1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental Hospital)
on May 26, 1980 as a Resident Physician with an annual salary of P15,264.00. In August of 1983, he was promoted
5

to the position of Senior Resident Physician a position he held until the Ministry of Health reorganized the National
6

Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119.

Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary
capacity immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to the
Secretary of Health. In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary
7

Status), which position was renewed the following year. 8

In 1988, the Department of Health issued Department Order No. 347 which required board certification as a
prerequisite for renewal of specialist positions in various medical centers, hospitals and agencies of the said
department. Specifically, Department Order No. 347 provided that specialists working in various hospitals and
branches of the Department of Health be recognized as "Fellows" of their respective specialty societies and/or
"Diplomates" of their specialty boards or both. The Order was issued for the purpose of upgrading the quality of
specialties in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside) examinations given
by recognized specialty boards, in keeping up with international standards of medical practice.

Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then) Secretary
of Health Alfredo Bengzon issued Department Order No. 347 providing for an extension of appointments of Medical
Specialist positions in cases where the termination of medical specialist who failed to meet the requirement for board
certification might result in the disruption of hospital services. Department Order No. 478 issued the following
guidelines:

1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the
Chief of Hospital requests for exemption, certifies that its application will result in the disruption of
the delivery service together with the steps taken to implement Section 4, and submit a plan of
action, lasting no more than 3-years, for the eventual phase out of non-Board certified medical
specialties.

2. Medical specialist recommended for extension of appointment shall meet the following minimum
criteria:

a. DOH medical specialist certified

b. Has been in the service of the Department at least three (3) years prior to
December 1988.

c. Has applied or taken the specialty board examination.

3. Each recommendation for extension of appointment must be individually justified to show not
only the qualification of the recommendee, but also what steps he has taken to be board certified.

4. Recommendation for extension of appointment shall be evaluated on a case to case basis.

5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.

Petitioner was one of the hundreds of government medical specialist who would have been adversely affected by
Department Order No. 347 since he was no yet accredited by the Psychiatry Specialty Board. Under Department
Order No. 478, extension of his appointment remained subject to the guidelines set by the said department order. On
August 20, 1991, after reviewing petitioner's service record and performance, the Medical Credentials Committee of
the National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I,
informing him of its decision on August 22, 1991. He was, however, allowed to continue in the service, and receive his
salary, allowances and other benefits even after being informed of the termination of his appointment.

On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters,
the petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed out
petitioner's poor performance, frequent tardiness and inflexibility as among the factors responsible for the
recommendation not to renew his appointment. With one exception, other department heads present in the meeting
9

expressed the same opinion, and the overwhelming concensus was for non-renewal. The matter was thereafter
10

referred to the Civil Service Commission, which on February 28, 1992 ruled that "the temporary appointment (of
petitioner) as Medical Specialist I can be terminated at any time . . ." and that "[a]ny renewal of such appointment is
within the discretion of the appointing authority." Consequently, in a memorandum dated March 25, 1992 petitioner
11

was advised by hospital authorities to vacate his cottage since he was no longer with said memorandum petitioner
filed a petition with the Merit System Protection Board (MSPB) complaining about the alleged harassment by
respondents and questioning the non-renewal of his appointment. In a Decision rendered on July 29, 1992, the
(MSPB) dismissed petitioner's complaint for lack of merit, finding that:

As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or
after its expiration is a matter largely addressed to the sound discretion of the appointing authority.
In this case, there is no dispute that Complainant was a temporary employee and his appointment
expired on August 22, 1991. This being the case, his re-appointment to his former position or the
renewal of his temporary appointment would be determined solely by the proper appointing
authority who is the Secretary, Department of Health upon the favorable recommendation of the
Chief of Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service
Commission G.R. Nos. 80455-56 dated April 10, 1989, held as follows:

The power of appointment is essentially a political question involving considerations of wisdom

which only the appointing authority can decide.

In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired
temporary appointment much less invoke the aid of this Board cannot substitute its judgment to that
of the appointing authority nor direct the latter to issue an appointment in the complainant's favor.

Regarding the alleged Department Order secured by the complainant from the Department of
Health (DOH), the Board finds the same inconsequential. Said Department Order merely allowed
the extension of tenure of Medical Specialist I for a certain period but does not mandate the
renewal of the expired appointment.

The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that the subsistence,
quarters and laundry benefits provided to the Complainant were in connection with his employment with the NCMH.
Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits.
Hence, the Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof,
including the occupancy of the said cottage, after his cessation form office.

In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal
infirmity, thus rendering as baseless, this instant complaint.

Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated
December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93-677 dated February 3, 1993,
hence this appeal, in which petitioner interposes the following assignments of errors:

THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY

SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF
TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND
ACCEPTANCE OF APPOINTMENT.

II

THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE

PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN
THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF TENURE.

Responding to the instant petition, the Solicitor General contends that 1) the petitioner's temporary appointment
12

after the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right of security of
tenure; 2) petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to
13

1991; and 3) the respondent Commission did not act with grave abuse of discretion in affirming the petitioner's non-
14

renewal of his appointment at the National Center for Mental Hospital. 15

We agree.

The patent absurdity of petitioner's posture is readily obvious. A residency or resident physician position in a medical
specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a
physician right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to his
recognition as a specialist or sub-specialist in a given field.

A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal
Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology
before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar
manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as
a fellow or diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement from residency to
specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and
ensures that the physician claiming to be a specialist will not be set loose on the community without the basic
knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive,
and based on merit. acceptance to a first year residency program is no guaranty that the physician will complete the
program. Attribution rates are high. Some programs are pyramidal. Promotion to the next post-graduate year is based
on merit and performance determined by periodic evaluations and examinations of knowledge, skills and bedside
manner. Under this system, residents, specialty those in university teaching hospitals enjoy their right to security
17 18

of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as
physicians undergoing post-graduate residencies and fellowships are concerned. While physicians (or consultants) of
specialist rank are not subject to the same stringent evaluation procedures, 19 specialty societies require continuing
education as a requirement for accreditation for good standing, in addition to peer review processes based on
performance, mortality and morbidity audits, feedback from residents, interns and medical students and research
output. The nature of the contracts of resident physicians meet traditional tests for determining employer-employee
relationships, but because the focus of residency is training, they are neither here nor there. Moreover, stringent
standards and requirements for renewal of specialist-rank positions or for promotion to the next post-graduate
residency year are necessary because lives are ultimately at stake.

Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to
Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and
staying there. From the position of senior resident physician, which he held at the time of the government
reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical
Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but because
of the prestige and status which the promotion conferred upon him in the medical community. Such status, however,
clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum
requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty rank, the
responsibility of completing board certification requirements within a reasonable period of time. The evaluation made
by the petitioner's peers and superiors clearly showed that he was deficient in a lot of areas, in addition to the fact
that at the time of his non-renewal, he was not even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I (temporary) in
August of 1988, no objection was raised by him about the change of position or the temporary nature of designation.
The pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years
later, following the non-renewal of his position by the Department of Health.

We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I
contracts in 1989 and 1990, clearly demonstrating his acquiescence to — if not his unqualified acceptance of the
promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change
from the status of permanent senior resident physician to temporary senior physician were neither pursued nor
mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting
upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the
promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to repudiate his
promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, that20

he "either abandoned (his claim) or declined to assert it."

There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil
service, permanent, temporary of otherwise, or any claim to a violation of the constitutional provision on security of
tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is
necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right
to any position are strongly discouraged. In the same token, the failure to assert a claim or the voluntary acceptance
21

of another position in government, obviously without reservation, leads to a presumption that the civil servant has
either given up his claim of has already settled into the new position. This is the essence of laches which is the failure
or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or
should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it.
22

In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of
petitioner's position from permanent resident physician status to that of a temporary resident physician pursuant to
the government reorganization after the EDSA Revolution. What is unique to petitioner's averments is the fact that he
hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the
National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at
once apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by falsely claiming
that petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second, by
insisting on a right of claim clearly abandoned by his acceptance of the position of Medical Specialist I (Temporary),
which is hence barred by laches.

The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue in
the case at bench, we decline to make any further pronouncements relating to petitioner's contentions relating to the
effect on him of the reorganization except to say that in the specific case of the change in designation from
permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous
situation whereby some government resident physicians were erroneously being classified as permanent resident
physicians in spite of the inherently temporary nature of the designation. The attempts by the Department of Health
not only to streamline these positions but to make them conform to current standards of specialty practice is a step in
a positive direction. The patient who consults with a physician of specialist rank should at least be safe in the
assumption that the government physician of specialist rank: 1.) has completed all necessary requirements at least
assure the public at large that those in government centers who claim to be specialists in specific areas of Medicine
possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in the
Hippocratic Oath, that they do their patients no harm. Primium non nocere.

Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment
(Medical Specialist I). As respondent Civil Service Commission has correctly pointed out 23, the appointment was for
a definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of the
petitioner's term.

ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.

Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug and
Mendoza, JJ., concur.

Footnotes

1 186 SCRA 108 (1990). In these consolidated cases various civil servants adversely affected by
the government wide reorganization challenged departments and agencies pursuant to the
mandate granted by President Corazon Aquino's proclamation No. 1. See also Manalo v
CSC, infra.

2 Id., at 152-153.

3 G.R. No. 106692, March 11, 1994.

4 Also cited in Mendoza, supra at 138.

5 Rollo, p. 42; Annex "F".

6 Id., at p. 43; Annex "G".

7 Id., at p. 5.

8 Id.

9 Id., at p. 100, Annex "2".

10 Id., at 100-104.

11 CSC Resolution No. 92-347, February 28, 1992.

12 See, COMMENT, p. 77, Rollo.

13 Id., at 85.

14 Id., at 87.

15 Id., at 91.

16 In most government teaching hospitals, the old and virtually permanent resident-
physician/senior resident physician classification or staffing system has given way to a stepladder
program (patterned after residency programs in the United States) where resident physicians move
on from one postgraduate residency year to the next.

17. In fact, some specialties like the Philippine College of Physicians (through its Specialty Board of
Internal Medicine) have began to require resident to take accreditation examinations conducted by
the college every year as a requirement for promotion. Program accreditation of residency
programs is based on passing/attrition rates in these examinations, providing a steady impetus for
maintaining standards set by the college.

18 The principal university teaching hospitals in Metro Manila include the UP-PGH, the UST
Medical Center, the UERMMC Hospital and the FEUNRMF.

Government hospitals with a reputation for exacting residency programs include the Philippine
Heart Center for Asia, the National Kidney Institute, and the National Orthopedic Hospital. Their
reputations in this area are based on the consistent performance of their residents in various
specialty board examinations, the quality of training specialists and consultants, and research
output.

19 With the exception of the Department of Health, which has both permanent and temporary
specialists on either a part-time or full-time basis, consultants in most of the large hospitals and
medical centers are not really employees of these hospitals. Large medical Centers like the MCM,
Makati Medical Center etc., require purchase of a minimum number of stocks (usually exceeding
P100,000.00) as a pre-requisite for attaining attending physician status. Acceptance is, moreover,
highly selective, based on the quality of the applicant's residency training program and school
graduated from. Board certification is a universal requirement. In 1988, the DOH made board
certification a requirement for renewal of specialist positions.

20 23 SCRA 35 (1968).

21 Unabia v. City Mayor, 99 Phil 253, 257 (1956).

22 Cristibal v. Melchor 78 SCRA 174, 183 (1977), citing Tijam, supra, note 19.

23 Rollo, p, 22; Annex "A"

 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 13th month pay are AFFIRMED.

SO ORDERED.[15]

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a
new one is hereby rendered dismissing the complaint filed by private respondent against
Kasei Corporation, et al. for constructive dismissal.

SO ORDERED.[16]

The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.

The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
 Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the other,
there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence.[17]

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has

been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such
end. In addition to the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in
the payrolls, can help in determining the existence of an employer-employee
relationship.

However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are
instances when, aside from the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test

involving: (1) the putative employers power to control the employee with respect
to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which

would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the
latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held that there
is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the

existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an 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.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief Justice
 Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN

Chief Justice
[1]
Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by Associate Justices Regalado E.
Maambong and Lucenito N. Tagle.
[2]
Id. at 24-25.
[3]
Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier and concurred in by Commissioner Tito F.
Genilo.
[4]
Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio.
[5]
Id. at 89.
[6]
Id. at 89-90.
[7]
Id. at 90.
[8]
Id.
[9]
Id. at 91.
[10]
Id.
[11]
Id. at 91-92.
[12]
Id. at 92-93.
[13]
Id. at 94.
[14]
Id. at 172-173.
[15]
Id. at 197-198.
[16]
Id. at 100.
[17]
Abante, Jr. v. Lamadrid Bearing & Parts Corporation, G.R. No. 159890, May 28, 2004, 430 SCRA 368, 379.
[18]
G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180, citing Visayan Stevedore Transportation
Company v. Court of Industrial Relations, 125 Phil. 817, 820 (1967).
[19]
99 Phil. 408 (1956).
[20]
G.R. No. 152459, June 15, 2006.
[21]
Supra note 18.
[22]
Rutherford Food Corporation v. McComb, 331 U.S. 722, 727 (1947); 91 L.Ed. 1772, 1777 (1946).
[23]
See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d
748 (9th Cir. 1979); Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100
(1961); Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947).
[24]
Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987).
[25]
Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir. 1979).
[26]
Rollo, pp. 305-321.
[27]
Id. at 264-265.
[28]
330 Phil. 518, 524 (1996).
[29]
G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571.
[30]
Rollo, pp. 120-121.
[31]
Id. at 57.
[32]
People v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-27.
[33]
People v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA 647, 651.
[34]
Globe-Mackay Cable and Radio Corporation v. National Labor Relations Commission, G.R. No. 82511, March
3, 1992, 206 SCRA 701, 711-712.
[35]
Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126 (2000).
[36]
438 Phil. 756 (2002).
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 146667 January 23, 2007

JOHN F. McLEOD, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), FILIPINAS SYNTHETIC FIBER CORPORATION
(FILSYN), FAR EASTERN TEXTILE MILLS, INC., STA. ROSA TEXTILES, INC., (PEGGY MILLS, INC.), PATRICIO
L. LIM, and ERIC HU, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 to set aside the Decision2 dated 15 June 2000 and the Resolution3 dated 27 December
2000 of the Court of Appeals in CA-G.R. SP No. 55130. The Court of Appeals affirmed with modification the 29
December 1998 Decision4 of the National Labor Relations Commission (NLRC) in NLRC NCR 02-00949-95.

The Facts

The facts, as summarized by the Labor Arbiter and adopted by the NLRC and the Court of Appeals, are as follows:

On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and sick leave benefits, non-
payment of unused airline tickets, holiday pay, underpayment of salary and 13th month pay, moral and exemplary
damages, attorney’s fees plus interest against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc.,
Sta. Rosa Textiles, Inc., Patricio Lim and Eric Hu.

In his Position Paper, complainant alleged that he is an expert in textile manufacturing process; that as early as 1956
he was hired as the Assistant Spinning Manager of Universal Textiles, Inc. (UTEX); that he was promoted to Senior
Manager and worked for UTEX till 1980 under its President, respondent Patricio Lim; that in 1978 Patricio Lim formed
Peggy Mills, Inc. with respondent Filsyn having controlling interest; that complainant was absorbed by Peggy Mills as
its Vice President and Plant Manager of the plant at Sta. Rosa, Laguna; that at the time of his retirement complainant
was receiving P60,000.00 monthly with vacation and sick leave benefits; 13th month pay, holiday pay and two round
trip business class tickets on a Manila-London-Manila itinerary every three years which is convertible to cas[h] if
unused; that in January 1986, respondents failed to pay vacation and leave credits and requested complainant to wait
as it was short of funds but the same remain unpaid at present; that complainant is entitled to such benefit as per
CBA provision (Annex "A"); that respondents likewise failed to pay complainant’s holiday pay up to the present; that
complainant is entitled to such benefits as per CBA provision (Annex "B"); that in 1989 the plant union staged a strike
and in 1993 was found guilty of staging an illegal strike; that from 1989 to 1992 complainant was entitled to 4 round
trip business class plane tickets on a Manila-London-Manila itinerary but this benefit not (sic) its monetary equivalent
was not given; that on August 1990 the respondents reduced complainant’s monthly salary of P60,000.00
by P9,900.00 till November 1993 or a period of 39 months; that in 1991 Filsyn sold Peggy Mills, Inc. to Far Eastern
Textile Mills, Inc. as per agreement (Annex "D") and this was renamed as Sta. Rosa Textile with Patricio Lim as
Chairman and President; that complainant worked for Sta. Rosa until November 30 that from time to time the owners
of Far Eastern consulted with complainant on technical aspects of reoperation of the plant as per correspondence
(Annexes "D-1" and "D-2"); that when complainant reached and applied retirement age at the end of 1993, he was
only given a reduced 13th month pay of P44,183.63, leaving a balance of P15,816.87; that thereafter the owners of
Far Eastern Textiles decided for cessation of operations of Sta. Rosa Textiles; that on two occasions, complainant
wrote letters (Annexes "E-1" to "E-2") to Patricio Lim requesting for his retirement and other benefits; that in the last
quarter of 1994 respondents offered complainant compromise settlement of only P300,000.00 which complainant
rejected; that again complainant wrote a letter (Annex "F") reiterating his demand for full payment of all benefits and
to no avail, hence this complaint; and that he is entitled to all his money claims pursuant to law.

On the other hand, respondents in their Position Paper alleged that complainant was the former Vice-President and
Plant Manager of Peggy Mills, Inc.; that he was hired in June 1980 and Peggy Mills closed operations due to
irreversible losses at the end of July 1992 but the corporation still exists at present; that its assets were acquired by
Sta. Rosa Textile Corporation which was established in April 1992 but still remains non-operational at present; that
complainant was hired as consultant by Sta. Rosa Textile in November 1992 but he resigned on November 30, 1993;
that Filsyn and Far Eastern Textiles are separate legal entities and have no employer relationship with complainant;
that respondent Patricio Lim is the President and Board Chairman of Sta. Rosa Textile Corporation; that respondent
Eric Hu is a Taiwanese and is Director of Sta. Rosa Textiles, Inc.; that complainant has no cause of action against
Filsyn, Far Eastern Textile Ltd., Sta. Rosa Textile Corporation and Eric Hu; that Sta. Rosa only acquired the assets
and not the liabilities of Peggy Mills, Inc.; that Patricio Lim was only impleaded as Board Chairman of Sta. Rosa
Textile and not as private individual; that while complainant was Vice President and Plant Manager of Peggy Mills, the
union staged a strike up to July 1992 resulting in closure of operations due to irreversible losses as per Notice (Annex
"1"); that complainant was relied upon to settle the labor problem but due to his lack of attention and absence the
strike continued resulting in closure of the company; and losses to Sta. Rosa which acquired its assets as per their
financial statements (Annexes "2" and "3"); that the attendance records of complainant from April 1992 to November
1993 (Annexes "4" and "5") show that he was either absent or worked at most two hours a day; that Sta. Rosa and
Peggy Mills are interposing counterclaims for damages in the total amount of P36,757.00 against complainant; that
complainant’s monthly salary at Peggy Mills was P50,495.00 and not P60,000.00; that Peggy Mills, does not have a
retirement program; that whatever amount complainant is entitled should be offset with the counterclaims; that
complainant worked only for 12 years from 1980 to 1992; that complainant was only hired as a consultant and not an
employee by Sta. Rosa Textile; that complainant’s attendance record of absence and two hours daily work during the
period of the strike wipes out any vacation/sick leave he may have accumulated; that there is no basis for
complainant’s claim of two (2) business class airline tickets; that complainant’s pay already included the holiday pay;
that he is entitled to holiday pay as consultant by Sta. Rosa; that he has waived this benefit in his 12 years of work
with Peggy Mills; that he is not entitled to 13th month pay as consultant; and that he is not entitled to moral and
exemplary damages and attorney’s fees.

In his Reply, complainant alleged that all respondents being one and the same entities are solidarily liable for all
salaries and benefits and complainant is entitled to; that all respondents have the same address at 12/F B.A. Lepanto
Building, Makati City; that their counsel holds office in the same address; that all respondents have the same offices
and key personnel such as Patricio Lim and Eric Hu; that respondents’ Position Paper is verified by Marialen C.
Corpuz who knows all the corporate officers of all respondents; that the veil of corporate fiction may be pierced if it is
used as a shield to perpetuate fraud and confuse legitimate issues; that complainant never accepted the change in
his position from Vice-President and Plant Manger to consultant and it is incumbent upon respondents to prove that
he was only a consultant; that the Deed of Dation in Payment with Lease (Annex "C") proves that Sta. Rosa took over
the assets of Peggy Mills as early as June 15, 1992 and not 1995 as alleged by respondents; that complainant never
resigned from his job but applied for retirement as per letters (Annexes "E-1", "E-2" and "F"); that documents "G", "H"
and "I" show that Eric Hu is a top official of Peggy Mills that the closure of Peggy Mills cannot be the fault of
complainant; that the strike was staged on the issue of CBA negotiations which is not part of the usual duties and
responsibilities as Plant Manager; that complainant is a British national and is prohibited by law in engaging in union
activities; that as per Resolution (Annex "3") of the NLRC in the proper case, complainant testified in favor of
management; that the alleged attendance record of complainant was lifted from the logbook of a security agency and
is hearsay evidence; that in the other attendance record it shows that complainant was reporting daily and even on
Saturdays; that his limited hours was due to the strike and cessation of operations; that as plant manager
complainant was on call 24 hours a day; that respondents must pay complainant the unpaid portion of his salaries
and his retirement benefits that cash voucher No. 17015 (Annex "K") shows that complainant drew the monthly salary
of P60,000.00 which was reduced to P50,495.00 in August 1990 and therefore without the consent of complainant;
that complainant was assured that he will be paid the deduction as soon as the company improved its financial
standing but this assurance was never fulfilled; that Patricio Lim promised complainant his retirement pay as per the
latter’s letters (Annexes "E-1", "E-2" and "F"); that the law itself provides for retirement benefits; that Patricio Lim by
way of Memorandum (Annex "M") approved vacation and sick leave benefits of 22 days per year effective 1986; that
Peggy Mills required monthly paid employees to sign an acknowledgement that their monthly compensation includes
holiday pay; that complainant was not made to sign this undertaking precisely because he is entitled to holiday pay
over and above his monthly pay; that the company paid for complainant’s two (2) round trip tickets to London in 1983
and 1986 as reflected in the complainant’s passport (Annex "N"); that respondents claim that complainant is not
entitled to 13th month pay but paid in 1993 and all the past 13 years; that complainant is entitled to moral and
exemplary damages and attorney’s fees; that all doubts must be resolved in favor of complainant; and that
complainant reserved the right to file perjury cases against those concerned.

In their Reply, respondents alleged that except for Peggy Mills, the other respondents are not proper persons in
interest due to the lack of employer-employee relationship between them and complainant; that undersigned counsel
does not represent Peggy Mills, Inc.

In a separate Position Paper, respondent Peggy Mills alleged that complainant was hired on February 10, 1991 as
per Board Minutes (Annex "A"); that on August 19, 1987, the workers staged an illegal strike causing cessation of
operations on July 21, 1992; that respondent filed a Notice of Closure with the DOLE (Annex "B"); that all employees
were given separation pay except for complainant whose task was extended to December 31, 1992 to wind up the
affairs of the company as per vouchers (Annexes "C" and "C-1"); that respondent offered complainant his retirement
benefits under RA 7641 but complainant refused; that the regular salaries of complainant from closure up to
December 31, 1992 have offset whatever vacation and sick leaves he accumulated; that his claim for unused plane
tickets from 1989 to 1992 has no policy basis, the company’s formula of employees monthly rate x 314 days over 12
months already included holiday pay; that complainant’s unpaid portion of the 13th month pay in 1993 has no basis
because he was only an employee up to December 31, 1992; that the 13th month pay was based on his last salary;
and that complainant is not entitled to damages.5

On 3 April 1998, the Labor Arbiter rendered his decision with the following dispositive portion:

WHEREFORE, premises considered, We hold all respondents as jointly and solidarily liable for complainant’s money
claims as adjudicated above and computed below as follows:

Retirement Benefits (one month salary for every year of service)

6/80 - 11/30/93 = 14 years

 P60,000 x 14.0 mos. …………………… P840,000.00

Vacation and Sick Leave (3 yrs.)

P2,000.00 x 22 days x 3 yrs. …………… 132,000.00

Underpayment of Salaries (3 yrs.)

P60,000 - P50,495 = P9,505

P 9,505 x 36.0 mos. …………………... 342,180.00

Holiday Pay (3 yrs.)

P2,000 x 30 days ………………………. 60,000.00

Underpayment of 13th month pay (1993) ……... 15,816.87

Moral Damages ……………………………….. 3,000,000.00

Exemplary Damages ………………………….. 1,000,000.00

10% Attorney’s Fees …………………………. 138,999.68

TOTAL P5,528,996.55

Unused Airline Tickets (3 yrs.)

(To be converted in Peso upon payment)

$2,450.00 x 3.0 [yrs.]..……………… $7,350.00

SO ORDERED.6

Filipinas Synthetic Fiber Corporation (Filsyn), Far Eastern Textile Mills, Inc. (FETMI), Sta. Rosa Textiles, Inc. (SRTI),
Patricio L. Lim (Patricio), and Eric Hu appealed to the NLRC. The NLRC rendered its decision on 29 December 1998,
thus:

WHEREFORE, the Decision dated 3 April 1998 is hereby REVERSED and SET ASIDE and a new one is entered
ORDERING respondent Peggy Mills, Inc. to pay complainant his retirement pay equivalent to 22.5 days for every
year of service for his twelve (12) years of service from 1980 to 1992 based on a salary rate of P50,495.00 a month.

All other claims are DISMISSED for lack of merit.

SO ORDERED.7

John F. McLeod (McLeod) filed a motion for reconsideration which the NLRC denied in its Resolution of 30 June
1999.8 McLeod thus filed a petition for certiorari before the Court of Appeals assailing the decision and resolution of
the NLRC.9

The Ruling of the Court of Appeals

On 15 June 2000, the Court of Appeals rendered judgment as follows:

WHEREFORE, the decision dated December 29, 1998 of the NLRC is hereby AFFIRMED with the MODIFICATION
that respondent Patricio Lim is jointly and solidarily liable with Peggy Mills, Inc., to pay the following amounts to
petitioner John F. McLeod:

1. retirement pay equivalent to 22.5 days for every year of service for his twelve (12) years of service from
1980 to 1992 based on a salary rate of P50,495, a month;

2. moral damages in the amount of one hundred thousand (P100,000.00) Pesos;

3. exemplary damages in the amount of fifty thousand (P50,000.00) Pesos; and

4. attorney’s fees equivalent to 10% of the total award.

No costs is awarded.

SO ORDERED.10

The Court of Appeals rejected McLeod’s theory that all respondent corporations are the same corporate entity which
should be held solidarily liable for the payment of his monetary claims.

The Court of Appeals ruled that the fact that (1) all respondent corporations have the same address; (2) all were
represented by the same counsel, Atty. Isidro S. Escano; (3) Atty. Escano holds office at respondent corporations’
address; and (4) all respondent corporations have common officers and key personnel, would not justify the
application of the doctrine of piercing the veil of corporate fiction.

The Court of Appeals held that there should be clear and convincing evidence that SRTI, FETMI, and Filsyn were
being used as alter ego, adjunct or business conduit for the sole benefit of Peggy Mills, Inc. (PMI), otherwise, said
corporations should be treated as distinct and separate from each other.

The Court of Appeals pointed out that the Articles of Incorporation of PMI show that it has six incorporators, namely,
Patricio, Jose Yulo, Jr., Carlos Palanca, Jr., Cesar R. Concio, Jr., E. A. Picasso, and Walter Euyang. On the other
hand, the Articles of Incorporation of Filsyn show that it has 10 incorporators, namely, Jesus Y. Yujuico, Carlos
Palanca, Jr., Patricio, Ang Beng Uh, Ramon A. Yulo, Honorio Poblador, Jr., Cipriano Azada, Manuel Tomacruz, Ismael
Maningas, and Benigno Zialcita, Jr.

The Court of Appeals pointed out that PMI and Filsyn have only two interlocking incorporators and directors, namely,
Patricio and Carlos Palanca, Jr.

Reiterating the ruling of this Court in Laguio v. NLRC,11 the Court of Appeals held that mere substantial identity of the
incorporators of two corporations does not necessarily imply fraud, nor warrant the piercing of the veil of corporate
fiction.

The Court of Appeals also pointed out that when SRTI and PMI executed the Dation in Payment with Lease, it was
clear that SRTI did not assume the liabilities PMI incurred before the execution of the contract.

The Court of Appeals held that McLeod failed to substantiate his claim that all respondent corporations should be
treated as one corporate

entity. The Court of Appeals thus upheld the NLRC’s finding that no employer-employee relationship existed between
McLeod and respondent corporations except PMI.

The Court of Appeals ruled that Eric Hu, as an officer of PMI, should be exonerated from any liability, there being no
proof of malice or bad faith on his part. The Court of Appeals, however, ruled that McLeod was entitled to recover
from PMI and Patricio, the company’s Chairman and President.

The Court of Appeals pointed out that Patricio deliberately and maliciously evaded PMI’s financial obligation to
McLeod. The Court of Appeals stated that, on several occasions, despite his approval, Patricio refused and ignored to
pay McLeod’s retirement benefits. The Court of Appeals stated that the delay lasted for one year prompting McLeod
to initiate legal action. The Court of Appeals stated that although PMI offered to pay McLeod his retirement benefits,
this offer for P300,000 was still below the "floor limits" provided by law. The Court of Appeals held that an employee
could demand payment of retirement benefits as a matter of right.

The Court of Appeals stated that considering that PMI was no longer in operation, its "officer should be held liable for
acting on behalf of the corporation."

The Court of Appeals also ruled that since PMI did not have a retirement program providing for retirement benefits of
its employees, Article 287 of the Labor Code must be followed. The Court of Appeals thus upheld the NLRC’s finding
that McLeod was entitled to retirement pay equivalent to 22.5 days for every year of service from 1980 to 1992 based
on a salary rate of P50,495 a month.

The Court of Appeals held that McLeod was not entitled to payment of vacation, sick leave and holiday pay because
as Vice President and Plant Manager, McLeod is a managerial employee who, under Article 82 of the Labor Code, is
not entitled to these benefits.

The Court of Appeals stated that for McLeod to be entitled to payment of service incentive leave and holidays, there
must be an agreement to that effect between him and his employer.

Moreover, the Court of Appeals rejected McLeod’s argument that since PMI paid for his two round-trip tickets Manila-
London in 1983 and 1986, he was also "entitled to unused airline tickets." The Court of Appeals stated that the fact
that PMI granted McLeod "free transport to and from Manila and London for the year 1983 and 1986 does not ipso
facto characterize it as regular that would establish a prevailing company policy."
The Court of Appeals also denied McLeod’s claims for underpayment of salaries and his 13th month pay for the year
1994. The Court of Appeals upheld the NLRC’s ruling that it could be deduced from McLeod’s own narration of facts
that he agreed to the reduction of his compensation from P60,000 to P50,495 in August 1990 to November 1993.

The Court of Appeals found the award of moral damages for P50,000 in order because of the "stubborn refusal" of
PMI and Patricio to respect McLeod’s valid claims.

The Court of Appeals also ruled that attorney’s fees equivalent to 10% of the total award should be given to McLeod
under Article 2208, paragraph 2 of the Civil Code.12

Hence, this petition.

The Issues

McLeod submits the following issues for our consideration:

1. Whether the challenged Decision and Resolution of the 14th Division of the Court of Appeals promulgated
on 15 June 2000 and 27 December 2000, respectively, in CA-G.R. SP No. 55130 are in accord with law and
jurisprudence;

2. Whether an employer-employee relationship exists between the private respondents and the petitioner for
purposes of determining employer liability to the petitioner;

3. Whether the private respondents may avoid their financial obligations to the petitioner by invoking the veil
of corporate fiction;

4. Whether petitioner is entitled to the relief he seeks against the private respondents;

5. Whether the ruling of [this] Court in Special Police and Watchman Association (PLUM) Federation v.
National Labor Relations Commission cited by the Office of the Solicitor General is applicable to the case of
petitioner; and

6. Whether the appeal taken by the private respondents from the Decision of the labor arbiter meets the
mandatory requirements recited in the Labor Code of the Philippines, as amended.13

The Court’s Ruling

The petition must fail.

