THIRD DIVISION G.R. No.

196426 August 15, 2011

MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners, vs. COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION, GALLERA DE MANDAUE / SPOUSES VICENTE and MARIA LUISA LOOT, Respondents. DECISION VELASCO, JR., J.: Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the Decision1 and Resolution2 dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed the October 18, 2006 Resolution3 of the National Labor Relations Commission (NLRC), Fourth Division (now Seventh Division), in NLRC Case No. V-000673-2004. Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador and sentenciador, respectively, of the cockpit sometime in 1993. As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders the start of the cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit. Meanwhile, as the sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks physical condition and capabilities to continue the cockfight, and eventually declares the result of the cockfight.4 For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every week, excluding monthly derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the morning depending on the needs of the cockpit. Petitioners had both been issued employees identification cards5 that they wear every time they report for duty. They alleged never having incurred any infraction and/or violation of the cockpit rules and regulations. On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of respondents, and were informed of the termination of their services effective that date. This prompted petitioners to file a complaint for illegal dismissal against respondents. In answer, respondents denied that petitioners were their employees and alleged that they were associates of respondents independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time or day and they are free to decide for themselves whether

to report for work or not on any cockfighting day. In times when there are few cockfights in Gallera de Mandaue, petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued identification cards to indicate that they were free from the normal entrance fee and to differentiate them from the general public.6 In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents as they performed work that was necessary and indispensable to the usual trade or business of respondents for a number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to pay petitioners their backwages and separation pay.7 Respondents counsel received the Labor Arbiters Decision on September 14, 2004. And within the 10-day appeal period, he filed the respondents appeal with the NLRC on September 24, 2004, but without posting a cash or surety bond equivalent to the monetary award granted by the Labor Arbiter.8 It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution9 dated August 25, 2005, the NLRC denied the appeal for its non-perfection. Subsequently, however, the NLRC, acting on respondents Motion for Reconsideration, reversed its Resolution on the postulate that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that there was no employer-employee relationship between petitioners and respondents, respondents having no part in the selection and engagement of petitioners, and that no separate individual contract with respondents was ever executed by petitioners.10 Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007, petitioners went to the CA on a petition for certiorari. In support of their petition, petitioners argued that the NLRC gravely abused its discretion in entertaining an appeal that was not perfected in the first place. On the other hand, respondents argued that the NLRC did not commit grave abuse of discretion, since they eventually posted their appeal bond and that their appeal was so meritorious warranting the relaxation of the rules in the interest of justice.11 In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-takers in a cockfight need to have the kind of expertise that is characteristic of the game to interpret messages conveyed by mere gestures. Hence, petitioners are akin to independent contractors who possess unique skills, expertise, and talent to distinguish them from ordinary employees. Further, respondents did not supply petitioners with the tools and instrumentalities they needed to perform work. Petitioners only needed their unique skills and talents to perform their job as masiador and sentenciador.12 The CA held: In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor cases. In this case, the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the case at bench which warrants a relaxation of the bond requirement as a condition for perfecting the appeal. This case is highly meritorious that propels this Court not to strictly apply the rules and thus prevent a grave injustice from being done.

As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employeremployee exists between the petitioners and the private respondents [constrain] the relaxation of the rules. In this regard, we find no grave abuse attributable to the administrative body. xxxx Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by Lucia Loot. Cockfighting, which is a part of our cultural heritage, has a peculiar set of rules. It is a game based on the fighting ability of the game cocks in the cockpit. The referees and bet-takers need to have that kind of expertise that is characteristic of the cockfight gambling who can interpret the message conveyed even by mere gestures. They ought to have the talent and skill to get the bets from numerous cockfighting aficionados and decide which cockerel to put in the arena. They are placed in that elite spot where they can control the game and the crowd. They are not given salaries by cockpit owners as their compensation is based on the "arriba". In fact, they can offer their services everywhere because they are duly licensed by the GAB. They are free to choose which cockpit arena to enter and offer their expertise. Private respondents cannot even control over the means and methods of the manner by which they perform their work. In this light, they are akin to independent contractors who possess unique skills, expertise and talent to distinguish them from ordinary employees. Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed to perform their work. Petitioners only needed their talent and skills to be a "masiador" and "sentenciador". As such, they had all the tools they needed to perform their work. (Emphasis supplied.) The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the CA committed a reversible error in entertaining an appeal, which was not perfected in the first place. Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the Decision of the Labor Arbiter.13 Article 223 of the Labor Code provides: Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: xxxx In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from. (Emphasis supplied.) Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on, and excused the late posting of, the appeal bond when there are strong and compelling

