EN BANC [G.R. No. L-8967. May 31, 1956.] ANASTACIO VIAA, Petitioner, vs.

ALEJO AL-LAGADAN and FILOMENA PIGA, Respondents. DECISION CONCEPCION, J.: Petitioner Anastacio Viaa owned the fishing sailboat Magkapatid, which, in the night of September 3, 1948, sunk in the waters between the province of Bataan and the island of Corregidor, as a consequence of a collision with the USS TINGLES, a vessel of the U.S. Navy. Inasmuch as Alejandro Al-Lagadan, a member of the crew of the Magkapatid, disappeared with the craft, his parents, Respondent Alejo Al-Lagadan and Filomena Piga, filed the corresponding claim for compensation under Act No. 3428. After appropriate proceedings, a Referee of the Workmens Compensation Commission rendered a decision, dated February 23, 1953: 1. Ordering Mr. Anastacio Viaa to pay the above-named claimants through the Workmens Compensation Commission, Manila, the sum of P1,560 in lump sum with interest at 6 per cent from September 3, 1948 until fully paid; and. To pay the sum of P16 to the Workmens Compensation Commission as costs. Said decision was, on petition for review filed by Viaa, affirmed by the Workmens Compensation Commissioner, on or about October 22, 1954, with additional fee of P5.00. Said Commissioner, having subsequently denied a reconsideration of this action, Viaa has brought the matter to us, for review by certiorari, upon the ground that this case does not fall within the purview of Act No. 3428, because the gross income of his business for the year 1947 was allegedly less than P10,000, and because Alejandro Al-Lagadan was, at the time of his death, his (Petitioners) industrial partner, not his employee. The first ground is untenable, Petitioner not having invoked it before the rendition of the Referees decision on February 23, 1953. The objection to the application of Act No. 3428, upon said ground, was made for the first time when Petitioner sought a review of said decision by the Workmens Compensation Commissioner. The non- applicability of said Act to employers whose gross income does not reach P20,000 is, however, a matter of defense, which cannot be availed of unless pleaded in the employers answer to the claim for compensation filed by the employee or his heirs. Petitioner herein having failed to do so, said defense may not now be entertained (Rolan vs. Perez, 63 Phil., 80, 85-86). As regards the second ground, Petitioner maintains, contrary to the finding of the Referee and said Commissioner, that the deceased was his industrial partner, not employee. In this connection, it is alleged in paragraph (6) of the petition: That the practice observed then and now in engaging the services of crewmen of sailboats plying between Mindoro and Manila is on a partnership basis, to

wit:chanroblesvirtuallawlibrary that the owner of the vessel, on one hand receives one-half of the earnings of the sailboat after deducting the expenses for the maintenance of the crew, the other half is divided pro rata among the members of the crew, the patron or captain receiving four parts, the piloto or next in command three parts, the wheelsman or timonel 1 1/2 parts and the rest of the members of the crew one part each, as per Annex B hereof. It appears that, before rendering his aforementioned decision, the Referee requested Mr. Manuel O. Morente, an attorney of the Workmens Compensation Commission, to look into and inquire and determine the method of and the basis of engaging the services of crewmen for sailboats (batel) of twenty (20) tons or more plying between Manila and Mariveles and moored along Manila North Harbor, and that, thereafter, said Atty. Morente reported: The basis of engaging the services of crewmen of a batel is determined in accordance with the contract executed between the owner and the patron. The contract commonly followed is on a share basis after deducting all the expenses incurred on the voyage. One half goes to the owner of the batel and the other half goes to the patron and the members of the crew and divided among themselves on a share basis also in accordance with their agreement with the patron getting the lions share. The hiring of the crew is done by the patron himself. Usually, when a patron enters into a contract with the owner of the batel, he has a crew ready with him. (Italics supplied.) In sustaining the Referees finding to the effect that the deceased was an employee of Viaa, the Workmens Compensation Commissioner said: The trial referee found that there was an employer-employee relation between the Respondent and the deceased, Alejandro Al-Lagadan, and the share which the deceased received at the end of each trip was in the nature of wages which is defined under section 39 of the Compensation Act. This is so because such share could be reckoned in terms of money. In other words, there existed the relation of employer and employee between the Respondent and Alejandro Al-Lagadan at the time of the latters death. We believe that the trial referee did not err in finding the deceased an employee of the Respondent. We cite the following cases which illustrate the point at issue: The officers and crews of whaling and other fishing vessels who are to receive certain proportions of produce of the voyage in lieu of wages; (Rice vs. Austin, 17 Mass. 206; 2Y & C. 61); Captains of merchant ships who, instead of wages, receive shares in the profits of the adventure; (4 Maule & C. 240); or who take vessels under an agreement to pay certain charges and receive a share of the earnings; (Tagard vs. Loring, 16 Mass. 336, 8 Am. Dec. 140; Winsor vs. Cutts, 7 Greenl. Me. 261) have generally been held not to be partners with the Respondent, and the like. Running a steamboat on shares does not make the owners partners in respect to the vessel (The Daniel Koine, 35 Fed. 785); so of an agreement between two parties to farm on shares; (Hooloway vs. Brinkley, 42 Ga. 226); A seaman who is to receive pay in proportion to the amount of fish caught is not a partner; (Holdren vs. French, 68 Me. 241); sharing profits in lieu of wages is not a partnership. There is no true contribution; (Crawford vs. Austin, 34 Md. 49; Whitehill vs. Shickle, 43 Mo. 538; Sankey vs. Iron Works, 44 Ga. 228.) (Italics supplied.)

