You are on page 1of 29

G.R. No. 126297.February 2, 2010.

* relationship exists, the hospital may be held


PROFESSIONAL SERVICES, INC., petitioner, vs. vicariously liable under Article 2176 in relation to
THE COURT OF APPEALS and NATIVIDAD and Article 2180 of the Civil Code or the principle of
ENRIQUE AGANA, respondents. respondeat superior. Even when no employment
G.R. No. 126467.February 2, 2010.* relationship exists but it is shown that the hospital
NATIVIDAD [substituted by her children Marcelino holds out to the patient that the doctor is its agent, the
Agana III, Enrique Agana, Jr., Emma Agana- hospital may still be vicariously liable under Article
Andaya, Jesus Agana and Raymund Agana] and 2176 in relation to Article 1431 and Article 1869 of the
ENRIQUE AGANA, petitioners, vs. THE COURT OF Civil Code or the principle of apparent authority.
APPEALS and JUAN FUENTES, respondents. Moreover, regardless of its relationship with the
G.R. No. 127590.February 2, 2010.* doctor, the hospital may be held directly liable to the
MIGUEL AMPIL, petitioner, vs. NATIVIDAD and patient for its own negligence or failure to follow
ENRIQUE AGANA, respondents. established standard of conduct to which it should
Medical Negligence; Corporate Negligence; conform as a corporation.
Ostensible Agency; Court holds that Professional Same; Same; Same; Employer-Employee
Services, Inc. (PSI) is liable to the Aganas not under Relationship; Court still employs the control test to
the principle of respondent superior for lack of determine the existence of an employer-employee
evidence of an employment relationship with Dr. Ampil relationship between hospital and doctor.This Court
but under the principle of ostensible agency for the still employs the control test to determine the
negligence of Dr. Ampil and pro hac vice under the existence of an employer-employee relationship
principle of corporate negligence for its failure to between hospital and doctor. In Calamba Medical
perform its duties as a hospital.After gathering its Center, Inc. v. National Labor Relations Commission,
thoughts on the issues, this Court holds that PSI is et al., 571 SCRA 585 (2008), it held: Under the
liable to the Aganas, not under the principle of control test, an employment relationship exists
respondeat superior for lack of evidence of an between a physician and a hospital if the hospital
employment relationship with Dr. Ampil but under the controls both the means and the details of the process
principle of ostensible agency for the negligence of Dr. by which the physician is to accomplish his task.
Ampil and, pro hac vice, under the principle of Same; Same; Same; Same; Control as a
corporate negligence for its failure to perform its duties determinative factor in testing the employer-employee
as a hospital. relationship between doctor and hospital under which
Same; Same; Same; While in theory a hospital as a the hospital could be held vicariously liable to a patient
juridical entity cannot practice medicine, in reality it in medical negligence cases is a requisite fact to be
utilizes doctors, surgeons and medical practitioners in established
the conduct of its business of facilitating medical and 284
surgical treatment; Three legal relationships crisscross by preponderance of evidence.To allay the anxiety
_______________ of the intervenors, the Court holds that, in this
particular instance, the concurrent finding of the RTC
* EN BANC. and the CA that PSI was not the employer of Dr. Ampil
283 is correct. Control as a determinative factor in testing
within that reality.While in theory a hospital as a the employer-employee relationship between doctor
juridical entity cannot practice medicine, in reality it and hospital under which the hospital could be held
utilizes doctors, surgeons and medical practitioners in vicariously liable to a patient in medical negligence
the conduct of its business of facilitating medical and cases is a requisite fact to be established by
surgical treatment. Within that reality, three legal preponderance of evidence. Here, there was
relationships crisscross: (1) between the hospital and insufficient evidence that PSI exercised the power of
the doctor practicing within its premises; (2) between control or wielded such power over the means and the
the hospital and the patient being treated or examined details of the specific process by which Dr. Ampil
within its premises and (3) between the patient and applied his skills in the treatment of Natividad.
the doctor. The exact nature of each relationship Consequently, PSI cannot be held vicariously liable for
determines the basis and extent of the liability of the the negligence of Dr. Ampil under the principle of
hospital for the negligence of the doctor. respondeat superior.
Same; Same; Same; Regardless of its relationship Same; Same; Same; Same; Factors that Determine
with the doctor, the hospital may be held directly liable Apparent Authority.There is, however, ample
to the patient for its own negligence or failure to follow evidence that the hospital (PSI) held out to the patient
established standard of conduct to which it should (Natividad) that the doctor (Dr. Ampil) was its agent.
conform as a corporation.Where an employment Present are the two factors that determine apparent
authority: first, the hospitals implied manifestation to 4Filed a motion to intervene and for leave to file
the patient which led the latter to conclude that the memorandum-in-intervention, id., p. 534. AHI did not
doctor was the hospitals agent; and second, the file any memorandum.
patients reliance upon the conduct of the hospital and 5Filed a motion for intervention (by way of attached
the doctor, consistent with ordinary care and brief/
prudence. memorandum), id., p. 602.
SECOND MOTION FOR RECONSIDERATION of a 6 Resolution dated June 16, 2008, id., at p. 647.
decision of the Supreme Court. 286
The facts are stated in the resolution of the Court. tion for prior leave of court and the second motion for
Enrique Agana & Associates and Horacio Alvaro B. reconsideration of PSI.7
Peralta for Natividad Agana and Enrique Agana. Due to paramount public interest, the Court en banc
Castelo & Associates Law Offices collaborating accepted the referral8 and heard the parties on oral
counsel for the Heirs of Natividad Agana and Enrique arguments on one particular issue: whether a hospital
Agana. may be held liable for the negligence of physicians-
The Bengzon Law Firm for Professional Services, consultants allowed to practice in its premises.9
Inc. To recall the salient facts, PSI, together with Dr.
The Law Firm of Raymundo M. Armovit for Miguel Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr.
Ampil. Fuentes), was impleaded by Enrique Agana and
Agcaoili Law Offices for Heirs of Natividad Agana. Natividad Agana (later substituted by her heirs), in a
Bu C. Castro for intervenor private hospitals. complaint10 for damages filed in the Regional Trial
285 Court (RTC) of Quezon City, Branch 96, for the
injuries suffered by Natividad when Dr. Ampil and Dr.
Caguioa & Gatmaitan for intervenor Asian Hospital, Fuentes neglected to remove from her body two
Inc. gauzes11 which were used in the surgery they
Pilar Nenuca P. Almira for Manila Medical Services, performed on her on April 11, 1984 at the Medical City
Inc. General Hospital. PSI was impleaded as owner,
Benjamin M. Tongol for Juan Fuentes. operator and manager of the hospital.
RESOLUTION In a decision12 dated March 17, 1993, the RTC held
PSI solidarily liable with Dr. Ampil and Dr. Fuentes for
CORONA,J.: damages.13 On appeal, the Court of Appeals (CA),
With prior leave of court,1 petitioner Professional absolved Dr. Fuentes but affirmed the liability of Dr.
Services, Inc. (PSI) filed a second motion for Ampil and PSI, sub-
reconsideration2 urging referral thereof to the Court _______________
en banc and seeking modification of the decision
dated January 31, 2007 and resolution dated February 7Resolution dated June 12, 2008, id., at p. 645.
11, 2008 which affirmed its vicarious and direct liability 8Resolution dated August 12, 2008, id., at p. 649.
for damages to respondents Enrique Agana and the 9 As per Advisory dated March 4, 2009. It should be
heirs of Natividad Agana (Aganas). borne in mind that the issues in G.R. No. 126467 on
Manila Medical Services, Inc. (MMSI),3 Asian the exculpation of Dr. Juan Fuentes from liability, and
Hospital, Inc. (AHI),4 and Private Hospital Association in G.R. No. 127590 on the culpability of Dr. Miguel
of the Philippines (PHAP)5 all sought to intervene in Ampil for negligence and medical malpractice, are
these cases invoking the common ground that, unless deemed finally decided, no motion for reconsideration
modified, the assailed decision and resolution will having been filed by the Heirs of Agana in G.R. No.
jeopardize the financial viability of private hospitals 126467 nor by Dr. Miguel Ampil in G.R. No. 127467
and jack up the cost of health care. from the January 31, 2007 Decision of the First
The Special First Division of the Court granted the Division of the Court.
motions for intervention of MMSI, AHI and PHAP 10 Docketed as Civil Case No. Q-43322, Record, p. 6.
(hereafter intervenors),6 and referred en consulta to 11 Also referred to in the records as sponges.
the Court en banc the mo- 12 Penned by then Presiding Judge and now
_______________ Associate Justice of the Supreme Court Lucas
Bersamin.
1 Rollo (G.R. No. 126297), p. 468. 13 RTC Decision, Record, p. 133.
2 Id., at p. 489. 287
3Filed a motion for leave of court to intervene (by way ject to the right of PSI to claim reimbursement from Dr.
of attached memorandum), id., at p. 512. Ampil.14
On petition for review, this Court, in its January 31, 26 to oversee or supervise all persons who practiced
2007 decision, affirmed the CA decision.15 PSI filed a medicine within its walls, and to take active steps in
motion for reconsideration16 but the Court denied it in fixing any form of negligence committed within its
a resolution dated February 11, 2008.17 premises.27 PSI committed a serious breach of its
The Court premised the direct liability of PSI to the corporate duty when it failed to conduct an immediate
Aganas on the following facts and law: investigation into the reported missing gauzes.28
First, there existed between PSI and Dr. Ampil an PSI is now asking this Court to reconsider the
employer-employee relationship as contemplated in foregoing rulings for these reasons:
the December 29, 1999 decision in Ramos v. Court of I
Appeals18 that for purposes of allocating The declaration in the 31 January 2007 Decision vis-
responsibility in medical negligence cases, an a-vis the 11 February 2009 Resolution that the ruling
employer-employee relationship exists between in Ramos vs. Court of Appeals (G.R. No. 134354,
hospitals and their consultants.19 Although the Court December 29, 1999) that an employer-employee
in Ramos later issued a Resolution dated April 11, relations exists between hospital and their
200220 reversing its earlier finding on the existence of consultants stays should be set aside for being
an employment relationship between hospital and inconsistent with or contrary to the import of the
doctor, a similar reversal was not warranted in the resolution granting the hospitals motion for
present case because the defense raised by PSI reconsideration in Ramos vs. Court of Appeals (G.R.
consisted of a mere general denial of control or No. 134354, April 11, 2002), which is applicable to PSI
responsibility over the actions of Dr. Ampil.21 since the Aganas failed to prove an
Second, by accrediting Dr. Ampil and advertising his _______________
qualifications, PSI created the public impression that
he was its agent.22 Enrique testified that it was on 23 Supra at 17, p. 181, citing TSN, April 12, 1985, pp.
account of Dr. Ampils 25-26.
_______________ 24 Id.
25 G.R. No. 142625, 19 December 2006, 511 SCRA
14 CA decision dated September 6, 1996, penned by 204.
then Court of Appeals Associate Justice and later 26 Supra at 15, p. 505.
Supreme Court Associate Justice Cancio Garcia 27 Supra at 17, p. 182.
(Ret.); CA Rollo, pp. 136-137. 28 Id.
15G.R. Nos. 126297/126467/127590, 31 January 289
2007, 513 SCRA 478. employer-employee relationship between PSI and Dr.
16 Rollo, p. 403. Ampil and PSI proved that it has no control over Dr.
17G.R. Nos. 126297/126467/127590, 11 February Ampil. In fact, the trial court has found that there is no
2008, 544 SCRA 170. employer-employee relationship in this case and that
18 G.R. No. 124354, 29 December 1999, 321 SCRA the doctors are independent contractors.
548. II
19 Supra at 15, p. 499. Respondents Aganas engaged Dr. Miguel Ampil as
20 G.R. No. 124354, 11 April 2002, 380 SCRA 467. their doctor and did not primarily and specifically look
21 Supra at 17, p. 179. to the Medical City Hospital (PSI) for medical care and
22 Supra at 15, p. 502. support; otherwise stated, respondents Aganas did not
288 select Medical City Hospital (PSI) to provide medical
accreditation with PSI that he conferred with said care because of any apparent authority of Dr. Miguel
doctor about his wifes (Natividads) condition.23 After Ampil as its agent since the latter was chosen
his meeting with Dr. Ampil, Enrique asked Natividad to primarily and specifically based on his qualifications
personally consult Dr. Ampil.24 In effect, when and being friend and neighbor.
Enrigue and Natividad engaged the services of Dr. III
Ampil, at the back of their minds was that the latter PSI cannot be liable under doctrine of corporate
was a staff member of a prestigious hospital. Thus, negligence since the proximate cause of Mrs. Aganas
under the doctrine of apparent authority applied in injury was the negligence of Dr. Ampil, which is an
Nogales, et al. v. Capitol Medical Center, et al.,25 PSI element of the principle of corporate negligence.29
was liable for the negligence of Dr. Ampil. In their respective memoranda, intervenors raise
Finally, as owner and operator of Medical City General parallel arguments that the Courts ruling on the
Hospital, PSI was bound by its duty to provide existence of an employer-employee relationship
comprehensive medical services to Natividad Agana, between private hospitals and consultants will force a
to exercise reasonable care to protect her from harm, drastic and complex alteration in the long-established
and currently prevailing relationships among patient, The father and, in case of his death or incapacity, the
physician and hospital, with burdensome operational mother, are responsible for the damages caused by
and financial consequences and adverse effects on all the minor children who live in their company.
three parties.30 Guardians are liable for damages caused by the
The Aganas comment that the arguments of PSI need minors or incapacitated persons who are under their
no longer be entertained for they have all been authority and live in their company.
traversed in the assailed decision and resolution.31 291
After gathering its thoughts on the issues, this Court superior. Even when no employment relationship
holds that PSI is liable to the Aganas, not under the exists but it is shown that the hospital holds out to the
principle of respondeat superior for lack of evidence of patient that the doctor is its agent, the hospital may
an employment still be vicariously liable under Article 2176 in relation
_______________ to Article 143136 and Article 186937 of the Civil Code
or the principle of apparent authority.38 Moreover,
29 Rollo (G.R. No. 126297), pp. 489-490. regardless of its relationship with the doctor, the
30 Id., at pp. 518-527, 605-613. hospital may be held directly liable to the patient for its
31 Id., at p. 659. own negligence or failure to follow established
290 standard of conduct to which it should conform as a
relationship with Dr. Ampil but under the principle of corporation.39
ostensible agency for the negligence of Dr. Ampil and, _______________
pro hac vice, under the principle of corporate
negligence for its failure to perform its duties as a The owners and managers of an establishment or
hospital. enterprise are likewise responsible for damages
While in theory a hospital as a juridical entity cannot caused by their employees in the service of the
practice medicine,32 in reality it utilizes doctors, branches in which the latter are employed or on the
surgeons and medical practitioners in the conduct of occasion of their functions.
its business of facilitating medical and surgical Employers shall be liable for the damages caused by
treatment.33 Within that reality, three legal their employees and household helpers acting within
relationships crisscross: (1) between the hospital and the scope of their assigned tasks, even though the
the doctor practicing within its premises; (2) between former are not engaged in any business or industry.
the hospital and the patient being treated or examined The State is responsible in like manner when it acts
within its premises and (3) between the patient and through a special agent; but not when the damage has
the doctor. The exact nature of each relationship been caused by the official to whom the task done
determines the basis and extent of the liability of the properly pertains, in which case what is provided in
hospital for the negligence of the doctor. article 2176 shall be applicable.
