Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitioner

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

Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.

Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.

GUTIERREZ, JR., J.:

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

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

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

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

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

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

c) the public respondents patently erred in finding that there exists an employer-employee
relationship;
 d) the public respondents whimsically disregarded the well-settled rule that commission
agents are not employees but are independent contractors.

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

The present case mainly calls for the application of the control test, which if not satisfied, would lead
us to conclude that no employer-employee relationship exists. Hence, if the union members are not
employees, no right to organize for purposes of bargaining, nor to be certified as such bargaining
agent can ever be recognized. The following elements are generally considered in the determination
of the employer-employee relationship; "(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct
— although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA
139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175
SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v.
NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147
SCRA 49 [1986]).

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

Meanwhile, the respondents rely on other features to strengthen their position that the collectors are
employees. They quote paragraph 2 which states that an agent shall utilize only receipt forms
authorized and issued by the Company. They also note paragraph 3 which states that an agent has
to submit and deliver at least once a week or as often as required a report of all collections made
using report forms furnished by the Company. Paragraph 4 on the monthly collection quota required
by the Company is deemed by respondents as a control measure over the means by which an agent
is to perform his services.
The nature of the relationship between a company and its collecting agents depends on the
circumstances of each particular relationship. Not all collecting agents are employees and neither
are all collecting agents independent contractors. The collectors could fall under either category
depending on the facts of each case.

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

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

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

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

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

2. The collection agents do not have to devote their time exclusively for SINGER. There is no
prohibition on the part of the collection agents from working elsewhere. Nor are these agents
required to account for their time and submit a record of their activity.

3. The manner and method of effecting collections are left solely to the discretion of the
collection agents without any interference on the part of Singer.

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

5. The collection agents are paid strictly on commission basis. The amounts paid to them are
based solely on the amounts of collection each of them make. They do not receive any
commission if they do not effect any collection even if they put a lot of effort in collecting.
They are paid commission on the basis of actual collections.
 6. The commissions earned by the collection agents are directly deducted by them from the
amount of collections they are able to effect. The net amount is what is then remitted to
Singer." (Rollo, pp. 7-8)

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

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

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

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

xxx xxx xxx

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

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

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

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

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

Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply
to this case. Respondents assert that the said provision on job contracting requires that for one to be
1âwphi 1

considered an independent contractor, he must have "substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials which are necessary in the
conduct of his business." There is no showing that a collection agent needs tools and machineries.
Moreover, the provision must be viewed in relation to Article 106 of the Labor Code which provides:

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

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

xxx xxx xxx

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

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

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

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

. . . The question of whether employer-employee relationship exists is a primordial

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

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

SO ORDERED.

Fernan, C.J., Feliciano and Bidin, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

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

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

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

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

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

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the Club
premises to render services as such to the individual members and guests playing the Club's golf
course and who themselves paid for such services; that as such caddies, the petitioners were not
subject to the direction and control of the Club as regards the manner in which they performed their
work; and hence, they were not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for
social security coverage, avowedly coming to realize that indeed there was no employment
relationship between them and the Club. The case continued, and was eventually adjudicated by the
SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo
Jomok. The Commission dismissed the petition for lack of merit, 3ruling:

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

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

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

The appeal ascribed two errors to the SSC:

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

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

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the
least importance. Nor, it would appear, did it find any greater merit in the second alleged error.
Although said Court reserved the appealed SSC decision and declared Fermin Llamar an employee
of the Manila Gold and Country Club, ordering that he be reported as such for social security
coverage and paid any corresponding benefits, 8 it conspicuously ignored the issue of res
adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's
ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra 9 and
declared that upon the evidence, the questioned employer-employee relationship between the Club
and Fermin Llamar passed the so-called "control test," establishment in the case — i.e., "whether
the employer controls or has reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and methods by which the same is to be
accomplished," — the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about
every aspect of the conduct that the caddy must observe, or avoid, when serving as
such, any violation of any which could subject him to disciplinary action, which may
include suspending or cutting off his access to the club premises;

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

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

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

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

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

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

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

A certification proceedings is not a "litigation" in the sense in which the term is

commonly understood, but mere investigation of a non-adversary, fact-finding
character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of the employees as to the
 matter of their representation. The court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining representatives
by the employees.15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of
employer-employee relationship between present petitioner and the private respondent, it would
logically be that rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra),
petitioner having asserted, without dispute from the private respondent, that said issue was there
squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of
Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the National
Labor Relations Commission in an appeal taken by said respondent. 16

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

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

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

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

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

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

By and large, there appears nothing in the record to refute the petitioner's claim that:
 (Petitioner) has no means of compelling the presence of a caddy. A caddy is not
required to exercise his occupation in the premises of petitioner. He may work with
any other golf club or he may seek employment a caddy or otherwise with any entity
or individual without restriction by petitioner. . . .

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

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

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

SO ORDERED.

Regalado and Mendoza, JJ., concur.

Padilla, J., is on leave.

Puno, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 87098 November 4, 1996

ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L.
ROGELIO and BENJAMIN LIMJOCO, respondents.

TORRES, JR., J.:

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

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

SO ORDERED.1

Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia
Britannica and was in charge of selling petitioner's products through some sales representatives. As
compensation, private respondent received commissions from the products sold by his agents. He
was also allowed to use petitioner's name, goodwill and logo. It was, however, agreed upon that
office expenses would be deducted from private respondent's commissions. Petitioner would also be
informed about appointments, promotions, and transfers of employees in private respondent's
district.

On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business.
Then on October 30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the
Department of Labor and Employment, claiming for non-payment of separation pay and other
benefits, and also illegal deduction from his sales commissions.

Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity)
was not its employee but an independent dealer authorized to promote and sell its products and in
return, received commissions therefrom. Limjoco did not have any salary and his income from the
petitioner company was dependent on the volume of sales accomplished. He also had his own
separate office, financed the business expenses, and maintained his own workforce. The salaries of
his secretary, utility man, and sales representatives were chargeable to his commissions. Thus,
petitioner argued that it had no control and supervision over the complainant as to the manner and
means he conducted his business operations. The latter did not even report to the office of the
petitioner and did not observe fixed office hours. Consequently, there was no employer-employee
relationship.

Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was
assigned in the sales department, and was earning an average of P4,000.00 monthly as his sales
commission. He was under the supervision of the petitioner's officials who issued to him and his
other personnel, memoranda, guidelines on company policies, instructions and other orders. He
was, however, dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result
thereof, Limjoco asserts that in accordance with the established company practice and the
provisions of the collective bargaining agreement, he was entitled to termination pay equivalent to
one month salary, the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance,
vacation leave, and sick leave), and the amounts illegally deducted from his commissions which
were then used for the payments of office supplies, office space, and overhead expenses.

On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an
employee of the petitioner company. Petitioner had control over Limjoco since the latter was
required to make periodic reports of his sales activities to the company. All transactions were subject
to the final approval of the petitioner, an evidence that petitioner company had active control on the
sales activities. There was therefore, an employer-employee relationship and necessarily, Limjoco
was entitled to his claims. The decision also ordered petitioner company to pay the following:

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

2. To pay complainant his unpaid Christmas bonus for three years or the amount of
12,000.00;

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

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

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

6. To pay complainant his accrued sick leave equivalent to 15 days per year of
service or the total amount of P6,000.00.2

On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed
decision. The Commission opined that there was no evidence supporting the allegation that Limjoco
was an independent contractor or dealer. The petitioner still exercised control over Limjoco through
its memoranda and guidelines and even prohibitions on the sale of products other than those
authorized by it. In short, the petitioner company dictated how and where to sell its products. Aside
from that fact, Limjoco passed the costs to the petitioner chargeable against his future commissions.
Such practice proved that he was not an independent dealer or contractor for it is required by law
that an independent contractor should have substantial capital or investment.

Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in
this petition for certiorari and injunction with prayer for preliminary injunction. On April 3, 1989, this
Court issued a temporary restraining order enjoining the enforcement of the decision dated
December 7, 1982.
The following are the arguments raised by the petitioner:

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

II

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

The NLRC ruled that there existed an employer-employee relationship and petitioner failed to
disprove this finding. We do not agree.

In determining the existence of an employer-employee relationship the following elements must be

present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of dismissal;
and 4) the power to control the employee's conduct. Of the above, control of employee's conduct is
commonly regarded as the most crucial and determinative indicator of the presence or absence of
an employer-employee relationship.3 Under the control test, an employer-employee relationship
exists where the person for whom the services are performed reserves the right to control not only
the end to be achieved, but also the manner and means to used in reaching that end.4

The fact that petitioner issued memoranda to private respondents and to other division sales
managers did not prove that petitioner had actual control over them. The different memoranda were
merely guidelines on company policies which the sales managers follow and impose on their
respective agents. It should be noted that in petitioner's business of selling encyclopedias and
books, the marketing of these products was done through dealership agreements. The sales
operations were primarily conducted by independent authorized agents who did not receive regular
compensations but only commissions based on the sales of the products. These independent agents
hired their own sales representatives, financed their own office expenses, and maintained their own
staff. Thus, there was a need for the petitioner to issue memoranda to private respondent so that the
latter would be apprised of the company policies and procedures. Nevertheless, private respondent
Limjoco and the other agents were free to conduct and promote their sales operations. The periodic
reports to the petitioner by the agents were but necessary to update the company of the latter's
performance and business income.

Private respondent was not an employee of the petitioner company. While it was true that the
petitioner had fixed the prices of the products for reason of uniformity and private respondent could
not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the
marketing operations. He selected his own personnel and the only reason why he had to notify the
petitioner about such appointments was for purpose of deducting the employees' salaries from his
commissions. This he admitted in his testimonies, thus:

Q. Yes, in other words you were on what is known as P&L basis or

profit and loss basis?

A. That is right.
 Q. If for an instance, just example your sales representative in any
period did not produce any sales, you would not get any money from
Britannica, would you?

A. No, sir.

Q. In fact, Britannica by doing the accounting for you as division

manager was merely making it easy for you to concentrate all your
effort in selling and you don't worry about accounting, isn't that so?

A. Yes, sir.

Q. In fact whenever you hire a secretary or trainer you merely hire

that person and notify Britannica so that Encyclopaedia Britannica will
give the salaries and deduct it from your earnings, isn't that so?

A. In certain cases I just hired people previously employed by

Encyclopaedia Britannica.

xxx xxx xxx

Q. In this Exhibit "2" you were informing Encyclopaedia Britannica

that you have hired a certain person and you were telling Britannica
how her salary was going to be taken cared of, is it not?

A. Yes, sir.

Q. You said here, "please be informed that we have appointed Miss

Luz Villan as division trainer effective May 1, 1971 at P550.00 per
month her salary will be chargeable to the Katipunan and Bayanihan
Districts", signed by yourself. What is the Katipunan and Bayanihan
District?

A. Those were districts under my division.

Q. In effect you were telling Britannica that you have hired this person
and "you should charge her salary to me," is that right?

A. Yes, sir.5

Private respondent was merely an agent or an independent dealer of the petitioner. He was free to
conduct his work and he was free to engage in other means of livelihood. At the time he was
connected with the petitioner company, private respondent was also a director and later the
president of the Farmers' Rural Bank. Had he been an employee of the company, he could not be
employed elsewhere and he would be required to devote full time for petitioner. If private respondent
was indeed an employee, it was rather unusual for him to wait for more than a year from his
separation from work before he decided to file his claims. Significantly, when Limjoco tendered his
resignation to petitioner on June 14, 1974, he stated, thus:

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

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

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

Evidently, Limjoco was aware of "conflict with other interests which . . . have increasingly required
my personal attention" (p. 118, Records). At the very least, it would indicate that petitioner has no
effective control over the personal activities of Limjoco, who as admitted by the latter had other
"conflict of interest" requiring his personal attention.

In ascertaining whether the relationship is that of employer-employee or one of independent

contractor, each case must be determined by its own facts and all features of the relationship are to
be considered.6 The records of the case at bar showed that there was no such employer-employee
relationship.