In other words, in the opinion of the Referee, as well as of said Commissioner, the mere fact that Alejandros share in the understanding could be reckoned in terms of money, sufficed to characterize him as an employee of Viaa. We do not share this view. Neither can we accept, however, Petitioners theory to the effect that the deceased was his partner, not an employee, simply because he (the deceased) shared in the profits, not in the losses. In determining the existence of employer-employee relationship, the following elements are generally considered, namely: 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 although the latter is the most important element (35 Am. Jur. 445). Assuming that the share received by the deceased could partake of the nature of wages on which we need not, and do not, express our view and that the second element, therefore, exists in the case at bar, the record does not contain any specific data regarding the third and fourth elements. With respect to the first element, the facts before us are insufficient to warrant a reasonable conclusion, one way or the other. On the one hand, Atty. Morente said, in his aforementioned report, that the contract commonly followed is on a share basis cralaw The hiring of a crew is done by the patron himself. Usually, when a patron enters into a contract with the owner of the batel, he has a crew ready with him. This statement suggests that the members of the crew are chosen by the patron, seemingly, upon his sole responsibility and authority. It is noteworthy, however, that said report referred to a practice commonly and usually observed in a given place. The record is silent on whether such practice had been followed in the case under consideration. More important still, the language used in said report may be construed as intimating, not only that the patron selects and engages the crew, but, also, that the members thereof are subject to his control and may be dismissed by him. To put it differently, the literal import of said report is open to the conclusion that the crew has a contractual relation, not with the owner of the vessel, but with the patron, and that the latter, not the former, is either their employer or their partner. Upon the other hand, the very allegations of the petition show otherwise, for Petitioner explicitly averred therein that the deceased Alejandro Al-Lagadan was his industrial partner. This implies that a contract of partnership existed between them and that, accordingly, if the crew was selected and engaged by the patron, the latter did so merely as agent or representative of Petitioner herein. Again, if Petitioner were a partner of the crew members, then neither the former nor the patron could control or dismiss the latter. In the interest of justice and equity, and considering that a decision on the merits of the issue before us may establish an important precedent, it would be better to remand the case to the Workmens Compensation Commission for further evidence and findings on the following questions: (1) who selected the crew of the Magkapatid a nd engaged their services; (2) if selected and engaged by the patron, did the latter act in his own name and for his own account, or on behalf and for the account of Viaa; (3) could Viaa have refused to accept any of the crew members chosen and engaged by the patron; (4) did Petitioner have authority to determine the time when, the place where and/or the manner or conditions in or under which the crew would work; and (5) who could dismiss its members.

Wherefore, let the case be remanded to the Workmens Compensation Commission, for further proceedings in conformity with this decision, without special pronouncement as to costs. SO ORDERED.