Where an employment relationship exists, the hospital Lastly, teachers or heads of establishments of arts
may be held vicariously liable under Article 217634 in and trades shall be liable for damages caused by their
relation to Article 218035 of the Civil Code or the pupils and students or apprentices, so long as they
principle of respondeat remain in their custody.
_______________ The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they
32 Section 8, Republic Act No. 2382 (RA 2382) or The observed all the diligence of a good father of a family
Medical Act of 1959. to prevent damage.
33See Acebedo Optical Co. Inc. v. CA, G.R. No. 36 Article1431.Through estoppel an admission or
100152, 31 March 2000, 314 SCRA 315. representation is rendered conclusive upon the person
34 Article 2176.Whoever by act or omission causes making it, and cannot be denied or disproved as
damage to another, there being fault or negligence, is against the person relying thereon.
obliged to pay for the damage done. Such fault or 37 Art. 1869.Agency may be express, or implied from
negligence, if there is no pre-existing contractual the acts of the principal, from his silence or lack of
relation between the parties is called a quasi-delict action, or his failure to repudiate the agency, knowing
and is governed by the provisions of this Chapter. that another person is acting on his behalf without
35 Art.2180.The obligation imposed by article 2176 authority.
is demandable not only for ones own acts or 38 Nogales v. Capitol Medical Center, et al., supra at
omissions, but also for those of persons for whom one 25.
is responsible. 39 Pedro Solis, Medical Jurisprudence (The Practice
of Medicine and the Law), Quezon City: R.P. Garcia
Publishing Co., 1988, p. 321, citing U.S. district and PSI, Dr. Ampil and Dr. Fuentes appealed44 from the
appellate cases. See also Darling v. Charles- RTC decision but only on the issues of negligence,
292 agency and corporate liability. In its September 6,
This Court still employs the control test to determine 1996 decision, the CA mistakenly referred to PSI and
the existence of an employer-employee relationship Dr. Ampil as employer-employee, but it was clear in its
between hospital and doctor. In Calamba Medical discussion on the matter that it viewed their
Center, Inc. v. National Labor Relations Commission, relationship as one of mere apparent agency.45
et al.40 it held: The Aganas appealed from the CA decision, but only
Under the control test,,an employment relationship to question the exoneration of Dr. Fuentes.46 PSI also
exists between a physician and a hospital if the appealed from the CA decision, and it was then that
hospital controls both the means and the details of the the issue of employment, though long settled, was
process by which the physician is to accomplish his unwittingly resurrected.
task. In fine, as there was no dispute over the RTC finding
xxxxxx that PSI and Dr. Ampil had no employer-employee
As priorly stated, private respondents maintained relationship, such finding became final and conclusive
specific work-schedules, as determined by petitioner even to this Court.47 There was no reason for PSI to
through its medical director, which consisted of 24- have raised it as an issue in its petition. Thus,
hour shifts totaling forty-eight hours each week and whatever discussion on the matter that may have
which were strictly to be observed under pain of ensued was purely academic.
administrative sanctions. Nonetheless, to allay the anxiety of the intervenors,
That petitioner exercised control over respondents the Court holds that, in this particular instance, the
gains light from the undisputed fact that in the concurrent finding of the RTC and the CA that PSI
emergency room, the operating room, or any was not the employer
department or ward for that matter, respondents work _______________
is monitored through its nursing supervisors, charge
nurses and orderlies. Without the approval or consent 43 Supra at 13, p. 126.
of petitioner or its medical director, no operations can 44 Dr. Fuentes filed with the CA a petition for certiorari
be undertaken in those areas. For control test to docketed as CA-G.R. SP No. 32198 (CA Rollo, p. 1)
apply, it is not essential for the employer to actually while Dr. Ampil and PSI jointly filed an appeal
supervise the performance of duties of the employee, docketed as CA-G.R. CV No. 42062 (CA Rollo, pp. 40
it being enough that it has the right to wield the and 152).
power. (emphasis supplied) 45 Supra at 14, p. 135.
Even in its December 29, 1999 decision41 and April 46 Rollo (G.R. No. 126467), p. 8.
11, 2002 resolution42 in Ramos, the Court found the 47 Elsie Ang v. Dr. Erniefel Grageda, G.R. No.
control test decisive. 166239, 8 June 2006, 490 SCRA 424.
In the present case, it appears to have escaped the 294
Courts attention that both the RTC and the CA found of Dr. Ampil is correct. Control as a determinative
no employment factor in testing the employer-employee relationship
_______________ between doctor and hospital under which the hospital
could be held vicariously liable to a patient in medical
ton Community Memorial Hospital, 14 A.L.R. 3D 860 negligence cases is a requisite fact to be established
(Ill. September 29, 1965). by preponderance of evidence. Here, there was
insufficient evidence that PSI exercised the power of
40 G.R. No. 176484, 25 November 2008, 571 SCRA control or wielded such power over the means and the
585. details of the specific process by which Dr. Ampil
41 Supra at 18. applied his skills in the treatment of Natividad.
42 Supra at 20. Consequently, PSI cannot be held vicariously liable for
293 the negligence of Dr. Ampil under the principle of
relationship between PSI and Dr. Ampil, and that the respondeat superior.
Aganas did not question such finding. In its March 17, There is, however, ample evidence that the hospital
1993 decision, the RTC found that defendant doctors (PSI) held out to the patient (Natividad)48 that the
were not employees of PSI in its hospital, they being doctor (Dr. Ampil) was its agent. Present are the two
merely consultants without any employer-employee factors that determine apparent authority: first, the
relationship and in the capacity of independent hospitals implied manifestation to the patient which
contractors.43 The Aganas never questioned such led the latter to conclude that the doctor was the
finding. hospitals agent; and second, the patients reliance
upon the conduct of the hospital and the doctor, By such statement, PSI virtually reinforced the public
consistent with ordinary care and prudence.49 impression that Dr. Ampil was a physician of its
Enrique testified that on April 2, 1984, he consulted Dr. hospital, rather than one independently practicing in it;
Ampil regarding the condition of his wife; that after the that the medications and treatments he prescribed
meeting and as advised by Dr. Ampil, he asked [his] were necessary and desirable; and that the hospital
wife to go to Medical City to be examined by [Dr. staff was prepared to carry them out.
Ampil]; and that the next day, April 3, he told his _______________
daughter to take her mother to Dr. Ampil.50 This
timeline indicates that it was Enrique who actually 52 Supra at 50, pp. 25-26.
made the decision on whom Natividad should consult 53 Exh. D-1, Exhibit Folder for Plaintiffs, p. 92.
and where, and that the latter merely acceded to it. It 296
explains the testimony of Natividad that she consulted
Dr. Ampil at the instigation of her daughter.51 PSI pointed out in its memorandum that Dr. Ampils
Moreover, when asked what impelled him to choose hospital affiliation was not the exclusive basis of the
Dr. Ampil, Enrique testified: Aganas decision to have Natividad treated in Medical
_______________ City General Hospital, meaning that, had Dr. Ampil
been affiliated with another hospital, he would still
48 Through the patients husband Enrique. have been chosen by the Aganas as Natividads
49 Nogales v. Capitol Medical Center, et al., supra at surgeon.54
25. The Court cannot speculate on what could have been
50 TSN, April 12, 1985, pp. 26-27. behind the Aganas decision but would rather adhere
51 Second Motion for Reconsideration, Rollo, pp. strictly to the fact that, under the circumstances at that
495-496. time, Enrique decided to consult Dr. Ampil for he
295 believed him to be a staff member of a prominent and
known hospital. After his meeting with Dr. Ampil,
Atty. Agcaoili Enrique advised his wife Natividad to go to the
On that particular occasion, April 2, 1984, what was Medical City General Hospital to be examined by said
your reason for choosing Dr. Ampil to contact with in doctor, and the hospital acted in a way that fortified
connection with your wifes illness? Enriques belief.
A.First, before that, I have known him to be a This Court must therefore maintain the ruling that PSI
specialist on that part of the body as a surgeon, is vicariously liable for the negligence of Dr. Ampil as
second, I have known him to be a staff member of the its ostensible agent.
Medical City which is a prominent and known hospital. Moving on to the next issue, the Court notes that PSI
And third, because he is a neighbor, I expect more made the following admission in its Motion for
than the usual medical service to be given to us, than Reconsideration:
his ordinary patients.52 (emphasis supplied) 51.Clearly, not being an agent or employee of
Clearly, the decision made by Enrique for Natividad to petitioner PSI, PSI [sic] is not liable for Dr. Ampils acts
consult Dr. Ampil was significantly influenced by the during the operation. Considering further that Dr.
impression that Dr. Ampil was a staff member of Ampil was personally engaged as a doctor by Mrs.
Medical City General Hospital, and that said hospital Agana, it is incumbent upon Dr. Ampil, as Captain of
was well known and prominent. Enrique looked upon the Ship, and as the Aganas doctor to advise her on
Dr. Ampil not as independent of but as integrally what to do with her situation vis--vis the two missing
related to Medical City. gauzes. In addition to noting the missing gauzes,
PSIs acts tended to confirm and reinforce, rather than regular check-ups were made and no signs of
negate, Enriques view. It is of record that PSI required complications were exhibited during her stay at the
a consent for hospital care53 to be signed hospital, which could have alerted petitioner PSIs
preparatory to the surgery of Natividad. The form hospital to render and provide post-operation services
reads: to and tread on Dr. Ampils role as the doctor of Mrs.
Permission is hereby given to the medical, nursing Agana. The absence of negligence of PSI from the
and laboratory staff of the Medical City General patients admission up to her discharge is borne by
Hospital to perform such diagnostic procedures and to the finding of facts in this case. Likewise evident
administer such medications and treatments as may therefrom is the absence of any complaint from
be deemed necessary or advisable by the physicians _______________
of this hospital for and during the confinement of
xxx. (emphasis supplied) 54 Petitioners Memorandum with Compliance, pp.
57-58.
297 did not include taking an active step in fixing the
Mrs. Agana after her discharge from the hospital negligence committed.59 An admission made in the
which had she brought to the hospitals attention, pleading cannot be controverted by the party making
could have alerted petitioner PSI to act accordingly such admission and is conclusive as to him, and all
and bring the matter to Dr. Ampils attention. But this proofs submitted by him contrary thereto or
was not the case. Ms. Agana complained ONLY to inconsistent therewith should be ignored, whether or
Drs. Ampil and Fuentes, not the hospital. How then not objection is interposed by a party.60
could PSI possibly do something to fix the negligence Given the standard of conduct that PSI defined for
committed by Dr. Ampil when it was not informed itself, the next relevant inquiry is whether the hospital
about it at all.55 (emphasis supplied) measured up to it.
PSI reiterated its admission when it stated that had PSI excuses itself from fulfilling its corporate duty on
Natividad Agana informed the hospital of her the ground that Dr. Ampil assumed the personal
discomfort and pain, the hospital would have been responsibility of informing Natividad about the two
obliged to act on it.56 missing gauzes.61 Dr. Ricardo Jocson, who was part
The significance of the foregoing statements is critical. of the group of doctors that attended to Natividad,
First, they constitute judicial admission by PSI that testified that toward the end of the surgery, their group
while it had no power to control the means or method talked about the missing gauzes but Dr. Ampil assured
by which Dr. Ampil conducted the surgery on them that he would personally notify the patient about
Natividad Agana, it had the power to review or cause it.62 Furthermore, PSI claimed that there was no
the review of what may have irregularly transpired _______________
within its walls strictly for the purpose of determining
whether some form of negligence may have attended 58 Rollo, p. 505-506.
any procedure done inside its premises, with the 59 Id., at pp. 506-507.
ultimate end of protecting its patients. 60Luciano Tan v. Rodil Enterprises, G.R. No. 168071,
Second, it is a judicial admission that, by virtue of the 18 December 2006, 511 SCRA 162; Heirs of Pedro
nature of its business as well as its prominence57 in Clemena Y. Zurbano v. Heirs of Irene B. Bien, G.R.
the hospital industry, it assumed a duty to tread on No. 155508, 11 September 2006, 501 SCRA 405.
the captain of the ship role of any doctor rendering 61 Second Motion for Reconsideration, Rollo, pp.
services within its premises for the purpose of 502-503.
ensuring the safety of the patients availing themselves 62 Id., at p. 503, citing TSN, February 26, 1987, p. 36.
of its services and facilities. 299
Third, by such admission, PSI defined the standards reason for it to act on the report on the two missing
of its corporate conduct under the circumstances of gauzes because Natividad Agana showed no signs of
this case, specifically: (a) that it had a corporate duty complications. She did not even inform the hospital
to Natividad even after her operation to ensure her about her discomfort.63
safety as a patient; (b) that The excuses proffered by PSI are totally
_______________ unacceptable.
To begin with, PSI could not simply wave off the
55 Motion for Reconsideration, Rollo, pp. 429-430. problem and nonchalantly delegate to Dr. Ampil the
56 Id., at p. 434. duty to review what transpired during the operation.
57 PSI has not denied its prominent place in the The purpose of such review would have been to
hospital industry but has in fact asserted such role in pinpoint when, how and by whom two surgical gauzes
its 1967 brochure (Annex K to its Manifestation filed were mislaid so that necessary remedial measures
on May 14, 2009). could be taken to avert any jeopardy to Natividads
298 recovery. Certainly, PSI could not have expected that
its corporate duty was not limited to having its nursing purpose to be achieved by merely hoping that the
staff note or record the two missing gauzes and (c) person likely to have mislaid the gauzes might be able
that its corporate duty extended to determining Dr. to retrace his own steps. By its own standard of
Ampils role in it, bringing the matter to his attention, corporate conduct, PSIs duty to initiate the review
and correcting his negligence. was non-delegable.