As stated earlier, "the element of control is absent; where a person who works for another does so
more or less at his own pleasure and is not subject to definite hours or conditions of work, and in
turn is compensated according to the result of his efforts and not the amount thereof, we should not
find that the relationship of employer and employee exists.7 In fine, there is nothing in the records to
show or would "indicate that complainant was under the control of the petitioner" in respect of the
means and methods 8 in the performance of complainant's work.

Consequently, private respondent is not entitled to the benefits prayed for.

In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is
hereby REVERSED AND SET ASIDE.

SO ORDERED.

Regalado, Romero, Puno and Mendoza, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 118086 December 15, 1997

SUSAN G. CARUNGCONG, petitioner,

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

NARVASA, C.J.:

Susan Carungcong began her career in the insurance industry in 1974 as an agent of Sun Life
Assurance Company of Canada (hereinafter Sun Life). She signed an "Agent's Agreement" with Sun
Life on September 10, 1974 (retroactive to June, 1974),1 in virtue of which she was designated the
latter's "agent to solicit applications for . . (its) insurance and annuity policies." The contract set out in
detail the terms and conditions — particularly those concerning the commissions payable to her —
under which her relationship with the company would be governed. This contract was superseded
some five years later when she signed two (2) new agreements, both dated July 1, 1979.

The first, denominated "Career Agent's (or Unit Manager's) Agreement," dealt with such matters as
the agent's commissions, his obligations, limitations on his authority, and termination of the
agreement by death, or by written notice "with or without cause." It declared that the "Agent shall be
an independent contractor and none of the terms of . . (the) Agreement shall be construed as
creating an employer-employee relationship."2

The second was titled, "MANAGER'S Supplementary Agreement." Making explicit reference to the
first (Agent's [the Unit Manager's] Agreement) "which became effective on the 1st day of July, 1979."
said second contract — explicitly described as a "further agreement" — contained provisions
regarding remuneration (overriding commissions in accordance with a fixed schedule), limitation of
authority, and termination of the agreement inter alia by written notice "without cause."3

Subsequently, Carungcong and Sun Life executed another Agreement — "made and effective as of
January 1, 1986" — by which the former was named New Business Manager with the function
generally "to manage a New Business Office established by the . . (latter), . . to obtain applications
for life insurance policies and other products offered by or distributed through Sun Life and to
perform such other duties in connection therewith as Sun Life may require from time to time."4 The
Agreement governed such matters as the New Business Manager's duties; limitations on authority;
compensation; expenses; termination of relation, by among others, notice in writing with or without
cause. Like the "Career Agent's (or Unit Manager's) Agreement" first signed by Carungcong,5 this
latest Agreement stressed that the "New Business Manager in performance of his duties defined
herein, shall be considered an independent contractor and not . . an employee of Sun Life," and that
"(u)nder no circumstance shall the New Business Manager and/or his employees be considered
employees of Sun Life."
Now, it appears that sometime in November, 1989. Ms. Eleizer Sibayan, Manager of Sun Life's
Internal Audit Department, commenced an inquiry into the special fund availments of Carungcong
and other New Business Managers; this, allegedly because the Company's Vice President for Far
East Asia, respondent Lance Kemp, had been receiving reports of anomalies in relation thereto from
unit managers and agents.6 These special fund availments are governed by the following portion of
the Agreement of January 1, 1986 under the sub-head, "New Business Manager's Expenses," viz:

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

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

It also appears that Ms. Sibayan drew up a report (Summary of Availments)7 after having examined
and analyzed the pertinent records, and interviewed the unit managers and agents mentioned in the
receipts presented by Carungcong to support her claims for reimbursement of expenses for 1987,
1988 and 1989. Thereafter, on January 4, 1990, and again on January 10, 1990, Carungcong was
confronted with and asked to explain the discrepancies set out in Sibayan's report. On January 11,
1990, she was given a letter signed by "Merton V. Deveza, CLU, Director, Marketing," which advised
of the termination of her relationship with Sun Life, viz.:8

In our meeting with you yesterday we presented the charge of fraudulent reimbursement of
the Branch Special Fund against you. Accordingly, you admitted having committed said act.

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

Carungcong promptly instituted proceedings for vindication in the Arbitration Branch of the National
Labor Relations Commission January 16, 1990. There she succeeded in obtaining a favorable
judgment.9 Labor Arbiter Ernesto S. Dinopol found that there existed an employer-employee
relationship between her and Sun Life; ruled that she had been illegally dismissed, thus entitled to
reinstatement without loss of seniority rights and other benefits; and ordered Sun Life, and its co-
respondents Lance Kemp and Merton Deveza,10 jointly and severally to pay her P12,475,973.25 as
"back commissions," P8,000,000.00 as moral damages, P2,000,000.00 as exemplary damages, and
P2,047,597.32 as attorney's fees — a total of P22,523,570.57.11

On appeal, the National Labor Relations Commission reversed the Arbiter's judgment. It affirmed
that no employment relationship existed between Carungcong and Sun Life. Nevertheless, it
awarded to her P2,696,252.00 as "lost average commission" on the ground that during the appeal,
she had neither been restored to work nor reinstated in payroll.12 However, the NLRC later eliminated
this monetary award in a second decision promulgated on October 28, 1994 on the basis of a motion
for reconsideration of Sun Life and its co-respondents. The NLRC declared itself without
competence to make such an award absent an employment relationship between the parties.13

Opting not to file a motion for reconsideration of the Commission's judgment,14 Carungcong forthwith
initiated the special civil action of certiorari at bar (after obtaining an extension of time to do so), in
which she seeks invalidation of the Commission's decision of October 28, 1994, and consequent
restoration of the Labor Arbiter's awards.

Carungcong claims that although she was not, as "new business manager," required either to
account for her time or perform her duties in a fixed manner, she was nonetheless an employee
subject to the control and supervision of Sun Life like any other managerial employee. She brands
as ludicrous the accusation leveled against her, of having defrauded Sun Life of the sum of
P6,000.00, since her annual income at that time was in excess of P3,000,000.00.15She contends that
the accusation was a mere fabrication of her Unit Managers, Jorge Chua and Corazon de Mesa,
who were promoted to Branch Managers after termination of her employment,16 and that she actually
had no hand in the preparation of the vouchers involved in the imputed anomaly, this task being
entrusted to the branch office secretary, Lilet Ginete, selected and hired by Sun Life.

She also contends that in dismissing her, Sun Life failed to observe procedural due process. She
was not furnished with copies of the audit report of her supposedly fraudulent use of her special fund
availments, and was never afforded an opportunity to be heard by Sun Life officials prior to
termination of her employment.17 She assails the decisions of the NLRC as tainted with bias and
grave abuse of discretion, particularly in ignoring the "deluge of evidence" adduced before the labor
arbiter.

On the other hand, Sun Life and its co-respondents argue that the challenged decisions were in fact
precisely based on Carungcong's so-called "deluge of evidence," and thus cannot in any sense be
deemed "capricious, whimsical, arbitrary or despotic."18 They invoke the familiar rule that the findings
of fact of administrative agencies are accorded respect, if not indeed finality, by this Court. The
assert that jurisprudence and Carungcong's admissions before the Labor Arbiter negate the
existence of an employment relationship; that in truth Carungcong was duly informed of the charge
of fraud and dishonesty, a charge supported by adequate proof; and that therefore the cancellation
of the business relationship between them and Carungcong was valid and legal, effected with due
process and for just cause.

The facts involved in this case are laid bare in considerable detail, and the issues identified and
extensively discussed by the parties, in their pleadings, namely: respondents' Comment dated May
4, 1995;19 petitioner's Reply thereto dated September 11, 1995; 20 respondents' Rejoinder of October
31, 1995;21 their Manifestation dated November 2, 1995, submitting copies of their exhibits in the
proceedings a quo;22 Comment on the petition of the Office of the Solicitor General, dated November
22, 199523 — in which it makes common cause with Carungcong; petitioner's Sur-Rejoinder dated
December 11, 1995;24 her Counter-Manifestation of December 11, 1995, submitting copies of her
own exhibits in the proceedings below;25 respondents' Reply (dated January 8, 1996) to the
Comment of the Solicitor General's Office;26 the Addendum to Respondents' Comment, dated July
15, 1997;27 and petitioner's "Reply to
Private Respondents' 'Addendum' filed without leave of court, with Motion to Expunge . . ," dated
July 30, 1997.28

The record does indeed disclose what Carungcong calls a "deluge of evidence" submitted by the
parties before the Labor Arbiter. Carungcong submitted two (2) affidavits of hers (Exhibits A and B)
in lieu of her direct examination, and numerous documents marked as Exhibits C to Z, inclusive, and
from AA to ZZ, and again from AAA to EEE and EEE-1 (to FFF and FFF-7).29 Sun Life and its co-
respondents in turn submitted more than thirty-eight (38) exhibits, including the affidavits of five
witnesses.30 Facts are thereby established which the Court cannot ignore.

As already mentioned, as Sun Life's New Business Manager, Carungcong had the prerogative under
her contract to claim reimbursement "for actual reasonable expenses properly incurred in performing
. . (her) duties . . ." Reimbursement was to be made by Sun Life "only upon . . (her) submission . . of
a statement in form and content acceptable to Sun Life detailing said expenses with attached
receipts." Availing of this prerogative, Carungcong presented several statements of reimbursable
expenses (appending the corresponding receipts), on the strength of which she duly received full
reimbursement from Sun Life. These statements included claims for reimbursement for:

1) more than P30,000.00, representing the cost of prizes or awards ostensibly advanced by Susan
Carungcong; and

2) several sums of money, representing the cost of food and drinks shouldered by Carungcong for
dinner or snacks in various restaurants and on different dates to which she had supposedly invited
agents of Sun Life, namely: Jorge Chua, Unit Manager, Prosperity Unit; Corazon de Mesa, Dynamic
Unit: Robert Tan, Royal Unit; NNBO; Lucila L. Natividad, Samaritan Unit; Cristina J, Gloton, NNBO;
Cynthia Suan; Zenaida B. Lim; Maynard Granados.

The record reveals the fraudulent character of these claims, that is to say, the unclean hands with
which Carungcong has come to court. Her claims are categorically belied by no less than the eight
(8) insurance managers and agents specifically named by her in her supporting documents, about
whose impartially or credibility the Court has been cited to no persuasive cause for doubt or
misgiving. Jorge Chua31 and Corazon de Mesa32 deposed that as regards the special fund raised by
Carungcong for prizes, awards, and outings, they had in fact contributed thereto but the latter had
made it appear that she had raised and disbursed the entire fund by herself, and although she later
obtained reimbursement therefor in the sum of more than P30,000.00, she never returned to them
what they had contributed.

Chua and de Mesa also denied Carungcong's claim that she had treated them to food and drinks on
December 7, 1987 at Kimpura (the bill amounting to P570.90), at Jade Garden on January 20, 1988
(the bill being P734.16), or at Flavors & Spices on November 5, 1988 (the bill coming to
P420.66).33 De Mesa also affirmed that contrary to Carungcong's claim, she had not been treated by
the latter at the Kamayan (the chit being in the sum of P1,099.71) or at Tropical Hut (the bill
P378.50).34

Robert Tan belied Carungcong's claim that she had paid for their food or drinks at the Emerald
Garden (the bill presented being in the sum of P742.33) or at Sugarhouse (the bill being P220.02).35

Lucila L. Natividad also belied Carungcong's assertion that she had treated her at the Flavours and
Spices (the bill being P834.48).36

So, too, Cristina J. Gloton gave the lie to Carungcong's claim that she
had treated her at the Hotel Intercontinental (the bill on one occasion being P559.98).37

Cynthia Suan denied having been entertained by Carungcong at the Manila Peninsula (the bill
supposedly being in the sum of P359.75).38

Zenaida B. Lim confirmed her earlier denial that Carungcong had paid for their snacks at Bing-
Bing's (the bill being P182.40).39

Maynard Granados denied, among other things, that he was treated to dinner by Carungcong at
the Hotel Intercontinental on March 29, 1988 (the bill being supposedly P437.95).40
The record thus appears to establish adequate cause for Sun Life to terminate its relationship with
Susan Carungcong. Her attention was drawn to the perfidious nature of her claims for
reimbursement; she was accorded an opportunity to explain the same; she refused to do so.