ANASTACIO VIAA VS. ALEJO AL-LAGADAN DIGEST G.R. NO. L-8967. May 31, 1956 FACTS: Petitioner Anastacio Viaa owned the fishing sailboat Magkapatid, which had a collision withthe USS TINGLES, a vessel of the U.S. Navy. Inasmuch as Alejandro Al -Lagadan, a member of the crew of the Magkapatid, disappeared with the craft, his parents, Respondent Alejo Al-Lagadan andFilomena Piga, filed the corresponding claim for compensation. After appropriate proceedings, a Referee of the Workmens Compensation Commission rendered a decision in favor of the respondents.Consequently, Viana filed a petition for review, and latter, a subsequent motion for reconsideration wasboth denied affirming the decision of the Referee. Hence the case at bar, that the case does not fallwithin the purview of Act No. 3428, because the gross income of his business for the year 1947 wasallegedly less than P10,000, and because Alejandro Al-Lagadan was, at the time of his death, his(Petitioners) industrial partner, not his employee. ISSUE: whether or not Alejandro Al-Lagadan was his industrial partner, not his employee. RULING: Petitioner maintains, contrary to the finding of the Referee and said Commissioner, that the deceased was his industrial partner, not employee. In the opinion of the Referee, as well as of said Commissioner, the mere fact that Alejandros share in the understanding could be reckoned in terms of money, sufficed to characterize him as an employee of Viaa. The Supreme Court does not share this view. Neither can they accept, however, Petitioners theory to the effect that the deceased was his partner, not an employee, simply because he (the deceased) shared in the profits, not in the losses. In determining the existence of employeremployee relationship, the following elements are generally considered, namely: (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, although the latter is the most important element. Assuming that the share received by the deceased could partake of the nature of wages, on which the Court need not, and do not, express their view, and that the second element, therefore, exists in the case at bar, the record does not contain any specific data regarding the third and fourth elements.

With respect to the first element, the facts before the Court are insufficient to warrant a reasonable conclusion, one way or the other. On the one hand, Atty. Morente said, in his

aforementioned report, that the contract commonly followed is on a share basis. The hiring of a crew is done by the patron himself. Usually, when a patron enters into a contract with the owner of the batel, he has a crew ready with him. This statement suggests that the members of the crew are chosen by the patron, seemingly, upon his sole responsibility and authority. It is noteworthy, however, that said report referred to a practice commonly and usually observed in a given place. The record is silent on whether such practice had been followed in the case under consideration. More important still, the language used in said report may be construed as intimating, not only that the patron selects and engages the crew, but, also, that the members thereof are subject to his control and may be dismissed by him. To put it differently, the literal import of said report is open to the conclusion that the crew has a contractual relation, not with the owner of the vessel, but with the patron, and that the latter, not the former, is either their employer or their partner. In the interest of justice and equity, and considering that a decision on the merits of the issue before us may establish an important precedent, it would be better to remand the case to the Workmens Compensation Commission for further evidence and findings on the following questions: (1) who selected the crew of the Magkapatid and engaged their services; (2) if selected and engaged by the patron, did the latter act in his own name and for his own account, or on behalf and for the account of Viaa; (3) could Viaa have refused to accept any of the crew members chosen and engaged by the patron; (4) did Petitioner have authority to determine the time when, the place where and/orthe manner or conditions in or under which the crew would work; and (5) who could dismiss its members. The case was remanded to the Workmens Compensation Commission, for further proceedings in conformity with the decision.

http://www.scribd.com/doc/157575935/ANASTACIO-VIANA-VS-ALEJO-AL-LAGADAN

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-32245 May 25, 1979 DY KEH BENG, petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents. A. M Sikat for petitioner. D. A. Hernandez for respondents.