And finally, by such admission, PSI barred itself from While Dr. Ampil may have had the primary
arguing in its second motion for reconsideration that responsibility of notifying Natividad about the missing
the concept of corporate responsibility was not yet in gauzes, PSI imposed upon itself the separate and
existence at the time Natividad underwent treatment; independent responsibility of initiating the inquiry into
58 and that if it had any corporate responsibility, the the missing gauzes. The purpose of the first would
same was limited to reporting the missing gauzes and have been to apprise Natividad of what transpired
during her surgery, while the purpose of the second 2006, 484 SCRA 671), a ruling expressly qualified as
would have been to pinpoint any lapse in procedure pro hac vice is limited in application to one particular
that led to the gauze count discrepancy, so as to case only; it cannot be relied upon as a precedent to
prevent a recurrence thereof and to determine govern other cases.
corrective measures that would ensure the safety of 65 See Sps. Chua v. Hon. Jacinto Ang, et al., G.R. No.
Natividad. That Dr. Ampil negligently failed to notify 156164, 4 September 2009, 598 SCRA 229.
Natividad did not release PSI from its self-imposed 301
separate responsibility. upon the Aganas has gone on for 26 long years, with
Corollary to its non-delegable undertaking to review Natividad coming to the end of her days racked in pain
potential incidents of negligence committed within its and agony. Such wretchedness could have been
premises, PSI had the duty to take notice of medical avoided had PSI simply done what was logical: heed
records prepared by its own staff and submitted to its the report of a guaze count discrepancy, initiate a
custody, especially when these bear earmarks of a review of what went wrong and take corrective
surgery gone awry. Thus, the record taken during the measures to ensure the safety of Natividad. Rather,
operation of Natividad which reported a gauze count for 26 years, PSI hemmed and hawed at every turn,
discrepancy should have given PSI sufficient disowning any such responsibility to its patient.
_______________ Meanwhile, the options left to the Aganas have all but
dwindled, for the status of Dr. Ampil can no longer be
63 Supra at 55. ascertained.66
300 Therefore, taking all the equities of this case into
reason to initiate a review. It should not have waited consideration, this Court believes P15 million would
for Natividad to complain. be a fair and reasonable liability of PSI, subject to
As it happened, PSI took no heed of the record of 12% p.a. interest from the finality of this resolution to
operation and consequently did not initiate a review of full satisfaction.
what transpired during Natividads operation. Rather, it WHEREFORE, the second motion for reconsideration
shirked its responsibility and passed it on to others is DENIED and the motions for intervention are
to Dr. Ampil whom it expected to inform Natividad, and NOTED.
to Natividad herself to complain before it took any Professional Services, Inc. is ORDERED pro hac vice
meaningful step. By its inaction, therefore, PSI failed to pay Natividad (substituted by her children Marcelino
its own standard of hospital care. It committed Agana III, Enrique Agana, Jr., Emma Agana-Andaya,
corporate negligence. Jesus Agana and Raymund Agana) and Enrique
It should be borne in mind that the corporate Agana the total amount of P15 million, subject to 12%
negligence ascribed to PSI is different from the p.a. interest from the finality of this resolution to full
medical negligence attributed to Dr. Ampil. The duties satisfaction.
of the hospital are distinct from those of the doctor- No further pleadings by any party shall be entertained
consultant practicing within its premises in relation to in this case.
the patient; hence, the failure of PSI to fulfill its duties Let the long-delayed entry of judgment be made in this
as a hospital corporation gave rise to a direct liability case upon receipt by all concerned parties of this
to the Aganas distinct from that of Dr. Ampil. resolution.
All this notwithstanding, we make it clear that PSIs SO ORDERED.
hospital liability based on ostensible agency and
corporate negligence applies only to this case, pro hac
vice. It is not intended to set a precedent and should
not serve as a basis to hold hospitals liable for every G.R. No. 176484.November 25, 2008.*
form of negligence of their doctors-consultants under CALAMBA MEDICAL CENTER, INC., petitioner, vs.
any and all circumstances. The ruling is unique to this NATIONAL LABOR RELATIONS COMMISSION,
case, for the liability of PSI arose from an implied RONALDO LANZANAS AND MERCEDITHA**
agency with Dr. Ampil and an admitted corporate duty LANZANAS, respondents.
to Natividad.64 Labor Law; Employer-Employee Relationship; Under
Other circumstances peculiar to this case warrant this the control test, an employment relationship exists
ruling,65 not the least of which being that the agony between a physician and a hospital if the hospital
wrought controls both the means and the details of the process
_______________ by which the physician is to accomplish his task.
Under the control test, an employment relationship
64 In Partido ng Manggagawa (PM) and Butil Farmers exists between a physician and a hospital if the
Party (Butil) v. Comelec (G.R. No. 164702, March 15, hospital controls both the means and the details of the
process by which the physician is to accomplish his Same; Same; An employer-employee relationship
task. Where a person who works for another does so exists between the resident physicians and the
more or less at his own pleasure and is not subject to training hospitals, under Section 15, Rule X of Book III
definite hours or conditions of work, and is of the Implementing Rules of the Labor Code, unless
compensated according to the result of his efforts and there is a training agreement between them, and the
not the amount thereof, the element of control is training program is duly accredited or approved by the
absent. As priorly stated, private respondents appropriate government agency.Under Section 15,
maintained specific work-schedules, as determined by Rule X of Book III of the Implementing Rules of the
petitioner through its medical director, which consisted Labor Code, an employer-employee relationship
of 24-hour shifts totaling forty-eight hours each week exists between the resident physicians and the
and which were strictly to be observed under pain of training hospitals, unless there is a training agreement
administrative sanctions. between them, and the training program is duly
Same; Same; For control test to apply, it is not accredited or approved by the appropriate government
essential for the employer to actually supervise the agency. In respondents case, they were not
performance of duties of the employee, it being undergoing any specialization training. They were
enough that it has the right to wield the power.That considered non-training general practitioners,
petitioner exercised control over respondents gains assigned at the emergency rooms and ward sections.
light from the undisputed fact that in the emergency Same; Strikes; Mere membership in a labor union
room, the operating room, or any department or ward does not ipso facto mean participation in a strike.
for that matter, respondents work is monitored Participation in a strike and intransigence to a return-
through its nursing supervisors, charge nurses and to-work order must, however, be duly proved in order
orderlies. Without the approval or consent of petitioner to justify immediate dismissal in a national interest
or its medical director, no operations can be case. As the appellate court as well as the NLRC
undertaken in those areas. For control test to apply, it observed, however, there is nothing in the records that
is not essential for the employer to actually supervise would bear out Dr. Lanzanas actual participation in
the performance of duties of the employee, it being the strike. And the medical directors Memorandum of
enough that it has the right to wield the power. April 22, 1998 contains nothing more than a general
_______________ directive to all union officers and members to return-
to-work. Mere membership in a labor union does not
* SECOND DIVISION. ipso facto mean participation in a strike.
** Mercedita in some pleadings and annexed 587
documents.
586 VOL. 571, NOVEMBER 25, 2008
587
586 Calamba Medical Center, Inc. vs. National Labor
SUPREME COURT REPORTS ANNOTATED Relations Commission
Calamba Medical Center, Inc. vs. National Labor PETITION for review on certiorari of a decision of the
Relations Commission Court of Appeals.
Same; Same; Mandatory coverage under the SSS The facts are stated in the opinion of the Court.
Law is premised on the existence of an employer- Cabio Law Office & Associates for petitioner.
employee relationship, except in cases of compulsory Benjamin S. David for private respondents.
coverage of the self-employed.Petitioner itself CARPIO-MORALES,J.:
provided incontrovertible proof of the employment The Calamba Medical Center (petitioner), a privately-
status of respondents, namely, the identification cards owned hospital, engaged the services of medical
it issued them, the payslips and BIR W-2 (now 2316) doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas)
Forms which reflect their status as employees, and and Merceditha Lanzanas (Dr. Merceditha) in March
the classification as salary of their remuneration. 1992 and August 1995, respectively, as part of its
Moreover, it enrolled respondents in the SSS and team of resident physicians. Reporting at the hospital
Medicare (Philhealth) program. It bears noting at this twice-a-week on twenty-four-hour shifts, respondents
juncture that mandatory coverage under the SSS Law were paid a monthly retainer of P4,800.00 each.1 It
is premised on the existence of an employer- appears that resident physicians were also given a
employee relationship, except in cases of compulsory percentage share out of fees charged for out-patient
coverage of the self-employed. It would be treatments, operating room assistance and discharge
preposterous for an employer to report certain billings, in addition to their fixed monthly retainer.2
persons as employees and pay their SSS premiums The work schedules of the members of the team of
as well as their wages if they are not its employees. resident physicians were fixed by petitioners medical
director Dr. Raul Desipeda (Dr. Desipeda). And they _______________
were issued identification cards3 by petitioner and
were enrolled in the Social Security System (SSS).4 6 Id., at p. 12; NLRC Records, pp. 99-100, Affidavit of
Income taxes were withheld from them.5 Dr. Meluz Trinidad.
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), 7 NLRC Records, p. 171.
also a resident physician at the hospital, inadvertently 8 Rollo, p. 12.
overheard a telephone conversation of respondent Dr. 9 NLRC Records, p.16.
Lanzanas with a fellow employee, Diosdado Miscala, 589
through an extension telephone line. Apparently, Dr.
Lanzanas and Miscala were VOL. 571, NOVEMBER 25, 2008
_______________ 589
Calamba Medical Center, Inc. vs. National Labor
1 Rollo, p. 10. Relations Commission
2 Id., at p. 11. Responding to the memorandum, Dr. Lanzanas, by
3 NLRC Records, pp. 79-80; Annexes E and F of letter of March 9, 1998,10 admitted that he spoke with
Complainants (herein private respondents) Joint Miscala over the phone but that their conversation
Reply and Rejoinder. was taken out of context by Dr. Trinidad.
4 Id., at pp. 74-75; Annexes A and B. On March 14, 1998,11 the rank-and-file employees
5 Id., at pp. 76-78; Annexes C and D. union of petitioner went on strike due to unresolved
588 grievances over terms and conditions of employment.
12
588 On March 20, 1998, Dr. Lanzanas filed a complaint for
SUPREME COURT REPORTS ANNOTATED illegal suspension13 before the National Labor
Calamba Medical Center, Inc. vs. National Labor Relations Commission (NLRC)-Regional Arbitration
Relations Commission Board (RAB) IV. Dr. Merceditha subsequently filed a
discussing the low census or admission of patients complaint for illegal dismissal.14
to the hospital.6 In the meantime, then Sec. Cresenciano Trajano of
Dr. Desipeda whose attention was called to the above- the Department of Labor and Employment (DOLE)
said telephone conversation issued to Dr. Lanzanas a certified the labor dispute to the NLRC for compulsory
Memorandum of March 7, 1998 reading: arbitration and issued on April 21, 1998 return-to-work
As a Licensed Resident Physician employed in Order to the striking union officers and employees of
Calamba Medical Center since several years ago, the petitioner pending resolution of the labor dispute.15
hospital management has committed upon you utmost In a memorandum16 of April 22, 1998, Dr. Desipeda
confidence in the performance of duties pursuant echoed the April 22, 1998 order of the Secretary of
thereto. This is the reason why you were awarded the Labor directing all union officers and members to
privilege to practice in the hospital and were entrusted return-to-work on or April 23, 1998, except those
hospital functions to serve the interest of both the employees that were already terminated or are
hospital and our patients using your capability for serving disciplinary actions. Dr. Desipeda thus
independent judgment. ordered the officers and members of the union to
Very recently though and unfortunately, you have report for work as soon as possible to the hospitals
committed acts inimical to the interest of the hospital, personnel officer and administrator for work
the details of which are contained in the hereto scheduling, assignments and/or re-assignments.
attached affidavit of witness. _______________
You are therefore given 24 hours to explain why no
disciplinary action should be taken against you. 10 Id., at p. 174.
Pending investigation of your case, you are hereby 11 The actual date of the union strike as reflected in
placed under 30-days [sic] preventive suspension the order of the Secretary of Labor and Employment.
effective upon receipt hereof.7 (Emphasis, italics and Id., at pp. 50-51.
underscoring supplied) 12 Rollo, p. 11.
Inexplicably, petitioner did not give respondent Dr. 13 NLRC Records, p. 1.
Merceditha, who was not involved in the said incident, 14 Id., at p. 7.
any work schedule after sending her husband Dr. 15 NLRC Records, pp. 50-51.