reasons for the liberality,14 such as the prevention of miscarriage of justice extant in the case15 or the special circumstances in the case combined with its legal merits or the amount and the issue involved.16 After all, technical rules cannot prevent courts from exercising their duties to determine and settle, equitably and completely, the rights and obligations of the parties.17 This is one case where the exception to the general rule lies. While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the other hand, that petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold test of employment We have repeatedly mentioned in countless decisions: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct, which is the most important element.18 1avvphi1 As found by both the NLRC and the CA, respondents had no part in petitioners selection and management;19 petitioners compensation was paid out of the arriba (which is a percentage deducted from the total bets), not by petitioners;20 and petitioners performed their functions as masiador and sentenciador free from the direction and control of respondents.21 In the conduct of their work, petitioners relied mainly on their "expertise that is characteristic of the cockfight gambling,"22 and were never given by respondents any tool needed for the performance of their work.23 Respondents, not being petitioners employers, could never have dismissed, legally or illegally, petitioners, since respondents were without power or prerogative to do so in the first place. The rule on the posting of an appeal bond cannot defeat the substantive rights of respondents to be free from an unwarranted burden of answering for an illegal dismissal for which they were never responsible.1avvphi1 Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from the records of this case.24 After all, the primary objective of our laws is to dispense justice and equity, not the contrary. WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010 Resolution of the CA, and the October 18, 2006 Resolution of the NLRC. SO ORDERED.

SECOND DIVISION [G.R. No. 192084, September 14, 2011] JOSE MEL BERNARTE, PETITIONER, VS. PHILIPPINE BASKETBALL

ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, AND PERRY MARTINEZ, RESPONDENTS. DECISION CARPIO, J.: The Case This is a petition for review[1] of the 17 December 2009 Decision[2] and 5 April 2010 Resolution[3] of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration. The Facts The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows: Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of their employment. Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract for the period July 1 to August 5, 2003. On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon. On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract. Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.[4] In her 31 March 2005 Decision,[5] the Labor Arbiter[6] declared petitioner an employee whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages and attorney's fees, to wit: WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay complainants: RENATO GUEVARRA 1. backwages from January 1, 2004 up to the finality JOSE MEL BERNARTE of this Decision, which to date is P536,250.00 100,000.00 2. moral damages 50,000.00 3. exemplary damages 4. 10% attorney's fees 68,625.00 TOTAL P754,875.00 or a total of P1,152,250.00 The rest of the claims are hereby dismissed for lack of merit or basis. SO ORDERED.[7] In its 28 January 2008 Decision,[8] the NLRC affirmed the Labor Arbiter's judgment. The dispositive portion of the NLRC's decision reads: WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED. SO ORDERED.[9] Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals' decision reads: WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents' complaint before the Labor Arbiter is DISMISSED. P397,375.00 P211,250.00 100,000.00 50,000.00 36,125.00

SO ORDERED.[10] The Court of Appeals' Ruling The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held: While the NLRC agreed that the PBA has no control over the referees' acts of blowing the whistle and making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball games for the illogical reason that said acts refer only to the referees' skills. How could a skilled referee perform his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls? Moreover, this Court disagrees with the Labor Arbiter's finding (as affirmed by the NLRC) that the Contracts of Retainer show that petitioners have control over private respondents. xxxx Neither do We agree with the NLRC's affirmance of the Labor Arbiter's conclusion that private respondents' repeated hiring made them regular employees by operation of law.[11] The Issues The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally dismissed. Petitioner raises the procedural issue of whether the Labor Arbiter's decision has become final and executory for failure of respondents to appeal with the NLRC within the reglementary period. The Ruling of the Court The petition is bereft of merit. The Court shall first resolve the procedural issue posed by petitioner. Petitioner contends that the Labor Arbiter's Decision of 31 March 2005 became final and executory for failure of respondents to appeal with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiter's decision was constructively served on respondents as early as August 2005 while respondents appealed the Arbiter's decision only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents the Postmaster's Certification to