McLeod asserts that the Court of Appeals should not have upheld the NLRC’s findings that he was a managerial
employee of PMI from 20 June 1980 to 31 December 1992, and then a consultant of SRTI up to 30 November 1993.
McLeod asserts that if only for this "brazen assumption," the Court of Appeals should not have sustained the NLRC’s
ruling that his cause of action was only against PMI.

These assertions do not deserve serious consideration.

Records disclose that McLeod was an employee only of PMI.14 PMI hired McLeod as its acting Vice President and
General Manager on 20 June 1980.15 PMI confirmed McLeod’s appointment as Vice President/Plant Manager in the
Special Meeting of its Board of Directors on 10 February 1981.16 McLeod himself testified during the hearing before
the Labor Arbiter that his "regular employment" was with PMI.17

When PMI’s rank-and-file employees staged a strike on 19 August 1989 to July 1992, PMI incurred serious business
losses.18 This prompted PMI to stop permanently plant operations and to send a notice of closure to the Department
of Labor and Employment on 21 July 1992.19

PMI informed its employees, including McLeod, of the closure.20 PMI paid its employees, including managerial
employees, except McLeod, their unpaid wages, sick leave, vacation leave, prorated 13th month pay, and separation
pay. Under the compromise agreement between PMI and its employees, the employer-employee relationship
between them ended on 25 November 1992.21

Records also disclose that PMI extended McLeod’s service up to 31 December 1992 "to wind up some affairs" of the
company.22 McLeod testified on cross-examination that he received his last salary from PMI in December 1992.23

It is thus clear that McLeod was a managerial employee of PMI from 20 June 1980 to 31 December 1992.

However, McLeod claims that after FETMI purchased PMI in January 1993, he "continued to work at the same plant
with the same responsibilities" until 30 November 1993. McLeod claims that FETMI merely renamed PMI as SRTI.
McLeod asserts that it was for this reason that when he reached the retirement age in 1993, he asked all the
respondents for the payment of his benefits.24
These assertions deserve scant consideration.

What took place between PMI and SRTI was dation in payment with lease. Pertinent portions of the contract that PMI
and SRTI executed on 15 June 1992 read:

WHEREAS, PMI is indebted to the Development Bank of the Philippines ("DBP") and as security for such debts (the
"Obligations") has mortgaged its real properties covered by TCT Nos. T-38647, T-37136, and T-37135, together with
all machineries and improvements found thereat, a complete listing of which is hereto attached as Annex "A" (the
"Assets");

WHEREAS, by virtue of an inter-governmental agency arrangement, DBP transferred the Obligations, including the
Assets, to the Asset Privatization Trust ("APT") and the latter has received payment for the Obligations from PMI,
under APT’s Direct Debt Buy-Out ("DDBO") program thereby causing APT to completely discharge and cancel the
mortgage in the Assets and to release the titles of the Assets back to PMI;

WHEREAS, PMI obtained cash advances from SRTC in the total amount of TWO HUNDRED TEN MILLION PESOS
(P210,000,000.00) (the "Advances") to enable PMI to consummate the DDBO with APT, with SRTC subrogating APT
as PMI’s creditor thereby;

WHEREAS, in payment to SRTC for PMI’s liability, PMI has agreed to transfer all its rights, title and interests in the
Assets by way of a dation in payment to SRTC, provided that simultaneous with the dation in payment, SRTC shall
grant unto PMI the right to lease the Assets under terms and conditions stated hereunder;

xxxx

NOW THEREFORE, for and in consideration of the foregoing premises, and of the terms and conditions hereinafter
set forth, the parties hereby agree as follows:

1. CESSION. In consideration of the amount of TWO HUNDRED TEN MILLION PESOS (P210,000,000.00), PMI
hereby cedes, conveys and transfers to SRTC all of its rights, title and interest in and to the Assets by way of a dation
in payment.25 (Emphasis supplied)

As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling corporation,
provided the former acted in good faith and paid adequate consideration for such assets, except when any of the
following circumstances is present: (1) where the purchaser expressly or impliedly agrees to assume the debts, (2)
where the transaction amounts to a consolidation or merger of the corporations, (3) where the purchasing corporation
is merely a continuation of the selling corporation, and (4) where the selling corporation fraudulently enters into the
transaction to escape liability for those debts.26

None of the foregoing exceptions is present in this case.

Here, PMI transferred its assets to SRTI to settle its obligation to SRTI in the sum of P210,000,000. We are not
convinced that PMI fraudulently transferred these assets to escape its liability for any of its debts. PMI had already
paid its employees, except McLeod, their money claims.

There was also no merger or consolidation of PMI and SRTI.

Consolidation is the union of two or more existing corporations to form a new corporation called the consolidated
corporation. It is a combination by agreement between two or more corporations by which their rights, franchises, and
property are united and become those of a single, new corporation, composed generally, although not necessarily, of
the stockholders of the original corporations.

Merger, on the other hand, is a union whereby one corporation absorbs one or more existing corporations, and the
absorbing corporation survives and continues the combined business.

The parties to a merger or consolidation are called constituent corporations. In consolidation, all the constituents are
dissolved and absorbed by the new consolidated enterprise. In merger, all constituents, except the surviving
corporation, are dissolved. In both cases, however, there is no liquidation of the assets of the dissolved corporations,
and the surviving or consolidated corporation acquires all their properties, rights and franchises and their
stockholders usually become its stockholders.

The surviving or consolidated corporation assumes automatically the liabilities of the dissolved corporations,
regardless of whether the creditors have consented or not to such merger or consolidation.27

In the present case, there is no showing that the subject dation in payment involved any corporate merger or
consolidation. Neither is there any showing of those indicative factors that SRTI is a mere instrumentality of PMI.

Moreover, SRTI did not expressly or impliedly agree to assume any of PMI’s debts. Pertinent portions of the subject
Deed of Dation in Payment with Lease provide, thus:
2. WARRANTIES AND REPRESENTATIONS. PMI hereby warrants and represents the following:

xxxx

(e) PMI shall warrant that it will hold SRTC or its assigns, free and harmless from any liability for claims of PMI’s
creditors, laborers, and workers and for physical injury or injury to property arising from PMI’s custody, possession,
care, repairs, maintenance, use or operation of the Assets except ordinary wear and tear;28 (Emphasis supplied)

Also, McLeod did not present any evidence to show the alleged renaming of "Peggy Mills, Inc." to "Sta. Rosa Textiles,
Inc."

Hence, it is not correct for McLeod to treat PMI and SRTI as the same entity.

Respondent corporations assert that SRTI hired McLeod as consultant after PMI stopped operations.29 On the other
hand, McLeod asserts that he was respondent corporations’ employee from 1980 to 30 November 1993.30However,
McLeod failed to present any proof of employer-employee relationship between him and Filsyn, SRTI, or FETMI.
McLeod testified, thus:

ATTY. ESCANO:

Do you have any employment contract with Far Eastern Textile?

WITNESS:

It is my belief up the present time.

ATTY. AVECILLA:

May I request that the witness be allowed to go through his Annexes, Your Honor.

ATTY. ESCANO:

Yes, but I want a precise answer to that question. If he has an employment contract with Far Eastern Textile?

WITNESS:

Can I answer it this way, sir? There is not a valid contract but I was under the impression taking into consideration
that the closeness that I had at Far Eastern Textile is enough during that period of time of the development of Peggy
Mills to reorganize a staff. I was under the basic impression that they might still retain my status as Vice President
and Plant Manager of the company.

ATTY. ESCANO:

But the answer is still, there is no employment contract in your possession appointing you in any capacity by Far
Eastern?

WITNESS:

There was no written contract, sir.

xxxx

ATTY. ESCANO:

So, there is proof that you were in fact really employed by Peggy Mills?

WITNESS:

Yes, sir.

ATTY. ESCANO:

Of course, my interest now is to whether or not there is a similar document to present that you were employed by the
other respondents like Filsyn Corporation?

WITNESS:
I have no document, sir.

ATTY. ESCANO:

What about Far Eastern Textile Mills?

WITNESS:

I have no document, sir.

ATTY. ESCANO:

And Sta. Rosa Textile Mills?

WITNESS:

There is no document, sir.31

xxxx

ATTY. ESCANO:

Q Yes. Let me be more specific, Mr. McLeod. Do you have a contract of employment from Far Eastern Textiles, Inc.?

A No, sir.

Q What about Sta. Rosa Textile Mills, do you have an employment contract from this company?

A No, sir.

xxxx

Q And what about respondent Eric Hu. Have you had any contract of employment from Mr. Eric Hu?

A Not a direct contract but I was taken in and I told to take over this from Mr. Eric Hu. Automatically, it confirms that
Mr. Eric Hu, in other words, was under the control of Mr. Patricio Lim at that period of time.

Q No documents to show, Mr. McLeod?

A No. No documents, sir.32

McLeod could have presented evidence to support his allegation of employer-employee relationship between him and
any of Filsyn, SRTI, and FETMI, but he did not. Appointment letters or employment contracts, payrolls, organization
charts, SSS registration, personnel list, as well as testimony of co-employees, may serve as evidence of employee
status.33

It is a basic rule in evidence that parties must prove their affirmative allegations. While technical rules are not strictly
followed in the NLRC, this does not mean that the rules on proving allegations are entirely ignored. Bare allegations
are not enough. They must be supported by substantial evidence at the very least.34

However, McLeod claims that "for purposes of determining employer liability, all private respondents are one and the
same employer" because: (1) they have the same address; (2) they are all engaged in the same business; and (3)
they have interlocking directors and officers.35

This assertion is untenable.

A corporation is an artificial being invested by law with a personality separate and distinct from that of its stockholders
and from that of other corporations to which it may be connected.36

While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of
two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This is
the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime,37 or when it is made as a shield to confuse
the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.38
To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and
convincingly. It cannot be presumed.39

Here, we do not find any of the evils sought to be prevented by the doctrine of piercing the corporate veil.

Respondent corporations may be engaged in the same business as that of PMI, but this fact alone is not enough
reason to pierce the veil of corporate fiction.40

In Indophil Textile Mill Workers Union v. Calica,41 the Court ruled, thus:

In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the creation of the
corporation is a devise to evade the application of the CBA between petitioner Union and private respondent
Company. While we do not discount the possibility of the similarities of the businesses of private respondent and
Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting the relief sought. The fact that
the businesses of private respondent and Acrylic are related, that some of the employees of the private respondent
are the same persons manning and providing for auxiliary services to the units of Acrylic, and that the physical plants,
offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient
to justify the piercing of the corporate veil of Acrylic.42 (Emphasis supplied)

Also, the fact that SRTI and PMI shared the same address, i.e., 11/F BA-Lepanto Bldg., Paseo de Roxas, Makati
City,43 can be explained by the two companies’ stipulation in their Deed of Dation in Payment with Lease that
"simultaneous with the dation in payment, SRTC shall grant unto PMI the right to lease the Assets under terms and
conditions stated hereunder."44

As for the addresses of Filsyn and FETMI, Filsyn held office at 12th Floor, BA-Lepanto Bldg., Paseo de Roxas,
Makati City,45 while FETMI held office at 18F, Tun Nan Commercial Building, 333 Tun Hwa South Road, Sec. 2, Taipei,
Taiwan, R.O.C.46 Hence, they did not have the same address as that of PMI.

That respondent corporations have interlocking incorporators, directors, and officers is of no moment.

The only interlocking incorporators of PMI and Filsyn were Patricio and Carlos Palanca, Jr.47 While Patricio was
Director and Board Chairman of Filsyn, SRTI, and PMI,48 he was never an officer of FETMI.

Eric Hu, on the other hand, was Director of Filsyn and SRTI.49 He was never an officer of PMI.

Marialen C. Corpuz, Filsyn’s Finance Officer,50 testified on cross-examination that (1) among all of Filsyn’s officers,
only she was the one involved in the management of PMI; (2) only she and Patricio were the common officers
between Filsyn and PMI; and (3) Filsyn and PMI are "two separate companies."51

Apolinario L. Posio, PMI’s Chief Accountant, testified that "SRTI is a different corporation from PMI."52

At any rate, the existence of interlocking incorporators, directors, and officers is not enough justification to pierce the
veil of corporate fiction, in the absence of fraud or other public policy considerations.53

In Del Rosario v. NLRC,54 the Court ruled that substantial identity of the incorporators of corporations does not
necessarily imply fraud.

In light of the foregoing, and there being no proof of employer-employee relationship between McLeod and
respondent corporations and Eric Hu, McLeod’s cause of action is only against his former employer, PMI.

On Patricio’s personal liability, it is settled that in the absence of malice, bad faith, or specific provision of law, a
stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities.55

To reiterate, a corporation is a juridical entity with legal personality separate and distinct from those acting for and in
its behalf and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting
through its directors, officers, and employees, are its sole liabilities.56

Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawful
act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is
a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (2) they consent to the
issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporate
secretary their written objection; (3) they agree to hold themselves personally and solidarily liable with the
corporation; or (4) they are made by specific provision of law personally answerable for their corporate action.57

Considering that McLeod failed to prove any of the foregoing exceptions in the present case, McLeod cannot hold
Patricio solidarily liable with PMI.

The records are bereft of any evidence that Patricio acted with malice or bad faith. Bad faith is a question of fact and
is evidentiary. Bad faith does not connote bad judgment or negligence. It imports a dishonest purpose or some moral
obliquity and conscious wrongdoing. It means breach of a known duty through some ill motive or interest. It partakes
of the nature of fraud.58

In the present case, there is nothing substantial on record to show that Patricio acted in bad faith in terminating
McLeod’s services to warrant Patricio’s personal liability. PMI had no other choice but to stop plant operations. The
work stoppage therefore was by necessity. The company could no longer continue with its plant operations because
of the serious business losses that it had suffered. The mere fact that Patricio was president and director of PMI is
not a ground to conclude that he should be held solidarily liable with PMI for McLeod’s money claims.

The ruling in A.C. Ransom Labor Union-CCLU v. NLRC,59 which the Court of Appeals cited, does not apply to this
case. We quote pertinent portions of the ruling, thus:

(a) Article 265 of the Labor Code, in part, expressly provides:

"Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to
reinstatement with full backwages."

Article 273 of the Code provides that:

"Any person violating any of the provisions of Article 265 of this Code shall be punished by a fine of not exceeding
five hundred pesos and/or imprisonment for not less than one (1) day nor more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation? The answer is found in
Article 212 (c) of the Labor Code which provides:

"(c) ‘Employer’ includes any person acting in the interest of an employer, directly or indirectly. The term shall not
include any labor organization or any of its officers or agents except when acting as employer.".

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM is an artificial person, it
must have an officer who can be presumed to be the employer, being the "person acting in the interest of (the)
employer" RANSOM. The corporation, only in the technical sense, is the employer.

The responsible officer of an employer corporation can be held personally, not to say even criminally, liable for non-
payment of back wages. That is the policy of the law.

xxxx

(c) If the policy of the law were otherwise, the corporation employer can have devious ways for evading payment of
back wages. In the instant case, it would appear that RANSOM, in 1969, foreseeing the possibility or
probability of payment of back wages to the 22 strikers, organized ROSARIO to replace RANSOM, with the
latter to be eventually phased out if the 22 strikers win their case. RANSOM actually ceased operations on May
1, 1973, after the December 19, 1972 Decision of the Court of Industrial Relations was promulgated against
RANSOM.60 (Emphasis supplied)

Clearly, in A.C. Ransom, RANSOM, through its President, organized ROSARIO to evade payment of backwages to
the 22 strikers. This situation, or anything similar showing malice or bad faith on the part of Patricio, does not obtain
in the present case. In Santos v. NLRC,61 the Court held, thus:

It is true, there were various cases when corporate officers were themselves held by the Court to be personally
accountable for the payment of wages and money claims to its employees. In A.C. Ransom Labor Union-CCLU vs.
NLRC, for instance, the Court ruled that under the Minimum Wage Law, the responsible officer of an employer
corporation could be held personally liable for nonpayment of backwages for "(i)f the policy of the law were otherwise,
the corporation employer (would) have devious ways for evading payment of backwages." In the absence of a clear
identification of the officer directly responsible for failure to pay the backwages, the Court considered the President of
the corporation as such officer. The case was cited in Chua vs. NLRC in holding personally liable the vice-president
of the company, being the highest and most ranking official of the corporation next to the President who was
dismissed for the latter’s claim for unpaid wages.

A review of the above exceptional cases would readily disclose the attendance of facts and circumstances that could
rightly sanction personal liability on the part of the company officer. In A.C. Ransom, the corporate entity was a family
corporation and execution against it could not be implemented because of the disposition posthaste of its leviable
assets evidently in order to evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction"
was thus clearly appropriate. Chua likewise involved another family corporation, and this time the conflict was
between two brothers occupying the highest ranking positions in the company. There were incontrovertible facts
which pointed to extreme personal animosity that resulted, evidently in bad faith, in the easing out from the company
of one of the brothers by the other.

The basic rule is still that which can be deduced from the Court’s pronouncement in Sunio vs. National Labor
Relations Commission; thus:
We come now to the personal liability of petitioner, Sunio, who was made jointly and severally responsible with
petitioner company and CIPI for the payment of the backwages of private respondents. This is reversible error. The
Assistant Regional Director’s Decision failed to disclose the reason why he was made personally liable.
Respondents, however, alleged as grounds thereof, his being the owner of one-half (½) interest of said corporation,
and his alleged arbitrary dismissal of private respondents.

Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner corporation. There
appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and was a corporate act.

It is basic that a corporation is invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality. Petitioner Sunio, therefore, should not have been made
personally answerable for the payment of private respondents’ back salaries.62 (Emphasis supplied)

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith, or a
specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for
corporate liabilities. Neither Article 212(c) nor Article 273 (now 272) of the Labor Code expressly makes any corporate
officer personally liable for the debts of the corporation. As this Court ruled in H.L. Carlos Construction, Inc. v. Marina
Properties Corporation:63

We concur with the CA that these two respondents are not liable. Section 31 of the Corporation Code (Batas
Pambansa Blg. 68) provides:

"Section 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith ... shall be liable
jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders and other
persons."

The personal liability of corporate officers validly attaches only when (a) they assent to a patently unlawful act of the
corporation; or (b) they are guilty of bad faith or gross negligence in directing its affairs; or (c) they incur conflict of
interest, resulting in damages to the corporation, its stockholders or other persons.

The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable negligence, or that he
acted outside the scope of his authority as company president. The unilateral termination of the Contract during the
existence of the TRO was indeed contemptible – for which MPC should have merely been cited for contempt of court
at the most – and a preliminary injunction would have then stopped work by the second contractor. Besides, there is
no showing that the unilateral termination of the Contract was null and void.64

McLeod is not entitled to payment of vacation leave and sick leave as well as to holiday pay. Article 82, Title I, Book
Three of the Labor Code, on Working Conditions and Rest Periods, provides:

Coverage. ─ The provisions of this title shall apply to employees in all establishments and undertakings whether for
profit or not, but not to government employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or members
of the managerial staff. (Emphasis supplied)

As Vice President/Plant Manager, McLeod is a managerial employee who is excluded from the coverage of Title I,
Book Three of the Labor Code. McLeod is entitled to payment of vacation leave and sick leave only if he and PMI had
agreed on it. The payment of vacation leave and sick leave depends on the policy of the employer or the agreement
between the employer and employee.65 In the present case, there is no showing that McLeod and PMI had an
agreement concerning payment of these benefits.

McLeod’s assertion of underpayment of his 13th month pay in December 1993 is unavailing.66 As already stated, PMI
stopped plant operations in 1992. McLeod himself testified that he received his last salary from PMI in December
1992. After the termination of the employer-employee relationship between McLeod and PMI, SRTI hired McLeod as
consultant and not as employee. Since McLeod was no longer an employee, he was not entitled to the 13th month
pay.67 Besides, there is no evidence on record that McLeod indeed received his alleged "reduced 13th month pay
of P44,183.63" in December 1993.68

Also unavailing is McLeod’s claim that he was entitled to the "unpaid monetary equivalent of unused plane tickets for
the period covering 1989 to 1992 in the amount of P279,300.00."69 PMI has no company policy granting its officers
and employees expenses for trips abroad.70 That at one time PMI reimbursed McLeod for his and his wife’s plane
tickets in a vacation to London71 could not be deemed as an established practice considering that it happened only
once. To be considered a "regular practice," the giving of the benefits should have been done over a long period, and
must be shown to have been consistent and deliberate.72

In American Wire and Cable Daily Rated Employees Union v. American Wire and Cable Co., Inc.,73 the Court held that
for a bonus to be enforceable, the employer must have promised it, and the parties must have expressly agreed upon
it, or it must have had a fixed amount and had been a long and regular practice on the part of the employer.

In the present case, there is no showing that PMI ever promised McLeod that it would continue to grant him the
benefit in question. Neither is there any proof that PMI and McLeod had expressly agreed upon the giving of that
benefit.

McLeod’s reliance on Annex M74 can hardly carry the day for him. Annex M, which is McLeod’s letter addressed to
"Philip Lim, VP Administration," merely contains McLeod’s proposals for the grant of some benefits to supervisory and
confidential employees. Contrary to McLeod’s allegation, Patricio did not sign the letter. Hence, the letter does not
embody any agreement between McLeod and the management that would entitle McLeod to his money claims.

Neither can McLeod’s assertions find support in Annex U.75 Annex U is the Agreement which McLeod and Universal
Textile Mills, Inc. executed in 1959. The Agreement merely contains the renewal of the service agreement which the
parties signed in 1956.

McLeod cannot successfully pretend that his monthly salary of P60,000 was reduced without his consent.

McLeod testified that in 1990, Philip Lim explained to him why his salary would have to be reduced. McLeod said that
Philip told him that "they were short in finances; that it would be repaid."76 Were McLeod not amenable to that
reduction in salary, he could have immediately resigned from his work in PMI.

McLeod knew that PMI was then suffering from serious business losses. In fact, McLeod testified that PMI was not
able to operate from August 1989 to 1992 because of the strike. Even before 1989, as Vice President of PMI, McLeod
was aware that the company had incurred "huge loans from DBP."77 As it happened, McLeod continued to work with
PMI. We find it pertinent to quote some portions of Apolinario Posio’s testimony, to wit:

Q You also stated that before the period of the strike as shown by annex "K" of the reply filed by the complainant
which was I think a voucher, the salary of Mr. McLeod was roughly P60,000.00 a month?

A Yes, sir.

Q And as shown by their annex "L" to their reply, that this was reduced to roughly P50,000.00 a month?

A Yes, sir.

Q You stated that this was indeed upon the instruction by the Vice-President of Peggy Mills at that time and that was
Mr. Philip Lim, would you not?

A Yes, sir.

Q Of your own personal knowledge, can you say if this was, in fact, by agreement between Mr. Philip Lim or any
other officers of Peggy Mills and Mr. McLeod?

A If I recall it correctly, I assume it was an agreement, verbal agreement with, between Mr. Philip Lim and Mr.
McLeod, because the voucher that we prepared was actually acknowledged by Mr. McLeod, the reduced amount was
acknowledged by Mr. McLeod thru the voucher that we prepared.

Q In other words, Mr. Witness, you mean to tell us that Mr. McLeod continuously received the reduced amount
of P50,000.00 by signing the voucher and receiving the amount in question?

A Yes, sir.

Q As far as you remember, Mr. Posio, was there any complaint by Mr. McLeod because of this reduced amount of his
salary at that time?

A I don’t have any personal knowledge of any complaint, sir.

Q At least, that is in so far as you were concerned, he said nothing when he signed the voucher in question?

A Yes, sir.
Q Now, you also stated that the reason for what appears to be an agreement between Peggy Mills and Mr. McLeod in
so far as the reduction of his salary from P60,000.00 to P50,000.00 a month was because he would have a reduced
number of working days in view of the strike at Peggy Mills, is that right?

A Yes, sir.

Q And that this was so because on account of the strike, there was no work to be done in the company?

A Yes, sir.78

xxxx

Q Now, you also stated if you remember during the first time that you testified that in the beginning, the monthly
salary of the complainant was P60,000.00, is that correct?

A Yes, sir.

Q And because of the long period of the strike, when there was no work to be done, by agreement with the
complainant, his monthly salary was adjusted to only P50,495 because he would not have to report for work on
Saturday. Do you remember having made that explanation?

A Yes, sir.

Q You also stated that the complainant continuously received his monthly salary in the adjusted amount
of P50,495.00 monthly signing the necessary vouchers or pay slips for that without complaining, is that not right, Mr.
Posio?

A Yes, sir.79

Since the last salary that McLeod received from PMI was P50,495, that amount should be the basis in computing his
retirement benefits. McLeod must be credited only with his service to PMI as it had a juridical personality separate
and distinct from that of the other respondent corporations.

Since PMI has no retirement plan,80 we apply Section 5, Rule II of the Rules Implementing the New Retirement Law
which provides:

5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall
be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at
least six (6) months being considered as one whole year.

5.2 Components of One-half (1/2) Month Salary. ─ For the purpose of determining the minimum retirement pay due
an employee under this Rule, the term "one-half month salary" shall include all of the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. x x x

With McLeod having worked with PMI for 12 years, from 1980 to 1992, he is entitled to a retirement pay equivalent to
½ month salary for every year of service based on his latest salary rate of P50,495 a month.

There is no basis for the award of moral damages.

Moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is guilty of gross
negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The breach must be wanton,
reckless, malicious, or in bad faith, oppressive or abusive.81 From the records of the case, the Court finds no ultimate
facts to support a conclusion of bad faith on the part of PMI.

Records disclose that PMI had long offered to pay McLeod his money claims. In their Comment, respondents assert
that they offered to pay McLeod the sum of P840,000, as "separation benefits, and not P300,000, if only to buy peace
and to forestall any complaint" that McLeod may initiate before the NLRC. McLeod admitted at the hearing before the
Labor Arbiter that PMI has made this offer ─

ATTY. ESCANO:

x x x According to your own statement in your Position Paper and I am referring to page 8, your unpaid retirement
benefit for fourteen (14) years of service at P60,000.00 per year is P840,000.00, is that correct?

WITNESS:

That is correct, sir.

ATTY. ESCANO:

And this amount is correct P840,000.00, according to your Position Paper?

WITNESS:

That is correct, sir.

ATTY. ESCANO:

The question I want to ask is, are you aware that this amount was offered to you sometime last year through your
own lawyer, my good friend, Atty. Avecilla, who is right here with us?

WITNESS:

I was aware, sir.

ATTY. ESCANO:

So this was offered to you, is that correct?

WITNESS:

I was told that a fixed sum of P840,000.00 was offered.

ATTY. ESCANO:

And , of course, the reason, if I may assume, that you declined this offer was that, according to you, there are other
claims which you would like to raise against the Respondents which, by your impression, they were not willing to pay
in addition to this particular amount?

WITNESS:

Yes, sir.

ATTY. ESCANO:

The question now is, if the same amount is offered to you by way of retirement which is exactly what you stated in
your own Position Paper, would you accept it or not?

WITNESS:

Not on the concept without all the basic benefits due me, I will refuse.82

xxxx

ATTY. ROXAS:

Q You mentioned in the cross-examination of Atty. Escano that you were offered the separation pay in 1994, is that
correct, Mr. Witness?

WITNESS:

A I was offered a settlement of P300,000.00 for complete settlement and that was I think in January or February
1994, sir.

ATTY. ESCANO:

No. What was mentioned was the amount of P840,000.00.

WITNESS:

What did you say, Atty. Escano?

ATTY. ESCANO:
The amount that I mentioned was P840,000.00 corresponding to the . . . . . . .

WITNESS:

May I ask that the question be clarified, your Honor?

ATTY. ROXAS:

Q You mentioned that you were offered for the settlement of your claims in 1994 for P840,000.00, is that right, Mr.
Witness?

A During that period in time, while the petition in this case was ongoing, we already filed a case at that period of time,
sir. There was a discussion. To the best of my knowledge, they are willing to settle for P840,000.00 and based on
what the Attorney told me, I refused to accept because I believe that my position was not in anyway due to a
compromise situation to the benefits I am entitled to.83

Hence, the awards for exemplary damages and attorney’s fees are not proper in the present case.84

That respondent corporations, in their appeal to the NLRC, did not serve a copy of their memorandum of appeal upon
PMI is of no moment. Section 3(a), Rule VI of the NLRC New Rules of Procedure provides:

Requisites for Perfection of Appeal. ─ (a) The appeal shall be filed within the reglementary period as provided in
Section 1 of this Rule; shall be under oath with proof of payment of the required appeal fee and the posting of a cash
or surety bond as provided in Section 5 of this Rule; shall be accompanied by a memorandum of appeal x x x and
proof of service on the other party of such appeal. (Emphasis supplied)

The "other party" mentioned in the Rule obviously refers to the adverse party, in this case, McLeod. Besides, Section
3, Rule VI of the Rules which requires, among others, proof of service of the memorandum of appeal on the other
party, is merely a rundown of the contents of the required memorandum of appeal to be submitted by the appellant.
These are not jurisdictional requirements.85

WHEREFORE, we DENY the petition and AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 55130,
with the following MODIFICATIONS: (a) the retirement pay of John F. McLeod should be computed at ½ month salary
for every year of service for 12 years based on his salary rate of P50,495 a month; (b) Patricio L. Lim is absolved
from personal liability; and (c) the awards for moral and exemplary damages and attorney’s fees are deleted. No
pronouncement as to costs.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTE STATI O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

C E RTI F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice

Footnotes

1
Under Rule 45 of the Rules of Court.

2
Penned by Associate Justice Teodoro P. Regino, with Associate Justices Conchita Carpio Morales (now
Associate Justice of this Court) and Mercedes Gozo-Dadole, concurring. Rollo, pp. 278-303.

3
Id. at 329-330.

4
Penned by Presiding Commissioner Rogelio I. Rayala. Id. at 182-203.

5
Id. at 158-165.

6
Id. at 167-168.

7
Id. at 202.

8
Id. at 224-225.

9
Id. at 226-250.

10
Id. at 302-303.

11
G.R. No. 108936, 4 October 1996, 262 SCRA 715.

12
Rollo, p. 302.

13
Id. at 28. Internal citation omitted.

14
TSN, 8 March 1996, p. 63; TSN, 10 December 1996, p. 55.

15
Rollo, p. 144.

16
Id. at 153.

17
TSN, 2 April 1996, p. 49.

18
Rollo, p. 145; TSN, 15 April 1996, pp. 13-14, 16-17.

19
Rollo, p. 93.

20
TSN, 10 December 1996, pp. 11-13.

21
Rollo, p. 242; TSN, 18 March 1997, pp. 19-22, 26-27; TSN, 26 August 1996, p. 24.

MISSING FOOTNOTES #22 TO #85

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 155731 September 3, 2007

LOLITA LOPEZ, petitioner,

vs.
BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES C. TORRES-YAP, respondents.

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
Decision1 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 petitioner's 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 latter's 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 for certiorari. 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; petitioner's 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 Court's 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
areperformed 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, petitioner's 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 Club's 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 LOPEZ19

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 one's 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 of those
facts.24

Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the testimony26 of Felimon Habitan
(Habitan), the concessionaire of the men's comfort room of Bodega 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 petitioner's contention that the Labor Arbiter was correct in concluding that there
existed an employer-employee relationship between respondents and petitioner. A perusal of the Decision29 of the
Labor Arbiter shows that his only basis for arriving at such a conclusion are the bare assertions of petitioner and the
fact that the 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 complainant's 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 "EMPLOYEE'S NAME" appear printed below petitioner's name.31However,
she failed to dispute respondents' evidence consisting of Habitan's 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 respondent's 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
family's 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 company's 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 company's ladies' comfort room during Bodega City's 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.

Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.

Footnotes

1
Penned by Justice Cancio C. Garcia (now a member of this Court) and concurred in by Justices Marina L.
Buzon and Eliezer R. de los Santos; rollo, p. 26.

2
CA rollo, p. 452.
3
Rollo, p. 113.

4
CA rollo, p. 16.

5
Rollo, p. 18.

6
Manila Water Company, Inc. v. Peña, G.R. No. 158255, July 8, 2004, 434 SCRA 53, 58.

7
Mitsubishi Motors Philippines Corporation v. Chrysler Philippines Labor Union, G.R. No. 148738, June 29,
2004, 433 SCRA 206, 217.