Lanzanas the memorandum,8 nor inform her the 16 CA Rollo, p. 198.
reason therefor, albeit she was later informed by the 590
Human Resource Department (HRD) officer that that
was part of petitioners cost-cutting measures.9 590
SUPREME COURT REPORTS ANNOTATED On appeal, the NLRC, by Decision20 of May 3, 2002,
Calamba Medical Center, Inc. vs. National Labor reversed the Labor Arbiters findings, disposing as
Relations Commission follows:
Petitioner later sent Dr. Lanzanas a notice of WHEREFORE, the assailed decision is set aside.
termination which he received on April 25, 1998, The respondents are ordered to pay the complainants
indicating as grounds therefor his failure to report back their full backwages; separation pay of one month
to work despite the DOLE order and his supposed role salary for every year of service in lieu of
in the striking union, thus: reinstatement; moral damages of P500,000.00 each;
On April 23, 1998, you still did not report for work exemplary damages of P250,000.00 each plus ten
despite memorandum issued by the CMC Medical percent (10%) of the total award as attorneys fees.
Director implementing the Labor Secretarys ORDER. SO ORDERED.21
The same is true on April 24, 1998 and April 25, 1998, Petitioners motion for reconsideration having been
you still did not report for work [sic]. denied, it brought the case to the Court of Appeals on
You are likewise aware that you were observed (re: certiorari.
signatories [sic] to the Saligang Batas of BMCMC- The appellate court, by June 30, 2004 Decision,22
UWP) to be unlawfully participating as member in the initially granted petitioners petition and set aside the
rank-and-file unions concerted activities despite NLRC ruling. However, upon a subsequent motion for
knowledge that your position in the hospital is reconsideration filed by respondents, it reinstated the
managerial in nature (Nurses, Orderlies, and staff of NLRC decision in an Amended Decision23 dated
the Emergency Room carry out your orders using your September 26, 2006 but tempered the award to each
independent judgment) which participation is of the spouses of moral and exemplary damages to
expressly prohibited by the New Labor Code and P100,000.00 and P50,000.00, respectively and
which prohibition was sustained by the Med-Arbiters omitted the award of attorneys fees.
ORDER dated February 24, 1998. (Emphasis and In finding the existence of an employer-employee
italics in the original; underscoring partly in the original relationship between the parties, the appellate court
and partly supplied) held:
For these reasons as grounds for termination, you are x x x. While it may be true that the respondents are
hereby terminated for cause from employment given the discretion to decide on how to treat the
effective today, April 25, 1998, without prejudice to petitioners patients, the petitioner has not denied nor
further action for revocation of your license before the explained why its Medical Director still
Philippine [sic] Regulations [sic] Commission.17 _______________
(Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to 20 Id., at pp. 280-305.
include illegal dismissal.18 His and Dr. Mercedithas 21 Id., at p. 304.
complaints were consolidated and docketed as NLRC 22 Rollo, pp. 94-99. Penned by Justice Elvi John S.
CASE NO. RAB-IV-3-9879-98-L. Asuncion with the concurrence of Justices Mariano C.
By Decision19 of March 23, 1999, Labor Arbiter Del Castillo and Hakim S. Abdulwahid.
Antonio R. Macam dismissed the spouses complaints 23 Id., at pp. 32-43. Penned by Justice Hakim S.
for want of jurisdiction upon a finding that there was Abdulwahid with the concurrence of Justices
no employer-employee relationship between the Remedios A. Salazar-Fernando and Mariano C. del
parties, the fourth requisite or the Castillo.
_______________ 592

17 NLRC Records, p. 175. 592


18 Id., at p. 12. SUPREME COURT REPORTS ANNOTATED
19 Id., at pp. 117-130. Calamba Medical Center, Inc. vs. National Labor
591 Relations Commission
has the direct supervision and control over the
VOL. 571, NOVEMBER 25, 2008 respondents. The fact is the petitioners Medical
591 Director still has to approve the schedule of duties of
Calamba Medical Center, Inc. vs. National Labor the respondents. The respondents stressed that the
Relations Commission petitioners Medical Director also issues instructions or
control test in the determination of an employment orders to the respondents relating to the means and
bond being absent. methods of performing their duties, i.e. admission of
patients, manner of characterizing cases, treatment of
cases, etc., and may even overrule, review or revise
the decisions of the resident physicians. This was not employee relationship27 between petitioner and the
controverted by the petitioner. The foregoing factors spouses-respondents.
taken together are sufficient to constitute the fourth Denying the existence of such relationship, petitioner
element, i.e. control test, hence, the existence of the argues that the appellate court, as well as the NLRC,
employer-employee relationship. In denying that it had overlooked its twice-a-week reporting arrangement
control over the respondents, the petitioner alleged with respondents who are free to practice their
that the respondents were free to put up their own profession elsewhere the rest of the week. And it
clinics or to accept other retainership agreement with invites attention to the uncontroverted allegation that
the other hospitals. But, the petitioner failed to respondents, aside from their monthly retainers, were
substantiate the allegation with substantial entitled to one-half of all suturing, admitting,
evidence. (Emphasis and underscoring supplied)24 consultation, medico-legal and operating room
The appellate court thus declared that respondents assistance fees.28 These circumstances, it stresses,
were illegally dismissed. are clear badges of the absence of any employment
x x x. The petitioners ground for dismissing relationship between them.
respondent Ronaldo Lanzanas was based on his This Court is unimpressed.
alleged participation in union activities, specifically in Under the control test, an employment relationship
joining the strike and failing to observe the return-to- exists between a physician and a hospital if the
work order issued by the Secretary of Labor. Yet, the hospital controls
petitioner did not adduce any piece of evidence to _______________
show that respondent Ronaldo indeed participated in
the strike. x x x. 26 Id., at p. 42.
In the case of respondent Merceditha Lanzanas, the 27 Applying the four-fold test which has the following
petitioners explanation that her marriage to elements: a) selection and engagement of the
complainant Ronaldo has given rise to the employee; b) payment of wages or salaries; c)
presumption that her sympat[hies] are likewise with exercise of the power of dismissal; and d) exercise of
her husband as a ground for her dismissal is the power to control the employees conduct.
unacceptable. Such is not one of the grounds to justify 28 Rollo, p. 26.
the termination of her employment.25 (Underscoring 594
supplied)
The fallo of the appellate courts decision reads: 594
_______________ SUPREME COURT REPORTS ANNOTATED
Calamba Medical Center, Inc. vs. National Labor
24 Id., at p. 40. Relations Commission
25 Id., at pp. 40-41. both the means and the details of the process by
593 which the physician is to accomplish his task.29
Where a person who works for another does so more
VOL. 571, NOVEMBER 25, 2008 or less at his own pleasure and is not subject to
593 definite hours or conditions of work, and is
Calamba Medical Center, Inc. vs. National Labor compensated according to the result of his efforts and
Relations Commission not the amount thereof, the element of control is
WHEREFORE, the instant Motion for absent.30
Reconsideration is GRANTED, and the Courts As priorly stated, private respondents maintained
decision dated June 30, 2004, is SET ASIDE. In lieu specific work-schedules, as determined by petitioner
thereof, a new judgment is entered, as follows: through its medical director, which consisted of 24-
WHEREFORE, the petition is DISMISSED. The hour shifts totaling forty-eight hours each week and
assailed decision dated May 3, 2002 and order dated which were strictly to be observed under pain of
September 24, 2002 of the NLRC in NLRC NCR CA administrative sanctions.
No. 019823-99 are AFFIRMED with the That petitioner exercised control over respondents
MODIFICATION that the moral and exemplary gains light from the undisputed fact that in the
damages are reduced to P100,000.00 each and emergency room, the operating room, or any
P50,000.00 each, respectively. department or ward for that matter, respondents work
SO ORDERED.26 (Emphasis and italics in the is monitored through its nursing supervisors, charge
original; underscoring supplied) nurses and orderlies. Without the approval or consent
Preliminarily, the present petition calls for a of petitioner or its medical director, no operations can
determination of whether there exists an employer- be undertaken in those areas. For control test to
apply, it is not essential for the employer to actually
supervise the performance of duties of the employee, juncture that mandatory coverage under the SSS
it being enough that it has the right to wield the power. Law34 is premised on the existence of an employer-
31 employee relationship,35 except in cases of
With respect to respondents sharing in some hospital compulsory coverage of the self-employed. It would
fees, this scheme does not sever the employment tie be preposterous for an employer to report certain
between them and petitioner as this merely mirrors persons as employees and pay their SSS premiums
additional form or another form of compensation or as well as their wages if they are not its employees.36
incentive similar to what commission-based _______________
employees receive as contemplated in Article 97 (f) of
the Labor Code, thus: 32 NLRC Records, pp. 179-184; Annex H.
_______________ 33 Id., at p. 89; Annex J.
34 Vide Section 9 of Republic Act No. 8282.
29 Nogales v. Capitol Medical Center, G.R. No. 35 Social Security System v. Court of Appeals, 401
142625, December 19, 2006, 511 SCRA 204, 221, Phil. 132, 141; 348 SCRA 1, 10 (2000).
citing Diggs v. Novant Health, Inc., 628 S.E.2d 851 36 Nagasura v. National Labor Relations Commission,
(2006). G.R. Nos. 117936-37, May 20, 1998, 290 SCRA 245,
30 Encyclopedia Britannica v. National Labor 251; Equitable Bank-
Relations Commission, G.R. No. 87098, November 4, 596
1996, 264 SCRA 1, 10.
31 Equitable Banking Corp. v. National Labor 596
Relations Commission, G.R. No. 102467, June 13, SUPREME COURT REPORTS ANNOTATED
1997, 273 SCRA 352, 371. Calamba Medical Center, Inc. vs. National Labor
595 Relations Commission
And if respondents were not petitioners employees,
VOL. 571, NOVEMBER 25, 2008 how does it account for its issuance of the earlier-
595 quoted March 7, 1998 memorandum explicitly stating
Calamba Medical Center, Inc. vs. National Labor that respondent is employed in it and of the
Relations Commission subsequent termination letter indicating respondent
Wage paid to any employee shall mean the Lanzanas employment status.
remuneration or earning, however designated, Finally, under Section 15, Rule X of Book III of the
capable of being expressed in terms of money, Implementing Rules of the Labor Code, an employer-
whether fixed or ascertained on a time, task, piece, or employee relationship exists between the resident
commission basis, or other method of calculating the physicians and the training hospitals, unless there is a
same, which is payable by an employer to an training agreement between them, and the training
employee under a written or unwritten contract of program is duly accredited or approved by the
employment for work done or to be done, or for appropriate government agency. In respondents case,
services rendered or to be rendered and includes the they were not undergoing any specialization training.
fair and reasonable value, as determined by the They were considered non-training general
Secretary of Labor, of board, lodging, or other facilities practitioners,37 assigned at the emergency rooms and
customarily furnished by the employer to the ward sections.
employee. x x x (Emphasis and underscoring Turning now to the issue of dismissal, the Court
supplied), upholds the appellate courts conclusion that private
Respondents were in fact made subject to petitioner- respondents were illegally dismissed.
hospitals Code of Ethics,32 the provisions of which Dr. Lanzanas was neither a managerial nor
cover administrative and disciplinary measures on supervisory employee but part of the rank-and-file.
negligence of duties, personnel conduct and behavior, This is the import of the Secretary of Labors
and offenses against persons, property and the Resolution of May 22, 1998 in OS A-05-15-98 which
hospitals interest. reads:
More importantly, petitioner itself provided x x x x
incontrovertible proof of the employment status of In the motion to dismiss it filed before the Med-Arbiter,
respondents, namely, the identification cards it issued the employer (CMC) alleged that 24 members of
them, the payslips33 and BIR W-2 (now 2316) Forms petitioner are supervisors, namely x x x Rolando
which reflect their status as employees, and the Lanzonas [sic] x x x.
classification as salary of their remuneration. A close scrutiny of the job descriptions of the alleged
Moreover, it enrolled respondents in the SSS and supervisors narrated by the employer only proves that
Medicare (Philhealth) program. It bears noting at this except for the contention that these employees
allegedly supervise, they do not however recommend
any managerial action. At most, their job is merely 38 NLRC Records, pp. 90-93.
routinary in nature and consequently, they cannot be 598
considered supervisory employees.
_______________ 598
SUPREME COURT REPORTS ANNOTATED
ing Corporation v. National Labor Relations Calamba Medical Center, Inc. vs. National Labor
Commission, supra note 31. Relations Commission
An assumption or certification order of the DOLE
37 Rollo, p. 58. Secretary automatically results in a return-to-work of
597 all striking workers, whether a corresponding return-
to-work order had been issued.39 The DOLE
VOL. 571, NOVEMBER 25, 2008 Secretary in fact issued a return-to-work Order, failing
597 to comply with which is punishable by dismissal or
Calamba Medical Center, Inc. vs. National Labor loss of employment status.40
Relations Commission Participation in a strike and intransigence to a return-
They are not therefore barred from membership in the to-work order must, however, be duly proved in order
union of rank[-]and[-]file, which the petitioner [the to justify immediate dismissal in a national interest
union] is seeking to represent in the instant case.38 case. As the appellate court as well as the NLRC
(Emphasis and underscoring supplied) observed, however, there is nothing in the records that
x x x x would bear out Dr. Lanzanas actual participation in
Admittedly, Dr. Lanzanas was a union member in the the strike. And the medical directors Memorandum41
hospital, which is considered indispensable to the of April 22, 1998 contains nothing more than a general
national interest. In labor disputes adversely affecting directive to all union officers and members to return-
the continued operation of a hospital, Article 263(g) of to-work. Mere membership in a labor union does not
the Labor Code provides: ipso facto mean participation in a strike.