DE CASTRO, J.: Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order him to reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully reinstated without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law. 1 Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations: I RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS. II RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER. III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN. IV RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT. V RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW. The facts as found by the Hearing Examiner are as follows: A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido Onayan. After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis. 4 The issue therefore centered on whether there existed an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and Tudla . According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although their services were compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8) workers and never less than five (5); including the complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons: (1) Solano never stayed long enought at Dy's establishment; (2) Solano had to leave as soon as he was through with the (3) order given him by Dy; (4) When there were no orders needing his services there was nothing for him to do; (5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him for these orders; and (6) Solano's work with Dy's establishment was not continuous. , 7 According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an employee 8 is referred to as shall include any employee and shag not be limited to the employee of a particular employer unless the Act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment. while an employer 9 includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization. Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that: The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in the performance of the work and to direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only when there was work. While this Court upholds the control test 11 under which an employer-employee relationship exists "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, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 12 Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed. As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the essence of the relation. Units of time ... and units of work are in establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure. At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a labor contract -between employers and employees, between capitalists and laborers. Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not

reverse the findings of fact of the Court of Industrial Relations when they were supported by substantial evidence. 14 Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision being appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances. 17 Considering there are no such circumstances in this case, there is no reason why the Court should not apply the abovementioned formula in this instance. WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of this award is entrusted to the National Labor Relations Commission. Costs against petitioner. SO ORDERED.

DY KEH BENG, DIGEST petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents. G.R. No. L-32245 May 25, 1979 FACTS: Petitioner, Dy Keh Beng, proprietor of basket factory, was charged with ULP for discriminatory acts defined under Sec 4(a), subparagraph (1 & 4), R.A. No. 875 by dismissing on September 28-29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After PI was conducted, a case was filed in the CIR for in behalf of the ILMUP and two of its members, Solano and Tudla. Dy Keh Beng contended that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis. According to Dy Keh Beng, Solano was no this employee for the following reasons: (1) Solano never stayed long enough at Dys establishment; (2) Solano had to leave as soon as he was through with the order given him by Dy; (3) When there were no orders needing his services there was nothing for him to do; (4) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him for these orders; and (5) Solano's work with Dy's establishment was not continuous. According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an employee is referred to as shall include any employee and shag not be limited to the employee of a particular employer unless the act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with any current labor dispute or because of any ulp and who has not obtained any other substantially equivalent and regular employment. while an employer

includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization. Petitioner also contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's work. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that: The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in the performance of the work and to direct the manner and method of its performance. The CIR found that there existed an employee-employer relationship between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis. Hence, this petition for certiorari. ISSUE: Whether or not an employee employer relation existed between petitioner Dy Keh Beng and the respondents Solano and Tudla. HELD: The SC also noted the decision of Justice Paras in the case of Sunrise Coconut Products Co. Vs. CIR (83 Phil 518, 523)thatjudicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a labor contract between employers and employees, between capitalists and laborers. With regard to the control test the SC said that It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed. The petition was dismissed. The Court affirmed the decision of the CIR.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-41182-3 April 16, 1988 DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.: The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute: xxx xxx xxx On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc. On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears

that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice. The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim. On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors: I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA'S COMPLAINT. II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE. III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER. IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES. VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS. On the foregoing facts and in the light of the errors asigned the issues to be resolved are: 1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita; 2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and 3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant. In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture appellant made declarations showing: 1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediately columnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965). 2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964). 3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with

said business at the Trade & Commerce Building (pp. 16-18 tsn Id.). 4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.) 5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965). 6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief) Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as such was designated manager.
1

xxx xxx xxx The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance. The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state: I

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW. II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8) III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS. IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6 As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation

between the between parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned. The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9 In this jurisdiction, there has been no uniform test to determine the evidence of an employeremployee relation. In general, we 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." 10 Subsequently, however, we have considered, 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, in determining the existence of an employer-employee relationship. 11 The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments, an arrangement that would be like claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment. In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities. It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators. In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed 15 and where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name. It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership.. But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc.

disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor. The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease contract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper. The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her. It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein. This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play. We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil

Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23 We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. 24 ART. 2219. Moral damages 25 may be recovered in the following and analogous cases: xxx xxx xxx (10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35. The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity. Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor. The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the circumstances. WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages. Costs against said private respondents. SO ORDERED.