8
Diamond Motors Corporation v. Court of Appeals, 462 Phil. 452, 458 (2003).

9
Tiu v. Pasaol, Sr. , 450 Phil. 370, 379 (2003); Manila Water Company, Inc. v. Peña, supra note 6, at 58-59.

10
Martinez v. National Labor Relations Commission, 339 Phil. 176, 183 (1997).

11
Rufina Patis Factory v. Alusitain, G.R. No. 146202, July 14, 2004, 434 SCRA 418, 428.

12
Imperial Victory Shipping Agency v. National Labor Relations Commission, G.R. No. 84672, August 5,
1991, 200 SCRA 178,185.

13
R.P. Dinglasan Construction, Inc. v. Atienza, G.R. No. 156104, June 29, 2004, 433 SCRA 263, 269.

14
Sy v. Court of Appeals, 446 Phil. 404, 413 (2003).

Martinez v. National Labor Relations Commission, supra note 10, at 183; Rules of Court, Rule 133,
15

Section 5.

16
G.R. No. 159890, May 28, 2004, 430 SCRA 368.

17
Id. at 379.

18
CA rollo, p. 62.

19
CA rollo, p. 176.

20
Jardine Davies Inc. v. Court of Appeals, 389 Phil. 204, 212 (2000).

21
Id.

22
Civil Code of the Philippines, Article 1320; Jardine Davies Inc. v. CA, supra note 20, at 214.

23
Cordial v. Miranda, 401 Phil. 307, 319 (2000).

24
Spouses Hanopol v. Shoemart, Inc., 439 Phil. 266, 285 (2002).

25
CA rollo, p. 207.

26
Id. at 242-245.

27
Aklan Electric Cooperative Inc. v. National Labor Relations Commission, 380 Phil. 225, 245 (2000).

28
Martinez v. National Labor Relations Commission, supra note 10, at 183; Ramoran v. Jardine CMG Life
Insurance Co., Inc., 383 Phil. 83, 100 (2000).

29
Rollo, pp. 94-113.

30
330 Phil. 518, 524-525 (1996).

31
CA rollo, p. 61.

32
Id. at 246-250.

33
CA rollo, p. 428.
34
Id. at 176-177.

G.R. No. 145443, March 18, 2005, 453 SCRA 732 citing Insular Life Assurance Co., Ltd. v. National Labor
35

Relations Commission, G.R. No. 84484, November 15, 1989, 175 SCRA 459.

36
Consulta v. Court of Appeals, id. at 740.

37
CA rollo, p. 184.
 SECOND DIVISION

[G.R. No. 151228. August 15, 2002]

ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE

HONORABLE COURT OF APPEALS, respondents.

DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated May 31, 2001, and
[1]

the resolution, dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No.
[2]

63160, annulling the resolutions of the National Labor Relations Commission (NLRC)
and reinstating the ruling of the Labor Arbiter which found petitioner Rolando Tan guilty
of illegally dismissing private respondent Leovigildo Lagrama and ordering him to pay
the latter the amount of P136,849.99 by way of separation pay, backwages, and
damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion pictures
shown at the Empress, Supreme, and Crown Theaters for more than 10 years, from
September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You again urinated
inside your work area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw
daghang estorya.Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing.
Gawas. (Dont say anything further. I dont want you to draw anymore.From now on, no
more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one
who entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan
shouted Gawas (Get out), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had
been illegally dismissed and sought reinvestigation and payment of 13th month pay,
service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama
was an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of Lagrama
during the conferences before the Labor Arbiter that he was paid on a fixed piece-work
basis, i.e., that he was paid for every painting turned out as ad billboard or mural for the
pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no pay
policy. He submitted the affidavits of other cinema owners, an amusement park owner,
and those supervising the construction of a church to prove that the services of
Lagrama were contracted by them. He denied having dismissed Lagrama and alleged
that it was the latter who refused to paint for him after he was scolded for his habits.
 As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby ordered:

1. Declaring complainants [Lagramas] dismissal illegal and

2. Ordering respondents [Tan] to pay complainant the following:

A. Separation Pay - P 59,000.00

B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]

Complainants other claims are dismissed for lack of merit. [3]

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City,
which, on June 30, 2000, rendered a decision finding Lagrama to be an independent
[4]

contractor, and for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of
merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for
certiorari under Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagramas work by
dictating the time when Lagrama should submit his billboards and murals and setting
rules on the use of the work area and rest room. Although it found that Lagrama did
work for other cinema owners, the appeals court held it to be a mere sideline insufficient
to prove that he was not an employee of Tan. The appeals court also found no evidence
of any intention on the part of Lagrama to leave his job or sever his employment
relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a
decision, the dispositive portion of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The
Resolutions of the Public Respondent issued on June 30, 2000 and September 29,
2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P.
Legaspi on June 17, 1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no reason to
reverse its decision and so denied his motion for lack of merit. Hence, this petition for
[5]

review on certiorari based on the following assignments of errors:

I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP
NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had
no jurisdiction or exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.

II. With all due respect, respondent Court of Appeals, absent any positive finding on
its part that the Resolution of 30 June 2000 of the NLRC is not supported by
substantial evidence, is without authority to substitute its conclusion for that of said
NLRC.
III. With all due respect, respondent Court of Appeals discourse on freelance artists
and painters in the decision in question is misplaced or has no factual or legal basis in
the record.

IV. With all due respect, respondent Court of Appeals opening statement in its
decision as to employment, monthly salary of P1,475.00 and work schedule from
Monday to Saturday, from 8:00 oclock in the morning up to 5:00 oclock in the
afternoon as facts is not supported by the evidence on record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420
[G.R. No. 111042 October 26, 1999] relied upon by respondent Court of Appeals is
not applicable to the peculiar circumstances of this case. [6]

The issues raised boil down to whether or not an employer-employee relationship

existed between petitioner and private respondent, and whether petitioner is guilty of
illegally dismissing private respondent. We find the answers to these issues to be in the
affirmative.
I.

In determining whether there is an employer-employee relationship, we have

applied a four-fold test, to wit: (1) whether the alleged employer has the power of
selection and engagement of employees; (2) whether he has control of the employee
with respect to the means and methods by which work is to be accomplished; (3)
whether he has the power to dismiss; and (4) whether the employee was paid wages.
These elements of the employer-employee relationship are present in this case.
[7]

First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party. It is the
existence of the second element, the power of control, that requires discussion here.
Of the four elements of the employer-employee relationship, the control test is the
most important. Compared to an employee, an independent contractor is one who
carries on a distinct and independent business and undertakes to perform the job, work,
or service on its own account and under its own responsibility according to its own
manner and method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof. Hence,
[8]

while an independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employers power to control
the means and methods by which the employees work is to be performed and
accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was
an independent contractor and never his employee, the evidence shows that the latter
performed his work as painter under the supervision and control of petitioner. Lagrama
worked in a designated work area inside the Crown Theater of petitioner, for the use of
which petitioner prescribed rules. The rules included the observance of cleanliness and
hygiene and a prohibition against urinating in the work area and any place other than
the toilet or the rest rooms. Petitioners control over Lagramas work extended not only
[9]

to the use of the work area, but also to the result of Lagramas work, and the manner
and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that he paid
Lagrama only for the latters services.[10]

Private respondent Lagrama claimed that he worked daily, from 8 oclock in the
morning to 5 oclock in the afternoon. Petitioner disputed this allegation and maintained
that he paid Lagrama P1,475.00 per week for the murals for the three theaters which
the latter usually finished in 3 to 4 days in one week. Even assuming this to be true,
[11]

the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in his
employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:

Complainant did not know how to use the available comfort rooms or toilets in and
about his work premises. He was urinating right at the place where he was
working when it was so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal
out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.

...

Given such circumstances, the respondents had every right, nay all the compelling
reason, to fire him from his painting job upon discovery and his admission of such
acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who stopped
to paint for respondents.
[12]

By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important element
of the employer-employee relationship. Indeed, the fact that, as petitioner himself said,
[13]

he waited for Lagrama to report for work but the latter simply stopped reporting for work
reinforces the conviction that Lagrama was indeed an employee of petitioner. For only
an employee can nurture such an expectancy, the frustration of which, unless
satisfactorily explained, can bring about some disciplinary action on the part of the
employer.
Third. Payment of wages is one of the four factors to be considered in determining
the existence of employer-employee relation. Wages are defined as 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. That Lagrama worked for Tan on a fixed piece-work basis
[14]

is of no moment. Payment by result is a method of compensation and does not define

the essence of the relation. It is a method of computing compensation, not a basis for
[15]

determining the existence or absence of employer-employee relationship. One may be

paid on the basis of results or time expended on the work, and may or may not acquire
an employment status, depending on whether the elements of an employer-employee
relationship are present or not. [16]

The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll. The payroll should show among other things, the
[17]

employees rate of pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the payroll to support his claim
that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case. [18]

The primary standard for 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. In this case, there is such a connection
[19]

between the job of Lagrama painting billboards and murals and the business of
petitioner. To let the people know what movie was to be shown in a movie theater
requires billboards. Petitioner in fact admits that the billboards are important to his
business. [20]

The fact that Lagrama was not reported as an employee to the SSS is not
conclusive on the question of whether he was an employee of petitioner. Otherwise, an
[21]

employer would be rewarded for his failure or even neglect to perform his obligation. [22]

Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends has not
been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had
rendered service, admitted in a sworn statement that he was told by Lagrama that the
latter worked for petitioner.
[23]

Lagrama had been employed by petitioner since 1988. Under the law, therefore, he
is deemed a regular employee and is thus entitled to security of tenure, as provided in
Art. 279 of Labor Code:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least
one year, even if not continuously but intermittently, the repeated and continuing need
for its performance is sufficient evidence of the necessity, if not indispensability, of that
activity to the business of his employer. Hence, the employment is also considered
regular, although with respect only to such activity, and while such activity exists. [24]

It is claimed that Lagrama abandoned his work. There is no evidence to show this.
Abandonment requires two elements: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-
employee relationship, with the second element as the more determinative factor and
being manifested by some overt acts. Mere absence is not sufficient. What is more,
[25]

the burden is on the employer to show a deliberate and unjustified refusal on the part of
the employee to resume his employment without any intention of returning. In the case
[26]

at bar, the Court of Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for abandonment to be
a just and valid ground for dismissal, the employer must show, by clear proof, the
intention of the employee to abandon his job. . . .

In the present recourse, the Private Respondent has not established clear proof of the
intention of the Petitioner to abandon his job or to sever the employment relationship
between him and the Private Respondent. On the contrary, it was Private Respondent
who told Petitioner that he did not want the latter to draw for him and thereafter
refused to give him work to do or any mural or billboard to paint or draw on.

More, after the repeated refusal of the Private Respondent to give Petitioner murals or
billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration Branch
No. X of the National Labor Relations Commission, a Complaint for Illegal
Dismissal and Money Claims. Such act has, as the Supreme Court declared, negate
any intention to sever employment relationship. . . . [27]
 II.

The second issue is whether private respondent Lagrama was illegally dismissed.
To begin, the employer has the burden of proving the lawfulness of his employees
dismissal. The validity of the charge must be clearly established in a manner
[28]

consistent with due process.The Implementing Rules of the Labor Code provide that [29]

no worker shall be dismissed except for a just or authorized cause provided by law and
after due process. This provision has two aspects: (1) the legality of the act of dismissal,
that is, dismissal under the grounds provided for under Article 282 of the Labor Code
and (2) the legality in the manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the manner of dismissal is
dismissal without due process. [30]

In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for the
purpose by the employer constitutes violation of reasonable regulations intended to
promote a healthy environment under Art. 282(1) of the Labor Code for purposes of
terminating employment, but the same must be shown by evidence. Here there is no
evidence that Lagrama did urinate in a place other than a rest room in the premises of
his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee has
been so strained that the latters reinstatement would no longer serve any purpose. The
parties do not dispute this finding. Hence, the grant of separation pay in lieu of
reinstatement is appropriate. This is of course in addition to the payment of backwages
which, in accordance with the ruling in Bustamante v. NLRC, should be computed from
[31]

the time of Lagramas dismissal up to the time of the finality of this decision, without any
deduction or qualification.
The Bureau of Working Conditions classifies workers paid by results into two
[32]

groups, namely; (1) those whose time and performance is supervised by the employer,
and (2) those whose time and performance is unsupervised by the employer. The first
involves an element of control and supervision over the manner the work is to be
performed, while the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such an employee is not
entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v.
NLRC and Mark Roche International v. NLRC, he is paid a fixed amount for work
[33] [34]

done, regardless of the time he spent in accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing
that the Court of Appeals committed any reversible error. The decision of the Court of
Appeals, reversing the decision of the National Labor Relations Commission and
reinstating the decision of the Labor Arbiter, is AFFIRMED with the MODIFICATION that
the backwages and other benefits awarded to private respondent Leovigildo Lagrama
should be computed from the time of his dismissal up to the time of the finality of this
decision, without any deduction and qualification. However, the service incentive leave
pay awarded to him is DELETED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

Per Justice Romeo J. Callejo, Sr. and concurred in by Justice Renato C. Dacudao and Justice Perlita J.
[1]

Tria Tirona.
[2]
Id., Annex B; id., p. 57.
[3]
CA Rollo, p. 61.
Per Commissioner Oscar N. Abella and concurred in by Presiding Commissioner Salic B. Dumarpa and
[4]

Commissioner Leon G. Gonzaga, Jr.

[5]
Annex B of the Petition for Review on Certiorari; Rollo, p. 57.
[6]
Petition, pp. 11-12; id., pp. 22-23.
See Ramos v. Court of Appeals, G.R. No. 124354, April 11, 2002; Santos v. NLRC, 293 SCRA 113
[7]

(1998) citing Jimenez v. NLRC, 256 SCRA 84 (1996); Sandigan Savings and Loan Bank, Inc. v. NLRC,
254 SCRA 126 (1996); and Viaa v. Al-Lagadan, 99 Phil 408 (1956); Brotherhood Labor Unity Movement
of the Philippines v. Zamora, 147 SCRA 49 (1987).
[8]
De los Santos v. NLRC, G.R. No. 121327, Dec. 20, 2001.
[9]
Sworn Statement of Rolando Tan, p. 2; CA Rollo, p. 81.
[10]
Id., pp. 1-3; id., pp. 164-166.
[11]
Id., p. 2; id., p. 81.
[12]
NLRC Position Paper for Respondent [Tan], pp. 2-3; Rollo, pp. 72-73 (underscoring supplied).
[13]
See Ramos v. Court of Appeals, 321 SCRA 584 (1999); Austria v. NLRC, 312 SCRA 410 (1999).
[14]
Labor Code, Art. 97 (f).
[15]
Lambo v. NLRC, 317 SCRA 420 (1999) citing Villuga v. NLRC, 225 SCRA 537 (1993).
[16]
C.A. Azucena, Everyones Labor Code 59 (2000).
[17]
Book III, Rule X, Sec. 6(a).
[18]
Revised Rules on Evidence, Rule 131, 3(e). See Villaruel v. NLRC, 284 SCRA 399 (1998).
[19]
Ganzon v. NLRC, 321 SCRA 434 (1999); Bernardo v. NLRC, 310 SCRA 186 (1999).
[20]
NLRC Position Paper for Respondent [Tan], p. 4; Rollo, p. 74.
[21]
Lambo v. NLRC, 317 SCRA 420 (1999).
[22]
See Santos v. NLRC, 293 SCRA 113 (1998).
[23]
CA Rollo, p. 167.
[24]
Conti v. NLRC, 271 SCRA 114 (1997) citing De Leon v. NLRC, 176 SCRA 615 (1989).
Hyatt Taxi Services Inc. v. Catinoy, G.R. No. 143204, June 26, 2001 citing Mendoza v. NLRC, 310
[25]

SCRA 846 (1999).

[26]
Labor v. NLRC, 248 SCRA 183 (1995).
[27]
CA Decision, p. 10; Rollo, p. 53.
EDI Staff Builders International, Inc. v. Magsino, G.R. No. 139430, June 20, 2001 citing Farrol v. Court
[28]

of Appeals, 325 SCRA 331 (2000).

[29]
Book V, Rule XXIII, 2 and, again, in Book VI, Rule I, 2.
[30]
Shoemart, Inc. v. NLRC, 176 SCRA 385 (1989).
[31]
265 SCRA 61 (1996).
Letter of the Bureau of Working Conditions to the Law Firm of Nittoreda and Nasser, June 26,
[32]

1990 cited in 1 Azucena, The Labor Code with Comments and Cases321 (1992).
[33]
179 SCRA 448 (1989).
[34]
313 SCRA 356 (1999) citing Omnibus Rules Implementing The Labor Code, Bk. III, Rule V, 1(d).
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

WILHELMINA S. OROZCO, G.R. No. 155207

Petitioner,

Present:

YNARES-SANTIAGO, J.,

- versus - Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

THE FIFTH DIVISION OF THE HONORABLE REYES, JJ.

COURT OF APPEALS, PHILIPPINE DAILY
INQUIRER, and LETICIA JIMENEZ
MAGSANOC, Promulgated:

Respondents.
August 13, 2008

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

DECISION

NACHURA, J.:
 The case before this Court raises a novel question never before decided in
our jurisdiction whether a newspaper columnist is an employee of the newspaper
which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil
Procedure, petitioner Wilhelmina S. Orozco assails the Decision [1] of the Court of
Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its
Resolution[2] dated September 11, 2002 denying her Motion for Reconsideration.
The CA reversed and set aside the Decision [3] of the National Labor Relations
Commission (NLRC), which in turn had affirmed the Decision [4] of the Labor Arbiter
finding that Orozco was an employee of private respondent Philippine Daily
Inquirer (PDI) and was illegally dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly

column for its Lifestyle section. She religiously submitted her articles every week,
except for a six-month stint in New York City when she, nonetheless, sent several
articles through mail. She received compensation of P250.00 later increased
to P300.00 for every column published.[5]

On November 7, 1992, petitioners column appeared in the PDI for the last
time. Petitioner claims that her then editor, Ms. Lita T. Logarta, [6] told her that
respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop
publishing her column for no reason at all and advised petitioner to talk to
Magsanoc herself. Petitioner narrates that when she talked to Magsanoc, the
latter informed her that it was PDI Chairperson Eugenia Apostol who had asked to
stop publication of her column, but that in a telephone conversation with Apostol,
the latter said that Magsanoc informed her (Apostol) that the Lifestyle section
already had many columnists.[7]

On the other hand, PDI claims that in June 1991, Magsanoc met with the
Lifestyle section editor to discuss how to improve said section. They agreed to cut
down the number of columnists by keeping only those whose columns were well-
written, with regular feedback and following. In their judgment, petitioners
column failed to improve, continued to be superficially and poorly written, and
failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioners column.[8]
 Aggrieved by the newspapers action, petitioner filed a complaint for illegal
dismissal, backwages, moral and exemplary damages, and other money claims
before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in

favor of petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an

employee of respondent company; ordering respondent company to reinstate her to her
former or equivalent position, with backwages.

Respondent company is also ordered to pay her 13 th month pay and service
incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.[9]

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method
by which complainants work that of a regular columnist had to be accomplished. This
control might not be found in an instruction, verbal or oral, given to complainant
defining the means and method she should write her column. Rather, this control is
manifested and certained (sic) in respondents admitted prerogative to reject any article
submitted by complainant for publication.

By virtue of this power, complainant was helplessly constrained to adopt her

subjects and style of writing to suit the editorial taste of her editor. Otherwise, off to the
trash can went her articles.

Moreover, this control is already manifested in column title, Feminist Reflection allotted
complainant. Under this title, complainants writing was controlled and limited to a
womans perspective on matters of feminine interests. That respondent had no control
over the subject matter written by complainant is strongly belied by this observation.
Even the length of complainants articles were set by respondents.
 Inevitably, respondents would have no control over when or where complainant wrote
her articles as she was a columnist who could produce an article in thirty (3) (sic) months
or three (3) days, depending on her mood or the amount of research required for an
article but her actions were controlled by her obligation to produce an article a week. If
complainant did not have to report for work eight (8) hours a day, six (6) days a week, it
is because her task was mainly mental. Lastly, the fact that her articles were (sic)
published weekly for three (3) years show that she was respondents regular employee,
not a once-in-a-blue-moon contributor who was not under any pressure or obligation to
produce regular articles and who wrote at his own whim and leisure. [10]

PDI appealed the Decision to the NLRC. In a Decision dated August 23,
1994, the NLRC Second Division dismissed the appeal thereby affirming the Labor
Arbiters Decision. The NLRC initially noted that PDI failed to perfect its appeal,
under Article 223 of the Labor Code, due to non-filing of a cash or surety bond.
The NLRC said that the reason proffered by PDI for not filing the bond that it was
difficult or impossible to determine the amount of the bond since the Labor
Arbiter did not specify the amount of the judgment award was not persuasive. It
said that all PDI had to do was compute based on the amount it was paying
petitioner, counting the number of weeks from November 7, 1992 up to
promulgation of the Labor Arbiters decision.[11]

The NLRC also resolved the appeal on its merits. It found no error in the
Labor Arbiters findings of fact and law. It sustained the Labor Arbiters reasoning
that respondent PDI exercised control over petitioners work.

PDI then filed a Petition for Review[12] before this Court seeking the reversal
of the NLRC Decision. However, in a Resolution [13] dated December 2, 1998, this
Court referred the case to the Court of Appeals, pursuant to our ruling in St.
Martin Funeral Homes v. National Labor Relations Commission.[14]

The CA rendered its assailed Decision on June 11, 2002. It set aside the
NLRC Decision and dismissed petitioners Complaint. It held that the NLRC
misappreciated the facts and rendered a ruling wanting in substantial evidence.
The CA said:

The Court does not agree with public respondent NLRCs conclusion. First, private
respondent admitted that she was and [had] never been considered by petitioner PDI as
its employee. Second, it is not disputed that private respondent had no employment
 contract with petitioner PDI. In fact, her engagement to contribute articles for
publication was based on a verbal agreement between her and the petitioners Lifestyle
Section Editor. Moreover, it was evident that private respondent was not required to
report to the office eight (8) hours a day. Further, it is not disputed that she stayed
in New York for six (6) months without petitioners permission as to her leave of absence
nor was she given any disciplinary action for the same. These undisputed facts negate
private respondents claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRCs
ruling that the guidelines given by petitioner PDI for private respondent to follow, e.g. in
terms of space allocation and length of article, is not the form of control envisioned by
the guidelines set by the Supreme Court. The length of the article is obviously limited so
that all the articles to be featured in the paper can be accommodated. As to the topic of
the article to be published, it is but logical that private respondent should not write
morbid topics such as death because she is contributing to the lifestyle section. Other
than said given limitations, if the same could be considered limitations, the topics of the
articles submitted by private respondent were all her choices. Thus, the petitioner PDI in
deciding to publish private respondents articles only controls the result of the work and
not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an
employer-employee relationship to exist.[15]

Petitioners Motion for Reconsideration was denied in a Resolution

dated September 11, 2002. She then filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to
the petition, ordered the Labor Arbiter to clarify the amount of the award due
petitioner and, thereafter, ordered PDI to post the requisite bond. Upon
compliance therewith, the petition would be given due course. Labor Arbiter
Amansec clarified that the award under the Decision amounted to P15,350.00.
Thus, PDI posted the requisite bond on January 25, 2007.[16]

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDIs Petition
for Certiorari for PDIs failure to post a cash or surety bond in violation of Article
223 of the Labor Code.
 This issue was settled by this Court in its Resolution dated April 29, 2005.
[17]
There, the Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition
sine qua non to the perfection of an appeal, there is a plethora of jurisprudence
recognizing exceptional instances wherein the Court relaxed the bond requirement as a
condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the
assailed decision of the Labor Arbiter concerned did not contain a computation of the
monetary award due the employees, a circumstance which is likewise present in this
case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection

of an appeal within the reglamentary (sic) period is mandatory and
jurisdictional. However, in National Federation of Labor Unions v.
Ladrido as well as in several other cases, this Court relaxed the
requirement of the posting of an appeal bond within the reglementary
period as a condition for perfecting the appeal. This is in line with the
principle that substantial justice is better served by allowing the appeal
to be resolved on the merits rather than dismissing it based on a
technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was
entitled to backwages, 13th month pay and service incentive leave pay without however
including a computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that private respondents
cannot be expected to post such appeal bond equivalent to the amount of the monetary
award when the amount thereof was not included in the decision of the labor arbiter.
The computation of the amount awarded to petitioner not having been clearly stated in
the decision of the labor arbiter, private respondents had no basis for determining the
amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed
as they are considered indispensable interdictions against needless delays and for
 orderly discharge of judicial business, the law does admit of exceptions when warranted
by the circumstances. Technicality should not be allowed to stand in the way of equitably
and completely resolving the rights and obligations of the parties. But while this Court
may relax the observance of reglementary periods and technical rules to achieve
substantial justice, it is not prepared to give due course to this petition and make a
pronouncement on the weighty issue obtaining in this case until the law has been duly
complied with and the requisite appeal bond duly paid by private respondents. [18]

Records show that PDI has complied with the Courts directive for the
posting of the bond;[19] thus, that issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of

PDI, and if the answer be in the affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a

question of fact.[20] Factual findings of quasi-judicial agencies like the NLRC are
generally accorded respect and finality if supported by substantial evidence.[21]

Considering, however, that the CAs findings are in direct conflict with those
of the Labor Arbiter and NLRC, this Court must now make its own examination
and evaluation of the facts of this case.

It is true that petitioner herself admitted that she was not, and [had] never been
considered respondents employee because the terms of works were arbitrarily
decided upon by the respondent.[22] However, the employment status of a person
is defined and prescribed by law and not by what the parties say it should be.[23]

This Court has constantly adhered to the four-fold test to determine

whether there exists an employer-employee relationship between parties. [24] The
four elements 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.[25]
 Of these four elements, it is the power of control which is the most
crucial[26] and most determinative factor,[27] so important, in fact, that the other
elements may even be disregarded.[28] As this Court has previously held:

the significant factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of performance
of the service being rendered, and the degree to which the principal may intervene to
exercise such control.[29]

In other words, the test is whether the employer controls or has reserved
the right to control the employee, not only as to the work done, but also as to the
means and methods by which the same is accomplished.[30]

Petitioner argues that several factors exist to prove that respondents

exercised control over her and her work, namely:

a. As to the Contents of her Column The PETITIONER had to insure that

the contents of her column hewed closely to the objectives of its Lifestyle Section and
the over-all principles that the newspaper projects itself to stand for. As admitted, she
wanted to write about death in relation to All Souls Day but was advised not to.

b. As to Time Control The PETITIONER, as a columnist, had to observe the

deadlines of the newspaper for her articles to be published. These deadlines were
usually that time period when the Section Editor has to close the pages of the Lifestyle
Section where the column in located. To close the pages means to prepare them for
printing and publication.

As a columnist, the PETITIONERs writings had a definite day on which it was

going to appear. So she submitted her articles two days before the designated day on
which the column would come out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the
newspapers obligations to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space The PETITIONER was told to submit only two or

three pages of article for the column, (sic) Feminist Reflections per week. To go beyond
 that, the Lifestyle editor would already chop off the article and publish the rest for the
next week. This shows that PRIVATE RESPONDENTS had control over the space that the
PETITIONER was assigned to fill.

d. As to Discipline Over time, the newspaper readers eyes are trained or

habituated to look for and read the works of their favorite regular writers and
columnists. They are conditioned, based on their daily purchase of the newspaper, to
look for specific spaces in the newspapers for their favorite write-ups/or opinions on
matters relevant and significant issues aside from not being late or amiss in the
responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and
significant issues on time by the PRIVATE RESPONDENTS who have a say on whether the
topics belong to those considered as highly relevant and significant, through the Lifestyle
Section Editor. The PETITIONER had to discuss the topics first and submit the articles two
days before publication date to keep her column in the newspaper space regularly as
expected or without miss by its readers. [31]

Given this discussion by petitioner, we then ask the question: Is this the
form of control that our labor laws contemplate such as to establish an employer-
employee relationship between petitioner and respondent PDI?

It is not.

Petitioner has misconstrued the control test, as did the Labor Arbiter and
the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former. Rules which serve as general
guidelines towards the achievement of the mutually desired result are not
indicative of the power of control.[32]Thus, this Court has explained:

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 untrammelled 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. x x x. [33]

The main determinant therefore is whether the rules set by the employer are
meant to control not just the results of the work but also the means and method
to be used by the hired party in order to achieve such results. Thus, in this case,
we are to examine the factors enumerated by petitioner to see if these are merely
guidelines or if they indeed fulfill the requirements of the control test.

Petitioner believes that respondents acts are meant to control how she
executes her work. We do not agree. A careful examination reveals that the
factors enumerated by the petitioner are inherent conditions in running a
newspaper. In other words, the so-called control as to time, space, and discipline
are dictated by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read
throughout the country. As such, public interest dictates that every article appearing in
the newspaper should subscribe to the standards set by the Inquirer, with its thousands
of readers in mind. It is not, therefore, unusual for the Inquirer to control what would be
published in the newspaper. What is important is the fact that such control pertains only
to the end result, i.e., the submitted articles. The Inquirer has no control over
[petitioner] as to the means or method used by her in the preparation of her articles.
The articles are done by [petitioner] herself without any intervention from the Inquirer.
[34]

Petitioner has not shown that PDI, acting through its editors, dictated how
she was to write or produce her articles each week. Aside from the constraints
presented by the space allocation of her column, there were no restraints on her
creativity; petitioner was free to write her column in the manner and style she
was accustomed to and to use whatever research method she deemed suitable
for her purpose. The apparent limitation that she had to write only on subjects
that befitted the Lifestyle section did not translate to control, but was simply a
logical consequence of the fact that her column appeared in that section and
therefore had to cater to the preference of the readers of that section.

The perceived constraint on petitioners column was dictated by her own

choice of her columns perspective. The column title Feminist Reflections was of
her own choosing, as she herself admitted, since she had been known as a
feminist writer.[35] Thus, respondent PDI, as well as her readers, could reasonably
expect her columns to speak from such perspective.

Contrary to petitioners protestations, it does not appear that there was any
actual restraint or limitation on the subject matter within the Lifestyle section that
she could write about. Respondent PDI did not dictate how she wrote or what she
wrote in her column. Neither did PDIs guidelines dictate the kind of research,
time, and effort she put into each column. In fact, petitioner herself said that she
received no comments on her articlesexcept for her to shorten them to fit into the
box allotted to her column. Therefore, the control that PDI exercised over
petitioner was only as to the finished product of her efforts, i.e., the column itself,
by way of either shortening or outright rejection of the column.

The newspapers power to approve or reject publication of any specific

article she wrote for her column cannot be the control contemplated in the
control test, as it is but logical that one who commissions another to do a piece of
work should have the right to accept or reject the product. The important factor
to consider in the control test is still the element of control over how the work
itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work

for the newspaper. We note the common practice in the newspaper business of
assigning its regular reporters to cover specific subjects, geographical locations,
government agencies, or areas of concern, more commonly referred to as beats. A
reporter must produce stories within his or her particular beat and cannot switch
to another beat without permission from the editor. In most newspapers also, a
reporter must inform the editor about the story that he or she is working on for
the day. The story or article must also be submitted to the editor at a specified
time. Moreover, the editor can easily pull out a reporter from one beat and ask
him or her to cover another beat, if the need arises.
 This is not the case for petitioner. Although petitioner had a weekly
deadline to meet, she was not precluded from submitting her column ahead of
time or from submitting columns to be published at a later time. More
importantly, respondents did not dictate upon petitioner the subject matter of her
columns, but only imposed the general guideline that the article should conform
to the standards of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his
own pleasure, in the manner he sees fit, not subject to definite hours or
conditions of work, and is compensated according to the result of his efforts and
not the amount thereof, no employer-employee relationship exists. [36]

Aside from the control test, this Court has also used the economic reality
test. The economic realities prevailing within the activity or between the parties
are examined, taking into consideration the totality of circumstances surrounding
the true nature of the relationship between the parties. [37] This is especially
appropriate when, as in this case, there is no written agreement or contract on
which to base the relationship. In our jurisdiction, the benchmark of economic
reality in analyzing possible employment relationships for purposes of applying
the Labor Code ought to be the economic dependence of the worker on his
employer.[38]

Petitioners main occupation is not as a columnist for respondent but as a

womens rights advocate working in various womens organizations. [39] Likewise,
she herself admits that she also contributes articles to other publications. [40] Thus,
it cannot be said that petitioner was dependent on respondent PDI for her
continued employment in respondents line of business.[41]

The inevitable conclusion is that petitioner was not respondent PDIs

employee but an independent contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an

independent contractor; thus, the characterization of the relationship must be
made based on the particular circumstances of each case. [42] There are several
factors[43] that may be considered by the courts, but as we already said, the right
to control is the dominant factor in determining whether one is an employee or
an independent contractor.[44]
 In our jurisdiction, the Court has held that an independent contractor is one
who carries on a distinct and independent business and undertakes to perform
the job, work, or service on ones own account and under ones own responsibility
according to ones own manner and method, free from the control and direction of
the principal in all matters connected with the performance of the work except as
to the results thereof.[45]

On this point, Sonza v. ABS-CBN Broadcasting Corporation[46] is enlightening.