ART.263.STRIKES, PICKETING, AND LOCKOUTS. Dr. Lanzanas claim that, after his 30-day preventive
suspension ended on or before April 9, 1998, he was
xxxx never given any work schedule42 was not refuted by
(g)x x x x petitioner. Petitioner in fact never released any
x x x x. In labor disputes adversely affecting the findings of its supposed investigation into Dr.
continued operation of such hospitals, clinics or Lanzanas alleged inimical acts.
medical institutions, it shall be the duty of the striking Petitioner thus failed to observe the two requirements,
union or locking-out employer to provide and maintain before dismissal can be effectednotice and hearing
an effective skeletal workforce of medical and other which constitute essential elements of the statutory
health personnel, whose movement and services shall process; the first to apprise the employee of the
be unhampered and unrestricted, as are necessary to particular acts or omissions for which his dismissal is
insure the proper and adequate protection of the life sought, and the second to inform the employee of the
and health of its patients, most especially emergency employers decision to dismiss
cases, for the duration of the strike or lockout. In such _______________
cases, the Secretary of Labor and Employment is
mandated to immediately assume, within twenty-four 39 Telefunken Semiconductors Employees Union-
hours from knowledge of the occurrence of such strike FFW v. Sec. of Labor and Employment, G.R. Nos.
or lockout, jurisdiction over the same or certify to the 122743 and 127215, December 12, 1997, 283 SCRA
Commission for compulsory arbitration. For this 145-146.
purpose, the contending parties are strictly enjoined to 40 Marcopper Mining Corp. v. Brillantes, G.R. No.
comply with such orders, prohibitions and/or 119381, March 11, 1996, 254 SCRA 595, 602.
injunctions as are issued by the Secretary of Labor 41 CA Rollo at p. 198.
and Employment or the Commission, under pain of 42 Rollo, p. 79.
immediate disciplinary action, including dismissal or 599
loss of employment status or payment by the locking-
out employer of backwages, damages and other VOL. 571, NOVEMBER 25, 2008
affirmative relief, even criminal prosecution against 599
either or both of them. Calamba Medical Center, Inc. vs. National Labor
x x x x (Emphasis and underscoring supplied) Relations Commission
_______________
him.43 Non-observance of these requirements runs Adding insult to injury was the circulation by petitioner
afoul of the procedural mandate.44 of a watchlist or watch out list49 including therein
The termination notice sent to and received by Dr. the names of respondents. Consider the following
Lanzanas on April 25, 1998 was the first and only time portions of Dr. Mercedithas Memorandum of Appeal:
that he was apprised of the reason for his dismissal. 3.Moreover, to top it all, respondents have circulated
He was not afforded, however, even the slightest a so called Watch List to other hospitals, one of
opportunity to explain his side. His was a termination which [was] procured from Foothills Hospital in Sto.
upon receipt situation. While he was priorly made to Tomas, Batangas [that] contains her name. The object
explain on his telephone conversation with Miscala,45 of the said list is precisely to harass Complainant and
he was not with respect to his supposed participation malign her good name and reputation. This is not only
in the strike and failure to heed the return-to-work unprofessional, but runs smack of oppression as CMC
order. is trying permanently deprived [sic] Complainant of her
As for the case of Dr. Merceditha, her dismissal was livelihood by ensuring that she is barred from
worse, it having been effected without any just or practicing in other hospitals.
authorized cause and without observance of due _______________
process. In fact, petitioner never proferred any valid
cause for her dismissal except its view that her 47 Article282.Termination by employer.An
marriage to [Dr. Lanzanas] has given rise to the employer may terminate an employee for any of the
presumption that her sympath[y] [is] with her husband; following causes:
[and that when [Dr. Lanzanas] declared that he was (a)Serious misconduct or willful disobedience by the
going to boycott the scheduling of their workload by employee of the lawful orders of his employer or
the medical doctor, he was presumed to be speaking representative in connection with his work;
for himself [and] for his wife Merceditha.46 (b)Gross and habitual neglect by the employee of his
Petitioners contention that Dr. Merceditha was a duties;
member of the union or was a participant in the strike (c)Fraud or willful breach by the employee of the trust
remained just that. Its termination of her employment reposed in him by his employer or duly authorized
on the basis of her conjugal relationship is not representative;
analogous to any of the causes (d)Commission of a crime or offense by the employee
_______________ against the person of his employer or any immediate
member of his family or his duly authorized
43 Philippine National Bank v. Cabansag, G.R. No. representative; and
157010, June 21, 2005, 460 SCRA 514, 530-531. (e)Other causes analogous to the foregoing.
44 Condo Suite Club Travel v. National Labor 48 Austria v. National Labor Relations Commission,
Relations Commission, G.R. No. 125671, January 28, G.R. No. 123646, July 14, 1999, 310 SCRA 293, 303.
2000, 323 SCRA 679, 690, citing Vinta Maritime v. 49 NLRC Records, pp. 197-199.
National Labor Relations Commission, 284 SCRA 601
656, 671-672 (1998).
45 Supra note 10. VOL. 571, NOVEMBER 25, 2008
46 NLRC Records, p. 43; Respondents (Petitioner 601
herein) Position Paper. Calamba Medical Center, Inc. vs. National Labor
600 Relations Commission
4.Other co-professionals and brothers in the
600 profession are fully aware of these watch out lists
SUPREME COURT REPORTS ANNOTATED and as such, her reputation was not only besmirched,
Calamba Medical Center, Inc. vs. National Labor but was damaged, and she suffered social humiliation
Relations Commission as it is of public knowledge that she was dismissed
enumerated in Article 28247 of the Labor Code. Mere from work. Complainant came from a reputable and
suspicion or belief, no matter how strong, cannot respected family, her father being a retired full Colonel
substitute for factual findings carefully established in the Army, Col. Romeo A. Vente, and her brothers
through orderly procedure.48 and sisters are all professionals, her brothers, Arnold
The Court even notes that after the proceedings at the and Romeo Jr., being engineers. The Complainant
NLRC, petitioner never even mentioned Dr. has a family protection [sic] to protect. She likewise
Mercedithas case. There is thus no gainsaying that has a professional reputation to protect, being a
her dismissal was both substantively and procedurally licensed physician. Both her personal and
infirm. professional reputation were damaged as a result of
the unlawful acts of the respondents.50
While petitioner does not deny the existence of such G.R. No. 167622.November 7, 2008.*
list, it pointed to the lack of any board action on its part GREGORIO V. TONGKO, petitioner, vs. THE
to initiate such listing and to circulate the same, viz.: MANUFACTURERS LIFE INSURANCE CO.
20.x x x. The alleged watchlist or watch out list, as (PHILS.), INC. and RENATO A. VERGEL DE DIOS,
termed by complainants, were merely lists obtained by respondents.
one Dr. Ernesto Naval of PAMANA Hospital. Said list Labor Law; Employer-Employee Relationship; Four-
was given by a stockholder of respondent who was at fold test to determine the existence of the elements of
the same time a stockholder of PAMAN[A] Hospital. an employer-employee relationship.In the
The giving of the list was not a Board action.51 determination of whether an employer-employee
(Emphasis and underscoring supplied) relationship exists between two parties, this Court
The circulation of such list containing names of applies the four-fold test to determine the existence of
alleged union members intended to prevent the elements of such relationship. In Pacific
employment of workers for union activities similarly Consultants International Asia, Inc. v. Schonfeld, 516
constitutes unfair labor practice, thereby giving a right SCRA 209, 228 (2007), the Court set out the elements
of action for damages by the employees prejudiced.52 of an employer-employee relationship, thus:
A word on the appellate courts deletion of the award Jurisprudence is firmly settled that whenever the
of attorneys fees. There being no basis advanced in existence of an employment relationship is in dispute,
deleting it, as four elements constitute the reliable yardstick: (a) the
_______________ selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d)
50 Id., at pp. 20-21. the employers power to control the employees
51 Id., at p. 59. conduct. It is the so-called control test which
52 Article 28 of the Civil Code states Unfair constitutes the most important index of the existence
competition in agricultural, commercial or industrial of the employer-employee relationship that is, whether
enterprises or in labor through the use of force, the employer controls or has reserved the right to
intimidation, deceit, machination or any other unjust, control the employee not only as to the result of the
oppressive or highhanded method shall give rise to a work to be done but also as to the means and
right of action by the person who thereby suffers methods by which the same is to be accomplished.
damage. Stated otherwise, an employer-employee relationship
602 exists where the person for whom the services are
performed reserves the right to control not only the
602 end to be achieved but also the means to be used in
SUPREME COURT REPORTS ANNOTATED reaching such end.
Calamba Medical Center, Inc. vs. National Labor Same; Same; Control not only applies to the work or
Relations Commission goal to be done but also to the means and methods to
exemplary damages were correctly awarded,53 the accomplish it; Not all forms of control would establish
award of attorneys fees should be reinstated. an employer-employee relationship.An impasse
WHEREFORE, the Decision of the Court of Appeals in appears to have been reached between the CA and
CA-G.R. SP No. 75871 is AFFIRMED with the NLRC on the sole issue of control over an
MODIFICATION in that the award by the National employees conduct. It bears clarifying that such
Labor Relations Commission of 10% of the total control not only applies to the work or goal to be done
judgment award as attorneys fees is reinstated. In all but also to the means and methods to accomplish it.
other aspects, the decision of the appellate court is In Sonza v. ABS-CBN Broadcasting Corporation, 431
affirmed. SCRA 583 (2004), we explained that not all forms of
SO ORDERED. control would establish
Quisumbing (Chairperson), Tinga, Velasco, Jr. and _______________
Brion, JJ., concur.
Judgment affirmed with modification. * SECOND DIVISION.
Note.The fact that a person was paid by way of 504
commission does not preclude the establishment of an
employer-employee relationship. (Lazaro vs. Social 504
Security System, 435 SCRA 472 [2004]) SUPREME COURT REPORTS ANNOTATED
Tongko vs. The Manufacturers Life Insurance Co.
(Phils.), Inc.
an employer-employee relationship, to wit: Further, not
every form of control that a party reserves to himself
over the conduct of the other party in relation to the of law, nor shall any person be denied the equal
services being rendered may be accorded the effect of protection of the laws.
establishing an employer-employee relationship. The Same; Same; Backwages; An illegally dismissed
facts of this case fall squarely with the case of Insular employee shall be entitled to backwages and
Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459 separation pay, if reinstatement is no longer viable.
(1989). In said case, we held that: Logically, the line In Triad Security & Allied Services, Inc. v. Ortega, Jr.
should be drawn between rules that merely serve as (Triad), 481 SCRA 591 (2006), we thus stated that an
guidelines towards the achievement of the mutually illegally dismissed employee shall be entitled to
desired result without dictating the means or methods backwages and separation pay, if reinstatement is no
to be employed in attaining it, and those that control or longer viable: As the law now stands, an illegally
fix the methodology and bind or restrict the party hired dismissed employee is entitled to two reliefs, namely:
to the use of such means. The first, which aim only to backwages and reinstatement. These are separate
promote the result, create no employer-employee and distinct from each other. However, separation pay
relationship unlike the second, which address both the is granted where reinstatement is no longer feasible
result and the means used to achieve it. because of strained relations between the employee
Same; Same; Insurance Agents; If the specific rules and the employer. In effect, an illegally dismissed
and regulations that are enforced against insurance employee is entitled to either reinstatement, if viable,
agents or managers are such that would directly affect or separation pay if reinstatement is no longer viable
the means and methods by which such agents or and backwages.
managers would achieve the objectives set by the QUISUMBING,J., Dissenting opinion:
insurance company, they are employees of the Labor Law; Employer-Employee Relationship; The
insurance company.Based on the foregoing cases, present case does not involve an employer-employee
if the specific rules and regulations that are enforced relationship which warrants the application of the
against insurance agents or managers are such that Labor Code provisions; rather, it calls for the
would directly affect the means and methods by which implementation of the Career Agents Agreement that
such agents or managers would achieve the should be construed in an ordinary civil action.The
objectives set by the insurance company, they are present case does not involve an employer-employee
employees of the insurance company. In the instant relationship which warrants the application of the
case, Manulife had the power of control over Tongko Labor Code provisions; rather, it calls for the
that would make him its employee. Several factors implementation of the Career Agents Agreement that
contribute to this conclusion. should be construed in an ordinary civil action.
Same; Termination of Employment; Burden of Proof; PETITION for review on certiorari of a decision of the
When there is no showing of a clear, valid and legal Court of Appeals.
cause for the termination of employment, the law The facts are stated in the opinion of the Court.
considers the matter a case of illegal dismissal and Ronald Rex S. Recidoro & Associates for petitioner.
the burden is on the employer to prove that the Ponce Enrile, Reyes, Manalastas for respondents.
termination was for a valid or authorized cause.In 506
Quebec, Sr. v. National Labor Relations Commission,
301 SCRA 627 (1999), we ruled that: When there is 506
no showing of a clear, valid and legal cause for the SUPREME COURT REPORTS ANNOTATED
termination of employment, the law considers the Tongko vs. The Manufacturers Life Insurance Co.
matter a case of illegal dismissal and the burden is on (Phils.), Inc.
the employer to prove that the termination was for a VELASCO, JR.,J.:
valid or authorized cause. This burden of proof The Case
appropriately lies on the shoulders of the employer This Petition for Review on Certiorari under Rule 45
and not on the employee because a workers job has seeks the reversal of the March 29, 2005 Decision1 of
some of the characteristics the Court of Appeals (CA) in CA-G.R. SP No. 88253,
505 entitled The Manufacturers Life Insurance Co. (Phils.),
Inc. v. National Labor Relations Commission and
VOL. 570, NOVEMBER 7, 2008 Gregorio V. Tongko. The assailed decision set aside
505 the Decision dated September 27, 2004 and
Tongko vs. The Manufacturers Life Insurance Co. Resolution dated December 16, 2004 rendered by the
(Phils.), Inc. National Labor Relations Commission (NLRC) in
of property rights and is therefore within the NLRC NCR CA No. 040220-04.
constitutional mantle of protection. No person shall be The Facts
deprived of life, liberty or property without due process
Manufacturers Life Insurance Co. (Phils.), Inc. Tongkos gross earnings from his work at Manulife,
(Manulife) is a domestic corporation engaged in life consisting of commissions, persistency income, and
insurance business. Renato A. Vergel De Dios was, management overrides, may be summarized as
during the period material, its President and Chief follows:
Executive Officer. Gregorio V. Tongko started his January to December 10, 2002 P
professional relationship with Manulife on July 1, 1977 865,096.07
by virtue of a Career Agents Agreement2 (Agreement) 2001 6,214,737.11
he executed with Manulife. 2000 8,003,180.38
In the Agreement, it is provided that: 1999 6,797,814.05
It is understood and agreed that the Agent is an 1998 4,805,166.34
independent contractor and nothing contained herein 1997 2,822,620.003
shall be construed or interpreted as creating an The problem started sometime in 2001, when Manulife
employer-employee relationship between the instituted manpower development programs in the
Company and the Agent. regional
xxxx _______________
a)The Agent shall canvass for applications for Life
Insurance, Annuities, Group policies and other 3 Id., at p. 53.
products offered by the 508
_______________
508
1 Rollo, pp. 51-87. Penned by Associate Justice SUPREME COURT REPORTS ANNOTATED
Martin S. Villarama, Jr. and concurred in by Associate Tongko vs. The Manufacturers Life Insurance Co.