Prescinding therefrom, the contracts she had willingly and knowingly signed with Sun
Life41 repeatedly and clearly provided that said agreements were terminable by either party by written
notice with or without cause. Her "Career Agent's (or Unit Manager's) Agreement" inter alia provided
for termination of the agreement by death, or by written notice "with or without cause,"42 Her
"MANAGER'S Supplementary Agreement." effective July 1, 1979, contained provisions regarding
termination of the agreement inter alia by written notice "without cause."43 A subsequent agreement
by which she was named Manager for New Business, dated January 1, 1986, similarly provided for
termination of relation, by among others, notice in writing with or without cause.

Noteworthy is that this last agreement of January 1, 1986 emphasized, like the "Career Agent's (or
Unit Manager's) Agreement" first signed by her,44 that in the performance of her duties defined
herein. Carungcong would be considered an independent contractor and not . . an employee of Sun
Life," and that "(u)nder no circumstance shall the New Business Manager and/or his employees be
considered employees of Sun Life."

It is germane to advert to the fact, which should by now be apparent, that Carungcong was not your
ordinary run-of-the-mill employee, nor even your average managerial employee or supervisor. Her
stated annual income from her occupation is impressive by any standards: "in excess of
P3,000,000.00," exclusive of overriding commissions.45Certainly, she may not be likened to an
ordinary person applying for employment, or an ordinary employee striving to keep his job, under the
moral dominance of the hiring entity or individual. By no means may Carungcong be considered as
dealing, or having dealt, with Sun Life from an inferior position, as a disadvantaged, morally-
dominated person. She must be deemed as having transacted with Sun Life's executives on more or
less equal terms.

These considerations impel concurrence with the conclusions of the challenged decision and
resolution of respondent Commission which considered Carungcong as an independent contractor,
not an employee of Sun Life. It is significant that this issue of the precise status of Carungcong as an
independent contractor, evidently deemed decisive by respondent Commission, was discussed by it
at some length not once, but twice, first in its Decision of July 29, 1994, and then in its second
Decision of October 28, 1994 resolving the separate motions for reconsideration of the parties.

In the Decision of July 29, 1994, the Commission said:46

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

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

Indeed, as adverted to by herein respondents, the contracts/agreements entered into by the

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

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

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

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

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

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

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

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

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

Of course, Carungcong disagrees with these dispositions. Quite possibly, others may share her
opinion, and insist that there was error in either the appreciation of the evidence or the choice of law
or jurisprudence applied by the Commission. But such errors of judgment as might be ascribed to
the Commission's reasoned conclusions may not be accorded so egregious a cast as to be fairly
considered to constitute grave abuse of discretion meriting correction by the extraordinary writ
of certiorari.

It should be apparent that no whimsicality, capriciousness, or want of logic or foundation may

rationally be imputed to NLRC in its marshaling and analysis of the evidence, its identification of the
issues, in its assessment of the arguments thereon, and its conclusions on the basis thereof. It is
simply not possible in the premises to opine that grave abuse of discretion was attendant on its
challenged decisions.

WHEREFORE, the petition is DISMISSED, with costs against petitioner.

SO ORDERED.

Romero, Melo, Francisco and Panganiban, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 124354 December 29, 1999

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

KAPUNAN, J.:

The Hippocratic Oath mandates physicians to give primordial consideration to the health and welfare
of their patients. If a doctor fails to live up to this precept, he is made accountable for his acts. A
mistake, through gross negligence or incompetence or plain human error, may spell the difference
between life and death. In this sense, the doctor plays God on his patient's fate. 1

In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist and a
hospital should be made liable for the unfortunate comatose condition of a patient scheduled for
cholecystectomy. 2

Petitioners seek the reversal of the decision 3 of the Court of Appeals, dated 29 May 1995, which
overturned the decision 4 of the Regional Trial Court, dated 30 January 1992, finding private
respondents liable for damages arising from negligence in the performance of their professional
duties towards petitioner Erlinda Ramos resulting in her comatose condition.

The antecedent facts as summarized by the trial court are reproduced hereunder:

Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old (Exh.
"A") robust woman (TSN, October 19, 1989, p. 10). Except for occasional complaints
of discomfort due to pains allegedly caused by the presence of a stone in her gall
bladder (TSN, January 13, 1988, pp. 4-5), she was as normal as any other woman.
Married to Rogelio E. Ramos, an executive of Philippine Long Distance Telephone
Company, she has three children whose names are Rommel Ramos, Roy Roderick
Ramos and Ron Raymond Ramos (TSN, October 19, 1989, pp. 5-6).

Because the discomforts somehow interfered with her normal ways, she sought
professional advice. She was advised to undergo an operation for the removal of a
stone in her gall bladder (TSN, January 13, 1988, p. 5). She underwent a series of
examinations which included blood and urine tests (Exhs. "A" and "C") which
indicated she was fit for surgery.
Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13, 1988,
p. 7), she and her husband Rogelio met for the first time Dr. Orlino Hozaka (should
be Hosaka; see TSN, February 20, 1990, p. 3), one of the defendants in this case, on
June 10, 1985. They agreed that their date at the operating table at the DLSMC
(another defendant), would be on June 17, 1985 at 9:00 A.M.. Dr. Hosaka decided
that she should undergo a "cholecystectomy" operation after examining the
documents (findings from the Capitol Medical Center, FEU Hospital and DLSMC)
presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka to look for a good
anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a good
anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was to include the
anesthesiologist's fee and which was to be paid after the operation (TSN, October
19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27, 1990, p. 13; and TSN,
November 9, 1989, pp. 3-4, 10, 17).

A day before the scheduled date of operation, she was admitted at one of the rooms
of the DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN, October
19,1989, p. 11).

At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared
for the operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the
Dean of the College of Nursing at the Capitol Medical Center, was also there for
moral support. She reiterated her previous request for Herminda to be with her even
during the operation. After praying, she was given injections. Her hands were held by
Herminda as they went down from her room to the operating room (TSN, January 13,
1988, pp. 9-11). Her husband, Rogelio, was also with her (TSN, October 19, 1989, p.
18). At the operating room, Herminda saw about two or three nurses and Dr.
Perfecta Gutierrez, the other defendant, who was to administer anesthesia. Although
not a member of the hospital staff, Herminda introduced herself as Dean of the
College of Nursing at the Capitol Medical Center who was to provide moral support
to the patient, to them. Herminda was allowed to stay inside the operating room.

At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka
who was not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez thereafter
informed Herminda Cruz about the prospect of a delay in the arrival of Dr. Hosaka.
Herminda then went back to the patient who asked, "Mindy, wala pa ba ang Doctor"?
The former replied, "Huwag kang mag-alaala, darating na iyon" (Ibid.).

Thereafter, Herminda went out of the operating room and informed the patient's
husband, Rogelio, that the doctor was not yet around (id., p. 13). When she returned
to the operating room, the patient told her, "Mindy, inip na inip na ako, ikuha mo ako
ng ibang Doctor." So, she went out again and told Rogelio about what the patient
said (id., p. 15). Thereafter, she returned to the operating room.

At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting for the
arrival of the doctor" even as he did his best to find somebody who will allow him to
pull out his wife from the operating room (TSN, October 19, 1989, pp. 19-20). He
also thought of the feeling of his wife, who was inside the operating room waiting for
the doctor to arrive (ibid.). At almost 12:00 noon, he met Dr. Garcia who remarked
that he (Dr. Garcia) was also tired of waiting for Dr. Hosaka to arrive (id., p. 21).
While talking to Dr. Garcia at around 12:10 P.M., he came to know that Dr. Hosaka
arrived as a nurse remarked, "Nandiyan na si Dr. Hosaka, dumating na raw." Upon
hearing those words, he went down to the lobby and waited for the operation to be
completed (id., pp. 16, 29-30).

At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the
patient, heard somebody say that "Dr. Hosaka is already here." She then saw people
inside the operating room "moving, doing this and that, [and] preparing the patient for
the operation" (TSN, January 13, 1988, p. 16). As she held the hand of Erlinda
Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She thereafter
heard Dr. Gutierrez say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan" (id., p. 17). Because of the remarks of Dra. Gutierrez, she
focused her attention on what Dr. Gutierrez was doing. She thereafter noticed bluish
discoloration of the nailbeds of the left hand of the hapless Erlinda even as Dr.
Hosaka approached her. She then heard Dr. Hosaka issue an order for someone to
call Dr. Calderon, another anesthesiologist (id., p. 19). After Dr. Calderon arrived at
the operating room, she saw this anesthesiologist trying to intubate the patient. The
patient's nailbed became bluish and the patient was placed in a trendelenburg
position — a position where the head of the patient is placed in a position lower than
her feet which is an indication that there is a decrease of blood supply to the patient's
brain (Id., pp. 19-20). Immediately thereafter, she went out of the operating room,
and she told Rogelio E. Ramos "that something wrong was . . . happening" (Ibid.).
Dr. Calderon was then able to intubate the patient (TSN, July 25, 1991, p. 9).

Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine
being rushed towards the door of the operating room. He also saw several doctors
rushing towards the operating room. When informed by Herminda Cruz that
something wrong was happening, he told her (Herminda) to be back with the patient
inside the operating room (TSN, October 19, 1989, pp. 25-28).

Herminda Cruz immediately rushed back, and saw that the patient was still in
trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of that
fateful day, she saw the patient taken to the Intensive Care Unit (ICU).

About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The
latter informed the former that something went wrong during the intubation. Reacting
to what was told to him, Rogelio reminded the doctor that the condition of his wife
would not have happened, had he (Dr. Hosaka) looked for a good anesthesiologist
(TSN, October 19, 1989, p. 31).

Doctors Gutierrez and Hosaka were also asked by the hospital to explain what
happened to the patient. The doctors explained that the patient had bronchospasm
(TSN, November 15, 1990, pp. 26-27).

Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on
November 15, 1985, the patient was released from the hospital.

During the whole period of her confinement, she incurred hospital bills amounting to
P93,542.25 which is the subject of a promissory note and affidavit of undertaking
executed by Rogelio E. Ramos in favor of DLSMC. Since that fateful afternoon of
June 17, 1985, she has been in a comatose condition. She cannot do anything. She
cannot move any part of her body. She cannot see or hear. She is living on
mechanical means. She suffered brain damage as a result of the absence of oxygen
in her brain for four to five minutes (TSN, November 9, 1989, pp. 21-22). After being
 discharged from the hospital, she has been staying in their residence, still needing
constant medical attention, with her husband Rogelio incurring a monthly expense
ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989, pp. 32-34). She was
also diagnosed to be suffering from "diffuse cerebral parenchymal damage" (Exh.
"G"; see also TSN, December 21, 1989,
p. 6). 5

Thus, on 8 January 1986, petitioners filed a civil case 6 for damages with the Regional Trial Court of
Quezon City against herein private respondents alleging negligence in the management and care of
Erlinda Ramos.

During the trial, both parties presented evidence as to the possible cause of Erlinda's injury. Plaintiff
presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino to prove that the
sustained by Erlinda was due to lack of oxygen in her brain caused by the faulty management of her
airway by private respondents during the anesthesia phase. On the other hand, private respondents
primarily relied on the expert testimony of Dr. Eduardo Jamora, a pulmonologist, to the effect that the
cause of brain damage was Erlinda's allergic reaction to the anesthetic agent, Thiopental Sodium
(Pentothal).

After considering the evidence from both sides, the Regional Trial Court rendered judgment in favor
of petitioners, to wit:

After evaluating the evidence as shown in the finding of facts set forth earlier, and
applying the aforecited provisions of law and jurisprudence to the case at bar, this
Court finds and so holds that defendants are liable to plaintiffs for damages. The
defendants were guilty of, at the very least, negligence in the performance of their
duty to plaintiff-patient Erlinda Ramos.

On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise
reasonable care in not only intubating the patient, but also in not repeating the
administration of atropine (TSN, August 20, 1991, pp. 5-10), without due regard to
the fact that the patient was inside the operating room for almost three (3) hours. For
after she committed a mistake in intubating [the] patient, the patient's nailbed
became bluish and the patient, thereafter, was placed in trendelenburg position,
because of the decrease of blood supply to the patient's brain. The evidence further
shows that the hapless patient suffered brain damage because of the absence of
oxygen in her (patient's) brain for approximately four to five minutes which, in turn,
caused the patient to become comatose.