prove constructive service of the Labor Arbiter's decision on respondents. The Postmaster certified: xxx That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively. That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.[12] Section 10, Rule 13 of the Rules of Court provides: SEC. 10. Completeness of service. - Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier. The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days from the date the addressee received the first notice of the postmaster.[13] Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee.[14] Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the addressee.[15] Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.[16] The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was actually delivered.[17] In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by respondents, negating petitioner's claim of constructive service of the Labor Arbiter's decision on respondents. The Postmaster's Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiter's decision on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiter's decision moot as respondents' appeal was considered in the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and remain unsettled due to procedural technicalities. The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.[18] To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee on the means and methods by which the work is accomplished. The so-called "control test" is the most important indicator of the presence or absence of an employer-employee relationship.[19] In this case, PBA admits repeatedly engaging petitioner's services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioner's violation of its terms and conditions. However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor and not an employee of respondents. Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and conditions of the contract. The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed by the Court of

Appeals, "how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?"[20] In Sonza v. ABS-CBN Broadcasting Corporation,[21] which determined the relationship between a television and radio station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. The Court held: We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that: Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that: Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address both the result and the means used to achieve it.[22] We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioner's job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents. Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes. In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees' salaries. These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent judgment are required specifically for such position and cannot possibly be controlled by the hiring party. In Yonan v. United States Soccer Federation, Inc.,[23] the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled: Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details by which the result is achieved, an employer/employee relationship is likely to exist." The Court must be careful to distinguish between "control[ling] the conduct of another party contracting party by setting out in detail his obligations" consistent with the freedom of contract, on the one hand, and "the discretionary control an employer daily exercises over its employee's conduct" on the other. Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving him an assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the Federation's registration and training requirements does not create an employer/employee relationship. x x x A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level, requires "a great deal of skill and natural ability." Yonan asserts that it was the Federation's training that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled significantly or negated when the putative employer's activity is the result of a statutory requirement, not the employer's choice. x xx In McInturff v. Battle Ground Academy of Franklin,[24] it was held that the umpire was not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the player's vicarious liability claim against the association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled: The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules. The

TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires work. In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to discontinue petitioner's services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of petitioner by respondents. WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals. SO ORDERED