Justices Regalado E. Maambong and Lucenito N. (Phils.), Inc.
Tagle (now retired). sales management level. Relative thereto, De Dios
2 Id., at pp. 451-453. addressed a letter dated November 6, 20014 to
507 Tongko regarding an October 18, 2001 Metro North
Sales Managers Meeting. In the letter, De Dios stated:
VOL. 570, NOVEMBER 7, 2008 The first step to transforming Manulife into a big
507 league player has been very clearto increase the
Tongko vs. The Manufacturers Life Insurance Co. number of agents to at least 1,000 strong for a start.
(Phils.), Inc. This may seem diametrically opposed to the way
Company, and collect, in exchange for provisional Manulife was run when you first joined the
receipts issued by the Agent, money due or to become organization. Since then, however, substantial
due to the Company in respect of applications or changes have taken place in the organization, as
policies obtained by or through the Agent or from these have been influenced by developments both
policyholders allotted by the Company to the Agent for from within and without the company.
servicing, subject to subsequent confirmation of xxxx
receipt of payment by the Company as evidenced by The issues around agent recruiting are central to the
an Official Receipt issued by the Company directly to intended objectives hence the need for a Senior
the policyholder. Managers meeting earlier last month when Kevin
xxxx OConnor, SVPAgency, took to the floor to
The Company may terminate this Agreement for any determine from our senior agency leaders what more
breach or violation of any of the provisions hereof by could be done to bolster manpower development. At
the Agent by giving written notice to the Agent within earlier meetings, Kevin had presented information
fifteen (15) days from the time of the discovery of the where evidently, your Region was the lowest
breach. No waiver, extinguishment, abandonment, performer (on a per Manager basis) in terms of
withdrawal or cancellation of the right to terminate this recruiting in 2000 and, as of today, continues to
Agreement by the Company shall be construed for remain one of the laggards in this area.
any previous failure to exercise its right under any While discussions, in general, were positive other than
provision of this Agreement. for certain comments from your end which were
Either of the parties hereto may likewise terminate his perceived to be uncalled for, it became clear that a
Agreement at any time without cause, by giving to the one-on-one meeting with you was necessary to
other party fifteen (15) days notice in writing. x x x ensure that you and management, were on the same
In 1983, Tongko was named as a Unit Manager in plane. As gleaned from some of your previous
Manulifes Sales Agency Organization. In 1990, he comments in prior meetings (both in group and one-
became a Branch Manager. As the CA found,
on-one), it was not clear that we were proceeding in Obviously, your above statement about making less
the same direction. money did not refer to you but the way you argued
Kevin held subsequent series of meetings with you as this point had us almost believing that you were
a result, one of which I joined briefly. In those spouting the gospel of truth when you were not. x x x
subsequent meetings you reiterated certain views, the xxxx
validity of which we challenged and subsequently All of a sudden, Greg, I have become much more
found as having no basis. worried about your ability to lead this group towards
With such views coming from you, I was a bit the new direction that we have been discussing these
concerned that the rest of the Metro North Managers past few weeks, i.e., Manulifes goal to become a
may be a bit confused as to the directions the major agency-led distribution company in the
company was taking. For this reason, I sought a Philippines. While as you claim, you have not stopped
meeting anyone from recruiting, I have
_______________ 510

4 Id., at pp. 295-300. 510


509 SUPREME COURT REPORTS ANNOTATED
Tongko vs. The Manufacturers Life Insurance Co.
VOL. 570, NOVEMBER 7, 2008 (Phils.), Inc.
509 never heard you proactively push for greater agency
Tongko vs. The Manufacturers Life Insurance Co. recruiting. You have not been proactive all these years
(Phils.), Inc. when it comes to agency growth.
with everyone in your management team, including xxxx
you, to clear the air, so to speak. I cannot afford to see a major region fail to deliver on
This note is intended to confirm the items that were its developmental goals next year and so, we are
discussed at the said Metro North Regions Sales making the following changes in the interim:
Managers meeting held at the 7/F Conference room 1.You will hire at your expense a competent assistant
last 18 October. who can unload you of much of the routine tasks
xxxx which can be easily delegated. This assistant should
Issue # 2:Some Managers are unhappy with their be so chosen as to complement your skills and help
earnings and would want to revert to the position of you in the areas where you feel may not be your cup
agents. of tea.
This is an often repeated issue you have raised with You have stated, if not implied, that your work as
me and with Kevin. For this reason, I placed the issue Regional Manager may be too taxing for you and for
on the table before the rest of your Regions Sales your health. The above could solve this problem.
Managers to verify its validity. As you must have xxxx
noted, no Sales Manager came forward on their own 2.Effective immediately, Kevin and the rest of the
to confirm your statement and it took you to name Agency Operations will deal with the North Star
Malou Samson as a source of the same, an allegation Branch (NSB) in autonomous fashion. x x x
that Malou herself denied at our meeting and in your I have decided to make this change so as to reduce
very presence. your span of control and allow you to concentrate
This only confirms, Greg, that those prior comments more fully on overseeing the remaining groups under
have no solid basis at all. I now believe what I had Metro North, your Central Unit and the rest of the
thought all along, that these allegations were simply Sales Managers in Metro North. I will hold you solely
meant to muddle the issues surrounding the inability responsible for meeting the objectives of these
of your Region to meet its agency development remaining groups.
objectives! xxxx
Issue # 3:Sales Managers are doing what the The above changes can end at this point and they
company asks them to do but, in the process, they need not go any further. This, however, is entirely
earn less. dependent upon you. But you have to understand that
xxxx meeting corporate objectives by everyone is primary
All the above notwithstanding, we had your own and will not be compromised. We are meeting tough
records checked and we found that you made a lot challenges next year and I would want everybody on
more money in the Year 2000 versus 1999. In board. Any resistance or holding back by anyone will
addition, you also volunteered the information to Kevin be dealt with accordingly.
when you said that you probably will make more 511
money in the Year 2001 compared to Year 2000.
VOL. 570, NOVEMBER 7, 2008 termination letter dated 18 December 2001 again
511 established in no uncertain terms the authority of the
Tongko vs. The Manufacturers Life Insurance Co. herein respondents to control the employees of
(Phils.), Inc. Manulife. Plainly, the respondents wielded control not
Subsequently, De Dios wrote Tongko another letter only as to the ends to be achieved but the ways and
dated December 18, 2001,5 terminating Tongkos means of attaining such ends.6
services, thus: Tongko bolstered his argument by citing Insular Life
It would appear, however, that despite the series of Assurance Co., Ltd. v. NLRC (4th Division)7 and
meetings and communications, both one-on-one Great Pacific Life Assurance Corporation v. NLRC,8
meetings between yourself and SVP Kevin OConnor, which Tongko claimed to be similar to the instant case.
some of them with me, as well as group meetings with Tongko further claimed that his dismissal was without
your Sales Managers, all these efforts have failed in basis and that he was not afforded due process. He
helping you align your directions with Managements also cited the Manulife Code of Conduct by which his
avowed agency growth policy. actions were controlled by the company.
xxxx Manulife then filed a Position Paper with Motion to
On account thereof, Management is exercising its Dismiss dated February 27, 2003,9 in which it alleged
prerogative under Section 14 of your Agents Contract that Tongko is not its employee, and that it did not
as we are now issuing this notice of termination of exercise control over him. Thus, Manulife claimed
your Agency Agreement with us effective fifteen days that the NLRC has no jurisdiction over the case.
from the date of this letter. In a Decision dated April 15, 2004, Labor Arbiter
Therefrom, Tongko filed a Complaint dated November Marita V. Padolina dismissed the complaint for lack of
25, 2002 with the NLRC against Manulife for illegal an employer-employee relationship. Padolina found
dismissal. The case, docketed as NLRC NCR Case that applying the four-fold test in determining the
No. 11-10330-02, was raffled to Labor Arbiter Marita V. existence of an employer-employee relationship, none
Padolina. was found in the instant case. The dispositive portion
In the Complaint, Tongko, in a bid to establish an thereof states:
employer-employee relationship, alleged that De Dios WHEREFORE, premises considered, judgment is
gave him specific directives on how to manage his hereby rendered DISMISSING the instant complaint
area of responsibility in the latters letter dated for lack of jurisdiction, there being no employer-
November 6, 2001. He further claimed that Manulife employee relationship between the parties.
exercised control over him as follows: SO ORDERED.
Such control was certainly exercised by respondents _______________
over the herein complainant. It was Manulife who
hired, promoted and gave various assignments to him. 6 Id., at p. 310.
It was the company who set objectives as regards 7 G.R. No. 119930, March 12, 1998, 287 SCRA 476.
productions, recruitment, training programs and all 8 G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694.
activities pertaining to its business. Manulife 9 Rollo, pp. 430-450.
prescribed a Code of Conduct which would govern in 513
minute detail all aspects of the work to be undertaken
by employees, including the sales process, the VOL. 570, NOVEMBER 7, 2008
underwriting process, signatures, handling of money, 513
policyholder service, confidentiality, legal and Tongko vs. The Manufacturers Life Insurance Co.
regulatory requirements and grounds for termination (Phils.), Inc.
of employment. The letter of Mr. De Dios dated 06 Tongko appealed the arbiters Decision to the NLRC
November 2001 left no doubt as to who was in control. which reversed the same and rendered a Decision
The subsequent dated September 27, 2004 finding Tongko to have
_______________ been illegally dismissed.
The NLRCs First Division, while finding an employer-
5 Id., at pp. 301-302. employee relationship between Manulife and Tongko
512 applying the four-fold test, held Manulife liable for
illegal dismissal. It further stated that Manulife
512 exercised control over Tongko as evidenced by the
SUPREME COURT REPORTS ANNOTATED letter dated November 6, 2001 of De Dios and wrote:
Tongko vs. The Manufacturers Life Insurance Co. The above-mentioned letter shows the extent to
(Phils.), Inc. which respondents controlled complainants manner
and means of doing his work and achieving the goals
set by respondents. The letter shows how the assailed Decision dated March 29, 2005, finding
respondents concerned themselves with the manner the absence of an employer-employee relationship
complainant managed the Metro North Region as between the parties and deeming the NLRC with no
Regional Sales Manager, to the point that respondents jurisdiction over the case. The CA arrived at this
even had a say on how complainant interacted with conclusion while again applying the four-fold test. The
other individuals in the Metro North Region. The letter CA found that Manulife did not exercise control over
is in fact replete with comments and criticisms on how Tongko that would render the latter an employee of
complainant carried out his functions as Regional Manulife. The dispositive portion reads:
Sales Manager. WHEREFORE, premises considered, the present
More importantly, the letter contains an abundance of petition is hereby GRANTED and the writ prayed for
directives or orders that are intended to directly affect accordingly GRANTED. The assailed Decision dated
complainants authority and manner of carrying out his September 27, 2004 and Resolution dated December
functions as Regional Sales Manager.10 x x x 16, 2004 of the National Labor Relations Commission
Additionally, the First Division also ruled that: in NLRC NCR Case No. 00-11-10330-2002 (NLRC
Further evidence of [respondents] control over NCR CA No. 040220-04) are hereby ANNULLED and
complainant can be found in the records of the case. SET ASIDE. The Decision dated April 15, 2004 of
[These] are the different codes of conduct such as the Labor Arbiter Marita V. Padolina is hereby
Agent Code of Conduct, the Manulife Financial Code REINSTATED.
of Conduct, and the Manulife Financial Code of _______________
Conduct Agreement, which serve as the foundations
of the power of control wielded by respondents over 12 Id., at pp. 375-377.
complainant that is further manifested in the different 515
administrative and other tasks that he is required to
perform. These codes of conduct corroborate and VOL. 570, NOVEMBER 7, 2008
reinforce the display of respondents power of control 515
in their 06 November 2001 Letter to complainant.11 Tongko vs. The Manufacturers Life Insurance Co.
_______________ (Phils.), Inc.
Hence, Tongko filed this petition and presented the
10 Id., at p. 361. following issues:
11 Id., at pp. 363-364. A
514 The Court of Appeals committed grave abuse of
discretion in granting respondents petition for
514 certiorari.
SUPREME COURT REPORTS ANNOTATED B
Tongko vs. The Manufacturers Life Insurance Co. The Court of Appeals committed grave abuse of
(Phils.), Inc. discretion in annulling and setting aside the Decision
The fallo of the September 27, 2004 Decision reads: dated September 27, 2004 and Resolution dated
WHEREFORE, premises considered, the appealed December 16, 2004 in finding that there is no
Decision is hereby reversed and set aside. We find employer-employee relationship between petitioner
complainant to be a regular employee of respondent and respondent.
Manulife and that he was illegally dismissed from C
employment by respondents. The Court of Appeals committed grave abuse of
In lieu of reinstatement, respondent Manulife is hereby discretion in annulling and setting aside the Decision
ordered to pay complainant separation pay as above dated September 27, 2004 and Resolution dated
set forth. Respondent Manulife is further ordered to December 16, 2004 which found petitioner to have
pay complainant backwages from the time he was been illegally dismissed and ordered his reinstatement
dismissed on 02 January 2002 up to the finality of this with payment of backwages.13
decision also as indicated above. Restated, the issues are: (1) Was there an employer-
xxxx employee relationship between Manulife and Tongko?