On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr.
Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as
part of his obligation to provide the patient a good anesthesiologist', and for arriving
for the scheduled operation almost three (3) hours late.

On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of
negligence of the doctors in their "practice of medicine" in the operating room.
Moreover, the hospital is liable for failing through its responsible officials, to cancel
the scheduled operation after Dr. Hosaka inexcusably failed to arrive on time.

In having held thus, this Court rejects the defense raised by defendants that they
have acted with due care and prudence in rendering medical services to plaintiff-
patient. For if the patient was properly intubated as claimed by them, the patient
 would not have become comatose. And, the fact that another anesthesiologist was
called to try to intubate the patient after her (the patient's) nailbed turned bluish, belie
their claim. Furthermore, the defendants should have rescheduled the operation to a
later date. This, they should have done, if defendants acted with due care and
prudence as the patient's case was an elective, not an emergency case.

xxx xxx xxx

WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the

plaintiffs and against the defendants. Accordingly, the latter are ordered to pay,
jointly and severally, the former the following sums of money, to wit:

1) the sum of P8,000.00 as actual monthly expenses for the plaintiff

Erlinda Ramos reckoned from November 15, 1985 or in the total sum
of P632,000.00 as of April 15, 1992, subject to its being updated;

2) the sum of P100,000.00 as reasonable attorney's fees;

3) the sum of P800,000.00 by way of moral damages and the further

sum of P200,000,00 by way of exemplary damages; and,

4) the costs of the suit.

SO ORDERED. 7

Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate court
rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The decretal
portion of the decision of the appellate court reads:

WHEREFORE, for the foregoing premises the appealed decision is hereby

REVERSED, and the complaint below against the appellants is hereby ordered
DISMISSED. The counterclaim of appellant De Los Santos Medical Center is
GRANTED but only insofar as appellees are hereby ordered to pay the unpaid
hospital bills amounting to P93,542.25, plus legal interest for justice must be
tempered with mercy.

SO ORDERED. 8

The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio Ramos who
was mistakenly addressed as "Atty. Rogelio Ramos." No copy of the decision, however, was sent
nor received by the Coronel Law Office, then counsel on record of petitioners. Rogelio referred the
decision of the appellate court to a new lawyer, Atty. Ligsay, only on 20 June 1995, or four (4) days
before the expiration of the reglementary period for filing a motion for reconsideration. On the same
day, Atty. Ligsay, filed with the appellate court a motion for extension of time to file a motion for
reconsideration. The motion for reconsideration was submitted on 4 July 1995. However, the
appellate court denied the motion for extension of time in its Resolution dated 25 July
1995. 9Meanwhile, petitioners engaged the services of another counsel, Atty. Sillano, to replace Atty.
Ligsay. Atty. Sillano filed on 7 August 1995 a motion to admit the motion for reconsideration
contending that the period to file the appropriate pleading on the assailed decision had not yet
commenced to run as the Division Clerk of Court of the Court of Appeals had not yet served a copy
thereof to the counsel on record. Despite this explanation, the appellate court still denied the motion
to admit the motion for reconsideration of petitioners in its Resolution, dated 29 March 1996,
primarily on the ground that the fifteen-day (15) period for filing a motion for reconsideration had
already expired, to wit:

We said in our Resolution on July 25, 1995, that the filing of a Motion for
Reconsideration cannot be extended; precisely, the Motion for Extension (Rollo, p.
12) was denied. It is, on the other hand, admitted in the latter Motion that
plaintiffs/appellees received a copy of the decision as early as June 9, 1995.
Computation wise, the period to file a Motion for Reconsideration expired on June
24. The Motion for Reconsideration, in turn, was received by the Court of Appeals
already on July 4, necessarily, the 15-day period already passed. For that alone, the
latter should be denied.

Even assuming admissibility of the Motion for the Reconsideration, but after
considering the Comment/Opposition, the former, for lack of merit, is hereby
DENIED.

SO ORDERED. 10

A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day, or on
12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to file the present
petition for certiorari under Rule 45. The Court granted the motion for extension of time and gave
petitioners additional thirty (30) days after the expiration of the fifteen-day (15) period counted from
the receipt of the resolution of the Court of Appeals within which to submit the petition. The due date
fell on 27 May 1996. The petition was filed on 9 May 1996, well within the extended period given by
the Court.

Petitioners assail the decision of the Court of Appeals on the following grounds:

IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA.

GUTIERREZ, DRA. CALDERON AND DR. JAMORA;

II

IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE

THE UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA
RAMOS;

III

IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR. 11

Before we discuss the merits of the case, we shall first dispose of the procedural issue on the
timeliness of the petition in relation to the motion for reconsideration filed by petitioners with the
Court of Appeals. In their
Comment, 12 private respondents contend that the petition should not be given due course since the
motion for reconsideration of the petitioners on the decision of the Court of Appeals was validly
dismissed by the appellate court for having been filed beyond the reglementary period. We do not
agree.
A careful review of the records reveals that the reason behind the delay in filing the motion for
reconsideration is attributable to the fact that the decision of the Court of Appeals was not sent to
then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of the decision of the
appellate court was instead sent to and received by petitioner Rogelio Ramos on 9 June 1995
wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based on the other communications
received by petitioner Rogelio Ramos, the appellate court apparently mistook him for the counsel on
record. Thus, no copy of the decision of the counsel on record. Petitioner, not being a lawyer and
unaware of the prescriptive period for filing a motion for reconsideration, referred the same to a legal
counsel only on 20 June 1995.

It is elementary that when a party is represented by counsel, all notices should be sent to the party's
lawyer at his given address. With a few exceptions, notice to a litigant without notice to his counsel
on record is no notice at all. In the present case, since a copy of the decision of the appellate court
was not sent to the counsel on record of petitioner, there can be no sufficient notice to speak of.
Hence, the delay in the filing of the motion for reconsideration cannot be taken against petitioner.
Moreover, since the Court of Appeals already issued a second Resolution, dated 29 March 1996,
which superseded the earlier resolution issued on 25 July 1995, and denied the motion for
reconsideration of petitioner, we believed that the receipt of the former should be considered in
determining the timeliness of the filing of the present petition. Based on this, the petition before us
was submitted on time.

After resolving the foregoing procedural issue, we shall now look into the merits of the case. For a
more logical presentation of the discussion we shall first consider the issue on the applicability of the
doctrine of res ipsa loquiturto the instant case. Thereafter, the first two assigned errors shall be
tackled in relation to the res ipsa loquiturdoctrine.

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks for
itself." The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the occurrence of an
injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of
negligence, or make out a plaintiff's prima facie case, and present a question of fact for defendant to
meet with an explanation. 13 Where the thing which caused the injury complained of is shown to be
under the management of the defendant or his servants and the accident is such as in ordinary
course of things does not happen if those who have its management or control use proper care, it
affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose
from or was caused by the defendant's want of care. 14

The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of common
knowledge and experience, the very nature of certain types of occurrences may justify an inference
of negligence on the part of the person who controls the instrumentality causing the injury in the
absence of some explanation by the defendant who is charged with negligence. 15 It is grounded in
the superior logic of ordinary human experience and on the basis of such experience or common
knowledge, negligence may be deduced from the mere occurrence of the accident
itself. 16 Hence, res ipsa loquitur is applied in conjunction with the doctrine of common knowledge.

However, much has been said that res ipsa loquitur is not a rule of substantive law and, as such,
does not create or constitute an independent or separate ground of liability. 17 Instead, it is
considered as merely evidentiary or in the nature of a procedural rule. 18 It is regarded as a mode of
proof, or a mere procedural of convenience since it furnishes a substitute for, and relieves a plaintiff
of, the burden of producing specific proof of negligence. 19 In other words, mere invocation and
application of the doctrine does not dispense with the requirement of proof of negligence. It is simply
a step in the process of such proof, permitting the plaintiff to present along with the proof of the
accident, enough of the attending circumstances to invoke the doctrine, creating an inference or
presumption of negligence, and to thereby place on the defendant the burden of going forward with
the proof. 20 Still, before resort to the doctrine may be allowed, the following requisites must be
satisfactorily shown:

1. The accident is of a kind which ordinarily does not occur in the

absence of someone's negligence;

2. It is caused by an instrumentality within the exclusive control of the

defendant or defendants; and

3. The possibility of contributing conduct which would make the

plaintiff responsible is eliminated. 21

In the above requisites, the fundamental element is the "control of instrumentality" which caused the
damage. 22Such element of control must be shown to be within the dominion of the defendant. In
order to have the benefit of the rule, a plaintiff, in addition to proving injury or damage, must show a
situation where it is applicable, and must establish that the essential elements of the doctrine were
present in a particular incident. 23

Medical malpractice 24 cases do not escape the application of this doctrine. Thus, res ipsa
loquitur has been applied when the circumstances attendant upon the harm are themselves of such
a character as to justify an inference of negligence as the cause of that harm. 25 The application
of res ipsa loquitur in medical negligence cases presents a question of law since it is a judicial
function to determine whether a certain set of circumstances does, as a matter of law, permit a given
inference. 26

Although generally, expert medical testimony is relied upon in malpractice suits to prove that a
physician has done a negligent act or that he has deviated from the standard medical procedure,
when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony
is dispensed with because the injury itself provides the proof of negligence. 27 The reason is that the
general rule on the necessity of expert testimony applies only to such matters clearly within the
domain of medical science, and not to matters that are within the common knowledge of mankind
which may be testified to by anyone familiar with the facts. 28 Ordinarily, only physicians and
surgeons of skill and experience are competent to testify as to whether a patient has been treated or
operated upon with a reasonable degree of skill and care. However, testimony as to the statements
and acts of physicians and surgeons, external appearances, and manifest conditions which are
observable by any one may be given by non-expert witnesses. 29 Hence, in cases where the res ipsa
loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of injury
to the patient, without the aid of expert testimony, where the court from its fund of common
knowledge can determine the proper standard of care. 30 Where common knowledge and experience
teach that a resulting injury would not have occurred to the patient if due care had been exercised,
an inference of negligence may be drawn giving rise to an application of the doctrine of res ipsa
loquitur without medical evidence, which is ordinarily required to show not only what occurred but
how and why it occurred. 31 When the doctrine is appropriate, all that the patient must do is prove a
nexus between the particular act or omission complained of and the injury sustained while under the
custody and management of the defendant without need to produce expert medical testimony to
establish the standard of care. Resort to res ipsa loquitur is allowed because there is no other way,
under usual and ordinary conditions, by which the patient can obtain redress for injury suffered by
him.

Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of a
foreign object in the body of the patient after an operation, 32 injuries sustained on a healthy part of
the body which was not under, or in the area, of treatment, 33 removal of the wrong part of the body
when another part was intended, 34 knocking out a tooth while a patient's jaw was under anesthetic
for the removal of his tonsils, 35 and loss of an eye while the patient plaintiff was under the influence
of anesthetic, during or following an operation for appendicitis, 36 among others.

Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably enlarged, it
does not automatically apply to all cases of medical negligence as to mechanically shift the burden
of proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is
not a rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending
upon the circumstances of each case. It is generally restricted to situations in malpractice cases
where a layman is able to say, as a matter of common knowledge and observation, that the
consequences of professional care were not as such as would ordinarily have followed if due care
had been
exercised. 37 A distinction must be made between the failure to secure results, and the occurrence of
something more unusual and not ordinarily found if the service or treatment rendered followed the
usual procedure of those skilled in that particular practice. It must be conceded that the doctrine
of res ipsa loquitur can have no application in a suit against a physician or surgeon which involves
the merits of a diagnosis or of a scientific treatment. 38 The physician or surgeon is not required at his
peril to explain why any particular diagnosis was not correct, or why any particular scientific
treatment did not produce the desired result. 39 Thus, res ipsa loquitur is not available in a
malpractice suit if the only showing is that the desired result of an operation or treatment was not
accomplished. 40The real question, therefore, is whether or not in the process of the operation any
extraordinary incident or unusual event outside of the routine performance occurred which is beyond
the regular scope of customary professional activity in such operations, which, if unexplained would
themselves reasonably speak to the average man as the negligent cause or causes of the untoward
consequence. 41 If there was such extraneous interventions, the doctrine of res ipsa loquitur may be
utilized and the defendant is called upon to explain the matter, by evidence of exculpation, if he
could. 42

We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter be
explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder operation
presents a case for the application of res ipsa loquitur.