In that case, the Court found, using the four-fold test, that petitioner, Jose Y.
Sonza, was not an employee of ABS-CBN, but an independent contractor. Sonza
was hired by ABS-CBN due to his unique skills, talent and celebrity status not
possessed by ordinary employees, a circumstance that, the Court said, was
indicative, though not conclusive, of an independent contractual relationship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. [47] The Court also
found that, as to payment of wages, Sonzas talent fees were the result of
negotiations between him and ABS-CBN.[48] As to the power of dismissal, the Court
found that the terms of Sonzas engagement were dictated by the contract he
entered into with ABS-CBN, and the same contract provided that either party may
terminate the contract in case of breach by the other of the terms thereof.
[49]
However, the Court held that the foregoing are not determinative of an
employer-employee relationship. Instead, it is still the power of control that is
most important.

On the power of control, the Court found that in performing his work, Sonza
only needed his skills and talent how he delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control.[50] Thus:

We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work. 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. 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.
 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., 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.

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. 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.

A radio broadcast specialist who works under minimal supervision is an

independent contractor. 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.[51]

The instant case presents a parallel to Sonza. Petitioner was engaged as a

columnist for her talent, skill, experience, and her unique viewpoint as a feminist
advocate. How she utilized all these in writing her column was not subject to
dictation by respondent. As in Sonza, respondent PDI was not involved in the
actual performance that produced the finished product. It only reserved the right
to shorten petitioners articles based on the newspapers capacity to accommodate
the same. This fact, we note, was not unique to petitioners column. It is a reality
in the newspaper business that space constraints often dictate the length of
articles and columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her
talent and skill to come up with a column every week. As such, she had all the
tools she needed to perform her work.
 Considering that respondent PDI was not petitioners employer, it cannot be
held guilty of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition

is DISMISSED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 50970 are hereby AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

RUBEN T. REYES
 Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
[1]
Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Eugenio S. Labitoria and Teodoro P.
Regino, concurring; rollo, pp. 101-106.
[2]
Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Teodoro P. Regino and Remedios
Salazar-Fernando, concurring; id. at 107.
[3]
Id. at 89-98.
[4]
Id. at 83-88.
[5]
Position Paper for Complainant, CA rollo, p. 39.
[6]
Also named in parts of the records as Lolita or Lita.
[7]
Reply to Respondents Position Paper, CA rollo, p. 40.
[8]
Petition for Certiorari, G.R. No. 117605, CA rollo, p. 4.
[9]
Rollo, p. 88.
[10]
Id. at 86-87.
[11]
Id. at 96.
[12]
Docketed as G.R. No. 117605, CA rollo, pp. 2-18.
[13]
CA rollo, p. 209.
[14]
356 Phil. 811 (1998).
[15]
Supra note 1.
[16]
Manifestation and Compliance, rollo, pp. 410-416.
[17]
Penned by Associate Justice Dante O. Tinga, with Associate Justices Reynato S. Puno (now Chief Justice), Ma.
Alicia Austria-Martinez, Romeo J. Callejo, Sr. (now retired), and Minita V. Chico-Nazario, concurring; id. at 380-
393.
[18]
Id. at 387-392. (Citations omitted.)
[19]
Supra note 16.
[20]
Lopez v. Bodega City, G.R. No. 155731, September 3, 2007, 532 SCRA 56, 64, citing Manila Water Company,
Inc. v. Pea, 434 SCRA 53, 58 (2004).
[21]
The Peninsula Manila, et al. v. Alipio, G.R. No. 167310, June 17, 2008, citing Trendline Employees Association-
Southern Philippines Federation of Labor v. NLRC, 272 SCRA 172, 179 (1997).
[22]
Reply to Respondents Position Paper, CA rollo, p. 40.
[23]
Insular Life Assurance, Inc. v. National Labor Relations Commission, G.R. No. 119930, March 12, 1993, 287
SCRA 476, 483, citing Industrial Timber Corporation v. NLRC, 169 SCRA 341 (1989).
[24]
Lopez v. Metropolitan Waterworks and Sewage System, G.R. No. 154472, June 30, 2005, 462 SCRA 428, 442.
[25]
Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame v.
Burlingame Corporation, G.R. No. 162833, June 15, 2007 524 SCRA 690, 695, citing Sy v. Court of Appeals, 398 SCRA
301, 307-308 (2003); Pacific Consultants International Asia, Inc. v. Schonfeld, G.R. No. 166920, February 19, 2007,
516 SCRA 209, 228.
[26]
Abante, Jr. v. Lamadrid Bearing and Parts Corporation, G.R. No. 159890, May 28, 2004, 430 SCRA 368, 379.
[27]
Sandigan Savings and Loan Bank, Inc v. National Labor Relations Commission, 324 Phil. 358 (1996),
citing Ruga v. NLRC, 181 SCRA 266, 273 (1990). See also Coca Cola Bottlers (Phils.), Inc. v. Climaco, G.R. No.
146881, February 5, 2007, 514 SCRA 164, 177.
[28]
Sandigan Savings and Loan Bank, Inc., v. National Labor Relations Commission, supra, citing Sara v. Agarrado,
166 SCRA 625, 630 (1988).
[29]
AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission, 334 Phil. 712, 721-722 (1997).
[30]
Lazaro v. Social Security Commission, 479 Phil. 385, 389-390 (2004), citing Investment Planning Corporation v.
Social Security System, 21 SCRA 924, 928-929 (1967). See also Abante, Jr. v. Lamadrid Bearing and Parts
Corporation, supra note 26.
[31]
Rollo, pp. 75-76.
[32]
Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005, 463 SCRA 331, 352-353. (Citations
omitted.)
[33]
Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, G.R. No. 84484, November 15, 1989,
179 SCRA 459, 464-465; Consulta v. Court of Appeals, G.R. No. 145443, March 18, 2005, 453 SCRA 732, 740-
741; Manila Electric Company v. Benamira, supra.
[34]
Manifestation and Motion of the Office of the Solicitor General, rollo, p. 192.
[35]
Reply to Position Paper of Respondents, CA rollo, p. 43.
[36]
Abante, Jr. v. Lamadrid Bearing and Parts Corporation, supra note 26, citing Encyclopedia Britannica
(Philippines), Inc. v. NLRC, 264 SCRA 1, 7 (1996).
[37]
Francisco v. National Labor Relations Commission, G.R. No. 170087, August 31, 2006, 500 SCRA 690, 697.
[38]
Id. at 699.
[39]
CA rollo, p. 200.
[40]
Reply to Respondents Position Paper, CA rollo, p. 43.
[41]
See Francisco v. National Labor Relations Commission, supra note 37.
[42]
Arkansas Transit Homes, Inc. v. Aetna Life & Casualty, 341 Ark. 317, 16 S.W.3d 545 (2000).
[43]
The court in Arkansas lists the following factors to be considered in determining whether one is an employee or
independent contractor:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether in the locality, the work is usually done under the direction of
the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person
doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant; and
(j) whether the principal is or is not in business.
[44]
Arkansas Transit Homes, Inc. v. Aetna Life & Casualty, supra note 42.
[45]
Chavez v. National Labor Relations Commission, G.R. No. 146530, January 17, 2005, 448 SCRA 478, 491,
citing Tan v. Lagrama, 387 SCRA 393 (2002).
[46]
G.R. No. 138051, June 10, 2004, 431 SCRA 583.
[47]
Sonza v. ABS-CBN Broadcasting Corporation, id. at 595.
[48]
Id. at 595-596.
[49]
Id. at 597.
[50]
Id. at 600.
[51]
Id. at 600-603. (Citations omitted.)
SECOND DIVISION

CALAMBA MEDICAL G.R. No. 176484

CENTER, INC.,
Petitioner, Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,
- versus - TINGA,
VELASCO, JR., and
BRION, JJ.
NATIONAL LABOR
RELATIONS COMMISSION, Promulgated:
RONALDO LANZANAS AND November 25, 2008
*
MERCEDITHA LANZANAS,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

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 petitioners 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 petitioners 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

suspension[13] 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 memorandum[16] 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
hospitals 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
Secretarys 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 unions 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-
Arbiters ORDERdated 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. Mercedithas complaints were consolidated and docketed
as NLRC CASE NO. RAB-IV-3-9879-98-L.

By Decision[19] 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 Decision[20] of May 3, 2002, reversed the Labor

Arbiters 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 attorneys fees.

SO ORDERED.[21]
 Petitioners 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

petitioners 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 Decision[23] 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 attorneys 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 petitioners 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 petitioners Medical Director still
has to approve the schedule of duties of the respondents . The respondents
stressed that the petitioners 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 petitioners 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 petitioners

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 courts decision reads:

WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the

Courts 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 relationship[27]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-hospitals 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 hospitals interest.
More importantly, petitioner itself provided incontrovertible proof of the
employment status of respondents, namely, the identification cards it issued them,
the payslips[33] 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 petitioners employees, how does it account for
its issuance of the earlier-quoted March 7, 1998memorandum 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 courts
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 Labors 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 directors Memorandum[41] 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 schedule [42] 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]

Petitioners 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 282[47] 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. Mercedithas 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. Mercedithas 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 courts deletion of the award of attorneys fees. There
being no basis advanced in deleting it, as exemplary damages were correctly
awarded,[53] the award of attorneys 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 attorneys fees
is reinstated. In all other aspects, the decision of the appellate court is affirmed.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

DANTE O. TINGA PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
 LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

*
Mercedita in some pleadings and annexed documents.
[1]
Rollo, p. 10.
[2]
Id. at 11.
[3]
NLRC records, pp. 79-80; Annexes E and F of Complainants (herein private respondents) Joint Reply and
Rejoinder.
[4]
Id. at 74-75; Annexes A and B.
[5]
Id. at 76-78; Annexes C and D.
[6]
Id. at 12.; NLRC records, pp. 99-100, Affidavit of Dr. Meluz Trinidad.
[7]
NLRC records, p. 171.
[8]
Rollo, p.12.
[9]
NLRC records, p.16.
[10]
Id. at 174.
[11]
The actual date of the union strike as reflected in the order of the Secretary of Labor and Employment. Id. at 50-
51.
[12]
Rollo, p. 11.
[13]
NLRC records, p. 1.
[14]
Id. at 7.
[15]
NLRC records, pp. 50-51.
[16]
CA rollo, p. 198.
[17]
NLRC records, p. 175.
[18]
Id. at 12.
[19]
Id. at 117-130.
[20]
Id. at 280-305.
[21]
Id. at 304.
[22]
Rollo, pp. 94-99. Penned by Justice Elvi John S. Asuncion with the concurrence of Justices Mariano C. Del
Castillo and Hakim S. Abdulwahid.
[23]
Id. at 32-43. Penned by Justice Hakim S. Abdulwahid with the concurrence of Justices Remedios A. Salazar-
Fernando and Mariano C. del Castillo.
[24]
Id. at 40.
[25]
Id. at 40-41.
[26]
Id. at 42.
[27]
Applying the four-fold test which has the following elements: a) selection and engagement of the employee; b)
payment of wages or salaries; c) exercise of the power of dismissal; and d) exercise of the power to control
the employees conduct.
[28]
Rollo, p. 26.
[29]
Nogales v. Capitol Medical Center, G.R. No. 142625, December 19, 2006, 511 SCRA 204, 221 citing Diggs v.
Novant Health, Inc., 628 S.E.2d 851 (2006).
[30]
Encyclopedia Britannica v. NLRC, G.R. No. 87098, November 4, 1996, 264 SCRA 1, 10.
[31]
Equitable Banking Corp. v. NLRC, G.R. No. 102467, June 13, 1997, 273 SCRA 352, 371.
[32]
NLRC records, pp. 179-184; Annex H.
[33]
Id. at 89; Annex J.
[34]
Vide Section 9 of REPUBLIC ACT NO. 8282.
[35]
Social Security System v. Court of Appeals, 401 Phil. 132, 141 (2000).
[36]
Nagasura v. NLRC, G.R. Nos. 117936-37, May 20, 1998, 290 SCRA 245, 251; Equitable Banking Corporation v.
NLRC, supra note 31.
[37]
Rollo, p. 58.
[38]
NLRC records, pp. 90-93.
[39]
Telefunken Semiconductors Employees Union-FFW v. Sec. of Labor and Employment, G.R. Nos. 122743 and
127215, December 12, 1997, 283 SCRA 145-146.
[40]
Marcopper Mining Corp. v. Brillantes, G.R. No. 119381, March 11, 1996, 254 SCRA 595, 602.
[41]
CA rollo at 198.
[42]
Rollo, p. 79.
[43]
PNB v. Cabansag, G.R. No. 157010, June 21, 2005, 460 SCRA 514, 530-531.
[44]
Condo Suite Club Travel v. NLRC, G.R. No. 125671, January 28, 2000, 323 SCRA 679, 690 citing Vinta
Maritime v. NLRC, 284 SCRA 656, 671-672 (1998).
[45]
Supra note 10.
[46]
NLRC records, p. 43; Respondents (Petitioner herein) Position Paper.
[47]
Article 282 Temination by employer.An employer may terminate an employee for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
[48]
Austria v. NLRC, G.R. No. 123646, July 14, 1999, 310 SCRA 293, 303.
[49]
NLRC records, pp. 197-199.
[50]
Id. at 20-21.
[51]
Id. at 59.
[52]
Article 28 of the Civil Code states Unfair competition in agricultural, commercial or industrial enterprises or in
labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded
method shall give rise to a right of action by the person who thereby suffers damage.
[53]
Article 2208 of the Civil Code states In the absence of stipulation, attorneys fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) x x x;
xxxx
 SECOND DIVISION
THELMA DUMPIT-MURILLO, G.R. No. 164652
Petitioner,
Present:

QUISUMBING, J.,* Chairperson,

- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

COURT OF APPEALS, Promulgated:

ASSOCIATED BROADCASTING
COMPANY, JOSE JAVIER AND
EDWARD TAN, June 8, 2007
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision[1] dated January
30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its
Resolution[2] dated June 23, 2004 denying the motion for reconsideration. The
Court of Appeals had overturned the Resolution [3] dated August 30, 2000 of the
National Labor Relations Commission (NLRC) ruling that petitioner was illegally
dismissed.

The facts of the case are as follows:

On October 2, 1995, under Talent Contract No. NT95-1805, [4] private

respondent Associated Broadcasting Company (ABC) hired petitioner Thelma
Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an early
evening news program. The contract was for a period of three months. It was
renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and
NT99-5649.[5] In addition, petitioners services were engaged for the program Live
on Five. On September 30, 1999, after four years of repeated renewals, petitioners
talent contract expired. Two weeks after the expiration of the last contract,
petitioner sent a letter to Mr. Jose Javier, Vice President for News and Public
Affairs of ABC, informing the latter that she was still interested in renewing her
contract subject to a salary increase. Thereafter, petitioner stopped reporting for
work. On November 5, 1999, she wrote Mr. Javier another letter,[6] which we quote
verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a
marginal note what terms and conditions in response to my first letter
 dated October 13, 1999. To date, or for more than fifteen (15) days since then, I
have not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.
xxxx

A month later, petitioner sent a demand letter[7] to ABC, demanding: (a)

reinstatement to her former position; (b) payment of unpaid wages for services
rendered from September 1 to October 20, 1999 and full backwages; (c) payment
of 13th month pay, vacation/sick/service incentive leaves and other monetary
benefits due to a regular employee starting March 31, 1996. ABC replied that a
check covering petitioners talent fees for September 16 to October 20, 1999 had
been processed and prepared, but that the other claims of petitioner had no basis in
fact or in law.

On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier
and Mr. Edward Tan, for illegal constructive dismissal, nonpayment of salaries,
overtime pay, premium pay, separation pay, holiday pay, service incentive leave pay,
vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-
99. She likewise demanded payment for moral, exemplary and actual damages, as
well as for attorneys fees.

The parties agreed to submit the case for resolution after settlement failed
during the mandatory conference/conciliation. On March 29, 2000, the Labor
Arbiter dismissed the complaint.[9]

On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August
30, 2000. The NLRC held that an employer-employee relationship existed between
petitioner and ABC; that the subject talent contract was void; that the petitioner was a
regular employee illegally dismissed; and that she was entitled to reinstatement and
backwages or separation pay, aside from 13th month pay and service incentive leave
pay, moral and exemplary damages and attorneys fees. It held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is
hereby REVERSED/SET ASIDE and a NEW ONEpromulgated:
1) declaring respondents to have illegally dismissed complainant from
her regular work therein and thus, ordering them to reinstate her in her former
position without loss of seniority right[s] and other privileges and to pay her full
backwages, inclusive of allowances and other benefits, including 13th month pay
based on her said latest rate of P28,000.00/mo. from the date of her illegal
dismissal on 21 October 1999 up to finality hereof, or at complainants option, to
pay her separation pay of one (1) month pay per year of service based on said
latest monthly rate, reckoned from date of hire on 30 September 1995 until
finality hereof;
2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5
days pay per year and 13th month pay for the years 1999, 1998 and 1997
of P19,236.00 and P84,000.00, respectively and her accrued salary from 16
September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12% from
date of judicial demand on 20 December 1999 until finality hereof;
 3) to pay complainant moral damages of P500,000.00, exemplary
damages of P350,000.00 and 10% of the total of the adjudged monetary awards as
attorneys fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]

After its motion for reconsideration was denied, ABC elevated the case to
the Court of Appeals in a petition for certiorari under Rule 65. The petition was
first dismissed for failure to attach particular documents, [11] but was reinstated on
grounds of the higher interest of justice.[12]

Thereafter, the appellate court ruled that the NLRC committed grave abuse
of discretion, and reversed the decision of the NLRC.[13] The appellate court
reasoned that petitioner should not be allowed to renege from the stipulations she
had voluntarily and knowingly executed by invoking the security of tenure under
the Labor Code. According to the appellate court, petitioner was a fixed-term
employee and not a regular employee within the ambit of Article 280[14] of the
Labor Code because her job, as anticipated and agreed upon, was only for a
specified time.[15]

Aggrieved, petitioner now comes to this Court on a petition for review,

raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT[;]

II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY
THE NLRC FIRST DIVISION, ARE ANTI-REGULARIZATION
DEVICES WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC
POLICY[;]

III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF
THE THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE
RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280
OF THE LABOR CODE[;]

IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONERS RIGHT
TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS
STATED IN THE COMPLAINT[.][16]

The issues for our disposition are: (1) whether or not this Court can review
the findings of the Court of Appeals; and (2) whether or not under Rule 45 of the
Rules of Court the Court of Appeals committed a reversible error in its Decision.
 On the first issue, private respondents contend that the issues raised in the
instant petition are mainly factual and that there is no showing that the said issues
have been resolved arbitrarily and without basis. They add that the findings of the
Court of Appeals are supported by overwhelming wealth of evidence on record as
well as prevailing jurisprudence on the matter.[17]

Petitioner however contends that this Court can review the findings of the
Court of Appeals, since the appellate court erred in deciding a question of
substance in a way which is not in accord with law or with applicable decisions of
this Court.[18]

We agree with petitioner. Decisions, final orders or resolutions of the Court

of Appeals in any case regardless of the nature of the action or proceeding involved
may be appealed to this Court through a petition for review. This remedy is a
continuation of the appellate process over the original case, [19] and considering
there is no congruence in the findings of the NLRC and the Court of Appeals
regarding the status of employment of petitioner, an exception to the general rule
that this Court is bound by the findings of facts of the appellate court, [20] we can
review such findings.

On the second issue, private respondents contend that the Court of Appeals
did not err when it upheld the validity of the talent contracts voluntarily entered
into by petitioner. It further stated that prevailing jurisprudence has recognized and
sustained the absence of employer-employee relationship between a talent and the
media entity which engaged the talents services on a per talent contract basis,
citing the case of Sonza v. ABS-CBN Broadcasting Corporation.[21]

Petitioner avers however that an employer-employee relationship was

created when the private respondents started to merely renew the contracts
repeatedly fifteen times or for four consecutive years.[22]

Again, we agree with petitioner. The Court of Appeals committed reversible

error when it held that petitioner was a fixed-term employee. Petitioner was a
regular employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid and
compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status.[23]

Further, the Sonza case is not applicable. In Sonza, the television station did
not instruct Sonza how to perform his job. How Sonza delivered his lines, appeared
on television, and sounded on radio were outside the television stations control.
Sonza had a free hand on what to say or discuss in his shows provided he did not
attack the television station or its interests. Clearly, the television station did not
exercise control over the means and methods of the performance of Sonzas work.
[24]
In the case at bar, ABC had control over the performance of petitioners work.
Noteworthy too, is the comparatively low P28,000 monthly pay of
petitioner[25]vis the P300,000 a month salary of Sonza,[26] that all the more bolsters
the conclusion that petitioner was not in the same situation as Sonza.
 The contract of employment of petitioner with ABC had the following
stipulations:
xxxx
1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time,
attention and best efforts in the performance of his/her duties and responsibilities as
Anchor/Program Host/Newscaster of the Program, in accordance with the direction
of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews
on- and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research
or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live
telecasts;
g. Be present promptly at the studios and/or other place of assignment at
the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time
to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND
OTHER RULES AND REGULATIONS TALENT agrees that he/she will
promptly and faithfully comply with the requests and instructions, as well
as the program standards, policies, rules and regulations of ABC, the KBP
and the government or any of its agencies and instrumentalities.[27]
xxxx

In Manila Water Company, Inc. v. Pena,[28] we said that 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 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.[29]

The duties of petitioner as enumerated in her employment contract indicate

that ABC had control over the work of petitioner. Aside from control, ABC also
dictated the work assignments and payment of petitioners wages. ABC also had
power to dismiss her. All these being present, clearly, there existed an employment
relationship between petitioner and ABC.

Concerning regular employment, the law provides for two kinds of

employees, namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; and
(2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed. [30] In other words,
regular status arises from either the nature of work of the employee or the duration
of his employment.[31] In Benares v. Pancho,[32] we very succinctly said:
[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis--vis the
usual trade or business of the employer. This connection can be determined by
considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. 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.[33]

In our view, the requisites for regularity of employment have been met in the
instant case. Gleaned from the description of the scope of services aforementioned,
petitioners work was necessary or desirable in the usual business or trade of the
employer which includes, as a pre-condition for its enfranchisement, its
participation in the governments news and public information dissemination. In
addition, her work was continuous for a period of four years. This repeated
engagement under contract of hire is indicative of the necessity and desirability of
the petitioners work in private respondent ABCs business.[34]

The contention of the appellate court that the contract was characterized by a
valid fixed-period employment is untenable. For such contract to be valid, it should be
shown that the fixed period was knowingly and voluntarily agreed upon by the
parties. There should have been no force, duress or improper pressure brought to bear
upon the employee; neither should there be any other circumstance that vitiates the
employees consent.[35] It should satisfactorily appear that the employer and the
employee dealt with each other on more or less equal terms with no moral dominance
being exercised by the employer over the employee.[36] Moreover, fixed-term
employment will not be considered valid where, from the circumstances, it is apparent
that periods have been imposed to preclude acquisition of tenurial security by the
employee.[37]

In the case at bar, it does not appear that the employer and employee dealt with
each other on equal terms. Understandably, the petitioner could not object to the terms
of her employment contract because she did not want to lose the job that she loved and
the workplace that she had grown accustomed to,[38] which is exactly what happened
when she finally manifested her intention to negotiate. Being one of the numerous
newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting
practitioner, petitioner was left with no choice but to affix her signature of conformity
on each renewal of her contract as already prepared by private respondents; otherwise,
private respondents would have simply refused to renew her contract. Patently, the
petitioner occupied a position of weaknessvis--vis the employer. Moreover, private
respondents practice of repeatedly extending petitioners 3-month contract for four years
is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-
term employment between petitioner and private respondents.
 While this Court has recognized the validity of fixed-term employment
contracts in a number of cases, it has consistently emphasized that when the
circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to
law, morals, good customs, public order or public policy.[39]

As a regular employee, petitioner is entitled to security of tenure and can be

dismissed only for just cause and after due compliance with procedural due
process. Since private respondents did not observe due process in constructively
dismissing the petitioner, we hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and

Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125,
which held that the petitioner was a fixed-term employee,
are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.

LEONARDO A. QUISUMBING
Acting Chief Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

C E RT I FI CAT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.`

LEONARDO A. QUISUMBING
Acting Chief Justice

*
Acting Chief Justice.
[1]
Rollo, pp. 207-220. Penned by Associate Justice Edgardo F. Sundiam, with Associate Justices Eubulo G. Verzola
and Remedios Salazar-Fernando concurring.
[2]
Id. at 246. Penned by Associate Justice Edgardo F. Sundiam, with Associate Justices Remedios Salazar-Fernando
and Mariano C. Del Castillo concurring.
[3]
Id. at 90-125.
[4]
CA rollo, pp. 105-107.
[5]
Id. at 108-112.
[6]
Id. at 121.
[7]
Id. at 123.
[8]
Id. at 213-214.
[9]
Id. at 155-169.
[10]
Id. at 124-125.
[11]
Rollo, p. 180.
[12]
Id. at 195.
[13]
Id. at 220.
[14]
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.
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 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.
[15]
Rollo, p. 217.
[16]
Id. at 382.
[17]
Id. at 335.
[18]
Id. at 387.
[19]
Pagoda Philippines, Inc. v. Universal Canning, Inc., G.R. No. 160966, October 11, 2005, 472 SCRA 355, 359.
[20]
Cirelos v. Hernandez, G.R. No. 146523, June 15, 2006, 490 SCRA 625, 635.
[21]
G.R. No. 138051, June 10, 2004, 431 SCRA 583.
[22]
Rollo, pp. 420-421.
[23]
See ABS-CBN Broadcasting Corporation v. Marquez, G.R. No. 167638, June 22, 2005, pp. 5-6 (Unsigned
Resolution), where the Court held what petitioner ABS-CBN called talents as regular employees. The Court
declared: It may be so that respondents were assigned to a particular tele-series. However, petitioner can and did
immediately reassign them to a new production upon completion of a previous one. Hence, they were continuously
employed, the tele-series being a regular feature in petitioners network programs. Petitioners continuous
engagement of respondents from one production after another, for more than five years, made the latter part of
petitioners workpool who cannot be separated from the service without cause as they are considered regular. A
project employee or a member of a workpool may acquire the status of a regular employee when the following
concur: there is continuous rehiring of project employees even after the cessation of the project and the tasks
performed by the alleged project employee are vital, necessary, and indispensable to the usual business or trade of
his employer. It cannot be denied that the services of respondents as members of a crew in the production of a tele-
series are undoubtedly connected with the business of the petitioner. This Court has held that the primary standard
in determining regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the business or trade of his employer. Here, the activity performed by respondents is,
without doubt, vital to petitioners trade or business.
[24]
See Sonza v. ABS-CBN Broadcasting Corporation, supra note 21, at 599, which also held that in the United
States, aside from the right of control test, there are the economic reality test and the multi-factor test. The tests
are drawn from statutes, regulations, rules, policies, rulings, case law and the like. The right of control test
applies under the Federal Internal Revenue Code (IRC). The economic reality test applies to the Federal Fair
Labor Standards Act (FLSA). The California Division of Labor Standards Enforcement (DLSE) uses a hybrid of
these two tests often referred to as the multi-factor test in determining who an employee is.
[25]
Rollo, p. 95.
[26]
Supra note 21, at 596.
[27]
CA rollo, p. 113.
[28]
G.R. No. 158255, July 8, 2004, 434 SCRA 53.
[29]
Id. at 61, 62.
[30]
Philippine Fruit & Vegetable Industries, Inc. v. NLRC, G.R. No. 122122, July 20, 1999, 310 SCRA 673, 681.
[31]
Bernardo v. National Labor Relations Commission, G.R. No. 122917, July 12, 1999, 310 SCRA 186, 204-205.
[32]
G.R. No. 151827, April 29, 2005, 457 SCRA 652.
[33]
Id. at 660.
[34]
Samson v. National Labor Relations Commission, G.R. No. 113166, February 1, 1996, 253 SCRA 112, 123.
[35]
Brent School, Inc. v. Zamora, G.R. No. 48494, February 5, 1990, 181 SCRA 702, 716 cited in Pangilinan v.
General Milling Corporation, G.R. No. 149329, July 12, 2004, 434 SCRA 159, 170.
[36]
Pangilinan v. General Milling Corporation, id.
[37]
Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, G.R. No.
152427, August 9, 2005, 466 SCRA 265, 273.
[38]
Rollo, p. 425.
[39]
Innodata Philippines, Inc. v. Quejada-Lopez, G.R. No. 162839, October 12, 2006, 504 SCRA 253, 258-259.
 Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

GREGORIO V. TONGKO, G.R. No. 167622

Petitioner,

Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO MORALES,

TINGA,

VELASCO, JR., and

BRION, JJ.

THE MANUFACTURERS LIFE

INSURANCE CO. (PHILS.), INC. Promulgated:

and RENATO A.

VERGEL DE DIOS,

Respondents. November 7, 2008

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

DECISION
VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of
the March 29, 2005 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No.
88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v. National
Labor Relations Commission and Gregorio V. Tongko. The assailed decision set
aside the Decision dated September 27, 2004 and Resolution dated December 16,
2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 040220-04.

The Facts

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation

engaged in life insurance business. Renato A. Vergel De Dios was, during the
period material, its President and Chief Executive Officer. Gregorio V. Tongko
started his professional relationship with Manulife on July 1, 1977 by virtue of a
Career Agents Agreement[2] (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

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 or to 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. x x x

In 1983, Tongko was named as a Unit Manager in Manulifes Sales Agency

Organization. In 1990, he became a Branch Manager. As the CA found, Tongkos
gross earnings from his work at Manulife, consisting of commissions, persistency
income, and management overrides, may be summarized as follows:

January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.00[3]

The problem started sometime in 2001, when Manulife instituted

manpower development programs in the regional sales management level.
Relative thereto, De Dios addressed a letter dated November 6, 2001[4] to Tongko
regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter,
De Dios stated:
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 OConnor, 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
Regions 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 Regions 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., Manulifes 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.

Subsequently, De Dios wrote Tongko another letter dated December 18,

[5]
2001, terminating Tongkos services, thus:

It would appear, however, that despite the series of meetings and

communications, both one-on-one meetings between yourself and SVP Kevin OConnor,
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 Managements 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.
 Therefrom, Tongko filed a Complaint dated November 25, 2002 with the
NLRC against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case
No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee

relationship, alleged that De Dios gave him specific directives on how to manage
his area of responsibility in the latters letter dated November 6, 2001. He further
claimed that Manulife exercised control over him as follows:

Such control was certainly exercised by respondents over the herein complainant. It was
Manulife who hired, promoted and gave various assignments to him. It was the company
who set objectives as regards productions, recruitment, training programs and all
activities pertaining to its business. Manulife prescribed a Code of Conduct which would
govern in minute detail all aspects of the work to be undertaken by employees, including
the sales process, the underwriting process, signatures, handling of money, policyholder
service, confidentiality, legal and regulatory requirements and grounds for termination
of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to
who was in control. The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein respondents to control the
employees of Manulife. Plainly, the respondents wielded control not only as to the ends
to be achieved but the ways and means of attaining such ends. [6]

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v.
NLRC (4th Division)[7] and Great Pacific Life Assurance Corporation v. NLRC,[8] which
Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was
not afforded due process. He also cited the Manulife Code of Conduct by which
his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February
27, 2003,[9] in which it alleged that Tongko is not its employee, and that it did not
exercise control over him. Thus, Manulife claimed that the NLRC has no
jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina

dismissed the complaint for lack of an employer-employee relationship. Padolina
found that applying the four-fold test in determining the existence of an
employer-employee relationship, none was found in the instant case. The
dispositive portion thereof states:
 WHEREFORE, premises considered, judgment is hereby rendered DISMISSING
the instant complaint for lack of jurisdiction, there being no employer-employee
relationship between the parties.