All other claims are hereby dismissed for utter lack of and (2) If yes, was Manulife guilty of illegal dismissal?
merit. The Courts Ruling
From this Decision, Manulife filed a motion for
reconsideration which was denied by the NLRC First This petition is meritorious.
Division in a Resolution dated December 16, 2004.12 Tongko Was An Employee of Manulife
Thus, Manulife filed an appeal with the CA docketed
as CA-G.R. SP No. 88253. Thereafter, the CA issued
The basic issue of whether or not the NLRC has Sales Manager. It enumerated these directives or
jurisdiction over the case resolves itself into the orders as follows:
question of whether an employer-employee _______________
relationship existed between Manulife and Tongko. If
no employer-employee relationship existed between 14 G.R. No. 166920, February 19, 2007, 516 SCRA
the two parties, then jurisdiction over the case 209, 228.
properly lies with the Regional Trial Court. 517
_______________
VOL. 570, NOVEMBER 7, 2008
13 Id., at p. 16. 517
516 Tongko vs. The Manufacturers Life Insurance Co.
(Phils.), Inc.
516 1.You will hire at your expense a competent assistant
SUPREME COURT REPORTS ANNOTATED who can unload you of much of the routine tasks
Tongko vs. The Manufacturers Life Insurance Co. which can be easily delegated. x x x
(Phils.), Inc. xxxx
In the determination of whether an employer- This assistant should be hired immediately.
employee relationship exists between two parties, this 2.Effective immediately, Kevin and the rest of the
Court applies the four-fold test to determine the Agency Operations will deal with the North Star
existence of the elements of such relationship. In Branch (NSB) in autonomous fashion x x x.
Pacific Consultants International Asia, Inc. v. xxxx
Schonfeld, the Court set out the elements of an I have decided to make this change so as to reduce
employer-employee relationship, thus: your span of control and allow you to concentrate
Jurisprudence is firmly settled that whenever the more fully on overseeing the remaining groups under
existence of an employment relationship is in dispute, Metro North, your Central Unit and the rest of the
four elements constitute the reliable yardstick: (a) the Sales Managers in Metro North. x x x
selection and engagement of the employee; (b) the 3.Any resistance or holding back by anyone will be
payment of wages; (c) the power of dismissal; and (d) dealt with accordingly.
the employers power to control the employees 4.I have been straightforward in this my letter and I
conduct. It is the so-called control test which know that we can continue to work together but it
constitutes the most important index of the existence will have to be on my terms. Anything else is
of the employer-employee relationship that is, whether unacceptable!
the employer controls or has reserved the right to The NLRC further ruled that the different codes of
control the employee not only as to the result of the conduct that were applicable to Tongko served as the
work to be done but also as to the means and foundations of the power of control wielded by
methods by which the same is to be accomplished. Manulife over Tongko that is further manifested in the
Stated otherwise, an employer-employee relationship different administrative and other tasks that he was
exists where the person for whom the services are required to perform.
performed reserves the right to control not only the The NLRC also found that Tongko was required to
end to be achieved but also the means to be used in render exclusive service to Manulife, further bolstering
reaching such end.14 the existence of an employer-employee relationship.
The NLRC, for its part, applied the four-fold test and Finally, the NLRC ruled that Tongko was integrated
found the existence of all the elements and declared into a management structure over which Manulife
Tongko an employee of Manulife. The CA, on the exercised control, including the actions of its officers.
other hand, found that the element of control as an The NLRC held that such integration added to the fact
indicator of the existence of an employer-employee that Tongko did not have his own agency belied
relationship was lacking in this case. The NLRC and Manulifes claim that Tongko was an independent
the CA based their rulings on the same findings of fact contractor.
but differed in their interpretations. The CA, however, considered the finding of the
The NLRC arrived at its conclusion, first, on the basis existence of an employer-employee relationship by
of the letter dated November 6, 2001 addressed by De the NLRC as far too sweeping having as its only basis
Dios to Tongko. According to the NLRC, the letter the letter dated November
contained an abundance of directives or orders that 518
are intended to directly affect complainants authority
and manner of carrying out his functions as Regional 518
SUPREME COURT REPORTS ANNOTATED
Tongko vs. The Manufacturers Life Insurance Co. prohibits. Of such a character are the rules which
(Phils.), Inc. prescribe the qualifications of persons who may be
6, 2001 of De Dios. The CA did not concur with the insured, subject insurance applications to processing
NLRCs ruling that the elements of control as pointed and approval by the Company, and also reserve to the
out by the NLRC are sufficient indicia of control that Company the determination of the premiums to be
negates independent contractorship and conclusively paid and the schedules of payment. None of these
establish an employer-employee relationship really invades the agents contractual prerogative to
between15 Tongko and Manulife. The CA ruled that adopt his own selling methods or to sell insurance at
there is no employer-employee relationship between his own time and convenience, hence cannot
Tongko and Manulife. justifiably be said to establish an employer-employee
An impasse appears to have been reached between relationship between him and the company.18
the CA and the NLRC on the sole issue of control over Hence, we ruled in Insular that no employer-employee
an employees conduct. It bears clarifying that such relationship existed therein. However, such ruling was
control not only applies to the work or goal to be done tempered with the qualification that had there been
but also to the means and methods to accomplish it. evidence that the company promulgated rules or
16 In Sonza v. ABS-CBN Broadcasting Corporation, regulations that effectively controlled or restricted an
we explained that not all forms of control would insurance agents choice of methods or the methods
establish an employer-employee relationship, to wit: themselves in selling insurance, an employer-
Further, not every form of control that a party employee relationship would have existed. In other
reserves to himself over the conduct of the other party words, the Court in Insular in no way definitively held
in relation to the services being rendered may be that insurance agents are not employees of insurance
accorded the effect of establishing an employer- companies, but rather made the same a case-to-case
employee relationship. The facts of this case fall basis. We held:
squarely with the case of Insular Life Assurance Co., The respondents limit themselves to pointing out that
Ltd. vs. NLRC. In said case, we held that: Basiaos contract with the Company bound him to
Logically, the line should be drawn between rules that observe and conform to such rules and regulations as
merely serve as guidelines towards the achievement the latter might from time to time prescribe. No
of the mutually desired result without dictating the showing has been made that any such rules or
means or methods to be employed in attaining it, and regulations were in fact promulgated, much less that
those that control or fix the methodology and bind or any rules existed or were issued which effectively
restrict the party hired to the use of such means. The controlled or restricted his choice of methods or the
first, which aim only to promote the result, create no methods themselves of selling insurance. Absent such
employer-employee relationship unlike the second, showing, the Court will not speculate that any
which address both the result and the means used to exceptions or qualifications were imposed on the
achieve it.17 (Emphasis supplied.) express provision of the contract leaving Basiao ...
_______________ _______________

15 Supra note 1, at p. 80. 18 G.R. No. 84484, November 15, 1989, 179 SCRA
16 Lakas ng Kapatirang Haligi ng Alyansa- 459, 465.
Pinagbuklod ng Manggagawang Promo ng 520
Burlingame v. Burlingame Corporation, G.R. No.
162833, June 15, 2007, 524 SCRA 690, 695. 520
17 G.R. No. 138051, June 10, 2004, 431 SCRA 583, SUPREME COURT REPORTS ANNOTATED
604. Tongko vs. The Manufacturers Life Insurance Co.
519 (Phils.), Inc.
free to exercise his own judgment as to the time, place
VOL. 570, NOVEMBER 7, 2008 and means of soliciting insurance.19 (Emphasis
519 supplied.)
Tongko vs. The Manufacturers Life Insurance Co. There is no conflict between our rulings in Insular and
(Phils.), Inc. in Great Pacific Life Assurance Corporation. We said
We ruled in Insular Life Assurance Co., Ltd. v. NLRC in the latter case:
(Insular) that: [I]t cannot be gainsaid that Grepalife had control over
It is, therefore, usual and expected for an insurance private respondents performance as well as the result
company to promulgate a set of rules to guide its of their efforts. A cursory reading of their respective
commission agents in selling its policies that they may functions as enumerated in their contracts reveals that
not run afoul of the law and what it requires or the company practically dictates the manner by which
their jobs are to be carried out. For instance, the Among the company regulations of Manulife are the
District Manager must properly account, record and different codes of conduct such as the Agent Code of
document the companys funds spot-check and audit Conduct, Manulife Financial Code of Conduct, and
the work of the zone supervisors, conserve the Manulife Financial Code of Conduct Agreement, which
companys business in the district through demonstrate the power of control exercised by the
reinstatements, follow up the submission of weekly company over Tongko. The fact that Tongko was
remittance reports of the debit agents and zone obliged to obey and comply with the codes of conduct
supervisors, preserve company property in good was not disowned by respondents.
condition, train understudies for the position of district Thus, with the company regulations and requirements
manager, and maintain his quota of sales (the failure alone, the fact that Tongko was an employee of
of which is a ground for termination). On the other Manulife may already be established. Certainly, these
hand, a zone supervisor must direct and supervise the requirements controlled the means and methods by
sales activities of the debit agents under him, which Tongko was to achieve the companys goals.
conserve company property through reinstatements, More importantly, Manulifes evidence establishes the
undertake and discharge the functions of absentee fact that Tongko was tasked to perform administrative
debit agents, spot-check the records of debit agents, duties that establishes his employment with Manulife.
and insure proper documentation of sales and In its Comment (Re: Petition for Review dated 15 April
collections by the debit agents.20 (Emphasis 2005) dated August 5, 2005, Manulife attached
supplied.) affidavits of its agents purportedly to support its claim
Based on the foregoing cases, if the specific rules and that Tongko, as a
regulations that are enforced against insurance agents _______________
or managers are such that would directly affect the
means and methods by which such agents or 21 Rollo, p. 451.
managers would achieve the objectives set by the 522
insurance company, they are employees of the
insurance company. 522
In the instant case, Manulife had the power of control SUPREME COURT REPORTS ANNOTATED
over Tongko that would make him its employee. Tongko vs. The Manufacturers Life Insurance Co.
Several factors contribute to this conclusion. (Phils.), Inc.
_______________ Regional Sales Manager, did not perform any
administrative functions. An examination of these
19 Id., at pp. 466-467. affidavits would, however, prove the opposite.
20 Supra note 8, at pp. 698-699. In an Affidavit dated April 28, 2003,22 John D. Chua, a
521 Regional Sales Manager of Manulife, stated:
4.On September 1, 1996, my services were engaged
VOL. 570, NOVEMBER 7, 2008 by Manulife as an Agency Regional Sales Manager
521 (RSM) for Metro South Region pursuant to an
Tongko vs. The Manufacturers Life Insurance Co. Agency Contract. As such RSM, I have the following
(Phils.), Inc. functions:
In the Agreement dated July 1, 1977 executed 1.Refer and recommend prospective agents to
between Tongko and Manulife, it is provided that: Manulife
The Agent hereby agrees to comply with all 2.Coach agents to become productive
regulations and requirements of the Company as 3.Regularly meet with, and coordinate activities of
herein provided as well as maintain a standard of agents affiliated to my region.
knowledge and competency in the sale of the While Amada Toledo, a Branch Manager of Manulife,
Companys products which satisfies those set by the stated in her Affidavit dated April 29, 200323 that:
Company and sufficiently meets the volume of new 3.In January 1997, I was assigned as a Branch
business required of Production Club membership.21 Manager (BM) of Manulife for the Metro North
Under this provision, an agent of Manulife must Sector;
comply with three (3) requirements: (1) compliance 4.As such BM, I render the following services:
with the regulations and requirements of the company; a.Refer and recommend prospective agents to
(2) maintenance of a level of knowledge of the Manulife;
companys products that is satisfactory to the b.Train and coordinate activities of other commission
company; and (3) compliance with a quota of new agents;
businesses.
c.Coordinate activities of Agency Managers who, in
turn, train and coordinate activities of other 24 Id., at p. 593.
commission agents; 25 Supra.
d.Achieve agreed production objectives in terms of 524
Net Annualized Commissions and Case Count and
recruitment goals; and 524
e.Sell the various products of Manulife to my personal SUPREME COURT REPORTS ANNOTATED
clients. Tongko vs. The Manufacturers Life Insurance Co.
_______________ (Phils.), Inc.
leads to no other conclusion that he was an employee
22 Id., at p. 590. of Manulife.
23 Id., at p. 592. In his letter dated November 6, 2001, De Dios harped
523 on the direction of Manulife of becoming a major
agency-led distribution company whereby greater
VOL. 570, NOVEMBER 7, 2008 agency recruitment is required of the managers,
523 including Tongko. De Dios made it clear that agent
Tongko vs. The Manufacturers Life Insurance Co. recruitment has become the primary means by which
(Phils.), Inc. Manulife intends to sell more policies. More
While Ma. Lourdes Samson, a Unit Manager of importantly, it is Tongkos alleged failure to follow this
Manulife, stated in her Affidavit dated April 28, 200324 principle of recruitment that led to the termination of
that: his employment with Manulife. With this, it is
3.In 1977, I was assigned as a Unit Manager (UM) inescapable that Tongko was an employee of
of North Peaks Unit, North Star Branch, Metro North Manulife.
Region; Tongko Was Illegally Dismissed
4.As such UM, I render the following services: In its Petition for Certiorari dated January 7, 200526
a.To render or recommend prospective agents to be filed before the CA, Manulife argued that even if
licensed, trained and contracted to sell Manulife Tongko is considered as its employee, his
products and who will be part of my Unit; employment was validly terminated on the ground of
b.To coordinate activities of the agents under my Unit gross and habitual neglect of duties, inefficiency, as
in their daily, weekly and monthly selling activities, well as willful disobedience of the lawful orders of
making sure that their respective sales targets are Manulife. Manulife stated:
met; In the instant case, private respondent, despite the
c.To conduct periodic training sessions for my agents written reminder from Mr. De Dios refused to shape up
to further enhance their sales skills. and altogether disregarded the latters advice resulting
d.To assist my agents with their sales activities by in his laggard performance clearly indicative of his
way of joint fieldwork, consultations and one-on-one willful disobedience of the lawful orders of his superior.
evaluation and analysis of particular accounts. xxx
e.To provide opportunities to motivate my agents to xxxx
succeed like conducting promos to increase sales As private respondent has patently failed to perform a
activities and encouraging them to be involved in very fundamental duty, and that is to yield obedience
company and industry activities. to all reasonable rules, orders and instructions of the
f.To provide opportunities for professional growth to Company, as well as gross failure to reach at least
my agents by encouraging them to be a member of minimum quota, the termination of his engagement
the LUCAP (Life Underwriters Association of the from Manulife is highly warranted and therefore, there
Philippines). is no illegal dismissal to speak of.