A case strikingly similar to the one before us is Voss vs. Bridwell, 43 where the Kansas Supreme
Court in applying the res ipsa loquitur stated:

The plaintiff herein submitted himself for a mastoid operation and delivered his
person over to the care, custody and control of his physician who had complete and
exclusive control over him, but the operation was never performed. At the time of
submission he was neurologically sound and physically fit in mind and body, but he
suffered irreparable damage and injury rendering him decerebrate and totally
incapacitated. The injury was one which does not ordinarily occur in the process of a
mastoid operation or in the absence of negligence in the administration of an
anesthetic, and in the use and employment of an endoctracheal tube. Ordinarily a
person being put under anesthesia is not rendered decerebrate as a consequence of
administering such anesthesia in the absence of negligence. Upon these facts and
under these circumstances a layman would be able to say, as a matter of common
knowledge and observation, that the consequences of professional treatment were
not as such as would ordinarily have followed if due care had been exercised.

Here the plaintiff could not have been guilty of contributory negligence because he
was under the influence of anesthetics and unconscious, and the circumstances are
 such that the true explanation of event is more accessible to the defendants than to
the plaintiff for they had the exclusive control of the instrumentalities of anesthesia.

Upon all the facts, conditions and circumstances alleged in Count II it is held that a
cause of action is stated under the doctrine of res ipsa loquitur. 44

Indeed, the principles enunciated in the aforequoted case apply with equal force here. In the present
case, Erlinda submitted herself for cholecystectomy and expected a routine general surgery to be
performed on her gall bladder. On that fateful day she delivered her person over to the care, custody
and control of private respondents who exercised complete and exclusive control over her. At the
time of submission, Erlinda was neurologically sound and, except for a few minor discomforts, was
likewise physically fit in mind and body. However, during the administration of anesthesia and prior
to the performance of cholecystectomy she suffered irreparable damage to her brain. Thus, without
undergoing surgery, she went out of the operating room already decerebrate and totally
incapacitated. Obviously, brain damage, which Erlinda sustained, is an injury which does not
normally occur in the process of a gall bladder operation. In fact, this kind of situation does not in the
absence of negligence of someone in the administration of anesthesia and in the use of
endotracheal tube. Normally, a person being put under anesthesia is not rendered decerebrate as a
consequence of administering such anesthesia if the proper procedure was followed. Furthermore,
the instruments used in the administration of anesthesia, including the endotracheal tube, were all
under the exclusive control of private respondents, who are the physicians-in-charge. Likewise,
petitioner Erlinda could not have been guilty of contributory negligence because she was under the
influence of anesthetics which rendered her unconscious.

Considering that a sound and unaffected member of the body (the brain) is injured or destroyed
while the patient is unconscious and under the immediate and exclusive control of the physicians,
we hold that a practical administration of justice dictates the application of res ipsa loquitur. Upon
these facts and under these circumstances the Court would be able to say, as a matter of common
knowledge and observation, if negligence attended the management and care of the patient.
Moreover, the liability of the physicians and the hospital in this case is not predicated upon an
alleged failure to secure the desired results of an operation nor on an alleged lack of skill in the
diagnosis or treatment as in fact no operation or treatment was ever performed on Erlinda. Thus,
upon all these initial determination a case is made out for the application of the doctrine of res ipsa
loquitur.

Nonetheless, in holding that res ipsa loquitur is available to the present case we are not saying that
the doctrine is applicable in any and all cases where injury occurs to a patient while under
anesthesia, or to any and all anesthesia cases. Each case must be viewed in its own light and
scrutinized in order to be within the res ipsa loquitur coverage.

Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of negligence
allowed therein, the Court now comes to the issue of whether the Court of Appeals erred in finding
that private respondents were not negligent in the care of Erlinda during the anesthesia phase of the
operation and, if in the affirmative, whether the alleged negligence was the proximate cause of
Erlinda's comatose condition. Corollary thereto, we shall also determine if the Court of Appeals erred
in relying on the testimonies of the witnesses for the private respondents.

In sustaining the position of private respondents, the Court of Appeals relied on the testimonies of
Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the testimony of Dra. Gutierrez,
the Court of Appeals rationalized that she was candid enough to admit that she experienced some
difficulty in the endotracheal intubation 45 of the patient and thus, cannot be said to be covering her
negligence with falsehood. The appellate court likewise opined that private respondents were able to
show that the brain damage sustained by Erlinda was not caused by the alleged faulty intubation but
was due to the allergic reaction of the patient to the drug Thiopental Sodium (Pentothal), a short-
acting barbiturate, as testified on by their expert witness, Dr. Jamora. On the other hand, the
appellate court rejected the testimony of Dean Herminda Cruz offered in favor of petitioners that the
cause of the brain injury was traceable to the wrongful insertion of the tube since the latter, being a
nurse, was allegedly not knowledgeable in the process of intubation. In so holding, the appellate
court returned a verdict in favor of respondents physicians and hospital and absolved them of any
liability towards Erlinda and her family.

We disagree with the findings of the Court of Appeals. We hold that private respondents were unable
to disprove the presumption of negligence on their part in the care of Erlinda and their negligence
was the proximate cause of her piteous condition.

In the instant case, the records are helpful in furnishing not only the logical scientific evidence of the
pathogenesis of the injury but also in providing the Court the legal nexus upon which liability is
based. As will be shown hereinafter, private respondents' own testimonies which are reflected in the
transcript of stenographic notes are replete of signposts indicative of their negligence in the care and
management of Erlinda.

With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the anesthesia
phase. As borne by the records, respondent Dra. Gutierrez failed to properly intubate the patient.
This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol Medical Center School of
Nursing and petitioner's sister-in-law, who was in the operating room right beside the patient when
the tragic event occurred. Witness Cruz testified to this effect:

ATTY. PAJARES:

Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the

patient?

A: In particular, I could see that she was intubating the patient.

Q: Do you know what happened to that intubation process

administered by Dra. Gutierrez?

ATTY. ALCERA:

She will be incompetent Your Honor.

COURT:

Witness may answer if she knows.

A: As have said, I was with the patient, I was beside the stretcher
holding the left hand of the patient and all of a sudden heard some
remarks coming from Dra. Perfecta Gutierrez herself. She was saying
"Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki
ang tiyan.

xxx xxx xxx

 ATTY. PAJARES:

Q: From whom did you hear those words "lumalaki ang tiyan"?

A: From Dra. Perfecta Gutierrez.

xxx xxx xxx

Q: After hearing the phrase "lumalaki ang tiyan," what did you notice
on the person of the patient?

A: I notice (sic) some bluish discoloration on the nailbeds of the left

hand where I was at.

Q: Where was Dr. Orlino Ho[s]aka then at that particular time?

A: I saw him approaching the patient during that time.

Q: When he approached the patient, what did he do, if any?

A: He made an order to call on the anesthesiologist in the person of

Dr. Calderon.

Q: Did Dr. Calderon, upon being called, arrive inside the operating
room?

A: Yes sir.

Q: What did [s]he do, if any?

A: [S]he tried to intubate the patient.

Q: What happened to the patient?

A: When Dr. Calderon try (sic) to intubate the patient, after a while the
patient's nailbed became bluish and I saw the patient was placed in
trendelenburg position.

xxx xxx xxx

Q: Do you know the reason why the patient was placed in that
trendelenburg position?

A: As far as I know, when a patient is in that position, there is a

decrease of blood supply to the brain. 46

xxx xxx xxx

The appellate court, however, disbelieved Dean Cruz's testimony in the trial court by declaring that:
 A perusal of the standard nursing curriculum in our country will show that intubation
is not taught as part of nursing procedures and techniques. Indeed, we take judicial
notice of the fact that nurses do not, and cannot, intubate. Even on the assumption
that she is fully capable of determining whether or not a patient is properly intubated,
witness Herminda Cruz, admittedly, did not peep into the throat of the patient. (TSN,
July 25, 1991, p. 13). More importantly, there is no evidence that she ever
auscultated the patient or that she conducted any type of examination to check if the
endotracheal tube was in its proper place, and to determine the condition of the
heart, lungs, and other organs. Thus, witness Cruz's categorical statements that
appellant Dra. Gutierrez failed to intubate the appellee Erlinda Ramos and that it was
Dra. Calderon who succeeded in doing so clearly suffer from lack of sufficient factual
bases. 47

In other words, what the Court of Appeals is trying to impress is that being a nurse, and considered a
layman in the process of intubation, witness Cruz is not competent to testify on whether or not the
intubation was a success.

We do not agree with the above reasoning of the appellate court. Although witness Cruz is not an
anesthesiologist, she can very well testify upon matters on which she is capable of observing such
as, the statements and acts of the physician and surgeon, external appearances, and manifest
conditions which are observable by any one. 48 This is precisely allowed under the doctrine of res
ipsa loquitur where the testimony of expert witnesses is not required. It is the accepted rule that
expert testimony is not necessary for the proof of negligence in non-technical matters or those of
which an ordinary person may be expected to have knowledge, or where the lack of skill or want of
care is so obvious as to render expert testimony unnecessary. 49 We take judicial notice of the fact
that anesthesia procedures have become so common, that even an ordinary person can tell if it was
administered properly. As such, it would not be too difficult to tell if the tube was properly inserted.
This kind of observation, we believe, does not require a medical degree to be acceptable.

At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long experience
and scholarship led to her appointment as Dean of the Capitol Medical Center School at Nursing,
was fully capable of determining whether or not the intubation was a success. She had extensive
clinical experience starting as a staff nurse in Chicago, Illinois; staff nurse and clinical instructor in a
teaching hospital, the FEU-NRMF; Dean of the Laguna College of Nursing in San Pablo City; and
then Dean of the Capitol Medical Center School of Nursing. 50Reviewing witness Cruz' statements,
we find that the same were delivered in a straightforward manner, with the kind of detail, clarity,
consistency and spontaneity which would have been difficult to fabricate. With her clinical
background as a nurse, the Court is satisfied that she was able to demonstrate through her
testimony what truly transpired on that fateful day.

Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who admitted that
she experienced difficulty in inserting the tube into Erlinda's trachea, to wit:

ATTY. LIGSAY:

Q: In this particular case, Doctora, while you were intubating at your

first attempt (sic), you did not immediately see the trachea?

DRA. GUTIERREZ:

A: Yes sir.
 Q: Did you pull away the tube immediately?

A: You do not pull the . . .

Q: Did you or did you not?

A: I did not pull the tube.

Q: When you said "mahirap yata ito," what were you referring to?

A: "Mahirap yata itong i-intubate," that was the patient.

Q: So, you found some difficulty in inserting the tube?

A: Yes, because of (sic) my first attempt, I did not see right away. 51

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that she
encountered hardship in the insertion of the tube in the trachea of Erlinda because it was positioned
more anteriorly (slightly deviated from the normal anatomy of a person) 52 making it harder to locate
and, since Erlinda is obese and has a short neck and protruding teeth, it made intubation even more
difficult.

The argument does not convince us. If this was indeed observed, private respondents adduced no
evidence demonstrating that they proceeded to make a thorough assessment of Erlinda's airway,
prior to the induction of anesthesia, even if this would mean postponing the procedure. From their
testimonies, it appears that the observation was made only as an afterthought, as a means of
defense.

The pre-operative evaluation of a patient prior to the administration of anesthesia is universally

observed to lessen the possibility of anesthetic accidents. Pre-operative evaluation and preparation
for anesthesia begins when the anesthesiologist reviews the patient's medical records and visits with
the patient, traditionally, the day before elective surgery. 53 It includes taking the patient's medical
history, review of current drug therapy, physical examination and interpretation of laboratory
data. 54 The physical examination performed by the anesthesiologist is directed primarily toward the
central nervous system, cardiovascular system, lungs and upper airway. 55 A thorough analysis of the
patient's airway normally involves investigating the following: cervical spine mobility,
temporomandibular mobility, prominent central incisors, diseased or artificial teeth, ability to visualize
uvula and the thyromental distance. 56Thus, physical characteristics of the patient's upper airway that
could make tracheal intubation difficult should be studied. 57 Where the need arises, as when initial
assessment indicates possible problems (such as the alleged short neck and protruding teeth of
Erlinda) a thorough examination of the patient's airway would go a long way towards decreasing
patient morbidity and mortality.