Sevilla v CA DIGEST

FACTS: A contract by and between Noguera and Tourist World Service (TWS), represented by Canilao, wherein TWS leased thepremises belonging to Noguera as branch office of TWS. When the branch office was opened, it was run by appellant Sevillapayable to TWS by any airline for any fare brought in on the efforts of Mrs. Sevilla, 4% was to go to Sevilla and 3% was to bewithheld by the TWS.Later, TWS was informed that Sevilla was connected with rival firm, and since the branch office was losing, TWSconsidered closing down its office.On January 3, 1962, the contract with appellee for the use of the branch office premises was terminated and while theeffectivity thereof was January 31, 1962, the appellees no longer used it. Because of this, Canilao, the secretary of TWS, went overto the branch office, and finding the premises locked, he padlocked the premises. When neither appellant Sevilla nor any of hisemployees could enter, a complaint was filed by the appellants against the appellees.TWS insisted that Sevilla was a mere employee, being the branch manager of its branch office and that she had no sayon the lease executed with the private respondent, Noguera.

ISSUE: W/N ER-EE relationship exists between Sevilla and TWS HELD: The records show that petitioner, Sevilla, was not subject to control by the private respondent TWS. In the first place,under the contract of lease, she had bound herself in solidum as and for rental payments, an arrangement that would belie claimsof a master-servant relationship. That does not make her an employee of TWS, since a true employee cannot be made to part withhis own money in pursuance of his employers business, or otherwise, assume any liability thereof.In the second place, when the branch office was opened, the same was run by the appellant Sevilla payable to TWS byany airline for any fare brought in on the effort of Sevilla. Thus, it cannot be said that Sevilla was under the control of TWS. Sevillain pursuing the business, relied on her own capabilities.It is further admitted that Sevilla was not in the companys payroll. For her efforts, she retained 4% in commissions fromairline bookings, the remaining 3% going to TWS. Unlike an employee, who earns a fixed salary, she earned compensation influctuating amount depending on her booking successes.The fact that Sevilla had been designated branch manager does not make her a TWS employee. It appears that

Sevilla isa bona fide travel agent herself, and she acquired an interest in the business entrusted to her. She also had assumed personalobligation for the operation thereof, holding herself solidary liable for the payment of rentals.Wherefore, TWS and Canilao are jointly and severally liable to indemnify the petitioner, Sevilla.

ANGELINA FRANCISCO, Petitioner,

G.R. No. 170087

Present: Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ.

- versus -

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. b. c. d. e. f. g. h. Backwages 10/2001 07/2002 275,000.00 (27,500 x 10 mos.) Salary Differentials (01/2001 09/2001) 22,500.00 Housing Allowance (01/2001 07/2002) 57,000.00 Midyear Bonus 2001 27,500.00 th 13 Month Pay 27,500.00 10% share in the profits of Kasei Corp. from 1996-2001 361,175.00 Moral and exemplary damages 100,000.00 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 employeremployee 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 Appeals18 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. Nuestro29 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 same is subject to the test of credibility and should be received with caution. 33 A

recantation does not necessarily cancel an earlier declaration, but like any other testimony the

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.

FRANCISCO vs. NLRC DIGEST [GR. No.170087 Aug. 31, 2006] Facts: Angelina Francisco has held several positions in Kasei Corporation, to wit: (1) Accountant and Corporate Secretary; (2) Liaison Officer to the City of Makati; (3) Corporate Secretary; and (4)Acting Manager. She performed the work of Acting Manager for five years but later she was replaced by Liza R. Fuentes as Manager. Then, Kasei Corporation reduced her salary and was not paid her mid-year bonus allegedly because the company was not earning well. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. Ultimately, she did not report for work and filed an action for constructive dismissal before the labor arbiter.

Issue: Was Francisco an employee of Kasei Corporation? Held: In certain cases where 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. Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as: 1. the extent to which the services performed are an integral part of the employer s 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. 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. 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, 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. There can be no other conclusion that she 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 the corporation on a regular basis over an indefinite period of engagement. The corporation hired and engaged her for compensation, with the power to dismiss for cause. More importantly, the corporation had the power to control her with the means and methods by which the work is to be accomplished. 2010 www.pinoylegal.com