SO ORDERED.

Tongko appealed the arbiters Decision to the NLRC which reversed the same
and rendered a Decision dated September 27, 2004 finding Tongko to have been
illegally dismissed.

The NLRCs First Division, while finding an employer-employee relationship

between Manulife and Tongko applying the four-fold test, held Manulife liable for
illegal dismissal. It further stated that Manulife exercised control over Tongko as
evidenced by the letter dated November 6, 2001 of De Dios and wrote:

The above-mentioned letter shows the extent to which respondents controlled

complainants manner and means of doing his work and achieving the goals set by
respondents. The letter shows how respondents concerned themselves with the manner
complainant managed the Metro North Region as Regional Sales Manager, to the point
that respondents even had a say on how complainant interacted with other individuals
in the Metro North Region. The letter is in fact replete with comments and criticisms on
how complainant carried out his functions as Regional Sales Manager.

More importantly, the letter contains an abundance of directives or orders that

are intended to directly affect complainants authority and manner of carrying out his
functions as Regional Sales Manager.[10] x x x

Additionally, the First Division also ruled that:

Further evidence of [respondents] control over complainant can be found in the

records of the case. [These] are the different codes of conduct such as the Agent Code of
Conduct, the Manulife Financial Code of Conduct, and the Manulife Financial Code of
Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative
and other tasks that he is required to perform. These codes of conduct corroborate and
reinforce the display of respondents power of control in their 06 November 2001 Letter
to complainant.[11]

The fallo of the September 27, 2004 Decision reads:

 WHEREFORE, premises considered, the appealed Decision is hereby reversed
and set aside. We find complainant to be a regular employee of respondent Manulife
and that he was illegally dismissed from employment by respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay

complainant separation pay as above set forth. Respondent Manulife is further ordered
to pay complainant backwages from the time he was dismissed on 02 January 2002 up
to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was
denied by the NLRC First Division in a Resolution dated December 16, 2004.[12]

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No.

88253. Thereafter, the CA issued the assailed Decision dated March 29, 2005,
finding the absence of an employer-employee relationship between the parties
and deeming the NLRC with no jurisdiction over the case. The CA arrived at this
conclusion while again applying the four-fold test. The CA found that Manulife did
not exercise control over Tongko that would render the latter an employee of
Manulife. The dispositive portion reads:

WHEREFORE, premises considered, the present petition is hereby GRANTED and

the writ prayed for accordingly GRANTED.The assailed Decision dated September 27,
2004 and Resolution dated December 16, 2004 of the National Labor Relations
Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are
hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter
Marita V. Padolina is hereby REINSTATED.

Hence, Tongko filed this petition and presented the following issues:

A
 The Court of Appeals committed grave abuse of discretion in granting
respondents petition for certiorari.

The Court of Appeals committed grave abuse of discretion in annulling and

setting aside the Decision dated September 27, 2004and Resolution dated December 16,
2004 in finding that there is no employer-employee relationship between petitioner and
respondent.

The Court of Appeals committed grave abuse of discretion in annulling and

setting aside the Decision dated September 27, 2004and Resolution dated December 16,
2004 which found petitioner to have been illegally dismissed and ordered his
reinstatement with payment of backwages.[13]

Restated, the issues are: (1) Was there an employer-employee relationship

between Manulife and Tongko? and (2) If yes, was Manulife guilty of illegal
dismissal?

The Courts Ruling

This petition is meritorious.

Tongko Was An Employee of Manulife

The basic issue of whether or not the NLRC has jurisdiction over the case
resolves itself into the question of whether an employer-employee relationship
existed between Manulife and Tongko. If no employer-employee relationship
existed between the two parties, then jurisdiction over the case properly lies with
the Regional Trial Court.

In the determination of whether an employer-employee relationship exists

between two parties, this Court applies the four-fold test to determine the
existence of the elements of such relationship. In Pacific Consultants International
Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment

relationship is in dispute, four elements constitute the reliable yardstick: (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. It is the so-
called control test which constitutes the most important index of the existence of the
employer-employee relationship that is, 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. Stated
otherwise, 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 means to be used in reaching such end. [14]

The NLRC, for its part, applied the four-fold test and found the existence of
all the elements and declared Tongko an employee of Manulife. The CA, on the
other hand, found that the element of control as an indicator of the existence of
an employer-employee relationship was lacking in this case. The NLRC and the CA
based their rulings on the same findings of fact but differed in their
interpretations.

The NLRC arrived at its conclusion, first, on the basis of the letter
dated November 6, 2001 addressed by De Dios to Tongko. According to the NLRC,
the letter contained an abundance of directives or orders that are intended to
directly affect complainants authority and manner of carrying out his functions as
Regional Sales Manager. It enumerated these directives or orders as follows:

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. x x x

xxxx

This assistant should be hired immediately.

 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.

xxxx

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. x x x

3. Any resistance or holding back by anyone will be dealt with accordingly.

4. I have been straightforward in this my letter and I know that we can

continue to work together but it will have to be on my terms. Anything else is
unacceptable!

The NLRC further ruled that the different codes of conduct that were
applicable to Tongko served as the foundations of the power of control wielded by
Manulife over Tongko that is further manifested in the different administrative
and other tasks that he was required to perform.

The NLRC also found that Tongko was required to render exclusive service
to Manulife, further bolstering the existence of an employer-employee
relationship.

Finally, the NLRC ruled that Tongko was integrated into a management
structure over which Manulife exercised control, including the actions of its
officers. The NLRC held that such integration added to the fact that Tongko did not
have his own agency belied Manulifes claim that Tongko was an independent
contractor.

The CA, however, considered the finding of the existence of an employer-

employee relationship by the NLRC as far too sweeping having as its only basis the
letter dated November 6, 2001 of De Dios. The CA did not concur with the NLRCs
ruling that the elements of control as pointed out by the NLRC are sufficient
indicia of control that negates independent contractorship and conclusively
establish an employer-employee relationship between[15] Tongko and
Manulife. The CA ruled that there is no employer-employee relationship between
Tongko and Manulife.
 An impasse appears to have been reached between the CA and the NLRC on
the sole issue of control over an employees conduct. It bears clarifying that such
control not only applies to the work or goal to be done but also to the means and
methods to accomplish it.[16] In Sonza v. ABS-CBN Broadcasting Corporation, we
explained that not all forms of control would establish an employer-employee
relationship, to wit:

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.[17] (Emphasis supplied.)

We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:

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. Of such a character are the rules which
prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid and the schedules of payment.
None of these really invades the agents contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot justifiably
be said to establish an employer-employee relationship between him and the company.
[18]

Hence, we ruled in Insular that no employer-employee relationship existed

therein. However, such ruling was tempered with the qualification that had there
been evidence that the company promulgated rules or regulations that effectively
controlled or restricted an insurance agents choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would have
existed. In other words, the Court in Insular in no way definitively held that
insurance agents are not employees of insurance companies, but rather made the
same a case-to-case basis. We held:

The respondents limit themselves to pointing out that Basiaos contract with the
Company bound him to observe and conform to such rules and regulations as the latter
might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods or the methods
themselves of selling insurance. Absent such showing, the Court will not speculate
that any exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao ... free to exercise his own judgment as to the time, place and
means of soliciting insurance.[19] (Emphasis supplied.)

There is no conflict between our rulings in Insular and in Great Pacific Life
Assurance Corporation. We said in the latter case:

[I]t cannot be gainsaid that Grepalife had control over private respondents
performance as well as the result of their efforts. A cursory reading of their respective
functions as enumerated in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried out. For instance, the District
Manager must properly account, record and document the companys funds spot-check
and audit the work of the zone supervisors, conserve the companys 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 manager, and maintain his quota of sales
(the failure of which is a ground for termination). On the other hand, a zone supervisor
must 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. [20] (Emphasis supplied.)

Based on the foregoing cases, if the specific rules and regulations that are
enforced against insurance agents or managers are such that would directly affect
the means and methods by which such agents or managers would achieve the
objectives set by the insurance company, they are employees of the insurance
company.

In the instant case, Manulife had the power of control over Tongko that
would make him its employee. Several factors contribute to this conclusion.
 In the Agreement dated July 1, 1977 executed between Tongko and
Manulife, it is provided that:

The Agent hereby agrees to comply with all regulations and requirements of the
Company as herein provided as well as maintain a standard of knowledge and
competency in the sale of the Companys products which satisfies those set by the
Company and sufficiently meets the volume of new business required of Production Club
membership.[21]

Under this provision, an agent of Manulife must comply with three (3)
requirements: (1) compliance with the regulations and requirements of the
company; (2) maintenance of a level of knowledge of the companys products that
is satisfactory to the company; and (3) compliance with a quota of new
businesses.

Among the company regulations of Manulife are the different codes of

conduct such as the Agent Code of Conduct, Manulife Financial Code of Conduct,
and Manulife Financial Code of Conduct Agreement, which demonstrate the
power of control exercised by the company over Tongko. The fact that Tongko was
obliged to obey and comply with the codes of conduct was not disowned by
respondents.

Thus, with the company regulations and requirements alone, the fact that
Tongko was an employee of Manulife may already be established. Certainly, these
requirements controlled the means and methods by which Tongko was to achieve
the companys goals.

More importantly, Manulifes evidence establishes the fact that Tongko was
tasked to perform administrative duties that establishes his employment with
Manulife.

In its Comment (Re: Petition for Review dated 15 April 2005) dated August
5, 2005, Manulife attached affidavits of its agents purportedly to support its claim
that Tongko, as a Regional Sales Manager, did not perform any administrative
functions. An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003,[22] John D. Chua, a Regional Sales

Manager of Manulife, stated:
 4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional
Sales Manager (RSM) for Metro South Region pursuant to an Agency Contract.
As such RSM, I have the following functions:

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents

affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit

dated April 29, 2003[23] that:

3. In January 1997, I was assigned as a Branch Manager (BM) of Manulife for the
Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate

activites of other commission agents;

d. Achieve agreed production objectives in terms of Net Annualized

Commissions and Case Count and recruitment goals; and

e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her

Affidavit dated April 28, 2003[24] that:

3. In 1977, I was assigned as a Unit Manager (UM) of North Peaks Unit, North
Star Branch, Metro North Region;

4. As such UM, I render the following services:

 a. To render or recommend prospective agents to be licensed, trained
and contracted to sell Manulife products and who will be part of my
Unit;

b. To coordinate activities of the agents under my Unit in their daily,

weekly and monthly selling activities, making sure that their respective
sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance

their sales skills.

d. To assist my agents with their sales activities by way of joint fieldwork,

consultations and one-on- one evaluation and analysis of particular
accounts.

e. To provide opportunities to motivate my agents to succeed like

conducting promos to increase sales activities and encouraging them to
be involved in company and industry activities.

f. To provide opportunities for professional growth to my agents by

encouraging them to be a member of the LUCAP (Life Underwriters
Association of the Philippines).

A comparison of the above functions and those contained in the Agreement

with those cited in Great Pacific Life Assurance Corporation[25] reveals a striking
similarity that would more than support a similar finding as in that case. Thus,
there was an employer-employee relationship between the parties.

Additionally, it must be pointed out that the fact that Tongko was tasked
with recruiting a certain number of agents, in addition to his other administrative
functions, leads to no other conclusion that he was an employee of Manulife.

In his letter dated November 6, 2001, De Dios harped on the direction of

Manulife of becoming a major agency-led distribution company whereby greater
agency recruitment is required of the managers, including Tongko. De Dios made
it clear that agent recruitment has become the primary means by which Manulife
intends to sell more policies. More importantly, it is Tongkos alleged failure to
follow this principle of recruitment that led to the termination of his employment
with Manulife. With this, it is inescapable that Tongko was an employee of
Manulife.

Tongko Was Illegally Dismissed

 In its Petition for Certiorari dated January 7, 2005[26] filed before the CA,
Manulife argued that even if Tongko is considered as its employee, his
employment was validly terminated on the ground of gross and habitual neglect
of duties, inefficiency, as well as willful disobedience of the lawful orders of
Manulife. Manulife stated:

In the instant case, private respondent, despite the written reminder from Mr.
De Dios refused to shape up and altogether disregarded the latters advice resulting in his
laggard performance clearly indicative of his willful disobedience of the lawful orders of
his superior. x x x

xxxx

As private respondent has patently failed to perform a very fundamental duty,

and that is to yield obedience to all reasonable rules, orders and instructions of the
Company, as well as gross failure to reach at least minimum quota, the termination of his
engagement from Manulife is highly warranted and therefore, there is no illegal
dismissal to speak of.

It is readily evident from the above-quoted portions of Manulifes petition

that it failed to cite a single iota of evidence to support its claims. Manulife did not
even point out which order or rule that Tongko disobeyed. More importantly,
Manulife did not point out the specific acts that Tongko was guilty of that would
constitute gross and habitual neglect of duty or disobedience. Manulife merely
cited Tongkos alleged laggard performance, without substantiating such claim, and
equated the same to disobedience and neglect of duty.

We cannot, therefore, accept Manulifes position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is
on the employer to prove that the termination was for a valid or authorized cause. This
burden of proof appropriately lies on the shoulders of the employer and not on the
employee because a workers job has some of the characteristics of property rights and is
therefore within the constitutional mantle of protection. No person shall be deprived of
 life, liberty or property without due process of law, nor shall any person be denied the
equal protection of the laws.

Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms
that the burden of proving the validity of the termination of employment rests on the
employer. Failure to discharge this evidential burden would necessarily mean that the
dismissal was not justified, and, therefore, illegal. [27]

We again ruled in Times Transportation Co., Inc. v. National Labor Relations

Commission that:

The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden would
necessarily mean that the dismissal was not justified, and, therefore, illegal.
Unsubstantiated suspicions, accusations and conclusions of employers do not provide
for legal justification for dismissing employees. In case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of our labor laws and
Constitution.[28]

This burden of proof was clarified in Community Rural Bank of San Isidro
(N.E.), Inc. v. Paez to mean substantial evidence, to wit:

The Labor Code provides that an employer may terminate the services of an
employee for just cause and this must be supported by substantial evidence. The settled
rule in administrative and quasi-judicial proceedings is that proof beyond
reasonable doubt is not required in determining the legality of an employers dismissal of
an employee, and not even a preponderance of evidence is necessary as substantial
evidence is considered sufficient. Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise.[29]

Here, Manulife failed to overcome such burden of proof. It must be

reiterated that Manulife even failed to identify the specific acts by which Tongkos
employment was terminated much less support the same with substantial
evidence. To repeat, mere conjectures cannot work to deprive employees of their
means of livelihood. Thus, it must be concluded that Tongko was illegally
dismissed.
 Moreover, as to Manulifes failure to comply with the twin notice rule, it
reasons that Tongko not being its employee is not entitled to such notices. Since
we have ruled that Tongko is its employee, however, Manulife clearly failed to
afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal
dismissal. In Quebec, Sr., we also stated:

Furthermore, not only does our legal system dictate that the reasons for
dismissing a worker must be pertinently substantiated, it also mandates that the manner
of dismissal must be properly done, otherwise, the termination itself is gravely
defective and may be declared unlawful.[30]

For breach of the due process requirements, Manulife is liable to Tongko in

the amount of PhP 30,000 as indemnity in the form of nominal damages. [31]

Finally, Manulife raises the issue of the correctness of the computation of

the award to Tongko made by the NLRC by claiming that Songco v. National Labor
Relations Commission[32] is inapplicable to the instant case, considering that
Songco was dismissed on the ground of retrenchment.

An examination of Songco reveals that it may be applied to the present

case. In that case, Jose Songco was a salesman of F.E. Zuellig (M), Inc. which
terminated the services of Songco on the ground of retrenchment due to financial
losses. The issue raised to the Court, however, was whether commissions are
considered as part of wages in order to determine separation pay. Thus, the fact
that Songco was dismissed due to retrenchment does not hamper the application
thereof to the instant case. What is pivotal is that we ruled in Songco that
commissions are part of wages for the determination of separation pay.

Article 279 of the Labor Code on security of tenure pertinently provides

that:

In cases of regular employment the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.
 In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated
that an illegally dismissed employee shall be entitled to backwages and separation
pay, if reinstatement is no longer viable:

As the law now stands, an illegally dismissed employee is entitled to two reliefs,
namely: backwages and reinstatement. These are separate and distinct from each other.
However, separation pay is granted where reinstatement is no longer feasible because of
strained relations between the employee and the employer. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.[33]

Taking into consideration the cases of Songco and Triad, we find correct the
computation of the NLRC that the monthly gross wage of Tongko in 2001 was PhP
518,144.76. For having been illegally dismissed, Tongko is entitled to
reinstatement with full backwages under Art. 279 of the Labor Code. Due to the
strained relationship between Manulife and Tongko, reinstatement, however, is no
longer advisable. Thus, Tongko will be entitled to backwages from January 2,
2002 (date of dismissal) up to the finality of this decision. Moreover, Manulife will
pay Tongko separation pay of one (1) month salary for every year of service that is
from 1977 to 2001 amounting to PhP 12,435,474.24, considering that
reinstatement is not feasible. Tongko shall also be entitled to an award of
attorneys fees in the amount of ten percent (10%) of the aggregate amount of the
above awards.

WHEREFORE, the petition is hereby GRANTED. The assailed March 29,

2005 Decision of the CA in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. The
Decision dated September 27, 2004 of the NLRC is REINSTATED with the following
modifications:

Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their

monetary equivalent from January 2, 2002 up to the finality of this Decision;
 (2) Separation pay of one (1) month salary for every year of service from
1977 up to 2001 amounting to PhP 12,435,474.24;

(3) Nominal damages of PhP 30,000 as indemnity for violation of the due
process requirements; and

(4) Attorneys fees equivalent to ten percent (10%) of the aforementioned

backwages and separation pay.

Costs against respondent Manulife.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson
CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

ARTURO D. BRION

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

[1]
Rollo, pp. 51-87. Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate
Justices Regalado E. Maambong and Lucenito N. Tagle (now retired).
[2]
Id. at 451-453.
[3]
Id. at 53.
[4]
Id. at 295-300.
[5]
Id. at 301-302.
[6]
Id. at 310.
[7]
G.R. No. 119930, March 12, 1998, 287 SCRA 476.
[8]
G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694.
[9]
Rollo, pp. 430-450.
[10]
Id. at 361.
[11]
Id. at 363-364.
[12]
Id. at 375-377.
[13]
Id. at 16.
[14]
G.R. No. 166920, February 19, 2007, 516 SCRA 209, 228.
[15]
Supra note 1, at 80.
[16]
Lakas ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame v.
Burlingame Corporation, G.R. No. 162833, June 15, 2007, 524 SCRA 690, 695.
[17]
G.R. No. 138051, June 10, 2004, 431 SCRA 583, 604.
[18]
G.R. No. 84484, November 15, 1989, 179 SCRA 459, 465.
 [19]
Id. at 466-467.
[20]
Supra note 8, at 698-699.
[21]
Rollo, p. 451.
[22]
Id. at 590.
[23]
Id. at 592.
[24]
Id. at 593.
[25]
Supra.
[26]
Rollo, pp. 88-162.
[27]
G.R. No. 123184, January 22, 1999, 301 SCRA 627, 633.
[28]
G.R. Nos. 148500-01, November 29, 2006, 508 SCRA 435, 443.
[29]
G.R. No. 158707, November 27, 2006, 508 SCRA 245, 257-258.
[30]
Supra at 634.
[31]
Agabon v. NLRC, G.R. No. 158693, November 17, 2004, 442 SCRA 573, 617.
[32]
G.R. Nos. 50999-51000, March 23, 1990, 183 SCRA 610.
[33]
G.R. No. 160871, February 6, 2006, 481 SCRA 591, 605.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 195190 July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.

DECISION

DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer
relationship. Rules and regulations that merely serve as guidelines towards the achievement of a mutually desired
result without dictating the means and methods of accomplishing it do not establish employer-employee relationship. 1

This Petition for Review on Certiorari assails the June 23, 2010 Decision of the Court of Appeals (CA) in CA-G.R. SP
2 3

No. 109998 which (i) reversed and set aside the February 23, 2009 Decision of the National Labor Relations
4

Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent
Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor Arbiter for the
proper determination and computation of said monetary awards.

Also assailed in this Petition isthe January 18, 2011 Resolution of the CA denying Royale Homes’ Motion for
5

Reconsideration, as well as its Supplemental thereto.

6 7

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes’ realestate inventories
on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of which covered the
period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-Sales. 8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal against Royale Homes and its President
9

Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive
Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he
is performing tasks that are necessary and desirable to its business; that in 2003 the company gave him ₱1.2 million
for the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office and sit at his table; and that the
10

actsof the executive officers of Royale Homes amounted to his dismissal from work without any valid or just cause
and in gross disregard of the proper procedure for dismissing employees. Thus, he alsoimpleaded the corporate
officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.

Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as
to be paid backwages, moral and exemplary damages, and attorney’s fees. He further sought that the ownership of
the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment
paper of Alcantara isclear that it engaged his services as an independent sales contractorfor a fixed term of one year
only. He never received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as hewas paid
purely on commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his tasks
and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriateand
necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it
as a sales agent, had formed a brokerage company that directly competed with its business, and even recruited
some of its sales agents. Although this was against the exclusivity clause of the contract, Royale Homes still offered
to accept Alcantara’s wife back so she could continue to engage in real estate brokerage, albeit exclusively for
Royale Homes. In a special management committee meeting on October 8,2003, however, Alcantara announced
publicly and openly that he would leave the company by the end of October 2003 and that he would no longer finish
the unexpired term of his contract. He has decided to join his wifeand pursue their own brokerage business. Royale
Homes accepted Alcantara’s decision. It then threw a despedidaparty in his honor and, subsequently, appointed a
new independent contractor. Two months after herelinquished his post, however, Alcantara appeared in Royale
Homes and submitted a letter claiming that he was illegally dismissed.
 Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision holding that Alcantara is an employee of Royale
11

Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of his
contract was against the law.Hence, Alcantara is entitled to an amount which he may have earned on the average for
the unexpired portion of the contract. With regard to the impleaded corporate officers, the Labor Arbiter absolved
them from any liability.

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing
Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS
(₱277,000.00) representing his compensation/commission for the unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED. 12

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter
grievously erred inruling that there exists an employer-employee relationship between the parties. It insisted that the
contract between them expressly statesthat Alcantara is an independent contractor and not an ordinary employee.
Ithad no control over the means and methods by which he performed his work. RoyaleHomes likewise assailed the
award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to
finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that
he is not entitled to backwages, reinstatement, unpaid commissions, and damages.

Ruling of the National LaborRelations Commission

On February 23, 2009, the NLRC rendered its Decision, ruling that Alcantara is not an employee but a mere
13

independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara
to observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can
even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered the
fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the
contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the
regular courts.

The falloof the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005
is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED. 14

Alcantara moved for reconsideration. In a Resolution dated May 29, 2009, however, the NLRC denied his motion.
15 16

Alcantara thus filed a Petition for Certiorari with the CA imputing grave abuse of discretion on the partof the NLRC in
17

ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the
issue of whether the pre-termination of the contract is valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision granting Alcantara’s Petition and reversing the NLRC’s Decision.
18

Applying the four-fold and economic reality tests, it held thatAlcantara is an employee of Royale Homes. Royale
Homes exercised some degree of control over Alcantara since his job, as observed by the CA, is subject to company
rules, regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover, the
exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the
theory that he is anemployee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was
carried out in violation of his right to procedural due process. Thus, the CA ruled that he isentitled to backwages and
separation pay, in lieu of reinstatement. Considering,however, that the CA was not satisfied with the proofadduced to
establish the amount of Alcantara’s annual salary, it remanded the caseto the Labor Arbiter to determine the same
and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any
liability for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith
orgross negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering the
respondent company to pay petitioner backwages which shall be computed from the time of his illegal termination in
October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for every year of
service. This case is REMANDED to the Labor Arbiter for the proper determination and computation of back wages,
separation pay and other monetary benefits that petitioner is entitled to.

SO ORDERED. 19

Royale Homes filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration. In a
20 21

Resolution dated January 18, 2011, however, the CA denied said motions.
22

Issues

Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE
NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING

THE EN BANCRULING OF THIS HONORABLE COURT IN THE CASEOF TONGKO VS. MANULIFE, AND
IN BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE
MOTION FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.] 23

Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an
independent contractor. This can be readily seen from the contract stating that no employer-employee relationship
exists between the parties; that Alcantara was free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes’ inventories; and, thathis
remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on
a shallow ground that his performance is subject to company rules and regulations, code of ethics, periodic
evaluation, and exclusivity clause of contract. RoyaleHomes maintains that it is expected to exercise some degree of
control over its independent contractors,but that does not automatically result in the existence ofemployer-employee
relationship. For control to be consideredas a proof tending to establish employer-employee relationship, the same
mustpertain to the means and method of performing the work; not on the relationship of the independent contractors
among themselves or their persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who
openly and publicly declared that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of
Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor
involves an evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the
conflicting findings of the tribunals below, however, this Court is constrained to go over the factual matters involved in
this case.24

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and
executed in pursuanceof their mutual agreement. While the existence of employer-employee relationship is a matter
of law, the characterization made by the parties in their contract as to the nature of their juridical relationship cannot
be simply ignored, particularly in this case where the parties’ written contractunequivocally states their intention at the
time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc., it was held that:
25
To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding
on the courts; x x x 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 embodiestheir 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. 26

In this case, the contract, duly signed and not disputed by the parties, conspicuously provides that "no employer-
27

employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they
did not want to be bound by employer-employee relationship atthe time ofthe signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I

Marikina City

Dear Mr. Alcantara,

This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING

CORPORATION effective January 1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms
and condition to be provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market
our real estate inventories subject to rules, regulations and code of ethics promulgated by the company. Further, you
are free to recruit sales personnel/agents to assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to be conducted by us from time to time for the
purpose of familiarizing them of terms and conditionsof sale, the natureof property sold, etc., attendance of which
shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your
sales agents.

2. Budget allocation depending on your division’s sale performance as per our budget guidelines.

3. Sales incentive and other forms of company support which may be granted from time to time. It
is understood, however, that no employer-employee relationship exists between us, that of your
sales personnel/agents, and that you shall hold our company x x x, its officers and directors, free
and harmless from any and all claims of liability and damages arising from and/or incident to the
marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations,
policies and code of ethics upon notice for justifiable reason.

Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the
management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space
provided below and return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our agreement on
the matter.(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of itsstipulations should control." No construction is even needed asthey already expressly state their
28

intention. Also, this Court adopts the observation of the NLRC that it is rather strange on the part of Alcantara, an
educated man and a veteran sales broker who claimed to be receiving ₱1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true
intention were otherwise.

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on 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 employer’s power to control the employee with respect to the means and methods by which the work is to
be accomplished. Among the four, the most determinative factor in ascertaining the existence of employeremployee
29

relationship is the "right of control test". "It is deemed to be such an important factor that the other requisites may
30

even be disregarded." This holds true where the issues to be resolved iswhether a person who performs work for
31

another is the latter’s employee or is an independent contractor, as in this case. For where the person for whom the
32

services are performed reserves the right to control not only the end to beachieved, but also the means by which
such end is reached, employer-employee relationship is deemed to exist. 33

In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his
tasks is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of control is
present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship. A person who performs work for another
1âwphi1

and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee. As long as
34

the level of control does not interfere with the means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the labor law concept of control that is indicative of
employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission it was 35

pronounced 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 employeremployee relationship unlike the second, which address both the result and
the means used to achieve it. x x x 36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation
alluded to byAlcantara do not involve control over the means and methods by which he was to performhis job.
Understandably, Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the
terms and conditionsof the sale, including the mode of payment, which the independent contractors must follow. It is
also necessary for Royale Homes to allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor the
result of their marketing and sales efforts. But tothe mind of this Court, these do not pertain to the means and
methods of how Alcantara was to perform and accomplish his task of soliciting sales. They do not dictate upon him
the details of how he would solicit sales or the manner as to how he would transact business with prospective clients.
In Tongko, this Court held that guidelines or rules and regulations that do notpertain to the means or methodsto be
employed in attaining the result are not indicative of control as understood inlabor law. Thus:

From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by
the rules and regulations of an insurance company does not ipso factomake 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 Lifecase 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 beemployed 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 Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully
below, Manulife’s codes of conduct, 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. (Emphases in the
37

original)

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the
elements thereof, particularly Royale Homes’ power of control over the means and methods of accomplishing the
work. He, however, failed to cite specificrules, regulations or codes of ethics that supposedly imposed control on his
38

means and methods of soliciting sales and dealing with prospective clients. On the other hand, this case is replete
with instances that negate the element of control and the existence of employer-employee relationship. Notably,
Alcantara was not required to observe definite working hours. Except for soliciting sales, RoyaleHomes did not
39

assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as he can
"solicit sales at any time and by any manner which [he may] deem appropriate and necessary." He performed his
tasks on his own account free from the control and direction of Royale Homes in all matters connected therewith,
except as to the results thereof.40

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship. As discussed
41

above, the absence of control over the means and methodsdisproves employer-employee relationship. The
continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights his
satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of contract establish the
existence of the labor law concept of control. In Consulta v. Court of Appeals, it was held that exclusivity of contract
42

does not necessarily result in employer-employee relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not
mean that Pamana exercised control over the means and methods of Consulta’s work as the term control is
understood in labor jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or from being connected with any other company, for aslong as the
business [of the] company did not compete with Pamana’s business. 43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as
he does not sell projects of Royale Homes’ competitors. He can engage in selling various other products or engage in
unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations
consist only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no
proof that Royale Homes deducted from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a
ballpark figure of his alleged salary of ₱100,000.00, more or less. All of these indicate an independent contractual
relationship. Besides, if Alcantara indeed consideredhimself an employee of Royale Homes, then he, an
44

experienced and professional broker, would have complained that he was being denied statutorily mandated benefits.
But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted the fact
that he is not entitled tothose employee benefits because he is an independent contractor.

This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent
contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-
G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor
Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTE STATI O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

C E RTI F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes
1
Insular Life Assurance Co., Ltd v. National Labor Relations Commission, 259 Phil. 65, 70-71 (1989).

2
Rollo, pp. 3-50.

3
CA rollo, pp. 209-229; penned by Associate Justice Maritlor P. Punzalan Castillo and concurred in by
Associate Justices Josefina Guevara-Salonga and Franchito N. Diamante.

4
Rollo, pp. 241-248; penned by Presiding Commissioner Gerardo C. Nograles and concurred in by
Commissioners Perlita B. Velasco and Romeo L. Go.

5
CA rollo, pp. 288-294.

6
Id. at 231-256.

7
Id. at 258-275.

8
See Contract dated January 24, 2003, id. at 36.

9
Rollo, p. 271.

10
See [Alcantara’s] Position Paper, id. at 106-110.

11
Id. at 208-219; penned by Labor Arbiter Dolores M. Peralta-Beley

12
Id. at 218-219.

13
Id. at 241-248.

14
Id. at 247-248.

15
See Motion for Reconsideration, id. at 249-251.

16
Id. at 260-261.

17
CA rollo, pp. 3-13.

18
Id. at 209-229.

19
Id. at 228.

20
Id. at 231-256.

21
Id. at 258-275.

22
Id. at 288-294.

23
Rollo, p. 376.

Bernarte v. Philippine Basketball Association (PBA), G.R. No. 192084, September 14, 2011, 657 SCRA
24

745, 754.

25
G.R. No. 167622, June 29, 2010, 622 SCRA 58.

26
Id. at 80.

27
CA rollo, p. 36.

28
CIVIL CODE OF THE PHILIPPINES, Article 1370.

29
Bernarte v. Philippine Basketball Association (PBA), supra note 24; Sandigan Savings and Loan Bank, Inc.
v. National Labor Relations Commission, 324 Phil. 348, 358 (1996); Sonza v. ABS-CBN Broadcasting
Corporation, G.R. No. 138051, June 10, 2004, 431 SCRA 583, 594-595.