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

Respondent Dra. Gutierrez, however, attempts to gloss over this omission by playing around with
the trial court's ignorance of clinical procedure, hoping that she could get away with it. Respondent
Dra. Gutierrez tried to muddle the difference between an elective surgery and an emergency surgery
just so her failure to perform the required pre-operative evaluation would escape unnoticed. In her
testimony she asserted:

ATTY. LIGSAY:

Q: Would you agree, Doctor, that it is good medical practice to see

the patient a day before so you can introduce yourself to establish
good doctor-patient relationship and gain the trust and confidence of
the patient?

DRA. GUTIERREZ:

A: As I said in my previous statement, it depends on the operative

procedure of the anesthesiologist and in my case, with elective cases
and normal cardio-pulmonary clearance like that, I usually don't do it
except on emergency and on cases that have an abnormalities
(sic). 58

However, the exact opposite is true. In an emergency procedure, there is hardly enough time
available for the fastidious demands of pre-operative procedure so that an anesthesiologist is able to
see the patient only a few minutes before surgery, if at all. Elective procedures, on the other hand,
are operative procedures that can wait for days, weeks or even months. Hence, in these cases, the
anesthesiologist possesses the luxury of time to be at the patient's beside to do a proper interview
and clinical evaluation. There is ample time to explain the method of anesthesia, the drugs to be
used, and their possible hazards for purposes of informed consent. Usually, the pre-operative
assessment is conducted at least one day before the intended surgery, when the patient is relaxed
and cooperative.

Erlinda's case was elective and this was known to respondent Dra. Gutierrez. Thus, she had all the
time to make a thorough evaluation of Erlinda's case prior to the operation and prepare her for
anesthesia. However, she never saw the patient at the bedside. She herself admitted that she had
seen petitioner only in the operating room, and only on the actual date of the cholecystectomy. She
negligently failed to take advantage of this important opportunity. As such, her attempt to exculpate
herself must fail.

Having established that respondent Dra. Gutierrez failed to perform pre-operative evaluation of the
patient which, in turn, resulted to a wrongful intubation, we now determine if the faulty intubation is
truly the proximate cause of Erlinda's comatose condition.

Private respondents repeatedly hammered the view that the cerebral anoxia which led to Erlinda's
coma was due to bronchospasm 59 mediated by her allergic response to the drug, Thiopental
Sodium, introduced into her system. Towards this end, they presented Dr. Jamora, a Fellow of the
Philippine College of Physicians and Diplomate of the Philippine Specialty Board of Internal
Medicine, who advanced private respondents' theory that the oxygen deprivation which led to anoxic
encephalopathy, 60 was due to an unpredictable drug reaction to the short-acting barbiturate. We find
the theory of private respondents unacceptable.
First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology simply
because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could not have been
capable of properly enlightening the court about anesthesia practice and procedure and their
complications. Dr. Jamora is likewise not an allergologist and could not therefore properly advance
expert opinion on allergic-mediated processes. Moreover, he is not a pharmacologist and, as such,
could not have been capable, as an expert would, of explaining to the court the pharmacologic and
toxic effects of the supposed culprit, Thiopental Sodium (Pentothal).

The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an expert witness in the
anesthetic practice of Pentothal administration is further supported by his own admission that he
formulated his opinions on the drug not from the practical experience gained by a specialist or expert
in the administration and use of Sodium Pentothal on patients, but only from reading certain
references, to wit:

ATTY. LIGSAY:

Q: In your line of expertise on pulmonology, did you have any

occasion to use pentothal as a method of management?

DR. JAMORA:

A: We do it in conjunction with the anesthesiologist when they have to

intubate our patient.

Q: But not in particular when you practice pulmonology?

A: No.

Q: In other words, your knowledge about pentothal is based only on

what you have read from books and not by your own personal
application of the medicine pentothal?

A: Based on my personal experience also on pentothal.

Q: How many times have you used pentothal?

A: They used it on me. I went into bronchospasm during my

appendectomy.

Q: And because they have used it on you and on account of your own
personal experience you feel that you can testify on pentothal here
with medical authority?

A: No. That is why I used references to support my claims. 61

An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within the fields
of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting anoxic
encephalopathy belongs to the field of neurology. While admittedly, many bronchospastic-mediated
pulmonary diseases are within the expertise of pulmonary medicine, Dr. Jamora's field, the
anesthetic drug-induced, allergic mediated bronchospasm alleged in this case is within the
disciplines of anesthesiology, allergology and pharmacology. On the basis of the foregoing
transcript, in which the pulmonologist himself admitted that he could not testify about the drug with
medical authority, it is clear that the appellate court erred in giving weight to Dr. Jamora's testimony
as an expert in the administration of Thiopental Sodium.

The provision in the rules of evidence 62 regarding expert witnesses states:

Sec. 49. Opinion of expert witness. — The opinion of a witness on a matter requiring
special knowledge, skill, experience or training which he is shown to possess, may
be received in evidence.

Generally, to qualify as an expert witness, one must have acquired special knowledge of the subject
matter about which he or she is to testify, either by the study of recognized authorities on the subject
or by practical experience. 63Clearly, Dr. Jamora does not qualify as an expert witness based on the
above standard since he lacks the necessary knowledge, skill, and training in the field of
anesthesiology. Oddly, apart from submitting testimony from a specialist in the wrong field, private
respondents' intentionally avoided providing testimony by competent and independent experts in the
proper areas.

Moreover, private respondents' theory, that Thiopental Sodium may have produced Erlinda's coma
by triggering an allergic mediated response, has no support in evidence. No evidence of stridor, skin
reactions, or wheezing — some of the more common accompanying signs of an allergic reaction —
appears on record. No laboratory data were ever presented to the court.

In any case, private respondents themselves admit that Thiopental induced, allergic-mediated
bronchospasm happens only very rarely. If courts were to accept private respondents' hypothesis
without supporting medical proof, and against the weight of available evidence, then every
anesthetic accident would be an act of God. Evidently, the Thiopental-allergy theory vigorously
asserted by private respondents was a mere afterthought. Such an explanation was advanced in
order to advanced in order to absolve them of any and all responsibility for the patient's condition.

In view of the evidence at hand, we are inclined to believe petitioners' stand that it was the faulty
intubation which was the proximate cause of Erlinda's comatose condition.

Proximate cause has been defined as that which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces injury, and without which the result would not have
occurred. 64 An injury or damage is proximately caused by an act or a failure to act, whenever it
appears from the evidence in the case, that the act or omission played a substantial part in bringing
about or actually causing the injury or damage; and that the injury or damage was either a direct
result or a reasonably probable consequence of the act or omission. 65 It is the dominant, moving or
producing cause.

Applying the above definition in relation to the evidence at hand, faulty intubation is undeniably the
proximate cause which triggered the chain of events leading to Erlinda's brain damage and,
ultimately, her comatosed condition.

Private respondents themselves admitted in their testimony that the first intubation was a failure.
This fact was likewise observed by witness Cruz when she heard respondent Dra. Gutierrez
remarked, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan."
Thereafter, witness Cruz noticed abdominal distention on the body of Erlinda. The development of
abdominal distention, together with respiratory embarrassment indicates that the endotracheal tube
entered the esophagus instead of the respiratory tree. In other words, instead of the intended
endotracheal intubation what actually took place was an esophageal intubation. During intubation,
such distention indicates that air has entered the gastrointestinal tract through the esophagus
instead of the lungs through the trachea. Entry into the esophagus would certainly cause some delay
in oxygen delivery into the lungs as the tube which carries oxygen is in the wrong place. That
abdominal distention had been observed during the first intubation suggests that the length of time
utilized in inserting the endotracheal tube (up to the time the tube was withdrawn for the second
attempt) was fairly significant. Due to the delay in the delivery of oxygen in her lungs Erlinda showed
signs of cyanosis. 66 As stated in the testimony of Dr. Hosaka, the lack of oxygen became apparent
only after he noticed that the nailbeds of Erlinda were already blue. 67 However, private respondents
contend that a second intubation was executed on Erlinda and this one was successfully done. We
do not think so. No evidence exists on record, beyond private respondents' bare claims, which
supports the contention that the second intubation was successful. Assuming that the endotracheal
tube finally found its way into the proper orifice of the trachea, the same gave no guarantee of
oxygen delivery, the hallmark of a successful intubation. In fact, cyanosis was again observed
immediately after the second intubation. Proceeding from this event (cyanosis), it could not be
claimed, as private respondents insist, that the second intubation was accomplished. Even granting
that the tube was successfully inserted during the second attempt, it was obviously too late. As aptly
explained by the trial court, Erlinda already suffered brain damage as a result of the inadequate
oxygenation of her brain for about four to five minutes. 68

The above conclusion is not without basis. Scientific studies point out that intubation problems are
responsible for one-third (1/3) of deaths and serious injuries associated with
anesthesia. 69 Nevertheless, ninety-eight percent (98%) or the vast majority of difficult intubations
may be anticipated by performing a thorough evaluation of the patient's airway prior to the
operation. 70 As stated beforehand, respondent Dra. Gutierrez failed to observe the proper pre-
operative protocol which could have prevented this unfortunate incident. Had appropriate diligence
and reasonable care been used in the pre-operative evaluation, respondent physician could have
been much more prepared to meet the contingency brought about by the perceived anatomic
variations in the patient's neck and oral area, defects which would have been easily overcome by a
prior knowledge of those variations together with a change in technique. 71 In other words, an
experienced anesthesiologist, adequately alerted by a thorough pre-operative evaluation, would
have had little difficulty going around the short neck and protruding teeth. 72 Having failed to observe
common medical standards in pre-operative management and intubation, respondent Dra. Gutierrez'
negligence resulted in cerebral anoxia and eventual coma of Erlinda.

We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the surgical
team. As the so-called "captain of the ship," 73 it is the surgeon's responsibility to see to it that those
under him perform their task in the proper manner. Respondent Dr. Hosaka's negligence can be
found in his failure to exercise the proper authority (as the "captain" of the operative team) in not
determining if his anesthesiologist observed proper anesthesia protocols. In fact, no evidence on
record exists to show that respondent Dr. Hosaka verified if respondent Dra. Gutierrez properly
intubated the patient. Furthermore, it does not escape us that respondent Dr. Hosaka had scheduled
another procedure in a different hospital at the same time as Erlinda's cholecystectomy, and was in
fact over three hours late for the latter's operation. Because of this, he had little or no time to confer
with his anesthesiologist regarding the anesthesia delivery. This indicates that he was remiss in his
professional duties towards his patient. Thus, he shares equal responsibility for the events which
resulted in Erlinda's condition.

We now discuss the responsibility of the hospital in this particular incident. The unique practice
(among private hospitals) of filling up specialist staff with attending and visiting "consultants," 74 who
are allegedly not hospital employees, presents problems in apportioning responsibility for negligence
in medical malpractice cases. However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the
conduct of their work within the hospital premises. Doctors who apply for "consultant" slots, visiting
or attending, are required to submit proof of completion of residency, their educational qualifications;
generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in
most cases, and references. These requirements are carefully scrutinized by members of the
hospital administration or by a review committee set up by the hospital who either accept or reject
the application. 75 This is particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is normally required to

attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and responsibilities, for the
privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients
into the hospital. In addition to these, the physician's performance as a specialist is generally
evaluated by a peer review committee on the basis of mortality and morbidity statistics, and
feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer
review committee, is normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting
"consultant" staff. While "consultants" are not, technically employees, a point which respondent
hospital asserts in denying all responsibility for the patient's condition, the control exercised, the
hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-
employee relationship, with the exception of the payment of wages. In assessing whether such a
relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing,
we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-
employee relationship in effect exists between hospitals and their attending and visiting physicians.
This being the case, the question now arises as to whether or not respondent hospital is solidarily
liable with respondent doctors for petitioner's condition. 76

The basis for holding an employer solidarily responsible for the negligence of its employee is found
in Article 2180 of the Civil Code which considers a person accountable not only for his own acts but
also for those of others based on the former's responsibility under a relationship of patria
potestas. 77 Such responsibility ceases when the persons or entity concerned prove that they have
observed the diligence of a good father of the family to prevent damage. 78 In other words, while the
burden of proving negligence rests on the plaintiffs, once negligence is shown, the burden shifts to
the respondents (parent, guardian, teacher or employer) who should prove that they observed the
diligence of a good father of a family to prevent damage.