A comparison of the above functions and those _______________
contained in the Agreement with those cited in Great
Pacific Life Assurance Corporation25 reveals a 26 Rollo, pp. 88-162.
striking similarity that would more than support a 525
similar finding as in that case. Thus, there was an
employer-employee relationship between the parties. VOL. 570, NOVEMBER 7, 2008
Additionally, it must be pointed out that the fact that 525
Tongko was tasked with recruiting a certain number of Tongko vs. The Manufacturers Life Insurance Co.
agents, in addition to his other administrative (Phils.), Inc.
functions, It is readily evident from the above-quoted portions of
_______________ Manulifes petition that it failed to cite a single iota of
evidence to support its claims. Manulife did not even The Labor Code provides that an employer may
point out which order or rule that Tongko disobeyed. terminate the services of an employee for just cause
More importantly, Manulife did not point out the and this must be supported by substantial evidence.
specific acts that Tongko was guilty of that would The settled rule in administrative and quasi-judicial
constitute gross and habitual neglect of duty or proceedings is that proof beyond reasonable doubt is
disobedience. Manulife merely cited Tongkos alleged not required in determining the legality of an
laggard performance, without substantiating such employers dismissal of an employee, and not even a
claim, and equated the same to disobedience and preponderance of evidence is necessary as
neglect of duty. substantial evidence is considered sufficient.
We cannot, therefore, accept Manulifes position. Substantial evidence is more than a mere scintilla of
In Quebec, Sr. v. National Labor Relations evidence or relevant evidence as a reasonable mind
Commission, we ruled that: might accept as adequate to support a conclusion,
When there is no showing of a clear, valid and legal even if other minds, equally reasonable, might
cause for the termination of employment, the law conceivably opine otherwise.29
considers the matter a case of illegal dismissal and Here, Manulife failed to overcome such burden of
the burden is on the employer to prove that the proof. It must be reiterated that Manulife even failed to
termination was for a valid or authorized cause. This identify the specific acts by which Tongkos
burden of proof appropriately lies on the shoulders of employment was terminated much less support the
the employer and not on the employee because a same with substantial evidence. To repeat, mere
workers job has some of the characteristics of conjectures cannot work to deprive employees of their
property rights and is therefore within the means of livelihood. Thus, it must be concluded that
constitutional mantle of protection. No person shall be Tongko was illegally dismissed.
deprived of life, liberty or property without due process Moreover, as to Manulifes failure to comply with the
of law, nor shall any person be denied the equal twin notice rule, it reasons that Tongko not being its
protection of the laws. employee is not entitled to such notices. Since we
Apropos thereto, Art. 277, par. (b), of the Labor Code have ruled that Tongko is its employee, however,
mandates in explicit terms that the burden of proving Manulife clearly failed to afford Tongko said notices.
the validity of the termination of employment rests on Thus, on this ground too, Manulife is guilty of illegal
the employer. Failure to discharge this evidential dismissal. In Quebec, Sr., we also stated:
burden would necessarily mean that the dismissal was _______________
not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. 28 G.R. Nos. 148500-01, November 29, 2006, 508
National Labor Relations Commission that: SCRA 435, 443.
The law mandates that the burden of proving the 29 G.R. No. 158707, November 27, 2006, 508 SCRA
validity of the termination of employment rests with the 245, 257-258.
employer. Failure to discharge this evidentiary burden 527
would necessarily mean that the dismissal was not
justified, and, therefore, illegal. Unsubstantiated VOL. 570, NOVEMBER 7, 2008
_______________ 527
Tongko vs. The Manufacturers Life Insurance Co.
27 G.R. No. 123184, January 22, 1999, 301 SCRA (Phils.), Inc.
627, 633. Furthermore, not only does our legal system dictate
526 that the reasons for dismissing a worker must be
pertinently substantiated, it also mandates that the
526 manner of dismissal must be properly done,
SUPREME COURT REPORTS ANNOTATED otherwise, the termination itself is gravely defective
Tongko vs. The Manufacturers Life Insurance Co. and may be declared unlawful.30
(Phils.), Inc. For breach of the due process requirements, Manulife
suspicions, accusations and conclusions of employers is liable to Tongko in the amount of PhP 30,000 as
do not provide for legal justification for dismissing indemnity in the form of nominal damages.31
employees. In case of doubt, such cases should be Finally, Manulife raises the issue of the correctness of
resolved in favor of labor, pursuant to the social justice the computation of the award to Tongko made by the
policy of our labor laws and Constitution.28 NLRC by claiming that Songco v. National Labor
This burden of proof was clarified in Community Rural Relations Commission32 is inapplicable to the instant
Bank of San Isidro (N.E.), Inc. v. Paez to mean case, considering that Songco was dismissed on the
substantial evidence, to wit: ground of retrenchment.
An examination of Songco reveals that it may be Tongko is entitled to reinstatement with full backwages
applied to the present case. In that case, Jose Songco under Art. 279 of the Labor Code. Due to the strained
was a salesman of F.E. Zuellig (M), Inc. which relationship between Manulife and Tongko,
terminated the services of Songco on the ground of reinstatement, however, is no longer advisable. Thus,
retrenchment due to financial losses. The issue raised Tongko will be entitled to backwages from January 2,
to the Court, however, was whether commissions are 2002 (date of dismissal) up to the finality of this
considered as part of wages in order to determine decision. Moreover, Manulife will pay Tongko
separation pay. Thus, the fact that Songco was separation pay of one (1) month salary for every year
dismissed due to retrenchment does not hamper the of service that is from 1977 to 2001 amounting to PhP
application thereof to the instant case. What is pivotal 12,435,474.24, considering that reinstatement is not
is that we ruled in Songco that commissions are part feasible. Tongko shall also be entitled to an award of
of wages for the determination of separation pay. attorneys fees in the amount of ten percent (10%) of
Article 279 of the Labor Code on security of tenure the aggregate amount of the above awards.
pertinently provides that: WHEREFORE, the petition is hereby GRANTED. The
In cases of regular employment the employer shall assailed March 29, 2005 Decision of the CA in CA-
not terminate the services of an employee except for a G.R. SP No.
just cause or when authorized by this Title. An _______________
employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority 33 G.R. No. 160871, February 6, 2006, 481 SCRA
_______________ 591, 605.
529
30 Supra at p. 634.
31 Agabon v. National Labor Relations Commission, VOL. 570, NOVEMBER 7, 2008
G.R. No. 158693, November 17, 2004, 442 SCRA 529
573, 617. Tongko vs. The Manufacturers Life Insurance Co.
32 G.R. Nos. 50999-51000, March 23, 1990, 183 (Phils.), Inc.
SCRA 610. 88253 is REVERSED and SET ASIDE. The Decision
528 dated September 27, 2004 of the NLRC is
REINSTATED with the following modifications:
528 Manulife shall pay Tongko the following:
SUPREME COURT REPORTS ANNOTATED (1)Full backwages, inclusive of allowances and other
Tongko vs. The Manufacturers Life Insurance Co. benefits or their monetary equivalent from January 2,
(Phils.), Inc. 2002 up to the finality of this Decision;
rights and other privileges and to his full backwages, (2)Separation pay of one (1) month salary for every
inclusive of allowances, and to his other benefits or year of service from 1977 up to 2001 amounting to
their monetary equivalent computed from the time his PhP 12,435,474.24;
compensation was withheld from him up to the time of (3)Nominal damages of PhP 30,000 as indemnity for
his actual reinstatement. violation of the due process requirements; and
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (4)Attorneys fees equivalent to ten percent (10%) of
(Triad), we thus stated that an illegally dismissed the aforementioned backwages and separation pay.
employee shall be entitled to backwages and Costs against respondent Manulife.
separation pay, if reinstatement is no longer viable: SO ORDERED.
As the law now stands, an illegally dismissed Carpio-Morales and Brion, JJ., concur.
employee is entitled to two reliefs, namely: backwages Quisumbing (Chairperson), J., Please see Dissenting
and reinstatement. These are separate and distinct Opinion.
from each other. However, separation pay is granted Tinga, J., I join J. Quisumbings dissent.
where reinstatement is no longer feasible because of
strained relations between the employee and the DISSENTING OPINION
employer. In effect, an illegally dismissed employee is QUISUMBING,J.:
entitled to either reinstatement, if viable, or separation With due respect, I cannot concur in the majority
pay if reinstatement is no longer viable and opinion. I vote to deny the petition and affirm the
backwages.33 decision of the Court of Appeals holding that the
Taking into consideration the cases of Songco and National Labor Relations Commission had no
Triad, we find correct the computation of the NLRC jurisdiction over this case due to the absence of an
that the monthly gross wage of Tongko in 2001 was employer-employee relationship between petitioner
PhP 518,144.76. For having been illegally dismissed,
Gregorio V. Tongko and respondent Manufacturers insurance sales. In fact, he derived his income from
Life Insurance Co. (Phils.), Inc. (Manulife). the agents under him through their sales volume. He
530 was not bound to observe any work schedule or any
working hours. He had freedom to adopt his own
530 methods in selling insurance policies, so long as he
SUPREME COURT REPORTS ANNOTATED and his recruited agents meet their quotas.
Tongko vs. The Manufacturers Life Insurance Co. So too, petitioners administrative functions are not
(Phils.), Inc. indicative of control. Such functions which consisted of
The majority opinion states that Manulife had the recruitment of new agents, training, and supervision
power of control over petitioner that would make him were exercised over other sales agents and not
its employee. It advances several reasons that do not employees of Manulife. Such functions relate to the
persuade me. insurance agents work in pursuit of their agencys
In my view, two points require stressing: (1) Manulife contractual obligations.
has no power of control over petitioner in the pursuit of Neither can the Letter dated November 6, 20014
his own business; and (2) petitioner is compensated addressed by Renato A. Vergel De Dios, Manulifes
through sales agency commissions and not through President and Chief Executive Officer, to petitioner
fixed wages or salary. regarding greater agency recruitment be considered
Time and again, the Court has indeed applied the as control. While the letter reminded petitioner that his
four-fold test in determining the existence of an Region was the lowest performer in terms of agency
employer-employee relationship. This test considers recruitment, it did not dictate how petitioner would
the following elements: (1) the power to hire; (2) the achieve this goal. Contrary to the finding of the main
payment of wages; (3) the power to dismiss; and (4) opinion,5 the letter did not contain an abundance of
the power to control, the last being the most important directives or orders other than suggesting to
element.1 petitioner to hire a competent assistant to whom he
The difficulty lies in correctly assessing if certain could unload routine tasks. It is obvious that said
factors or elements properly indicate the presence of assistant would be paid by petitioner as part of his
control.2 The companys codes of conduct such as the agencys staff, not of the companys office personnel.
Agent Code of Conduct, Manulife Financial Code of Clearly, following industry practice, petitioner had
Conduct, and Manulife Financial Code of Conduct never been an employee of Manulife. He is an
Agreement cannot be justifiably said to establish an independent contractor as stated in the Career
employer-employee relationship. These merely served Agents Agreement. Although he was eventually
as general guidelines for agents in selling Manulife promoted as Regional Sales Manager, the Agreement
policies in keeping with ethical principles governing subsisted since he still received commissions from
the insurance business and in accordance with the insurance he directly sold to third persons aside from
rules promulgated by the Insurance Commissioner for the override commissions he received from his own
proper regulation of the industry. None of these rules recruited
and regulations negated petitioners contractual _______________
prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience.3 Nor did 4 Rollo, pp. 395-400.
it overturn company or industry practices. Petitioner 5 Page 11 thereof.
made his own strategy on how to generate more 532
_______________
532
1 AFP Mutual Benefit Association, Inc. v. National SUPREME COURT REPORTS ANNOTATED
Labor Relations Commission, G.R. No. 102199, Tongko vs. The Manufacturers Life Insurance Co.
January 28, 1997, 267 SCRA 47, 57. (Phils.), Inc.
2 Ibid. agents sales. The Agreement was never changed or
3 Insular Life Assurance Co., Ltd. v. National Labor altered by the parties.
Relations Commission, G.R. No. 84484, November Anent petitioners compensation, he was paid through
15, 1989, 179 SCRA 459, 465. commissions from premium payments instead of fixed
531 wages or salary. Petitioners commissions varied,
based on the computed premiums paid in full and
VOL. 570, NOVEMBER 7, 2008 actually received on policies obtained through his
531 agency. His summary of commission, persistency, and
Tongko vs. The Manufacturers Life Insurance Co. management overrides constituted the income earned
(Phils.), Inc.
from business activities, not traditional office
employment by Manulife, as follows:
2001 P6,214,737.11
2000 P8,003,180.38
1999 P6,797,814.05
1998 P4,805,166.34
1997 P2,822,620.006
Indeed, petitioners earnings by way of commissions
varied, depending on the clientele or those who
availed of the insurance policies he procured. As also
noted by the Labor Arbiter, his annual income was
duly reflected in petitioners income tax returns as
agency earnings from which were deducted operating
expenses and taxes withheld at source by Manulife.
His returns did not reflect regular wages or salaries
paid by the company.
Since no employer-employee relationship existed
between petitioner and Manulife, there is no basis to
award backwages and separation pay to petitioner.
There is no reason to apply Songco v. National Labor
Relations Commission7 which considered commission
as part of the employees salary in the computation of
separation pay. Here, there exists no employer-
employee relationship. A contrary ruling will reverse