30
Id.
31
Sandigan Savings and Loan Bank, Inc. v. National Labor Relations Commission, supra note 29.

32
Cosmopolitan Funeral Homes, Inc. v. Maalat, G.R. No. 86693, July 2, 1990, 187 SCRA 108, 112.

33
Id. at 112-113.

Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., supra note 25 at 85; Sonza v. ABS-CBN
34

Broadcasting Corporation, supra note 29 at 603.

35
Supra note 1.

36
Id. at 71.

37
Supra note 25 at 86-87.

38
Javier v. Fly Ace Corporation, G.R. No. 192558, February 15, 2012, 666 SCRA 382, 397-398.

See Consulta v. Court of Appeals, 493 Phil. 842, 848 (2005); Sonza v. ABS-CBN Broadcasting
39

Corporation, supra note 29 at 600.

40
See Chavez v. National Labor Relations Commission, 489 Phil. 444, 457-458 (2005).

41
Bernarte v. Philippine Basketball Association (PBA), supra note 24 at 759.

42
Supra note 39.

43
Id. at 852.

Bernarte v. Philippine Basketball Association (PBA), supra note 24 at 757; Consulta v. Court of Appeals,
44

supra note 39 at 851.

THIRD DIVISION

PEOPLE OF THE G.R. No. 169076

PHILIPPINES,
Appellee, Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and
CHICO-NAZARIO, JJ.

Promulgated:
JOSEPH JAMILOSA,
Appellant. January 27, 2007
x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

This is an appeal from the Decision[1] of the Regional Trial Court (RTC) of Quezon
City in Criminal Case No. Q-97-72769 convicting appellant Joseph Jamilosa of large
scale illegal recruitment under Sections 6 and 7 of Republic Act (R.A.) No. 8042,
and sentencing him to life imprisonment and to pay a P500,000.00 fine.

The Information charging appellant with large scale illegal recruitment was
filed by the Senior State Prosecutor on August 29, 1997. The inculpatory portion
of the Information reads:

That sometime in the months of January to February, 1996, or thereabout in the City of
Quezon, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
representing to have the capacity, authority or license to contract, enlist and deploy or
transport workers for overseas employment, did then and there, willfully, unlawfully and
criminally recruit, contract and promise to deploy, for a fee the herein complainants,
namely, Haide R. Ruallo, Imelda D. Bamba, Geraldine M. Lagman and Alma E. Singh, for
work or employment in Los Angeles, California, U.S.A. in Nursing Home and Care Center
without first obtaining the required license and/or authority from the Philippine
Overseas Employment Administration (POEA).

Contrary to law.[2]
On arraignment, the appellant, assisted by counsel, pleaded not guilty to the
charge.

The case for the prosecution, as synthesized by the Court of Appeals (CA), is
as follows:

The prosecution presented three (3) witnesses, namely: private complainants Imelda D.
Bamba, Geraldine M. Lagman and Alma E. Singh.

Witness Imelda D. Bamba testified that on January 17, 1996, she met the appellant in
Cubao, Quezon City on board an aircon bus. She was on her way to Shoemart
(SM), North EDSA, Quezon City where she was working as a company nurse. The
appellant was seated beside her and introduced himself as a recruiter of workers for
employment abroad. The appellant told her that his sister is a head nurse in a nursing
home in Los Angeles, California, USA and he could help her get employed as a nurse at a
monthly salary of Two Thousand US Dollars ($2,000.00) and that she could leave in two
(2) weeks time. He further averred that he has connections with the US Embassy, being a
US Federal Bureau of Investigation (FBI) agent on official mission in the Philippines for
one month. According to the appellant, she has to pay the amount of US$300.00
intended for the US consul. The appellant gave his pager number and instructed her to
contact him if she is interested to apply for a nursing job abroad.

On January 21, 1996, the appellant fetched her at her office. They then went to her
house where she gave him the photocopies of her transcript of records, diploma,
Professional Regulatory Commission (PRC) license and other credentials. On January 28
or 29, 1996, she handed to the appellant the amount of US$300.00 at the McDonalds
outlet in North EDSA, Quezon City, and the latter showed to her a photocopy of her
supposed US visa. The appellant likewise got several pieces of jewelry which she was
then selling and assured her that he would sell the same at the US embassy. However,
the appellant did not issue a receipt for the said money and jewelry. Thereafter, the
appellant told her to resign from her work at SM because she was booked with
Northwest Airlines and to leave for Los Angeles, California, USA on February 25, 1996.

The appellant promised to see her and some of his other recruits before their scheduled
departure to hand to them their visas and passports; however, the appellant who was
supposed to be with them in the flight failed to show up. Instead, the appellant called
and informed her that he failed to give the passport and US visa because he had to go to
the province because his wife died. She and her companions were not able to leave for
the United States. They went to the supposed residence of the appellant to verify, but
nobody knew him or his whereabouts. They tried to contact him at the hotel where he
temporarily resided, but to no avail. They also inquired from the US embassy and found
out that there was no such person connected with the said office. Thus, she decided to
file a complaint with the National Bureau of Investigation (NBI).

Prosecution witness Geraldine Lagman, for her part, testified that she is a registered
nurse by profession. In the morning of January 22, 1996, she went to SM North
EDSA, Quezon City to visit her cousin Imelda Bamba. At that time, Bamba informed her
that she was going to meet the appellant who is an FBI agent and was willing to help
nurses find a job abroad. Bamba invited Lagman to go with her. On the same date at
about 2:00 oclock in the afternoon, she and Bamba met the appellant at the SM Fast-
Food Center, Basement, North EDSA, Quezon City. The appellant convinced them of his
ability to send them abroad and told them that he has a sister in the United
States.Lagman told the appellant that she had no working experience in any hospital but
the appellant assured her that it is not necessary to have one. The appellant asked for
US$300.00 as payment to secure an American visa and an additional amount of Three
Thousand Four Hundred Pesos (P3,400.00) as processing fee for other documents.

On January 24, 1996, she and the appellant met again at SM North EDSA, Quezon
City wherein she handed to the latter her passport and transcript of records. The
appellant promised to file the said documents with the US embassy. After one (1) week,
they met again at the same place and the appellant showed to her a photocopy of
her US visa. This prompted her to give the amount of US$300.00 and two (2) bottles of
Black Label to the appellant. She gave the said money and liquor to the appellant
without any receipt out of trust and after the appellant promised her that he would
issue the necessary receipt later. The appellant even went to her house, met her mother
and uncle and showed to them a computer printout from Northwest Airlines showing
that she was booked to leave for Los Angeles, California, USA on February 25, 1996.

Four days after their last meeting, Extelcom, a telephone company, called her because
her number was appearing in the appellants cellphone documents. The caller asked if
she knew him because they were trying to locate him, as he was a swindler who failed to
pay his telephone bills in the amount of P100,000.00. She became suspicious and told
Bamba about the matter. One (1) week before her scheduled flight on February 25,
1996, they called up the appellant but he said he could not meet them because his
mother passed away. The appellant never showed up, prompting her to file a complaint
with the NBI for illegal recruitment.

Lastly, witness Alma Singh who is also a registered nurse, declared that she first met the
appellant on February 13, 1996 at SM North EDSA, Quezon City when Imelda Bamba
introduced the latter to her. The appellant told her that he is an undercover agent of the
FBI and he could fix her US visa as he has a contact in the US embassy. The appellant told
her that he could help her and her companions Haidee Raullo, Geraldine Lagman and
Imelda Bamba find jobs in the US as staff nurses in home care centers.
 On February 14, 1996 at about 6:30 in the evening, the appellant got her passport and
picture. The following day or on February 15, 1996, she gave the appellant the amount
of US$300.00 and a bottle of cognac as grease money to facilitate the processing of her
visa. When she asked for a receipt, the appellant assured her that there is no need for
one because she was being directly hired as a nurse in the United States.

She again met the appellant on February 19, 1996 at the Farmers Plaza and this time,
the appellant required her to submit photocopies of her college diploma, nursing board
certificate and PRC license. To show his sincerity, the appellant insisted on meeting her
father. They then proceeded to the office of her father in Barrio Ugong, Pasig City and
she introduced the appellant. Thereafter, the appellant asked permission from her father
to allow her to go with him to the Northwest Airlines office in Ermita, Manila to reserve
airline tickets. The appellant was able to get a ticket confirmation and told her that they
will meet again the following day for her to give P10,000.00 covering the half price of
her plane ticket. Singh did not meet the appellant as agreed upon. Instead, she went to
Bamba to inquire if the latter gave the appellant the same amount and found out that
Bamba has not yet given the said amount. They then paged the appellant through his
beeper and told him that they wanted to see him. However, the appellant avoided them
and reasoned out that he could not meet them as he had many things to do. When the
appellant did not show up, they decided to file a complaint for illegal recruitment with
the NBI.

The prosecution likewise presented the following documentary evidence:

Exh. A Certification dated February 23, 1998 issued by Hermogenes C.

Mateo, Director II, Licensing Branch, POEA.

Exh. B Affidavit of Alma E. Singh dated February 23, 1996.[3]

On the other hand, the case for the appellant, as culled from his Brief, is as
follows:

Accused JOSEPH JAMILOSA testified on direct examination that he got acquainted with
Imelda Bamba inside an aircon bus bound for Caloocan City when the latter borrowed
his cellular phone to call her office at Shoe Mart (SM), North Edsa, Quezon City. He never
told Bamba that he could get her a job in Los Angeles, California, USA, the truth being
that she wanted to leave SM as company nurse because she was having a problem
thereat. Bamba called him up several times, seeking advice from him if Los
Angeles, California is a good place to work as a nurse. He started courting Bamba and
they went out dating until the latter became his girlfriend. He met Geraldine Lagman
and Alma Singh at the Shoe Mart (SM), North Edsa, Quezon City thru Imelda Bamba. As
complainants were all seeking advice on how they could apply for jobs abroad, lest he be
charged as a recruiter, he made Imelda Bamba, Geraldine Lagman and Alma Singh sign
 separate certifications on January 17, 1996 (Exh. 2), January 22, 1996 (Exh. 4),
and February 19, 1996 (Exh. 3), respectively, all to the effect that he never recruited
them and no money was involved. Bamba filed an Illegal Recruitment case against him
because they quarreled and separated. He came to know for the first time that charges
were filed against him in September 1996 when a preliminary investigation was
conducted by Fiscal Daosos of the Department of Justice. (TSN, October 13, 1999, pp. 3-
9 and TSN, December 8, 1999, pp. 2-9)[4]

On November 10, 2000, the RTC rendered judgment finding the accused guilty
beyond reasonable doubt of the crime charged.[5]The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered finding accused guilty beyond reasonable

doubt of Illegal Recruitment in large scale; accordingly, he is sentenced to suffer the
penalty of life imprisonment and to pay a fine of Five Hundred Thousand Pesos
(P500,000.00), plus costs.

Accused is ordered to indemnify each of the complainants, Imelda Bamba, Geraldine

Lagman and Alma Singh the amount of Three Hundred US Dollars ($300.00).

SO ORDERED.[6]

In rejecting the defenses of the appellant, the trial court declared:

To counter the version of the prosecution, accused claims that he did not recruit the
complainants for work abroad but that it was they who sought his advice relative to their
desire to apply for jobs in Los Angeles, California, USA and thinking that he might be
charged as a recruiter, he made them sign three certifications, Exh. 2, 3 and 4, which in
essence state that accused never recruited them and that there was no money involved.

Accuseds contention simply does not hold water. Admittedly, he executed and submitted
a counter-affidavit during the preliminary investigation at the Department of Justice, and
that he never mentioned the aforesaid certifications, Exhibits 2, 3 and 4 in said counter-
affidavit. These certifications were allegedly executed before charges were filed against
him. Knowing that he was already being charged for prohibited recruitment, why did he
not bring out these certifications which were definitely favorable to him, if the same
were authentic.It is so contrary to human nature that one would suppress evidence
which would belie the charge against him.

Denials of the accused can not stand against the positive and categorical narration of
each complainant as to how they were recruited by accused who had received some
 amounts from them for the processing of their papers. Want of receipts is not fatal to
the prosecutions case, for as long as it has been shown, as in this case, that accused had
engaged in prohibited recruitment. (People v. Pabalan, 262 SCRA 574).

That accused is neither licensed nor authorized to recruit workers for overseas
employment, is shown in the Certification issued by POEA, Exh. A.

In fine, the offense committed by the accused is Illegal Recruitment in large scale, it
having been committed against three (3) persons, individually. [7]

Appellant appealed the decision to this Court on the following assignment of

error:

THE TRIAL COURT ERRED IN CONVICTING ACCUSED-APPELLANT OF THE CRIME OF

ILLEGAL RECRUITMENT IN LARGE SCALE DESPITE THE FACT THAT THE LATTERS GUILT
WAS NOT PROVED BEYOND REASONABLE DOUBT BY THE PROSECUTION. [8]

According to appellant, the criminal Information charging him with illegal

recruitment specifically mentioned the phrase for a fee, and as such, receipts to
show proof of payment are indispensable. He pointed out that the three (3)
complaining witnesses did not present even one receipt to prove the alleged
payment of any fee. In its eagerness to cure this patent flaw, the prosecution
resorted to presenting the oral testimonies of complainants which were contrary
to the ordinary course of nature and ordinary habits of life [under Section 3(y),
Rule 131 of the Rules on Evidence] and defied credulity. Appellant also pointed
out that complainants testimony that they paid him but no receipts were issued
runs counter to the presumption under Section [3](d), Rule 131 of the Rules on
Evidence that persons take ordinary care of their concern. The fact that
complainants were not able to present receipts lends credence to his allegation
that it was they who sought
advice regarding their desire to apply for jobs in Los
Angeles, California, USA. Thus, thinking that he might be charged as a recruiter, he
made them sign three (3) certifications stating that he never recruited them and
there was no money involved. On the fact that the trial court disregarded the
certifications due to his failure to mention them during the preliminary
investigation at the Department of Justice (DOJ), appellant pointed out that there
is no provision in the Rules of Court which bars the presentation of evidence
during the hearing of the case in court. He also pointed out that the counter-
affidavit was prepared while he was in jail and probably not assisted by a lawyer.[9]
Appellee, through the Office of the Solicitor General (OSG), countered that the
absence of receipts signed by appellant acknowledging receipt of the money and
liquor from the complaining witnesses cannot defeat the prosecution and
conviction for illegal recruitment. The OSG insisted that the prosecution was able
to prove the guilt of appellant beyond reasonable doubt via the collective
testimonies of the complaining witnesses, which the trial court found credible and
deserving of full probative weight. It pointed out that appellant failed to prove any
ill-motive on the part of the complaining witnesses to falsely charge him of illegal
recruitment.

On appellants claim that the complaining witness Imelda Bamba was his
girlfriend, the OSG averred:

Appellants self-serving declaration that Imelda is his girlfriend and that she filed a
complaint for illegal recruitment after they quarreled and separated is simply
preposterous. No love letters or other documentary evidence was presented by
appellant to substantiate such claim which could be made with facility. Imelda has no
reason to incriminate appellant except to seek justice. The evidence shows that Alma
and Geraldine have no previous quarrel with appellant. Prior to their being recruited by
appellant, Alma and Geraldine have never met appellant. It is against human nature and
experience for private complainants to conspire and accuse a stranger of a most serious
crime just to mollify their hurt feelings. (People v. Coral, 230 SCRA 499, 510 [1994])[10]

The OSG posited that the appellants reliance on the certifications [11] purportedly
signed by the complaining witnesses is misplaced, considering that the
certifications are barren of probative weight.

On February 23, 2005, the Court resolved to transfer the case to the CA.
[12]
On June 22, 2005, the CA rendered judgment affirming the decision of the RTC.
[13]

The OSG filed a Supplemental Brief, while the appellant found no need to
file one.

The appeal has no merit.

Article 13(b) of the Labor Code of the Philippines defines recruitment and
placement as follows:
 (b) Recruitment and placement refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally or abroad, whether for profit
or not. Provided, That any person or entity which, in any manner, offers or promises for a
fee employment to two or more persons shall be deemed engaged in recruitment and
placement.

Section 6 of R.A. No. 8042 defined when recruitment is illegal:

SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and
includes referring, contract services, promising or advertising for employment abroad,
whether for profit or not, when undertaken by a non-licensee or non-holder of authority
contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines: Provided, That any such non-licensee or
non-holder who, in any manner, offers or promises for a fee employment abroad to two
or more persons shall be deemed so engaged. x x x

Any recruitment activities to be undertaken by non-licensee or non-holder of

contracts shall be deemed illegal and punishable under Article 39 of the Labor
Code of the Philippines.[14] Illegal recruitment is deemed committed in large scale
if committed against three (3) or more persons individually or as a group. [15]

To prove illegal recruitment in large scale, the prosecution is burdened to prove

three (3) essential elements, to wit: (1) the person charged undertook a
recruitment activity under Article 13(b) or any prohibited practice under Article 34
of the Labor Code; (2) accused did not have the license or the authority to lawfully
engage in the recruitment and placement of workers; and (3) accused committed
the same against three or more persons individually or as a group. [16] As gleaned
from the collective testimonies of the complaining witnesses which the trial court
and the appellate court found to be credible and deserving of full probative
weight, the prosecution mustered the requisite quantum of evidence to prove the
guilt of accused beyond reasonable doubt for the crime charged. Indeed, the
findings of the trial court, affirmed on appeal by the CA, are conclusive on this
Court absent evidence that the tribunals ignored, misunderstood, or misapplied
substantial fact or other circumstance.

The failure of the prosecution to adduce in evidence any receipt or document

signed by appellant where he acknowledged to have received money and liquor
does not free him from criminal liability. Even in the absence of money or other
valuables given as consideration for the services of appellant, the latter is
considered as being engaged in recruitment activities.

It can be gleaned from the language of Article 13(b) of the Labor Code that
the act of recruitment may be for profit or not. It is sufficient that the accused
promises or offers for a fee employment to warrant conviction for illegal
recruitment.[17] As the Court held in People v. Sagaydo:[18]

Such is the case before us. The complainants parted with their money upon the
prodding and enticement of accused-appellant on the false pretense that she had the
capacity to deploy them for employment abroad. In the end, complainants were neither
able to leave for work abroad nor get their money back.

The fact that private complainants Rogelio Tibeb and Jessie Bolinao failed to produce
receipts as proof of their payment to accused-appellant does not free the latter from
liability. The absence of receipts cannot defeat a criminal prosecution for illegal
recruitment. As long as the witnesses can positively show through their respective
testimonies that the accused is the one involved in prohibited recruitment, he may be
convicted of the offense despite the absence of receipts. [19]

Appellants reliance on the certifications purportedly signed by the complaining

witnesses Imelda Bamba, Alma Singh and Geraldine Lagman [20] is
misplaced. Indeed, the trial court and the appellate court found the certifications
barren of credence and probative weight. We agree with the following
pronouncement of the appellate court:

Anent the claim of the appellant that the trial court erred in not giving weight to the
certifications (Exhs. 2, 3 & 4) allegedly executed by the complainants to the effect that
he did not recruit them and that no money was involved, the same deserves scant
consideration.

The appellant testified that he was in possession of the said certifications at the time the
same were executed by the complainants and the same were always in his possession;
however, when he filed his counter-affidavit during the preliminary investigation before
the Department of Justice, he did not mention the said certifications nor attach them to
his counter-affidavit.

We find it unbelievable that the appellant, a college graduate, would not divulge the said
certifications which would prove that, indeed, he is not an illegal recruiter. By failing to
present the said certifications prior to the trial, the appellant risks the adverse inference
 and legal presumption that, indeed, such certifications were not genuine. When a party
has it in his possession or power to produce the best evidence of which the case in its
nature is susceptible and withholds it, the fair presumption is that the evidence is
withheld for some sinister motive and that its production would thwart his evil or
fraudulent purpose. As aptly pointed out by the trial court:

x x x These certifications were allegedly executed before charges were

filed against him. Knowing that he was already being charged for
prohibited recruitment, why did he not bring out these certifications
which were definitely favorable to him, if the same were authentic. It
is so contrary to human nature that one would suppress evidence
which would belie the charge against him. (Emphasis Ours)[21]

At the preliminary investigation, appellant was furnished with copies of the

affidavits of the complaining witnesses and was required to submit his counter-
affidavit. The complaining witnesses identified him as the culprit who recruited
them. At no time did appellant present the certifications purportedly signed by
the complaining witnesses to belie the complaint against him. He likewise did not
indicate in his counter-affidavit that the complaining witnesses had executed
certifications stating that they were not recruited by him and that he did not
receive any money from any of them. He has not come forward with any valid
excuse for his inaction. It was only when he testified in his defense that he
revealed the certifications for the first time. Even then, appellant lied when he
claimed that he did not submit the certifications because the State Prosecutor did
not require him to submit any counter-affidavit, and that he was told that the
criminal complaint would be dismissed on account of the failure of the
complaining witnesses to appear during the preliminary investigation. The
prevarications of appellant were exposed by Public Prosecutor Pedro Catral on
cross-examination, thus:

Q Mr. Witness, you said that a preliminary investigation [was] conducted by the
Department of Justice through State Prosecutor Daosos.Right?

A Yes, Sir.

Q Were you requested to file your Counter-Affidavit?

A Yes, Sir. I was required.

Q Did you file your Counter-Affidavit?

A Yes, Sir, but he did not accept it.

Q Why?
A Because he said never mind because the witness is not appearing so he dismissed the
case.

Q Are you sure that he did not accept your Counter-Affidavit, Mr. Witness?

A I dont know of that, Sir.

Q If I show you that Counter-Affidavit you said you prepared, will you be able to identify
the same, Mr. Witness?

A Yes, Sir.

Q I will show you the Counter-Affidavit dated June 16, 1997 filed by one Joseph J.
Jamilosa, will you please go over this and tell if this is the same Counter-Affidavit
you said you prepared and you are going to file with the investigating state
prosecutor?

A Yes, Sir. This the same Counter-Affidavit.

Q There is a signature over the typewritten name Joseph J. Jamilosa, will you please go
over this and tell this Honorable Court if this is your signature, Mr. Witness?

A Yes, Sir. This is my signature.

Q During the direct examination you were asked to identify [the] Certification as Exh. 2
dated January 17, 1996, allegedly issued by Bamba, one of the complainants in this
case, when did you receive this Certification issued by Imelda Bamba, Mr. Witness?

A That is the date, Sir.

Q You mean the date appearing in the Certification.

A Yes, Sir.

Q Where was this handed to you by Imelda Bamba, Mr. Witness?

A At SM North Edsa, Sir.

Q During the direct examination you were also asked to identify a Certification Exh. 3 for
the defense dated February 19, 1996, allegedly issued by Alma Singh, one of the
complainants in this case, will you please go over this and tell us when did Alma
Singh allegedly issue to you this Certification?
A On February 19, 1996, Sir.

Q And also during the direct examination, you were asked to identify a Certification
which was already marked as Exh. 4 for the defense dated January 22,
1996 allegedly issued by Geraldine M. Lagman, one of the complainants in this case,
will you please tell the court when did Geraldine Lagman give you this Certification?

A January 22, 1996, Sir.

Q During that time, January 22, 1996, January 17, 1996 and February 19, 1996, you were
in possession of all these Certification. Correct, Mr. Witness?

A Yes, Sir.

Q These were always in your possession. Right?

A Yes, Sir, with my papers.

Q Do you know when did the complainants file cases against you?

A I dont know, Sir.

Q Alright. I will read to you this Counter-Affidavit of yours, and I quote I, Joseph Jamilosa,
of legal age, married and resident of Manila City Jail, after having duly sworn to in
accordance with law hereby depose and states that: 1) the complainants sworn
under oath to the National Bureau of Investigation that I recruited them and paid
me certain sums of money assuming that there is truth in those allegation of this
(sic) complainants. The charge filed by them should be immediately dismissed for
certain lack of merit in their Sworn Statement to the NBI Investigator; 2) likewise,
the complainants allegation is not true and I never recruited them to work abroad
and that they did not give me money, they asked me for some help so I [helped]
them in assisting and processing the necessary documents, copies for getting US
Visa; 3) the complainant said under oath that they can show a receipt to prove that
they can give me sums or amount of money. That is a lie. They sworn (sic), under
oath, that they can show a receipt that I gave to them to prove that I got the money
from them. I asked the kindness of the state prosecutor to ask the complainants to
show and produce the receipts that I gave to them that was stated in the sworn
statement of the NBI; 4) the allegation of the complainants that the charges filed by
them should be dismissed because I never [received] any amount from them and
they can not show any receipt that I gave them, Manila City Jail, Philippines, June
16, 1997. So, Mr. Witness, June 16, 1997 is the date when you prepared
this. Correct?

A Yes, Sir.
Q Now, my question to you, Mr. Witness, you said that you have with you all the time
the Certification issued by [the] three (3) complainants in this case, did you allege in
your Counter-Affidavit that this Certification you said you claimed they issued to
you?

A I did not say that, Sir.

Q So, it is not here in your Counter-Affidavit?

A None, Sir.

Q What is your educational attainment, Mr. Witness?

A I am a graduate of AB Course Associate Arts in 1963 at the University of the East.

Q You said that the State Prosecutor of the Department of Justice did not accept your
Counter-Affidavit, are you sure of that, Mr. Witness?

A Yes, Sir.

Q Did you receive a copy of the dismissal which you said it was dismissed?

A No, Sir. I did not receive anything.

Q Did you receive a resolution from the Department of Justice?

A No, Sir.

Q Did you go over the said resolution you said you received here?

A I just learned about it now, Sir.

Q Did you read the content of the resolution?

A Not yet, Sir. Its only now that I am going to read.

COURT

Q You said it was dismissed. Correct?

A Yes, Your Honor.

 Q Did you receive a resolution of this dismissal?

A No, Your Honor.

FISCAL CATRAL

Q What did you receive?

A I did not receive any resolution, Sir. Its just now that I learned about the finding.

Q You said you learned here in court, did you read the resolution filed against you, Mr.
Witness?

A I did not read it, Sir.

Q Did you read by yourself the resolution made by State Prosecutor Daosos, Mr.
Witness?

A Not yet, Sir.

Q What did you take, if any, when you received the subpoena from this court?

A I was in court already when I asked Atty. Usita to investigate this case.

Q You said a while ago that your Affidavit was not accepted by State Prosecutor
Daosos. Is that correct?

A Yes, Sir.

Q Will you please read to us paragraph four (4), page two (2) of this resolution of State
Prosecutor Daosos.

(witness reading par. 4 of the resolution)

Alright. What did you understand of this paragraph 4, Mr. Witness?

A Probably, guilty to the offense charge.[22]

It turned out that appellant requested the complaining witnesses to sign the
certifications merely to prove that he was settling the cases:

COURT

Q These complainants, why did you make them sign in the certifications?
 A Because one of the complainants told me to sign and they are planning to sue me.

Q You mean they told you that they are filing charges against you and yet you [made]
them sign certifications in your favor, what is the reason why you made them sign?

A To prove that Im settling this case.

Q Despite the fact that they are filing cases against you and yet you were able to make
them sign certifications?

A Only one person, Your Honor, who told me and he is not around.

Q But they all signed these three (3) certifications and yet they filed charges against you
and yet you made them sign certifications in your favor, so what is the reason why
you made them sign?

(witness can not answer)[23]

The Court notes that the trial court ordered appellant to refund US$300.00 to
each of the complaining witnesses. The ruling of the appellate court must be
modified. Appellant must pay only the peso equivalent of US$300.00 to each of
the complaining witnesses.

IN LIGHT OF ALL THE FOREGOING, the appeal is DISMISSED. The Decision of the
Court of Appeals affirming the conviction of Joseph Jamilosa for large scale illegal
recruitment under Sections 6 and 7 of Republic Act No. 8042 is AFFIRMED WITH
MODIFICATION. The appellant is hereby ordered to refund to each of the
complaining witnesses the peso equivalent of US$300.00. Costs against appellant.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:
 CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
REYNATO S. PUNO

Chief Justice

[1]
Penned by Judge Lydia Querubin Layosa; CA rollo, pp. 51-56.
[2]
Records, p. 7.
[3]
CA rollo, pp. 130-135.
[4]
Id. at 44.
[5]
Id. at 51-56.
[6]
Id. at 56.
[7]
Id. at 55.
[8]
Id. at 45.
[9]
Id. at 46-48.
[10]
Id. at 99-100.
[11]
Exhibits 2, 3 and 4, records, pp. 189-191.
[12]
CA rollo, p. 127.
[13]
Id. at 129-141.
[14]
LABOR CODE, Art. 38(a).
[15]
LABOR CODE, Art. 38(b).
[16]
People v. Dionisio, 425 Phil. 651, 665 (2002).
[17]
People v. Dela Piedra, 403 Phil. 31, 51 (2001).
[18]
395 Phil. 538 (2000).
[19]
Id. at 549.
[20]
Exhibits 2, 3 and 4, supra note 11.
[21]
Rollo, pp. 13-14.
[22]
TSN, December 8, 1999, pp. 11-15.
[23]
TSN, March 8, 2000, p. 6.
 Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

PEOPLE OF THE PHILIPPINES, G.R. No. 180926

Plaintiff-Appellee,

Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO MORALES,

TINGA,

VELASCO, JR., and

BRION, JJ.

LOURDES VALENCIANO y Promulgated:

DACUBA,

Accused-Appellant. December 10, 2008

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

DECISION
VELASCO, JR., J.:

This is an appeal from the Decision[1] dated July 24, 2007 of the Court of Appeals
(CA) in CA-G.R. CR-H.C. No. 01390 which upheld the Decision [2] of the Regional
Trial Court (RTC), Branch 116 in Pasay City in Criminal Case No. 97-9851. The RTC
convicted Lourdes Valenciano of the crime of Illegal Recruitment in Large Scale.
 The Facts

In May 1996, Lourdes Valenciano, claiming to be an employee of Middle East

International Manpower Resources, Inc., went with one Susie Caraeg to the house
of Agapito De Luna, and told him he could apply for a job in Taiwan. A week later,
De Luna went to Valencianos house, there to be told to undergo a medical
examination, with the assurance that if there were a job order abroad, he would
be able to leave. He was also told that the placement fee for his employment as a
factory worker in Taiwan was PhP 70,000.

After passing the medical examination, De Luna paid Valenciano at the latters
residence the following amounts: PhP 20,000 on June 21, 1996; PhP 20,000
on July 12, 1996; and PhP 30,000 on August 21, 1996. The first and last payments
were turned over by Valenciano to Teresita Imperial, who issued the
corresponding receipts, and the second payment was turned over by Valenciano
to Rodante Imperial, who also issued a receipt.

Also in May 1996, Valenciano visited the house of Allan De Villa, accompanied by
Euziel N. Dela Cuesta, Eusebio T. Candelaria, and De Luna, to recruit De Villa as a
factory worker in Taiwan. De Villa was also asked for PhP 70,000 as placement
fee. He paid Valenciano the following amounts: PhP 20,000 on May 16, 1996 at
Valencianos residence; PhP 20,000 on May 30, 1996 at the Rural Bank of Calaca,
Batangas; PhP 20,000 on July 8, 1996 at Valencianos residence; and PhP 10,000
on August 14, 1996, also at her residence. Valenciano turned over the amounts to
either Teresita or Rodante. Teresita issued receipts for the May 16, July 8,
and August 14, 1996 payments, while Rodante issued a receipt for the payment
made on May 30, 1996.