THIRD DIVISION G.R. No. 169757 November 23, 2011

CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX, Petitioner, vs. WILMER D. GENOVIA, Respondent. DECISION PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated September 21, 2005, denying petitioners motion for reconsideration. The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor Arbiter with modification, finding that respondent is an employee of petitioner, and that respondent was illegally dismissed and entitled to the payment of backwages and separation pay in lieu of reinstatement. The facts are as follows: On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of moral and exemplary damages. In his Position Paper,1 respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage and operate Celkor and to promote and sell the recording studio's services to music enthusiasts and other prospective clients. He received a monthly salary of P7,000.00. They also agreed that he was entitled to an additional commission of P100.00 per hour as recording technician whenever a client uses the studio for recording, editing or any related work. He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but most of the time, he still rendered eight hours of work or more. All the employees of petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record to avoid paying the employees overtime pay. Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him about his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would draft a contract to assure respondent of his compensation for such services. As agreed upon, the additional services that respondent would render included composing and arranging musical scores only, while the technical aspect in producing the album, such as digital editing, mixing and sound engineering would be performed by respondent in his capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his work on the album as composer and arranger would only be done during his spare time, since his other work as studio manager was the priority. Respondent then started working on the album. Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer and arranger of the album. Petitioner verbally assured him that he would be duly compensated. By mid-November 2001, respondent finally finished the compositions and musical arrangements of the songs to be included in the album. Before the month ended, the lead and back-up vocals in the ten (10) songs were finally recorded and completed. From December 2001 to January 2002, respondent, in his capacity as studio manager, worked on digital editing, mixing and sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with various radio stations, malls, publishers, record companies and manufacturers, record bars and other outlets in preparation for the promotion of the said album. By early February 2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do the job. The carrier single of the album, which respondent composed and arranged, was finally aired over the radio on February 22, 2002. On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and arranger of the album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in the music industry, respondent did not deserve a high compensation, and he should be thankful that he was given a job to feed his family. Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the gross sales of the album, and that the salaries he received and would continue to receive as studio manager of Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that he be properly compensated. On March 14, 2002, petitioner verbally terminated respondents services, and he was instructed not to report for work. Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was conducted before he was terminated, in violation of his constitutional right to due process. Having worked for more than six months, he was already a regular employee. Although he was a so called "studio manager," he had no managerial powers, but was merely an ordinary employee. Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation pay, backwages and overtime pay; and that he be awarded unpaid commission in the amount of P2,000.00 for services rendered as a studio technician as well as moral and exemplary damages. Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by petitioner,2 and Petty Cash Vouchers3 evidencing receipt of payroll payments by respondent from Celkor. In defense, petitioner stated in his Position Paper4 that respondent was not hired as studio manager, composer, technician or as an employee in any other capacity of Celkor. Respondent could not have been hired as a studio manager, since the recording studio has no personnel except petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he decided to produce an album for his daughter and established a recording studio, which he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be an amateur composer, an arranger with limited experience and musician without any formal musical training. According to petitioner, respondent had no track record as a composer, and he was not known in the field of music. Nevertheless, after some discussion, respondent verbally agreed with petitioner to co-produce the album based on the following terms and conditions: (1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs; (3) respondent shall act as composer

and arranger of all the lyrics and the music of the five songs he already composed and the revival songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw advances of P7,000.00 a month, which shall be deductible from his share of the net profits and only until such time that the album has been produced. According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that respondent was just an amateur composer with no track record whatsoever in the music industry, had no definite source of income, had limited experience as an arranger, had no knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach him how to use the studio equipment; that petitioner would shoulder all the expenses of production and provide the studio and equipment as well as his knowledge in the use thereof; and Celine Mei Lirio would sing the songs. They embarked on the production of the album on or about the third week of August 2002. Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal partnership under Article 17675 of the New Civil Code, since they agreed to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and manner by which respondent composed or arranged the songs, except on the result thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employeremployee relationship existed between him and the respondent, and there was no illegal dismissal to speak of. On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision,6 finding that an employer-employee relationship existed between petitioner and respondent, and that respondent was illegally dismissed. The dispositive portion of the decision reads: WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee and, consequently, ORDERING said respondents: 1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision and, in lieu of reinstatement, to [pay] his separation pay of one (1) month pay per year of service reckoned from [the] date of hire on August 15, 2001 until finality of this decision, which as of date amounts to full backwages total of 145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00 + 1/12 thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x 1.58 yrs.=P1,695.27); separation pay of P22,750.00 (P7,000.00 x 3.25 yrs.); 2) To pay complainant's unpaid commission of P2,000.00; 3) To pay him moral and exemplary damages in the combined amount of P75,000.00. Other monetary claims of complainant are dismissed for lack of merit.7

The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome respondents positive assertion and documentary evidence proving that petitioner hired respondent as his employee.8 Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC). In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The dispositive portion of the Resolution reads: WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of merit.9 The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC agreed that respondent was able to prove that he received gross pay less deduction and net pay, with the corresponding Certification of Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved with substantial evidence that he was selected and engaged by petitioner, that petitioner had the power to dismiss him, and that they had the power to control him not only as to the result of his work, but also as to the means and methods of accomplishing his work. Respondents motion for reconsideration was denied by the NLRC in a Resolution9 dated December 14, 2004. Respondent filed a petition for certiorari before the Court of Appeals. On August 4, 2005, the Court of Appeals rendered a decision10 reversing and setting aside the resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with modification in regard to the award of commission and damages. The Court of Appeals deleted the award of commission, and moral and exemplary damages as the same were not substantiated. The dispositive portion of the Court of Appeals decision reads: WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14, 2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated October 31, 2003 of the Labor Arbiter is REINSTATED, with the modification that the awards of commission and damages are deleted.11 (Emphasis supplied.) Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution12 dated September 21, 2005. Hence, petitioner Lirio filed this petition. Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part of the NLRC.13 However, petitioner contends that