In the instant case, respondent hospital, apart from a general denial of its responsibility over
respondent physicians, failed to adduce evidence showing that it exercised the diligence of a good
father of a family in the hiring and supervision of the latter. It failed to adduce evidence with regard to
the degree of supervision which it exercised over its physicians. In neglecting to offer such proof, or
proof of a similar nature, respondent hospital thereby failed to discharge its burden under the last
paragraph of Article 2180. Having failed to do this, respondent hospital is consequently solidarily
responsible with its physicians for Erlinda's condition.

Based on the foregoing, we hold that the Court of Appeals erred in accepting and relying on the
testimonies of the witnesses for the private respondents. Indeed, as shown by the above
discussions, private respondents were unable to rebut the presumption of negligence. Upon these
disquisitions we hold that private respondents are solidarily liable for damages under Article
2176 79 of the Civil Code.
We now come to the amount of damages due petitioners. The trial court awarded a total of
P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff, "subject to its
being updated" covering the period from 15 November 1985 up to 15 April 1992, based on monthly
expenses for the care of the patient estimated at P8,000.00.

At current levels, the P8000/monthly amount established by the trial court at the time of its decision
would be grossly inadequate to cover the actual costs of home-based care for a comatose individual.
The calculated amount was not even arrived at by looking at the actual cost of proper hospice care
for the patient. What it reflected were the actual expenses incurred and proved by the petitioners
after they were forced to bring home the patient to avoid mounting hospital bills.

And yet ideally, a comatose patient should remain in a hospital or be transferred to a hospice
specializing in the care of the chronically ill for the purpose of providing a proper milieu adequate to
meet minimum standards of care. In the instant case for instance, Erlinda has to be constantly
turned from side to side to prevent bedsores and hypostatic pneumonia. Feeding is done by
nasogastric tube. Food preparation should be normally made by a dietitian to provide her with the
correct daily caloric requirements and vitamin supplements. Furthermore, she has to be seen on a
regular basis by a physical therapist to avoid muscle atrophy, and by a pulmonary therapist to
prevent the accumulation of secretions which can lead to respiratory complications.

Given these considerations, the amount of actual damages recoverable in suits arising from
negligence should at least reflect the correct minimum cost of proper care, not the cost of the care
the family is usually compelled to undertake at home to avoid bankruptcy. However, the provisions of
the Civil Code on actual or compensatory damages present us with some difficulties.

Well-settled is the rule that actual damages which may be claimed by the plaintiff are those suffered
by him as he has duly proved. The Civil Code provides:

Art. 2199. — Except as provided by law or by stipulation, one is entitled to an

adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages.

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

In these cases, the amount of damages which should be awarded, if they are to adequately and
correctly respond to the injury caused, should be one which compensates for pecuniary loss incurred
and proved, up to the time of trial; and one which would meet pecuniary loss certain to be suffered
but which could not, from the nature of the case, be made with certainty. 80 In other words, temperate
damages can and should be awarded on top of actual or compensatory damages in instances where
the injury is chronic and continuing. And because of the unique nature of such cases, no
incompatibility arises when both actual and temperate damages are provided for. The reason is that
these damages cover two distinct phases.

As it would not be equitable — and certainly not in the best interests of the administration of justice
— for the victim in such cases to constantly come before the courts and invoke their aid in seeking
adjustments to the compensatory damages previously awarded — temperate damages are
appropriate. The amount given as temperate damages, though to a certain extent speculative,
should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a comatose
patient who has remained in that condition for over a decade. Having premised our award for
compensatory damages on the amount provided by petitioners at the onset of litigation, it would be
now much more in step with the interests of justice if the value awarded for temperate damages
would allow petitioners to provide optimal care for their loved one in a facility which generally
specializes in such care. They should not be compelled by dire circumstances to provide
substandard care at home without the aid of professionals, for anything less would be grossly
inadequate. Under the circumstances, an award of P1,500,000.00 in temperate damages would
therefore be reasonable. 81

In Valenzuela vs. Court of Appeals, 82 this Court was confronted with a situation where the injury
suffered by the plaintiff would have led to expenses which were difficult to estimate because while
they would have been a direct result of the injury (amputation), and were certain to be incurred by
the plaintiff, they were likely to arise only in the future. We awarded P1,000,000.00 in moral
damages in that case.

Describing the nature of the injury, the Court therein stated:

As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic

amputation of her left lower extremity at the distal left thigh just above the knee.
Because of this, Valenzuela will forever be deprived of the full ambulatory functions
of her left extremity, even with the use of state of the art prosthetic technology. Well
beyond the period of hospitalization (which was paid for by Li), she will be required to
undergo adjustments in her prosthetic devise due to the shrinkage of the stump from
the process of healing.

These adjustments entail costs, prosthetic replacements and months of physical and
occupational rehabilitation and therapy. During the lifetime, the prosthetic devise will
have to be replaced and readjusted to changes in the size of her lower limb effected
by the biological changes of middle-age, menopause and aging. Assuming she
reaches menopause, for example, the prosthetic will have to be adjusted to respond
to the changes in bone resulting from a precipitate decrease in calcium levels
observed in the bones of all post-menopausal women. In other words, the damage
done to her would not only be permanent and lasting, it would also be permanently
changing and adjusting to the physiologic changes which her body would normally
undergo through the years. The replacements, changes, and adjustments will require
corresponding adjustive physical and occupational therapy. All of these adjustments,
it has been documented, are painful.

xxx xxx xxx

A prosthetic devise, however technologically advanced, will only allow a reasonable

amount of functional restoration of the motor functions of the lower limb. The sensory
functions are forever lost. The resultant anxiety, sleeplessness, psychological injury,
mental and physical pain are inestimable. 83

The injury suffered by Erlinda as a consequence of private respondents' negligence is certainly

much more serious than the amputation in the Valenzuela case.

Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has been in a
comatose state for over fourteen years now. The burden of care has so far been heroically
shouldered by her husband and children, who, in the intervening years have been deprived of the
love of a wife and a mother.

Meanwhile, the actual physical, emotional and financial cost of the care of petitioner would be
virtually impossible to quantify. Even the temperate damages herein awarded would be inadequate if
petitioner's condition remains unchanged for the next ten years.

We recognized, in Valenzuela that a discussion of the victim's actual injury would not even scratch
the surface of the resulting moral damage because it would be highly speculative to estimate the
amount of emotional and moral pain, psychological damage and injury suffered by the victim or
those actually affected by the victim's condition. 84 The husband and the children, all petitioners in
this case, will have to live with the day to day uncertainty of the patient's illness, knowing any hope of
recovery is close to nil. They have fashioned their daily lives around the nursing care of petitioner,
altering their long term goals to take into account their life with a comatose patient. They, not the
respondents, are charged with the moral responsibility of the care of the victim. The family's moral
injury and suffering in this case is clearly a real one. For the foregoing reasons, an award of
P2,000,000.00 in moral damages would be appropriate.

Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby awarded.
Considering the length and nature of the instant suit we are of the opinion that attorney's fees valued
at P100,000.00 are likewise proper.

Our courts face unique difficulty in adjudicating medical negligence cases because physicians are
not insurers of life and, they rarely set out to intentionally cause injury or death to their patients.
However, intent is immaterial in negligence cases because where negligence exists and is proven,
the same automatically gives the injured a right to reparation for the damage caused.

Established medical procedures and practices, though in constant flux are devised for the purpose of
preventing complications. A physician's experience with his patients would sometimes tempt him to
deviate from established community practices, and he may end a distinguished career using
unorthodox methods without incident. However, when failure to follow established procedure results
in the evil precisely sought to be averted by observance of the procedure and a nexus is made
between the deviation and the injury or damage, the physician would necessarily be called to
account for it. In the case at bar, the failure to observe pre-operative assessment protocol which
would have influenced the intubation in a salutary way was fatal to private respondents' case.

WHEREFORE, the decision and resolution of the appellate court appealed from are hereby modified
so as to award in favor of petitioners, and solidarily against private respondents the following: 1)
P1,352,000.00 as actual damages computed as of the date of promulgation of this decision plus a
monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos expires or miraculously
survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate damages; 4)
P100,000.00 each as exemplary damages and attorney's fees; and, 5) the costs of the suit.

SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

 FIRST DIVISION

G.R. No. 138051 June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission
("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

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

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

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

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and
₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on
the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

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

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning
his programs and career. We consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we hereby serve notice of rescission
of said Agreement at our instance effective as of date.
 Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not
pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with
the same bank where ABS-CBN deposited SONZA’s talent fees and other payments due him under
the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed
the parties to file their respective position papers. The Labor Arbiter ruled:

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

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge
Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:

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

It must be noted that complainant was engaged by respondent by reason of his peculiar
skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee,
he was free to perform the services he undertook to render in accordance with his
own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant
Sonza’s monthly talent fees amount to a staggering ₱317,000. Moreover, his engagement as
a talent was covered by a specific contract. Likewise, he was not bound to render eight (8)
hours of work per day as he worked only for such number of hours as may be necessary.

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

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

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the
Labor Arbiter’s decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the
following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract
merely as an agent of complainant Sonza, the principal. By all indication and as the law puts
it, the act of the agent is the act of the principal itself. This fact is made particularly true in this
case, as admittedly MJMDC ‘is a management company devoted exclusively to managing
the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition
to Motion to Dismiss)

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

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

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN

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

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

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stocks…with
FIVE HUNDRED THOUSAND PESOS (₱500,000.00).

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

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(₱150,000.00) per year.’

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

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

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

The Issue

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

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION

AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming
the NLRC ruling which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence
define clearly the elements of an employer-employee relationship, this is the first time that the Court
will resolve the nature of the relationship between a television and radio station and one of its
"talents." There is no case law stating that a radio and television program host is an employee of the
broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in
the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee
of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because
SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord
the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence.15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible.17

SONZA maintains that all essential elements of an employer-employee relationship are present in
this case. Case law has consistently held that the elements of an employer-employee relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee on the means and methods by
which the work is accomplished.18 The last element, the so-called "control test", is the most
important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of
SONZA’s peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did
not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel department just like any
other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have
enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which the law
automatically incorporates into every employer-employee contract.21Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and
out of the ordinary that they indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA’s unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment.
Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA
failed to show that ABS-CBN could terminate his services on grounds other than breach of contract,
such as retrenchment to prevent losses as provided under labor laws.23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT
and Jay Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it
suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA’s talent fees during the life of the Agreement. This circumstance indicates
an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him
his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying
SONZA’s talent fees during the remaining life of the Agreement even if ABS-CBN cancelled
SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission
that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that
complainant was really an employee, he would merely resign, instead." SONZA did actually resign
from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA’s letter
clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-
CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.