On May 20, 1996, Valenciano, accompanied by Rodante and Puring Caraeg, went
to the house of Dela Cuesta to recruit her for employment as a factory worker
in Taiwan. Dela Cuesta paid Valenciano PhP 20,000 as initial payment on May 20,
1996. On May 30, 1996, she paid Valenciano another PhP 20,000. On August 12,
1996, she paid PhP 15,000, and on August 21, 1996, she paid PhP 7,000.
Valenciano turned the May 20 and 30, 1996 payments over to Rodante, who
issued receipts for these payments. The payments made on August 12 and 21,
1996 were turned over to Teresita, who also issued receipts for them. These
payments were to cover the placement fee and other expenses for the processing
of the requirements for the employment of Dela Cuesta in Taiwan.
On May 1, 1996, Valenciano, with Rodante, Teresita, and Rommel Imperial, went
to Lian, Batangas to recruit workers for employment abroad. Candelaria applied
for a job as a factory worker in Taiwan when Valenciano went to his residence in
Lian.Valenciano asked him for an initial payment of PhP 20,000. On May 30, 1996,
Candelaria paid Valenciano PhP 20,000 when she returned to Lian. He then paid
PhP 20,000 on June 24, 1996 and PhP 29,000 on July 17, 1996 at Valencianos
residence in Manila.These payments were to cover the placement fee and the
expenses for the processing of his passport and other papers connected with his
application for employment as a factory worker in Taiwan. The payments made on
May 30 and July 17, 1996 were turned over to Rodante, who issued a receipt for
the said payments. The payment made on June 24, 1996 was turned over by
Valenciano to Teresita.

After the payments were made, Valenciano brought the prospective workers to
the office of Middle East International Manpower Resources, Inc. in Pasay City,
where they were made to fill out application forms for their employment as
factory workers in Taiwan. The complainants were introduced to Romeo Marquez,
alias Rodante Imperial, Teresita Marquez, alias Teresita Imperial, and Rommel
Marquez, alias Rommel Imperial, whom Valenciano made to appear as the owners
of the employment agency. She assured the prospective workers that they could
leave for Taiwan within one month from the filing of their applications. During the
period material, they have not yet found employment as factory workers
in Taiwan.

Valenciano, Rodante, Teresita, and Rommel were charged with the offense of
illegal recruitment in large scale, as defined under Article 13(b) of Presidential
Decree No. (PD) 442, otherwise known as the Labor Code of the Philippines, as
amended, in relation to Art. 38(a), and penalized under Art. 39(c) of the Code, as
amended by PD 1920 and PD 2018. The Information reads as follows:
That sometime in May, 1996 to August, 1996, or thereabout, in the City of Pasay, Metro
Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-
named accused, representing to have the capacity, authority or license to contract, enlist
and deploy or transport workers for overseas employment, conspiring, confederating,
and mutually helping each other, did then and there, wilfully, unlawfully and criminally
recruit and promise to deploy the herein complainants, namely, Agapito R. De Luna,
Allan Ilagan De Villa, Euziel N. Dela Cuesta and Eusebio T. Candelaria, as factory workers
in Taiwan, in exchange for placement, processing and other fees ranging from
P62,000.00 to P70,000.00 or a total of P271,000.00, without first obtaining the required
license and/or authority from the Philippine Overseas Employment Administration
(POEA).

CONTRARY TO LAW.[3]
Accused-appellant Valenciano pleaded not guilty and waived the pre-trial. The
other three accused remained at large.

The RTC found accused-appellant guilty, the dispositive portion of the decision
reading as follows:
WHEREFORE, accused Lourdes Valenciano y Dacuba is found guilty beyond reasonable
doubt of the offense of illegal recruitment in large scale as charged in the aforequoted
Information; and she is sentenced to suffer the penalty of life imprisonment and to pay a
fine of P100,000.00.

She is also ordered to indemnify complainants Agapito R. de Luna, Allan Ilagan de Villa,
Euziel N. dela Cuesta and Eusebio T. Candelaria the amounts of P70,000.00, P70,000.00,
P62,000.00 and P69,000.00, respectively, as reparation of the damage caused.

No other civil liability may be adjudged against the accused for lack of any factual or
legal basis therefor.

SO ORDERED.[4]

Accused-appellant appealed to this Court, but the case was transferred to

the CA through a Resolution dated September 6, 2004, following People v. Mateo.
[5]

The CA, in CA-G.R. CR-H.C. No. 01390, affirmed the decision of the trial
court finding accused-appellant guilty of the offense charged.

Hence, we have this appeal.

The Issues

Accused-appellant raises the following assignment of errors: (1) the lower court
gravely erred in not acquitting accused-appellant on reasonable doubt; and (2) the
lower court gravely erred in holding that a conspiracy exists between accused-
appellant and her co-accused.

The Courts Ruling

The appeal is without merit.

In her defense, accused-appellant claims that she was an ordinary employee of

Middle East International Manpower Resources, Inc., where her other co-accused
were the owners and managers. She also denies receiving payment from the
complainants; that had she promised employment in Taiwan, this promise was
made in the performance of her duties as a clerk in the company. She denies too
having knowledge of the criminal intent of her co-accused, adding that she might
even be regarded as a victim in the present case, as she was in good faith when
she made the promise.

Art. 13(b) of the Labor Code reads:

Recruitment and placement refers to any act of canvassing, enlisting, contracting,

transporting, utilizing, hiring or procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally or abroad, whether for profit
or not: Provided, That any person or entity which, in any manner, offers or promises for a
fee employment to two or more persons shall be deemed engaged in recruitment and
placement.

Art. 38(a) and (b) of the Labor Code reads as follows:

(a) Any recruitment activities, including the prohibited practices enumerated under
Article 34 of this Code, to be undertaken by non-licensees or non-holders of
authority shall be deemed illegal and punishable under Article 39 of this Code. x x
x

(b) Illegal recruitment when committed by a syndicate or in large scale shall be

considered an offense involving economic sabotage and shall be penalized in
accordance with Article 39 hereof.

Illegal recruitment is deemed committed by a syndicate if carried out by a group

of three (3) or more persons conspiring and/or confederating with one another in
carrying out any unlawful or illegal transaction, enterprise or scheme defined
under the first paragraph hereof. Illegal recruitment is deemed committed in large
scale if committed against three (3) or more persons individually or as a group.
 Art. 39(a) provides that the penalty of life imprisonment and a fine of PhP
100,000 shall be imposed if illegal recruitment constitutes economic sabotage as
defined above.

The claim of accused-appellant that she was a mere employee of her other
co-accused does not relieve her of liability. An employee of a company or
corporation engaged in illegal recruitment may be held liable as principal,
together with his employer, if it is shown that the employee actively and
consciously participated in illegal recruitment.[6] As testified to by the
complainants, accused-appellant was among those who met and transacted with
them regarding the job placement offers. In some instances, she made the effort
to go to their houses to recruit them. She even gave assurances that they would
be able to find employment abroad and leave for Taiwan after the filing of their
applications. Accused-appellant was clearly engaged in recruitment activities,
notwithstanding her gratuitous protestation that her actions were merely done in
the course of her employment as a clerk.

Accused-appellant cannot claim to be merely following the dictates of her

employers and use good faith as a shield against criminal liability. As held
in People v. Gutierrez:

Appellant cannot escape liability by claiming that she was not aware that before
working for her employer in the recruitment agency, she should first be registered with
the POEA. Illegal recruitment in large scale is malum prohibitum, not malum in se. Good
faith is not a defense.[7]

The claim of accused-appellant that she received no payment and that the
payments were handed directly over to her co-accused fails in the face of the
testimony of the complainants that accused-appellant was the one who received
the money. In spite of the receipts having been issued by her co-accused, the trial
court found that payments were directly made to accused-appellant, and this
finding was upheld by the CA. Nothing is more entrenched than the rule that
where, as here, the findings of fact of the trial court are affirmed by the CA, these
are final and conclusive upon this Court. [8] And even if it were true that no money
changed hands, money is not material to a prosecution for illegal recruitment, as
the definition of recruitment and placement in the Labor Code includes the
phrase, whether for profit or not. We held in People v. Jamilosa that it was
sufficient that the accused promises or offers for a fee employment to warrant
conviction for illegal recruitment.[9] Accused-appellant made representations that
complainants would receive employment abroad, and this suffices for her
conviction, even if her name does not appear on the receipts issued to
complainants as evidence that payment was made.

Neither accused-appellant nor her co-accused had authority to recruit

workers for overseas employment. The Philippine Overseas Employment
Administration (POEA), through its employee, Corazon Aquino, issued on July 8,
1997 the following certification to that effect:
This is to certify that per available records of this Office, MIDDLE EAST
INTERNATIONAL MANPOWER RESOURCES INC., with office address at 2119 P. Burgos St.,
cor. Gil Puyat Ave., Pasay City represented by SAPHIA CALAMATA ASAAD is a licensed
landbased agency whose license expired on October 13, 1996. Per record, said agency
has not filed any application for renewal of license.

Per available records, the names of RODANTE IMPERIAL a.k.a. ROMEO

MARQUEZ, TERESITA IMPERIAL a.k.a. TERESITA MARQUEZ, ROMMEL MARQUEZ a.k.a.
ROMMEL IMPERIAL and LOURDES VALENCIANO do not appear on the list of employees
submitted by agency.

This certification is being issued for whatever legal purpose it may serve. [10]

Another certification dated July 9, 1997 stated that accused-appellant in her

personal capacity was not licensed or authorized to recruit workers for overseas
employment and that any recruitment activities undertaken by her are illegal.
[11]
Accused-appellant could thus point to no authority allowing her to recruit
complainants, as she was not an employee of Middle East International
Manpower Resources, Inc. nor was she allowed to do so in her personal
capacity. Furthermore, she undertook recruitment activities outside the premises
of the office of a licensed recruitment agency, which can only be done with the
prior approval of the POEA, and neither she nor her co-accused had permission to
do so, as testified by Aquino of the POEA.[12]

Accused-appellant was convicted of Illegal Recruitment in Large Scale, and

there could be no other result. As held in Jamilosa:
To prove illegal recruitment in large scale, the prosecution is burdened to prove three (3)
essential elements, to wit: (1) the person charged undertook a recruitment activity
under Article 13(b) or any prohibited practice under Article 34 of the Labor Code; (2)
accused did not have the license or the authority to lawfully engage in the recruitment
and placement of workers; and (3) accused committed the same against three or more
persons individually or as a group.[13] x x x
 The RTC found accused-appellant to have undertaken recruitment activities,
and this was affirmed by the CA. A POEA certification was submitted stating that
accused-appellant was not authorized to recruit applicants for overseas
employment, and she did not contest this certification. In the present case, there
are four complainants: De Luna, De Villa, Dela Cuesta, and Candelaria.The three
essential elements for illegal recruitment in large scale are present. Thus, there
can be no other conclusion in this case but to uphold the conviction of accused-
appellant and apply the penalty as imposed by law.

WHEREFORE, premises considered, we AFFIRM the appealed CA Decision

dated July 24, 2007 in CA-G.R. CR-H.C. No. 01390, with no costs.
SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice
WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

 ARTURO D. BRION

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING

Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
REYNATO S. PUNO

Chief Justice

[1]
Penned by Associate Justice Marina L. Buzon and concurred in by Associate Justices Rosmari D. Carandang and
Mariflor P. Punzalan Castillo.
[2]
Penned by Judge Alfredo G. Gustilo.
[3]
Rollo, p. 3.
[4]
Id. at 99-100.
[5]
G.R. Nos. 147678-87, July 7, 2004, 433 SCRA 640.
[6]
People v. Cabais, G.R. 129070, March 16, 2001, 354 SCRA 553, 561.
[7]
G.R. No. 124439, February 5, 2004, 422 SCRA 32, 43-44.
[8]
Springsun Management Systems Corporation v. Camerino, G.R. No. 161029, January 19, 2005, 449 SCRA 65, 85.
[9]
G.R. No. 169076, January 23, 2007, 512 SCRA 340, 352.
[10]
Rollo, p. 7.
[11]
Id.
[12]
Id. at 9-10.
[13]
Supra note 9, at 351.
 SECOND DIVISION

PEOPLE OF THE PHILIPPINES, G.R. No. 179931

Appellee,
Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO,*

CARPIO MORALES,

BRION, and

ABAD, JJ.

NIDA ADESER y RICO, Promulgated:

Appellant.

October 26, 2009

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

DECISION

QUISUMBING, J.:

On appeal is the Decision[1] dated June 28, 2007, of the Court of Appeals in
CA-G.R. CR-H.C. No. 01902, affirming the Decision [2] dated May 2, 2005, of the
Regional Trial Court (RTC) of Pasay City, Branch 118 in Criminal Cases Nos. 03-2700
and 03-2701. The RTC convicted appellant of the crimes of syndicated illegal
recruitment constituting economic sabotage and estafa.

On November 12, 2003, the Office of the City Prosecutor of Pasay filed
before the RTC two Informations[3] against appellant Nida Adeser y Rico, Lourdes
Chang, and the spouses Roberto and Mel Tiongson. The Informations read as
follows:

Criminal Case No. 03-2700

That on or about and sometime in the month of May, 2003, in Pasay City, Metro Manila,
Philippines and within the jurisdiction of this Honorable Court, the above-named
 accused, conspiring and confederating together and mutually helping one another, by
means of false representation and fraudulent allegation to the effect that they could
secure employment abroad for complainant JOSEPHINE R. PALO, did then and there
wilfully, unlawfully and feloniously recruit for a fee aforesaid person without the
corresponding license from the Philippine Overseas Employment Administration, a
syndicated illegal recruitment involving economic sabotage.

Contrary to law.[4]

Criminal Case No. 03-2701

That on or about and sometime in the month of May, 2003, in Pasay City, Metro Manila,
Philippines and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring and confederating together and mutually helping one another,
defrauded private complainant JOSEPHINE R. PALO, in the following manner to wit: that
said accused, by means of false representations and fraudulent allegations that they
could facilitate private complainants working and travel papers, did then and there
wilfully, unlawfully, and feloniously ask, demand and receive from the said complainant
the amount of P80,000.00 as placement fee for the latters supposed deployment to
Australia as Apple Picker/Office Worker; and said private complainant carried away by
said misrepresentations, in fact gave and delivered to said accused the amount
of P80,000.00, which amount accused in turn misapplied, misappropriated and
converted to their own personal use and benefit, failing, however, to deploy private
complainant to Australia, and despite repeated demands accused failed and refused to
do so, or account for the said amount, to the damage and prejudice of the said private
complainant in the aforesaid amount of P80,000.00.

Contrary to law.[5]

Upon arraignment, appellant pleaded not guilty [6] to both charges while her
co-accused remained at large. Trial on the merits thereafter ensued.

Private complainant Josephine R. Palo and her sister Teresa Caraig testified
that sometime in November 2002, the spouses Roberto and Mel Tiongson, agents
of Naples Travel and Tours, introduced Palo to appellant, owner and general
manager of Naples, to discuss employment opportunities in Australia. During their
meeting held at the Naples office in Villaruel Tower, Villaruel Street, Pasay City,
appellant and the spouses Tiongson informed Palo that for a placement fee
of P80,000, she can work as an apple picker in Australia with a monthly salary of
$1,400.

Thus, on November 8, 2002, Palo and Caraig went to the Naples office and
gave Roberto Tiongson and Lourdes Chang, operations manager
of Naples, P15,000 as first installment for the placement fee. Palo was issued a
voucher[7] signed by Roberto and Chang stating therein that the P15,000 was for
Palos visa application.
 On November 11, 2002, Palo and Caraig returned to the Naples office and
paid P58,500. She was again issued a voucher[8]signed by Roberto and Chang
stating therein that the amount paid was for Palos visa application. Palo insisted
that the voucher should indicate that her payments were for placement fees but
they were able to convince her that it is not necessary because they know her.

After making her payments, she was required to submit her resume and
pictures and was promised that she would be employed within three months.

More than three months passed, however, but Palo was not deployed
to Australia. Neither did she get her Australian visa.

In May 2003, she learned from the National Bureau of Investigation (NBI)
that Naples had closed down. NBI likewise informed her that Naples had no
license to operate and deploy workers abroad. Upon advice of the NBI, Palo filed a
complaint[9]against appellant, the spouses Tiongson and Chang.

Appellant on the other hand denied the charges against her. She admitted
that she was the owner and general manager of Naples which was a travel agency
that offered visa assistance, ticketing, documentation, airport transfer and courier
services, but denied having engaged in recruitment. She claimed that she cannot
remember meeting Palo in her office and asserted that she met her for the first
time only at the fiscals office when Palo was already claiming for a refund. She
testified that Roberto, to whom Palo claims to have given her payment, was
neither her employee nor her agent but was only her drivers brother. Based on
her records, Roberto endorsed to her office P30,000 from Palo for tourist visa
assistance. Appellant also admitted that she and Roberto offered to settle
the P30,000 but not the amount claimed by Palo per vouchers issued to her.

On May 2, 2005, the trial court rendered a Decision finding appellant guilty
of both charges. The dispositive portion reads:

WHEREFORE, all the foregoing considered NIDA ADESER is hereby found GUILTY beyond
reasonable doubt of the crime of Syndicated Illegal Recruitment constituting Economic
Sabotage in Criminal Case No. 03-2700 and Estafa in Criminal Case No. 03-2701.
Accordingly, she is hereby sentenced to suffer the following penalties:

1. In Criminal Case No. 3-2700 LIFE IMPRISONMENT and a FINE of Five

Hundred Thousand Pesos (P500,000.00), and

2. In Criminal Case No. 03-2701 Indeterminate imprisonment of six (6) years

of prision correccional, as minimum, to 13 years of reclusion temporal, as maximum, and
to indemnify Josephine R. Palo the sum of Eighty Thousand Pesos (P80,000.00) with
legal interest from the time of the filing of the information.

Cost against the accused.

 SO ORDERED.[10]

Appellant appealed her conviction but the same was affirmed by the Court
of Appeals in its Decision dated June 28, 2007.The appellate court did not give
credence to appellants denials and found that the prosecution evidence fully
supports the finding that appellant and her co-accused engaged in recruitment
and placement as defined under the Labor Code despite having no authority to do
so. It likewise held that the same evidence proving the commission of the crime of
illegal recruitment also established that appellant and her co-accused acted in
unity in defrauding Palo and in misrepresenting to her that upon payment of the
placement fee, they could obtain employment abroad for her. The appellants act
of deception and the resultant damage suffered by Palo render appellant guilty
of estafa.

In this appeal, appellant raises the following lone assignment of error:

THE [APPELLATE] COURT GRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT OF
THE CRIME CHARGED DESPITE THE FAILURE OF THE PROSECUTION TO PROVE HER GUILT
BEYOND REASONABLE DOUBT.[11]

Essentially, the issue is whether appellants guilt for the crimes of syndicated
illegal recruitment and estafa was proven beyond reasonable doubt.

Appellant argues that she was able to prove that she was not part of the
group that defrauded Palo. She points out that as can be gleaned from the facts
established and even from Palos testimony, she was not involved in the evil
scheme orchestrated by Roberto and Chang as her signature did not even appear
on the vouchers issued to Palo.

Appellant likewise contends that the elements of the crime of illegal

recruitment were not established with moral certainty.Naples was never into
recruitment as it was only engaged in the business of assisting clients procure
passports and visas. She argues that it should be Roberto and Chang who should
be convicted as she had no hand in recruiting Palo.

Appellants arguments are bereft of merit.

Illegal recruitment is committed when these two elements concur: (1) the
offenders have no valid license or authority required by law to enable them to
lawfully engage in the recruitment and placement of workers, and (2) the
offenders undertake any activity within the meaning of recruitment and
placement defined in Article 13(b) or any prohibited practices enumerated in
Article 34 of the Labor Code. Under Article 13(b), recruitment and placement
refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring
or procuring workers and includes referrals, contract services, promising or
advertising for employment, locally or abroad, whether for profit or not. In the
simplest terms, illegal recruitment is committed by persons who, without
authority from the government, give the impression that they have the power to
send workers abroad for employment purposes. [12] The law imposes a higher
penalty when the crime is committed by a syndicate as it is considered as an
offense involving economic sabotage. Illegal recruitment is deemed committed by
a syndicate if carried out by a group of three (3) or more persons conspiring
and/or confederating with one another in carrying out any unlawful or illegal
transaction, enterprise or scheme defined under the first paragraph of Article 38
of the Labor Code.[13]

Undoubtedly, what transpired in the instant case is illegal recruitment by a

syndicate. As categorically testified by Palo and Caraig, appellant, together with
her co-accused, made representations to Palo that they could send her
to Australia to work as an apple picker. There is no denying that they gave Palo the
distinct impression that they had the power or ability to send her abroad for work
such that the latter was convinced to part with a huge amount of money as
placement fee in order to be employed. And this act was committed by appellant
and her co-accused even if they did not have the required license to do
so. Appellant herself admitted that Naples, the travel agency which she owned
and managed, only offered visa assistance, ticketing, documentation, airport
transfer and courier services. Clearly, neither she nor her agents had a license to
recruit Palo to work abroad. It is the lack of the necessary license or authority that
renders the recruitment unlawful or criminal.[14]

Thus, as against the positive and categorical testimonies of Palo and Caraig,
appellants denials cannot prevail.[15] Moreover, there is no reason to overturn the
trial and appellate courts findings on the credibility of the prosecution witnesses
as there is no showing that any of them had ill motives against appellant or her
co-accused and especially since it appears they were motivated solely by the
desire to bring appellant and her co-accused to justice for the crimes they have
committed.[16]

Neither can this Court sustain appellants contention that her participation
in the recruitment is negated by the fact that her signature does not even appear
on the vouchers issued to Palo. Even if Palo did not present receipts signed by
appellant, this would not rule out the fact that appellant did receive the
money. This Court has consistently ruled that absence of receipts as to the
amounts delivered to a recruiter does not mean that the recruiter did not accept
or receive such payments. Neither in the Statute of Frauds nor in the rules of
evidence is the presentation of receipts required in order to prove the existence of
a recruitment agreement and the procurement of fees in illegal recruitment
cases. Such proof may come from the credible testimonies of witnesses [17] as in
the case at bar.
 We likewise uphold appellants conviction for estafa. A person who is
convicted of illegal recruitment may also be convicted of estafa under Article
315(2) (a) of the Revised Penal Code provided the elements of estafa are
present. Estafa under Article 315, paragraph 2(a) of the Revised Penal Code is
committed by any person who defrauds another by using a fictitious name, or
falsely pretends to possess power, influence, qualifications, property, credit,
agency, business or imaginary transactions, or by means of similar deceits
executed prior to or simultaneously with the commission of the fraud. The
offended party must have relied on the false pretense, fraudulent act or
fraudulent means of the accused and as a result thereof, the offended party
suffered damage.[18]

Such is the case before us. Palo parted with her money upon the prodding
and enticement of appellant and her co-accused on the false pretense that they
had the capacity to deploy her for employment in Australia. Unfortunately,
however, Palo was not able to work abroad nor get her Australian visa. Worse, she
did not get her money back.

As to the penalties, Section 7 of Republic Act No. 8042 [19] or the Migrant
Workers Act of 1995 provides the penalties for illegal recruitment:
SEC. 7. Penalties.

(a) Any person found guilty of illegal recruitment shall suffer the penalty
of imprisonment of not less than six (6) years and one (1) day but not more than
twelve (12) years and a fine not less than Two hundred thousand pesos
(P200,000.00) nor more than Five hundred thousand pesos (P500,000.00).

(b) The penalty of life imprisonment and a fine of not less than Five
hundred thousand pesos (P500,000.00) nor more than One million pesos
(P1,000,000.00) shall be imposed if illegal recruitment constitutes economic
sabotage as defined herein. (Emphasis supplied.)

xxxx

As appellant was found guilty of syndicated illegal recruitment constituting

economic sabotage, she was aptly meted out the penalty of life imprisonment and
to pay a fine of P500,000.

With respect to the estafa case, Article 315 of the Revised Penal Code
reads:
ART. 315. Swindling (estafa). Any person who shall defraud another by any of
the means mentioned hereinbelow shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision

mayor in its minimum period, if the amount of the fraud is over 12,000 pesos but does
not exceed 22,000 pesos; and if such amount exceeds the latter sum, the penalty
provided in this paragraph shall be imposed in its maximum period, adding one year for
each additional 10,000 pesos; but the total penalty which may be imposed shall not
 exceed twenty years. In such cases, and in connection with the accessory penalties
which may be imposed and for the purpose of the other provisions of this Code, the
penalty shall be termed prision mayor or reclusion temporal, as the case may be;

xxxx

Considering that the total amount paid by Palo is P73,500 or P51,500 in

excess of the P22,000 limit, an additional sentence of five years should be
imposed based on the above-quoted provision. Thus, appellant was correctly
meted the maximum penalty of 13 years of reclusion temporal.

As to the amount to be indemnified to Palo, contrary to the findings of the

trial and appellate courts, Palos testimony and the vouchers she presented
establish that the total amount she paid is only P73,500[20] and not the P80,000
quoted as placement fee.Thus, she should only be indemnified the said amount,
plus legal interest of 12% per annum from the time of filing of the information. [21]

WHEREFORE, the appeal is DENIED. The Decision dated June 28, 2007 of
the Court of Appeals in CA-G.R. CR-H.C. No. 01902 is hereby AFFIRMED with
MODIFICATION. The amount to be indemnified to private complainant Josephine
R. Palo is reduced to Seventy-Three Thousand Five Hundred Pesos (P73,500) with
legal interest of 12% per annum from the time of filing of the information until
fully paid.

No pronouncement as to costs.

SO ORDERED.

LEONARDO A. QUISUMBINGAssociate
Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice
 CONCHITA CARPIO MORALES ARTURO D. BRION

Associate Justice Associate Justice

ROBERTO A. ABAD

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

*
Additional member per Special Order No. 757.
[1]
Rollo, pp. 2-15. Penned by Associate Justice Romeo F. Barza, with Associate Justices Mariano C. Del Castillo
(now a member of this Court) and Arcangelita M. Romilla-Lontok concurring.
[2]
CA rollo, pp. 61-72. Penned by Judge Pedro B. Corales.
[3]
Records, Vol. 1, pp. 1-2; Records, Vol. 2, pp. 1-2.
[4]
Records, Vol. 1, p. 1.
[5]
Records, Vol. 2, p. 1.
[6]
Records, Vol. 1, p. 20; Records, Vol. 2, p. 23.
[7]
Records, Vol. 1. p. 9.
[8]
Id.
[9]
Records, Vol. 2, p. 8.
[10]
CA rollo, pp. 71-72.
[11]
Id. at 48.
[12]
People v. Lapis, G.R. Nos. 145734-35, October 15, 2002, 391 SCRA 131, 141-142.
[13]
People v. Hernandez, G.R. Nos. 141221-36, March 7, 2002, 378 SCRA 593, 610.
[14]
People v. Borromeo, G.R. No. 117154, March 25, 1999, 305 SCRA 180, 202, citing People v. Seoron, G.R. No.
119160, January 30, 1997, 267 SCRA 278, 286.
[15]
People v. Mercado, G.R. Nos. 108440-42, March 11, 1999, 304 SCRA 504, 527.
[16]
People v. Sagaydo, G.R. Nos. 124671-75, September 29, 2000, 341 SCRA 329, 337.
[17]
People v. Alvarez, G.R. No. 142981, August 20, 2002, 387 SCRA 448, 464-465, citing People v. Pabalan, G.R.
Nos. 115350 and 117819-21, September 30, 1996, 262 SCRA 574, 585.
[18]
People v. Hernandez, supra note 13, at 611.
[19]
AN ACT TO INSTITUTE THE POLICIES OF OVERSEAS EMPLOYMENT AND ESTABLISH A HIGHER
STANDARD OF PROTECTION AND PROMOTION OF THE WELFARE OF MIGRANT WORKERS,
THEIR FAMILIES AND OVERSEAS FILIPINOS IN DISTRESS, AND FOR OTHER PURPOSES, approved
on June 7, 1995.
[20]
Records, Vol. 1, p. 9.
[21]
People v. Billaber, G.R. Nos. 114967-68, January 26, 2004, 421 SCRA 27, 43-44.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 170139 August 5, 2014

SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,

vs.
JOY C. CABILES, Respondent.

DECISION

LEONEN, J.:

This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and the law, to
approximate justice for her.

We are asked to decide a petition for review on certiorari assailing the Court of Appeals’ decision dated June 27,
1 2

2005. This decision partially affirmed the National Labor RelationsCommission’s resolution dated March 31,
2004, declaring respondent’s dismissal illegal, directing petitioner to pay respondent’s three-month salary equivalent
3

to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from respondent, and
pay her NT$300.00 attorney’s fees. 4

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency. Responding to an ad it 5

published, respondent, Joy C. Cabiles, submitted her application for a quality control job in Taiwan. 6

Joy’s application was accepted. Joy was later asked to sign a oneyear employment contract for a monthly salary of
7

NT$15,360.00. She alleged that Sameer Overseas Agency required her to pay a placement fee of ₱70,000.00 when
8

she signed the employment contract. 9

Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997. She alleged that in her 10

employment contract, she agreed to work as quality control for one year. In Taiwan, she was asked to work as a
11

cutter.
12

Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from Wacoal informedJoy,
without prior notice, that she was terminated and that "she should immediately report to their office to get her salary
and passport." She was asked to "prepare for immediate repatriation."
13 14

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of NT$9,000. According to 15

her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila. 16

On October 15, 1997, Joy filed a complaint with the National Labor Relations Commission against petitioner and
17

Wacoal. She claimed that she was illegally dismissed. She asked for the return of her placement fee, the withheld
18

amount for repatriation costs, payment of her salary for 23 months as well as moral and exemplary damages. She 19

identified Wacoal as Sameer Overseas Placement Agency’s foreign principal. 20

Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency, negligence in
her duties, and her "failure to comply with the work requirements [of] her foreign [employer]." The agency also 21

claimed that it did not ask for a placement fee of ₱70,000.00. As evidence, it showedOfficial Receipt No. 14860
22

dated June 10, 1997, bearing the amount of ₱20,360.00. Petitioner added that Wacoal's accreditation with petitioner
23

had already been transferred to the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6,
1997. Thus, petitioner asserts that it was already substituted by Pacific Manpower.
24 25

Pacific Manpower moved for the dismissal of petitioner’s claims against it. It alleged that there was no employer-
26

employee relationship between them. Therefore, the claims against it were outside the jurisdiction of the Labor
27

Arbiter. Pacific Manpower argued that the employment contract should first be presented so that the employer’s
28

contractual obligations might be identified. It further denied that it assumed liability for petitioner’s illegal acts.
29 30

On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint. Acting Executive Labor Arbiter Pedro C.Ramos ruled
31

that her complaint was based on mereallegations. The Labor Arbiter found that there was no excess payment of
32

placement fees, based on the official receipt presented by petitioner. The Labor Arbiter found unnecessary a
33

discussion on petitioner’s transfer of obligations to Pacific and considered the matter immaterial in view of the
34

dismissal of respondent’s complaint. 35

Joy appealed to the National Labor Relations Commission.

36
In a resolution dated March 31, 2004, the National Labor Relations Commission declared that Joy was illegally
37

dismissed. It reiterated the doctrine that the burden of proof to show that the dismissal was based on a just or valid
38

cause belongs to the employer. It found that Sameer Overseas Placement Agency failed to prove that there were
39

just causes for termination. There was no sufficient proofto show that respondent was inefficient in her work and that
40

she failed to comply with company requirements. Furthermore, procedural dueprocess was not observed in
41

terminating respondent. 42

The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees for lack of
jurisdiction. It refused to entertain the issue of the alleged transfer of obligations to Pacific. It did not acquire
43 44

jurisdiction over that issue because Sameer Overseas Placement Agency failed to appeal the Labor Arbiter’s decision
not to rule on the matter. 45

The National Labor Relations Commission awarded respondent only three (3) months worth of salaryin the amount of
NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorney’s fees of NT$300. 46

The Commission denied the agency’s motion for reconsideration dated May 12, 2004 through a resolution dated
47 48

July 2, 2004.

Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition for certiorari with the
49

Court of Appeals assailing the National Labor Relations Commission’s resolutions dated March 31, 2004 and July 2,
2004.

The Court of Appeals affirmed the decision of the National Labor Relations Commission with respect to the finding of
50

illegal dismissal, Joy’s entitlement to the equivalent of three months worth of salary, reimbursement of withheld
repatriation expense, and attorney’s fees. The Court of Appeals remanded the case to the National Labor Relations
51

Commission to address the validity of petitioner's allegations against Pacific. The Court of Appeals held, thus:
52

Although the public respondent found the dismissal of the complainant-respondent illegal, we should point out that
the NLRC merely awarded her three (3) months backwages or the amount of NT$46,080.00, which was based upon
its finding that she was dismissed without due process, a finding that we uphold, given petitioner’s lack of worthwhile
discussion upon the same in the proceedings below or before us. Likewise we sustain NLRC’s finding in regard to the
reimbursement of her fare, which is squarely based on the law; as well as the award of attorney’s fees.