the Court of Appeals decided the case not in accordance with law and applicable rulings of this Court as petitioner could not find any portion in the Decision of the Court of Appeals ruling that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by the NLRC raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner contends that it was error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether there exists an employeremployee relationship between the parties. Petitioners argument lacks merit. It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with the decision of the Court in St. Martin Funeral Home v. NLRC,14 which held: Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired.15 The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the public respondent [NLRC] committed grave abuse of discretion when it declared that no employeremployee relationship exists between the petitioner and the private respondents, since the petitioner failed to prove such fact by substantial evidence."16 Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion.17 By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was exercised arbitrarily or despotically.18 The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot make this determination without looking into the evidence of the parties.19 Necessarily, the appellate court can only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on record.20 Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding of facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its discretion in finding that no employer-employee relationship existed between petitioner and respondent.21 Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE. II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS. III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.22 Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by way of any document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter that petitioner failed to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiters finding, thus: In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate the recording studio and to promote and sell its services to music enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed monthly compensation of P7,000.00, with commission of P100.00 per hour when serving as recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points to complainant's hiring as employee so that the case comes within the purview of our jurisdiction on labor disputes between an employer and an employee. x x x. Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion thereto, in the face of complainant's evidence, constitute but a self-serving assertion, without probative value, a mere invention to justify the illegal dismissal. xxxx Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the album which he composed and arranged during his free time and, moreover, that salaries which he received would be deducted therefrom, which obviously, soured the relations from the point of view of respondent Lirio.23 Hence, based on the finding above and the doctrine that "if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter,"24 the Court of Appeals reversed the resolution of the NLRC and reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals was remiss in not stating it in

definite terms, it is implied that the Court of Appeals found that the NLRC gravely abused its discretion in finding that no employer-employee relationship existed between petitioner and respondent based on the evidence on record. We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in accordance with law, or whether or not the Court of Appeals erred in reversing and setting aside the decision of the NLRC, and reinstating the decision of the Labor Arbiter with modification. In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not ironclad.25 Where the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, in this case, the NLRC, this Court is constrained to review the factual findings of the Court of Appeals.26 Before a case for illegal dismissal can prosper, it must first be established that an employeremployee relationship existed between petitioner and respondent.27 The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.28 It is settled that no particular form of evidence is required to prove the existence of an employeremployee relationship.29 Any competent and relevant evidence to prove the relationship may be admitted.30 In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by petitioner,31 which showed that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month) with the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers,32 showing the amounts he received and signed for in the payrolls. The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to the existence of the power.33 It is not essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient that the former has a right to wield the power.34 Nevertheless, petitioner stated in his Position Paper that it was agreed that he would help and teach respondent how to use the studio equipment. In such case, petitioner certainly had the power to check on the progress and work of respondent. On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership.1wphi1 Such claim was not supported by any written agreement. The Court notes that

in the payroll dated July 31, 2001 to March 15, 2002,35 there were deductions from the wages of respondent for his absence from work, which negates petitioners claim that the wages paid were advances for respondents work in the partnership. In Nicario v. National Labor Relations Commission,36 the Court held: It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the formers favor. The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection of labor. This rule should be applied in the case at bar, especially since the evidence presented by the private respondent company is not convincing. x x x37 Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed that an employer-employee relationship existed between petitioner and respondent. In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made.38 Article 277 (b) of the Labor Code39 puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the dismissal.40 For an employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process.41 Procedural due process requires the employer to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense.42 Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly affirmed the Labor Arbiters finding that respondent was illegally dismissed, and entitled to the payment of backwages, and separation pay in lieu of reinstatement. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED. No costs. SO ORDERED