But we do find it necessary to remand the instant case to the public respondent for further proceedings, for the
purpose of addressing the validity or propriety of petitioner’s third-party complaint against the transferee agent or the
Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should emphasize that as far as the
decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby affirmed with finality, and we
hold petitioner liable thereon, but without prejudice to further hearings on its third party complaint against Pacific for
reimbursement.

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in accordance with the
foregoing discussion, but subject to the caveat embodied inthe last sentence. No costs.

SO ORDERED. 53

Dissatisfied, Sameer Overseas Placement Agency filed this petition. 54

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the National Labor
Relations Commission finding respondent illegally dismissed and awarding her three months’ worth of salary, the
reimbursement of the cost ofher repatriation, and attorney’s fees despite the alleged existence of just causes of
termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that respondent
was inefficient in her work. 55

Therefore, it claims that respondent’s dismissal was valid. 56

Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the time respondent
filed her complaint, it should be Pacific that should now assume responsibility for Wacoal’s contractual obligations to
the workers originally recruited by petitioner. 57

Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s dismissal. The
employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work. They may also impose
58

reasonable rules to ensure that the employees comply with these standards. Failure to comply may be a just cause
59

for their dismissal. Certainly, employers cannot be compelled to retain the services of anemployee who is guilty of
60
acts that are inimical to the interest of the employer. While the law acknowledges the plight and vulnerability of
61

workers, it does not "authorize the oppression or self-destruction of the employer." Management prerogative is
62

recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is "tempered with the employee’s right to security of
tenure." Workers are entitled to substantive and procedural due process before termination. They may not be
63

removed from employment without a validor just cause as determined by law and without going through the proper
procedure.

Security of tenure for labor is guaranteed by our Constitution. 64

Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With respect
to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.Thus, in Triple Eight Integrated
Services, Inc. v. NLRC, this court noted:
65

Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana was
working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently, petitioner hopes
tomake it appear that the labor laws of Saudi Arabia do not require any certification by a competent public health
authority in the dismissal of employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs in this
jurisdiction. There is no question that the contract of employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this
case.Furthermore, settled is the rule that the courts of the forum will not enforce any foreign claim obnoxious to the
forum’s public policy. Herein the Philippines, employment agreements are more than contractual in nature. The
Constitution itself, in Article XIII, Section 3, guarantees the special protection of workers, to wit:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. Theyshall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

....

This public policy should be borne in mind in this case because to allow foreign employers to determine for and by
themselves whether an overseas contract worker may be dismissed on the ground of illness would encourage illegal
or arbitrary pretermination of employment contracts. (Emphasis supplied, citation omitted)
66

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines, Inc. v.
NLRC, to wit:
67

Petitioners admit that they did notinform private respondent in writing of the charges against him and that they failed
to conduct a formal investigation to give him opportunity to air his side. However, petitioners contend that the twin
requirements ofnotice and hearing applies strictly only when the employment is within the Philippines and that these
need not be strictly observed in cases of international maritime or overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford protection to
labor apply to Filipino employees whether working within the Philippines or abroad. Moreover, the principle of lex loci
contractus (the law of the place where the contract is made) governs in this jurisdiction. In the present case, it is not
disputed that the Contract of Employment entered into by and between petitioners and private respondent was
executed here in the Philippines with the approval of the Philippine Overseas Employment Administration (POEA).
Hence, the Labor Code together with its implementing rules and regulations and other laws affecting labor apply in
this case. (Emphasis supplied, citations omitted)
68

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause and after
compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:

Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

 (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties may, therefore,
69

constitute a just cause for termination under Article 282(b), but only if petitioner was able to prove it.

The burden of proving that there is just cause for termination is on the employer. "The employer must affirmatively
show rationally adequate evidence that the dismissal was for a justifiable cause." Failure to show that there was
70

valid or just cause for termination would necessarily mean that the dismissal was illegal. 71

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the employer has set
standards of conduct and workmanship against which the employee will be judged; 2) the standards of conduct and
workmanship must have been communicated tothe employee; and 3) the communication was made at a reasonable
time prior to the employee’s performance assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination ofthe employee only
when there is "just cause or when [the probationary employee] fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to the employee at the time of his [or her] engagement." 72

However, we do not see why the application of that ruling should be limited to probationary employment. That rule is
basic to the idea of security of tenure and due process, which are guaranteed to all employees, whether their
employment is probationary or regular.

The pre-determined standards that the employer sets are the bases for determining the probationary employee’s
fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires that the probationary
employee be informed of such standards at the time of his or her engagement so he or she can adjusthis or her
character or workmanship accordingly. Proper adjustment to fit the standards upon which the employee’s
qualifications will be evaluated will increase one’s chances of being positively assessed for regularization by his or
her employer.

Assessing an employee’s work performance does not stop after regularization. The employer, on a regular basis,
determines if an employee is still qualified and efficient, based on work standards. Based on that determination, and
after complying with the due process requirements of notice and hearing, the employer may exercise its management
prerogative of terminating the employee found unqualified.

The regular employee must constantlyattempt to prove to his or her employer that he or she meets all the standards
for employment. This time, however, the standards to be met are set for the purpose of retaining employment or
promotion. The employee cannot be expected to meet any standard of character or workmanship if such standards
were not communicated to him or her. Courts should remain vigilant on allegations of the employer’s failure to
communicatework standards that would govern one’s employment "if [these are] to discharge in good faith [their] duty
to adjudicate."73

In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s work requirements
and was inefficient in her work. No evidence was shown to support such allegations. Petitioner did not even bother
74

to specify what requirements were not met, what efficiency standards were violated, or what particular acts of
respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which her work
efficiency and performance were judged. The parties’ conflict as to the position held by respondent showed that even
the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for termination. There is
no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not onlyfailure on
the partof petitioner to comply with the requirement of the existence of just cause for termination. They patently show
that the employersdid not comply with the due process requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal. The employer is
75

required to give the charged employee at least two written notices before termination. One of the written notices
76

must inform the employee of the particular acts that may cause his or her dismissal. The other notice must "[inform]
77
the employee of the employer’s decision." Aside from the notice requirement, the employee must also be given "an
78

opportunity to be heard."79

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working on June 26,
1997. She was told that she was terminated on July 14, 1997 effective on the same day and barely a month from her
first workday. She was also repatriated on the same day that she was informed of her termination. The abruptness of
the termination negated any finding that she was properly notified and given the opportunity to be heard. Her
constitutional right to due process of law was violated.

II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired portion ofthe
employment contract that was violated together with attorney’s fees and reimbursement of amounts withheld from her
salary.

Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas Filipinos Act of1995,
states thatoverseas workers who were terminated without just, valid, or authorized cause "shall be entitled to the full
reimbursement of his placement fee with interest of twelve (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less."

Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-employee relationship or
by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral,
exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provisions [sic] shall be incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors
and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation orpartnership
for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be affected
by any substitution, amendment or modification made locally or in a foreign country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under this
section shall be paid within four (4) months from the approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

....

(Emphasis supplied)

Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his [or her] personal
belongings shall be the primary responsibility of the agency which recruited or deployed the worker overseas." The
exception is when "termination of employment is due solely to the fault of the worker," which as we have established,
80

is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. – The
repatriation of the worker and the transport of his personal belongings shall be the primary responsibility of the
agency which recruited or deployed the worker overseas. All costs attendant to repatriation shall be borne by or
charged to the agency concerned and/or its principal. Likewise, the repatriation of remains and transport of the
personal belongings of a deceased worker and all costs attendant thereto shall be borne by the principal and/or local
agency. However, in cases where the termination of employment is due solely to the fault of the worker, the
principal/employer or agency shall not in any manner be responsible for the repatriation of the former and/or his
belongings.

....

The Labor Code also entitles the employee to 10% of the amount of withheld wages as attorney’s feeswhen the
81

withholding is unlawful.

The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award respondent
NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00, and the reimbursement of
the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the three-month equivalent of
respondent’s salary should, however, be increased to the amount equivalent to the unexpired term of the employment
contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., this court ruled that the clause "or for
82

three (3) months for every year of the unexpired term, whichever is less" is unconstitutional for violating the equal
83

protection clause and substantive due process. 84

A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is inoperative as if it has not been passed at all."
85

We are aware that the clause "or for three (3) months for every year of the unexpired term, whichever is less"was
reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7 of Republic Act
No. 10022 provides:

Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:

SEC. 10. Money Claims.– Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall endeavor to update and
keep abreast with the developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a
condition precedent for its approval. The performance bond to de [sic] filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and
damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be affected
by any substitution, amendment or modification made locally or in a foreign country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under this
section shall be paid within thirty (30) days from approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
or any unauthorized deductions from the migrant worker’s salary, the worker shall be entitled to the full
reimbursement if [sic] his placement fee and the deductions made with interest at twelve percent (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

In case of a final and executory judgement against a foreign employer/principal, it shall be automatically disqualified,
without further proceedings, from participating in the Philippine Overseas Employment Program and from recruiting
and hiring Filipino workers until and unless it fully satisfies the judgement award.

Noncompliance with the mandatory periods for resolutions of case providedunder this section shall subject the
responsible officials to any or all of the following penalties:

(a) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.

Provided, however,That the penalties herein provided shall be without prejudice to any liability which any such official
may have incured [sic] under other existing laws or rules and regulations as a consequence of violating the provisions
of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause in
Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from work in 1997. Republic Act
86

No. 8042 before it was amended byRepublic Act No. 10022 governs this case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their proper context
before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause already declared
as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of Appeals.At
minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment in this case, further
frustrating remedies to assuage the wrong done to petitioner.

Hence, there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the protection and
enforcement of constitutional rights." When cases become mootand academic, we do not hesitate to provide for
87

guidance to bench and bar in situations where the same violations are capable of repetition but will evade review.
This is analogous to cases where there are millions of Filipinos working abroad who are bound to suffer from the lack
of protection because of the restoration of an identical clause in a provision previously declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its powers
in any manner inconsistent with the Constitution, regardless of the existence of any law that supports such exercise.
The Constitution cannot be trumped by any other law. All laws must be read in light of the Constitution. Any law that is
inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the nullity cannot be
cured by reincorporation or reenactment of the same or a similar law or provision. A law or provision of law that was
already declared unconstitutional remains as such unless circumstances have sochanged as to warrant a reverse
conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to cause us
to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases. The new law puts
our overseas workers in the same vulnerable position as they were prior to Serrano. Failure to reiterate the very ratio
decidendi of that case will result in the same untold economic hardships that our reading of the Constitution intended
to avoid. Obviously, we cannot countenance added expenses for further litigation thatwill reduce their hardearned
wages as well as add to the indignity of having been deprived of the protection of our laws simply because our
precedents have not been followed. There is no constitutional doctrine that causes injustice in the face of empty
procedural niceties. Constitutional interpretation is complex, but it is never unreasonable.

Thus, in a resolution dated October 22, 2013, we ordered the parties and the Office of the Solicitor General to
88

comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment, petitioner argued that the clause was constitutional. The legislators intended a balance between the
89 90

employers’ and the employees’ rights by not unduly burdening the local recruitment agency. Petitioner is also of the
91

view that the clause was already declared as constitutional in Serrano. 92

The Office of the Solicitor General also argued that the clause was valid and constitutional. However, since the
93

parties never raised the issue of the constitutionality of the clause asreinstated in Republic Act No. 10022, its
contention is that it is beyond judicial review. 94

On the other hand, respondentargued that the clause was unconstitutional because it infringed on workers’ right to
contract.95

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the constitutional
rights to equal protection and due process. Petitioner as well as the Solicitor General have failed to show any
96

compelling changein the circumstances that would warrant us to revisit the precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered by anillegally
dismissed overseas worker to three months is both a violation of due process and the equal protection clauses of the
Constitution.

Equal protection of the law is a guarantee that persons under like circumstances and falling within the same class are
treated alike, in terms of "privileges conferred and liabilities enforced." It is a guarantee against "undue favor and
97

individual or class privilege, as well as hostile discrimination or the oppression of inequality." 98

In creating laws, the legislature has the power "to make distinctions and classifications." 99

In exercising such power, it has a wide discretion. 100

The equal protection clause does not infringe on this legislative power. A law is void on this basis, only if
101

classifications are made arbitrarily. There is no violation of the equal protection clause if the law applies equally to
102

persons within the same class and if there are reasonable grounds for distinguishing between those falling within the
class and those who do not fall within the class. A law that does not violate the equal protection clause prescribesa
103

reasonable classification. 104

A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the purposes of the law;
(3) must not be limited to existing conditions only; and (4) must apply equally to all members of the same class." 105

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between fixed-period
overseas workers and fixedperiod local workers. It also distinguished between overseas workers with employment
106

contracts of less than one year and overseas workers with employment contracts of at least one year. Within the 107

class of overseas workers with at least one-year employment contracts, there was a distinction between those with at
least a year left in their contracts and those with less than a year left in their contracts when they were illegally
dismissed. 108

The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative classification which
impermissibly interferes with the exercise of a fundamental right or operates to the peculiar disadvantage of a suspect
class."109

Under the Constitution, labor is afforded special protection. Thus, this court in Serrano, "[i]mbued with the same
110

sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict judicial scrutiny, for it
perceive[d] in the subject clause a suspect classification prejudicial to OFWs." 111

We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of illegally terminated
overseas and local workers with fixed-term employment werecomputed in the same manner. Their money claims 112

were computed based onthe "unexpired portions of their contracts." The adoption of the reinstated clause in
113

Republic Act No. 8042 subjected the money claims of illegally dismissed overseas workers with an unexpired term of
at least a year to a cap of three months worth of their salary. There was no such limitation on the money claims of
114

illegally terminated local workers with fixed-term employment. 115

We observed that illegally dismissed overseas workers whose employment contracts had a term of less than one
year were granted the amount equivalent to the unexpired portion of their employment contracts. Meanwhile, 116

illegally dismissed overseas workers with employment terms of at least a year were granted a cap equivalent to three
months of their salary for the unexpired portions of their contracts. 117

Observing the terminologies used inthe clause, we also found that "the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed
with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof,
while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the
reinstated clause, and their monetary benefits limited to their salaries for three months only." 118

We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial distinctions
that would justify different treatments in terms of the computation of money claims resulting from illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the period agreed
upon in their contracts. This means that they cannot be dismissed before the end of their contract terms without due
process. If they were illegally dismissed, the workers’ right to security of tenure is violated.

The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than norless than
the rights violated when a fixed-period overseas worker is illegally terminated. It is state policy to protect the rights of
workers withoutqualification as to the place of employment. In both cases, the workers are deprived of their
119

expected salary, which they could have earned had they not been illegally dismissed. For both workers, this
deprivation translates to economic insecurity and disparity. The same is true for the distinctions between overseas
120

workers with an employment contract of less than one year and overseas workers with at least one year of
employment contract, and between overseas workers with at least a year left in their contracts and overseas workers
with less than a year left in their contracts when they were illegally dismissed.

For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual employeeswho can
never acquire regular employment status, unlike local workers" because it already justifies differentiated treatment
121

in terms ofthe computation of money claims. 122

Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify a differentiated
treatment in the computation of their money claims. If anything, these issues justify an equal, if not greater
123

protection and assistance to overseas workers who generally are more prone to exploitation given their physical
distance from our government.

We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a higher standard
of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos in distress, and for
other purposes." Further, we find specious the argument that reducing the liability of placement agencies "redounds
124

to the benefit of the [overseas] workers." 125

Putting a cap on the money claims of certain overseas workers does not increase the standard of protection afforded
to them. On the other hand, foreign employers are more incentivizedby the reinstated clause to enter into contracts of
at least a year because it gives them more flexibility to violate our overseas workers’ rights. Their liability for arbitrarily
terminating overseas workers is decreased at the expense of the workers whose rights they violated. Meanwhile,
these overseas workers who are impressed with an expectation of a stable job overseas for the longer contract
period disregard other opportunities only to be terminated earlier. They are left with claims that are less than what
others in the same situation would receive. The reinstated clause, therefore, creates a situation where the law meant
to protect them makes violation of rights easier and simply benign to the violator.

As Justice Brion said in his concurring opinion in Serrano:

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden twist affecting
the principal/employer’s liability. While intended as an incentive accruing to recruitment/manning agencies, the law, as
worded, simply limits the OFWs’ recovery in wrongfuldismissal situations. Thus, it redounds to the benefit of whoever
may be liable, including the principal/employer – the direct employer primarily liable for the wrongful dismissal. In this
sense, Section 10 – read as a grant of incentives to recruitment/manning agencies – oversteps what it aims to do by
effectively limiting what is otherwise the full liability of the foreign principals/employers. Section 10, in short, really
operates to benefit the wrong party and allows that party, without justifiable reason, to mitigate its liability for wrongful
dismissals. Because of this hidden twist, the limitation ofliability under Section 10 cannot be an "appropriate"
incentive, to borrow the term that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose
clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to encourage greater
efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits their liability for the wrongful
dismissals of already deployed OFWs. This is effectively a legally-imposed partial condonation of their liability to
OFWs, justified solely by the law’s intent to encourage greater deployment efforts. Thus, the incentive,from a more
practical and realistic view, is really part of a scheme to sell Filipino overseas labor at a bargain for purposes solely of
attracting the market. . . .

The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits accruing to the
recruitment/manning agencies and their principals are takenfrom the pockets of the OFWs to whom the full salaries
for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the recruitment/manning
agencies even profit from their violation of the security of tenure that an employment contract embodies. Conversely,
lesser protection is afforded the OFW, not only because of the lessened recovery afforded him or her by operation of
law, but also because this same lessened recovery renders a wrongful dismissal easier and less onerous to
undertake; the lesser cost of dismissing a Filipino will always bea consideration a foreign employer will take into
account in termination of employment decisions. . . . 126

Further, "[t]here can never be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector is composed of private
businesses suchas placement agencies, while the disadvantaged sector is composed ofOFWs whose protection no
less than the Constitution commands. The idea thatprivate business interest can be elevated to the level of a
compelling state interest is odious." 127

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any discernable valid purpose. 128

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with Section
10 of Republic Act No. 8042. The award of the three-month equivalence of respondent’s salary must be modified
accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997, respondent is entitled
to her salary from July 15, 1997 to June 25, 1998. "To rule otherwise would be iniquitous to petitioner and other
OFWs, and would,in effect, send a wrong signal that principals/employers and recruitment/manning agencies may
violate an OFW’s security of tenure which an employment contract embodies and actually profit from such violation
based on an unconstitutional provision of law." 129

III

On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the interest
rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies in this case. The pertinent portions
of Circular No. 799, Series of 2013, read: The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rateof interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended
accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal interest in
Nacar v. Gallery Frames: 130

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of
the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the rate of interest fixed therein. 131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in judgments when
there is no stipulation on the applicable interest rate. Further, it is only applicable if the judgment did not become final
and executory before July 1, 2013. 132

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko Sentral ng
Pilipinas has the power to set or limit interest rates, these interest rates do not apply when the law provides that a
133

different interest rate shall be applied. "[A] Central Bank Circular cannot repeal a law. Only a law can repeal another
law."
134

For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers are entitled
to the reimbursement of his or her placement fee with an interest of 12% per annum. Since Bangko Sentral ng
Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance of Circular No. 799 does not have the effect of
changing the interest on awards for reimbursement of placement fees from 12% to 6%. This is despite Section 1 of
Circular No. 799, which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat them. They do not
even have to be referred to. Every contract, thus, contains not only what has been explicitly stipulated, but the
statutory provisions that have any bearing on the matter." There is, therefore, an implied stipulation in contracts
135

between the placement agency and the overseasworker that in case the overseas worker is adjudged as entitled to
reimbursement of his or her placement fees, the amount shall be subject to a 12% interest per annum. This implied
stipulation has the effect of removing awards for reimbursement of placement fees from Circular No. 799’s coverage.

The same cannot be said for awardsof salary for the unexpired portion of the employment contract under Republic
Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide for a specific interest
rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of Republic Act No. 8042 shall be
subject to the 6% interest per annum in accordance with Circular No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims from the finality of
this judgment.

IV

Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that facilitated
respondent’s overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and the
local employment agency are jointly and severally liable for money claims including claims arising out of an employer-
employee relationship and/or damages. This section also provides that the performance bond filed by the local
agency shall be answerable for such money claims or damages if they were awarded to the employee.
This provision is in line with the state’s policy of affording protection to labor and alleviating workers’ plight. 136

In overseas employment, the filing of money claims against the foreign employer is attended by practical and legal
complications. The distance of the foreign employer alonemakes it difficult for an overseas worker to reach it and
1âwphi1

make it liable for violations of the Labor Code. There are also possible conflict of laws, jurisdictional issues, and
procedural rules that may be raised to frustrate an overseas worker’sattempt to advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an indispensable
party without which no final determination can be had of an action. 137

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995 assures
overseas workers that their rights will not be frustrated with these complications. The fundamental effect of joint and
several liability is that "each of the debtors is liable for the entire obligation." A final determination may, therefore, be
138

achieved even if only oneof the joint and several debtors are impleaded in an action. Hence, in the case of overseas
employment, either the local agency or the foreign employer may be sued for all claims arising from the foreign
employer’s labor law violations. This way, the overseas workers are assured that someone — the foreign employer’s
local agent — may be made to answer for violationsthat the foreign employer may have committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in law despite
the circumstances of their employment. By providing that the liability of the foreign employer may be "enforced to the
full extent" against the local agent,the overseas worker is assured of immediate and sufficientpayment of what is
139

due them. 140

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the Migrant
Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer from the overseas
worker to the local employment agency. However, it must be emphasized that the local agency that is held to answer
for the overseas worker’s money claims is not leftwithout remedy. The law does not preclude it from going after the
foreign employer for reimbursement of whatever payment it has made to the employee to answer for the money
claims against the foreign employer.

A further implication of making localagencies jointly and severally liable with the foreign employer is thatan additional
layer of protection is afforded to overseas workers. Local agencies, which are businesses by nature, are inoculated
with interest in being always on the lookout against foreign employers that tend to violate labor law. Lest they risk
their reputation or finances, local agenciesmust already have mechanisms for guarding against unscrupulous foreign
employers even at the level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of
obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to proceed
with the enforcement of this judgment. Petitioner is possessed with the resources to determine the proper legal
remedies to enforce its rights against Pacific, if any.

Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and mostdifficult
reaches of our planet to provide for their families. In Prieto v. NLRC: 141

The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment, rape,
insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are only a few of the inhumane
acts towhich they are subjected by their foreign employers, who probably feel they can do as they please in their own
country. Whilethese workers may indeed have relatively little defense against exploitation while they are abroad, that
disadvantage must not continue to burden them when they return to their own territory to voice their muted complaint.
There is no reason why, in their very own land, the protection of our own laws cannot be extended to them in full
measure for the redress of their grievances. 142

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of their stories
as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of families left behind daily.
They would count the minutes, hours, days, months, and years yearning to see their sons and daughters. We all
know of the joy and sadness when they come home to see them all grown up and, being so, they remember what
their work has cost them. Twitter accounts, Facetime, and many other gadgets and online applications will never
substitute for their lost physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic crises. They are
our true diplomats, they who show the world the resilience, patience, and creativity of our people. Indeed, we are a
people who contribute much to the provision of material creations of this world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when their contracts are breached by the foreign employers.
While we sit, this court will ensure that our laws will reward our overseas workers with what they deserve: their
dignity.

Inevitably, their dignity is ours as weil.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with modification.
Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C. Cabiles the amount
equivalent to her salary for the unexpired portion of her employment contract at an interest of 6% per annum from the
finality of this judgment. Petitioner is also ORDERED to reimburse respondent the withheld NT$3,000.00 salary and
pay respondent attorney's fees of NT$300.00 at an interest of 6% per annum from the finality of this judgment.

The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in Section 7 of Republic
Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and, therefore, null and
void.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

WE CONCUR:

(On Leave)
MARIA LOURDES P. A. SERENO*
Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Acting Chief Justice Associate Justice

See: Concur/Dissenting Opn.

TERESITA J. LEONARDO-DE CASTRO
ARTURO D. BRION
Associate Justice
Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

C E RTI F I CATI O N

I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the court.

ANTONIO T. CARPIO
Acting Chief Justice

Footnotes

* On Leave.

1
Rollo, pp. 3–29.

2
Id. at 32–44.

3
Id. at 125–131.
4
Id. at 131.

5
Id. at 3.

6
Id. at 126.

7
Id. at 102.

8
Id.

9
Id.

10
Id. at 54 and 102.

11
Id. at 6–7 and 195–196.

12
Id. at 36.

13
Id.

14
Id.

15
Id. at 127.

16
Id.

17
Id. at 53.

18
Id.

19
Id. at 33, 53, and 54.

20
Id.

21
Id. at 11.

22
Id. at 56.

23
Id. at 56 and 62.

24
Id. at 57.

25
Id.

26
Id. at 107.

27
Id.

28
Id.

29
Id. at 108.

30
Id.

31
Id. at 101–112.

32
Id. at 108–110.

33
Id. at 110.

34
Id. at 111–112.

35
Id.

36
Id. at 113–123.
37
Id. at 125–131.

38
Id. at 131.

39
Id. at 129.

40
Id.

41
Id.

42
Id at 130.

43
Id.

44
Id. at 131.

45
Id.

46
Id.

47
Id. at 132–137.

48
Id. at 139–141.

49
Id. at 142–153.

Thirteenth Division, decision penned by Associate Justice Renato C.Dacudao with Associate Justices
50

Edgardo F. Sundiam and Japar B. Dimaampao concurring.

51
Rollo, pp. 43–44.

52
Id.

53
Id.

54
Id. at 3–29.

55
Id. at 11.

56
Id.

57
Id. at 9–11.

Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126–127 (2000) [Per J. De Leon, Jr.,
58

Second Division].

59
Id.

60
Id.

San Miguel Corporation v. Ubaldo, G.R. No. 92859, February 1, 1993, 218 SCRA 293, 301 [Per J.
61

Campos, Jr., Second Division].

62
Id.

63
Bascon v. Court of Appeals, 466 Phil. 719, 732 (2004) [Per J. Quisumbing, Second Division].

64
CONST., art. XIII, sec. 3.

65
359 Phil. 955 (1998) [Per J. Romero, Third Division].

66
Id. at 968–969.

67
540 Phil. 65 (2006) [Per J. Austria-Martinez, First Division].
68
Id. at 80–81.

69
Rollo, p. 11.

70
Hilton Heavy Equipment Corporation v. Dy, G.R. No. 164860, February 2, 2010, 611 SCRA 329, 338 [Per
J. Carpio, Second Division], citing Dizon v. NLRC, 259 Phil. 523, 529 (1989) [Per J. Feliciano, Third
Division].

Skippers United Pacific, Inc. v. National Labor Relations Commission, 527 Phil. 248, 257 (2006) [Per J.
71

Austria-Martinez, First Division].

LABOR CODE, art. 281; See also Tamson’s Enterprises, Inc. v. Court of Appeals, G.R. No. 192881,
72

November 16, 2011, 660 SCRA 374, 383 [Per J. Mendoza, Third Division].

Seedissenting opinion of J. Brion in Abbott Laboratories Philippines v. Alcaraz, G.R. No. 192571, July 23,
73

2013, 701 SCRA 682, 752 [Per J. Perlas-Bernabe, En Banc]. This ponencia joined J. Brion.

74
Rollo, p. 129.

75
Skippers United Pacific, Inc. v. Doza, et al., G.R. No. 175558, February 8, 2012, 665 SCRA 412, 426 [Per
J. Carpio, Second Division].

76
Id.

77
Id.

78
Id.

79
Id.

80
Rep. Act. No. 8042 (1995), sec. 15.

Article 111. Attorney’s Fees – (a) In cases of unlawful withholding of wages, the culpable party may be
81

assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

82
601 Phil. 245 (2009) [Per J. Austria-Martinez, En Banc].

83
Rep. Act. No. 8042 (1995), sec. 10, par. 5.

Serrano v. Gallant Maritime Services, Inc., 601 Phil. 245, 302 and 304 (2009) [Per J. Austria-Martinez, En
84

Banc].

Yap v. Thenamaris Ship’s Management, G.R. No. 179532, May 30, 2011, 649 SCRA 369, 380 [Per J.
85

Nachura, Second Division].

86
See also Skippers United Pacific, Inc. v. Doza, et al., G.R. No. 175558, February 8, 2012, 665 SCRA 430
[Per J. Carpio, Second Division].

87
CONST., art. VIII, sec. 5(5).

88
Rollo, pp. 266–267.

89
Id. at 309–328.

90
Id. at 311.

91
Id.

92
Id.

93
Id. at 364–371.

94
Id. at 371.

95
Id. at 304.
 CONST., art. III, sec. 1. No person shall be deprived of life, liberty, or property without due process of law,
96

nor shall any person be denied the equal protection of the laws.

97
Ichong v. Hernandez, 101 Phil. 1155, 1164 (1957) [Per J. Labrador, En Banc].

98
Id. at 1164.

99
Id. at 1177.

100
Id.

101
Id. at 1164 and 1177.

102
Id. at 1165 and 1177.

103
Id. at 1164.

104
People v. Cayat, 68 Phil. 12, 18 (1939) [Per J. Moran, En Banc].

105
Id. at 18.

Serrano v. Gallant Maritime Services, Inc., 601 Phil. 245, 294–298 (2009) [Per J. Austria-Martinez, En
106

Banc].

107
Id. at 287–292.

108
Id. at 292–294.

109
Id. at 282.

110
CONST., art. XIII, sec. 3.

111
Serrano v. Gallant Maritime Services, Inc., 601 Phil. 245, 286 (2009) [Per J. Austria-Martinez, En Banc].

112
Id. at 297–298.

113
Id. at 298.

114
Id.

115
Id.

116
Id. at 287–292.

117
Id.

118
Id. at 293.

119
Id. at 281.

120
Id.

121
Id. at 277.

122
Id.

123
Id. at 276–277.

124
Rep. Act. No. 8042 (1995); See alsoRep. Act No. 10022 (2010).

125
Serrano v. Gallant Maritime Services, Inc., 601 Phil. 245, 277 (2009) [Per J. Austria-Martinez, En Banc].

Seeconcurring opinion of J. Brion in Serrano v. Gallant Maritime Services, Inc., 601 Phil. 245, 319–321
126

(2009) [Per J. Austria-Martinez, En Banc].

127
Id. at 301.

128
Id. at 304.

Yap v. Thenamaris Ship’s Management, G.R. No. 179532, May 30, 2011, 649 SCRA 369, 381 [Per J.
129

Nachura, Second Division].

130
G.R. No. 189871, August 13, 2013, 703 SCRA 439 [Per J. Peralta, En Banc].

Id. at 457–458. This court modified the guidelines laid down in Eastern Shipping Lines v. Court of Appeals,
131

G.R. No. 97412, July 12, 1994, 234 SCRA 78, 97[Per J. Vitug, En Banc] to embody Bangko Sentral ng
Pilipinas Circular No. 799.

Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457 [Per J. Peralta, En
132

Banc].

133
Id.

Palanca v. Court of Appeals, G.R. No. 106685, December 2, 1994,238 SCRA 593, 601 [Per J. Quiason,
134

En Banc].

Maritime Company of the Philippines v. Reparations Commission, 148-B Phil. 65, 70 (1971) [Per J.
135

Fernando, En Banc].

ATCI Overseas Corporation v. Echin,G.R. No. 178551, October 11, 2010, 632 SCRA 528, 533 [Per J.
136

Carpio-Morales, Third Division], citing Datuman v. First Cosmopolitan Manpower and Promotion Services,
Inc., 591 Phil. 662, 673 (2008) [Per J. Leonardo-De Castro, First Division]; Migrant Workers and Overseas
Filipinos Act of 1995, sec. 2(b).

137
RULES OF COURT, Rule 3, sec. 7.

138
PH Credit Corporation v. Court of Appeals, 421 Phil. 821, 832 (2001) [Per J. Panganiban, Third Division].

139
See alsoC. A. AZUCENA, JR., EVERYONE’S LABOR CODE29 (5th ed., 2007).

140
Id.

141
G..R. No. 93699, September 10, 1993, 226 SCRA 232 [Per J. Cruz, First Division].

Id. at 239–240, also cited in Triple Eight Integrated Services v. NLRC, 359 Phil. 955, 968 (1998) [Per J.
142

Romero, Third Division].