D. Power of Control

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

Several factors favor classifying Alberty as an independent contractor. First, a television

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

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence
that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.29 This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer exercises,
the more likely the worker is deemed an employee. The converse holds true as well – the less
control the hirer exercises, the more likely the worker is considered an independent contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the
"Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render eight hours
of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents
of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-
CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss
in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule "for more effective
programming."34 ABS-CBN’s sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option not
to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even
if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s performance of
his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN
must still pay his talent fees in full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to
continue paying in full SONZA’s talent fees, did not amount to control over the means and methods
of the performance of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines and appeared on
television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only
to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right to
delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment
and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the
"Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and
instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his
talent or skills and the costumes necessary for his appearance.38Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for
SONZA to display his talent during the airing of the programs.39

A radio broadcast specialist who works under minimal supervision is an independent

contractor.40 SONZA’s work as television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected
him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s control
"not only [over] his manner of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules
and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed
on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code
of Ethics."42 The KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the
rules and standards of performance referred to in the Agreement are those applicable to talents and
not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former.43 In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that comply with
standards of the industry. We have ruled that:

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

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

The Vaughan case also held that one could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the desired result. The hirer, however, must
not deprive the one hired from performing his services according to his own initiative.45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively
to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.46 This practice is not designed to control the means and methods of work of the talent, but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort "in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his
employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the
employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who
is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the
principal. The law makes the principal responsible to the employees of the "labor-only contractor"
as if the principal itself directly hired or employed the employees.48 These circumstances are not
present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted
as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s agent.
MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation
organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is
SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed
by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is
represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the

careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49
Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of
law. There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status. A
mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
Cruz without giving his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to

attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of
these witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying
or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a
formal (trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

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

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the

parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and
for the purpose of making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.50

The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial.51 The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the
documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.
Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries
to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it
is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services without
any one controlling the means and methods by which he performs his art or craft. This Court will not
interpret the right of labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television hosts what they
say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock
Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA’s
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

 SECOND DIVISION

G.R. No. 138254 July 30, 2004

ANGELITO L. LAZARO, Proprietor of Royal Star Marketing, petitioner,

vs.
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO, SOCIAL SECURITY SYSTEM and
THE HONORABLE COURT OF APPEALS, respondents.

DECISION

TINGA, J.:

Before us is a Petition for Review under Rule 45, assailing the Decision1 of the Court of Appeals
Fifteenth Division2in CA-G.R. Sp. No. 40956, promulgated on 20 November 1998, which affirmed two
rulings of the Social Security Commission ("SSC") dated 8 November 1995 and 24 April 1996.

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

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

After the parties submitted their respective position papers, the SSC promulgated
a Resolution6 dated 8 November 1995 ruling in favor of Laudato.7 Applying the "control test," it held
that Laudato was an employee of Royal Star, and ordered Royal Star to pay the unremitted social
security contributions of Laudato in the amount of Five Thousand Seven Pesos and Thirty Five
Centavos (P5,007.35), together with the penalties totaling Twenty Two Thousand Two Hundred
Eighteen Pesos and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made liable to
pay damages to the SSC in the amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven
Centavos (P15,680.07) for not reporting Laudato for social security coverage, pursuant to Section 24
of the Social Security Law.8

After Lazaro's Motion for Reconsideration before the SSC was denied,9 Lazaro filed a Petition for
Review with the Court of Appeals. Lazaro reiterated that Laudato was merely a sales agent who was
paid purely on commission basis, not included in the company payroll, and who neither observed
regular working hours nor accomplished time cards.
In its assailed Decision, the Court of Appeals noted that Lazaro's arguments were a reprise of those
already presented before the SSC.10 Moreover, Lazaro had not come forward with particulars and
specifics in his petition to show that the Commission's ruling is not supported by substantial
evidence.11 Thus, the appellate court affirmed the finding that Laudato was an employee of Royal
Star, and hence entitled to coverage under the Social Security Law.

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

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

Lazaro's arguments are nothing more but a mere reiteration of arguments unsuccessfully posed
before two bodies: the SSC and the Court of Appeals. They likewise put to issue factual questions
already passed upon twice below, rather than questions of law appropriate for review under a Rule
45 petition. The determination of an employer-employee relationship depends heavily on the
particular factual circumstances attending the professional interaction of the parties. The Court is not
a trier of facts15 and accords great weight to the factual findings of lower courts or agencies whose
function is to resolve factual matters.16

Lazaro's arguments may be dispensed with by applying precedents. Suffice it to say, the fact that
Laudato was paid by way of commission does not preclude the establishment of an employer-
employee relationship. In Grepalife v. Judico,17 the Court upheld the existence of an employer-
employee relationship between the insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not paid by the company but by the
investor or the person insured.18 The relevant factor remains, as stated earlier, whether the
"employer" controls or has reserved the right to control the "employee" not only as to the result of the
work to be done but also as to the means and methods by which the same is to be accomplished.19

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

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

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

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of
Teresita Lazaro, General Manager of Royal Star, directing that no commissions were to be given on
all "main office" sales from walk-in customers and enjoining salesmen and sales supervisors to
observe this new policy.26 The Memorandum evinces the fact that, contrary to Lazaro's claim, Royal
Star exercised control over its sales supervisors or agents such as Laudato as to the means and
methods through which these personnel performed their work.

Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v. Court of
Appeals27 that a person who works for another at his own pleasure, subject to definite hours or
conditions of work, and is compensated according to the result of his effort is not an employee.28 The
citation is odd for Lazaro to rely upon, considering that in the cited case, the Court affirmed the
employee-employer relationship between a sales agent and the cigarette firm whose products he
sold.29 Perhaps Lazaro meant instead to cite our 1969 ruling in the similarly-titled case of Social
Security System v. Court of Appeals,30 also cited in the later eponymous ruling, whose disposition is
more in accord with Lazaro's argument.

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

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

SO ORDERED.

Puno, Chairman, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

 THIRD DIVISION

G.R. No. 157214 June 7, 2005

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,

vs.
RICARDO DE VERA, respondent.

DECISION

GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002
Decision1 and the 13 February 2003 Resolution2 of the Court of Appeals in CA-G.R. SP No. 65178,
upholding the finding of illegal dismissal by the National Labor Relations Commission against
petitioner.

As culled from the records, the pertinent facts are:

Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the

business of communication services and allied activities, while respondent Ricardo De Vera is a
physician by profession whom petitioner enlisted to attend to the medical needs of its employees. At
the crux of the controversy is Dr. De Vera’s status vis a vis petitioner when the latter terminated his
engagement.

It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,3 offered his services to the
petitioner, therein proposing his plan of works required of a practitioner in industrial medicine, to
include the following:

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

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

3. Management and treatment of employees that may necessitate hospitalization including

emergency cases and accidents;

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

medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative function such as accomplishing medical forms,

evaluating conditions of employees applying for sick leave of absence and subsequently
issuing proper certification, and all matters referred which are medical in nature.

The parties agreed and formalized respondent’s proposal in a document denominated

as RETAINERSHIP CONTRACT4 which will be for a period of one year subject to renewal, it being
made clear therein that respondent will cover "the retainership the Company previously had with Dr.
K. Eulau" and that respondent’s "retainer fee" will be at P4,000.00 a month. Said contract was
renewed yearly.5 The retainership arrangement went on from 1981 to 1994 with changes in the
retainer’s fee. However, for the years 1995 and 1996, renewal of the contract was only made
verbally.

The turning point in the parties’ relationship surfaced in December 1996 when Philcom, thru a
letter6 bearing on the subject boldly written as "TERMINATION – RETAINERSHIP CONTRACT",
informed De Vera of its decision to discontinue the latter’s "retainer’s contract with the Company
effective at the close of business hours of December 31, 1996" because management has decided
that it would be more practical to provide medical services to its employees through accredited
hospitals near the company premises.

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor
Relations Commission (NLRC), alleging that that he had been actually employed by Philcom as its
company physician since 1981 and was dismissed without due process. He averred that he was
designated as a "company physician on retainer basis" for reasons allegedly known only to Philcom.
He likewise professed that since he was not conversant with labor laws, he did not give much
attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees of Philcom.

On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
decision7 dismissing De Vera’s complaint for lack of merit, on the rationale that as a "retained
physician" under a valid contract mutually agreed upon by the parties, De Vera was an "independent
contractor" and that he "was not dismissed but rather his contract with [PHILCOM] ended when said
contract was not renewed after December 31, 1996".

On De Vera’s appeal to the NLRC, the latter, in a decision8 dated 23 October 2000, reversed (the
word used is "modified") that of the Labor Arbiter, on a finding that De Vera is Philcom’s "regular
employee" and accordingly directed the company to reinstate him to his former position without loss
of seniority rights and privileges and with full backwages from the date of his dismissal until actual
reinstatement. We quote the dispositive portion of the decision:

WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate

complainant to his former position without loss of seniority rights and privileges with full backwages
from the date of his dismissal until his actual reinstatement computed as follows:

Backwages:

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

Travelling allowance:
c) 39,330.00
P1,000.00 x 39.33 mos.

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27 February
2001,9 Philcom then went to the Court of Appeals on a petition for certiorari, thereat docketed as CA-
G.R. SP No. 65178, imputing grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth
month pay and traveling allowance to De Vera even as such award had no basis in fact and in law.

On 12 September 2002, the Court of Appeals rendered a decision,10 modifying that of the NLRC by
deleting the award of traveling allowance, and ordering payment of separation pay to De Vera in lieu
of reinstatement, thus:

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

SO ORDERED.

In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its
resolution of 13 February 2003.11

Hence, Philcom’s present recourse on its main submission that -

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

We GRANT.

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

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

As we see it, the parties’ respective submissions revolve on the primordial issue of whether an
employer-employee relationship exists between petitioner and respondent, the existence of which is,
in itself, a question of fact13 well within the province of the NLRC. Nonetheless, given the reality that
the NLRC’s findings are at odds with those of the labor arbiter, the Court, consistent with its ruling
in Jimenez vs. National Labor Relations Commission,14 is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.

In a long line of decisions,15 the Court, in determining the existence of an employer-employee

relationship, has invariably adhered to the four-fold test, to wit: [1] the selection and engagement of
the employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control the
employee’s conduct, or the so-called "control test", considered to be the most important element.

Applying the four-fold test to this case, we initially find that it was respondent himself who sets the
parameters of what his duties would be in offering his services to petitioner. This is borne by no less
than his 15 May 1981 letter16which, in full, reads:

"May 15, 1981

Mrs. Adela L. Vicente

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

Madam:

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

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

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

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

3. Management and treatment of employees that may necessitate hospitalization

including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no

additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative functions such as accomplishing medical

forms, evaluating conditions of employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters referred which are medical
in nature.

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

Very truly yours,

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

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

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

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

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

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

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

The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work
with petitioner, he never was included in its payroll; was never deducted any contribution for
remittance to the Social Security System (SSS); and was in fact subjected by petitioner to the ten
(10%) percent withholding tax for his professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an employer-employee relationship. In
the precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed
that no SSS deductions were made on his remuneration or that the respondent was deducting the
10% tax for his fees and he surely would have complained about them if he had considered himself
an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider
the SSS payments important and thus make sure they would be paid. The complainant never
bothered to ask the respondent to remit his SSS contributions. This clearly shows that the
complainant never considered himself an employee of PHILCOM and thus, respondent need not
remit anything to the SSS in favor of the complainant."18

Clearly, the elements of an employer-employee relationship are wanting in this case. We may add
that the records are replete with evidence showing that respondent had to bill petitioner for his
monthly professional fees.19 It simply runs against the grain of common experience to imagine that
an ordinary employee has yet to bill his employer to receive his salary.

We note, too, that the power to terminate the parties’ relationship was mutually vested on both.
Either may terminate the arrangement at will, with or without cause.20

Finally, remarkably absent from the parties’ arrangement is the element of control, whereby the
employer has reserved the right to control the employee not only as to the result of the work done
but also as to the means and methods by which the same is to be accomplished.21

Here, petitioner had no control over the means and methods by which respondent went about
performing his work at the company premises. He could even embark in the private practice of his
profession, not to mention the fact that respondent’s work hours and the additional compensation
therefor were negotiated upon by the parties.22 In fine, the parties themselves practically agreed on
every terms and conditions of respondent’s engagement, which thereby negates the element of
control in their relationship. For sure, respondent has never cited even a single instance when
petitioner interfered with his work.

Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of
Appeals ruled that respondent is petitioner’s regular employee at the time of his separation.

Partly says the appellate court in its assailed decision:

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

Article 280 of the Labor code (sic) provides:

‘The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the
season.’

‘An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That, any employee who has rendered at least one (1) year of service, whether such
is continuous or broken, shall be considered a regular with respect to the activity in which he is
employed and his employment shall continue while such activity exists.’
Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and
desirable because the need for medical attention of employees cannot be foreseen, hence, it is
necessary to have a physician at hand. In fact, the importance and desirability of a physician in a
company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a
physician depending on the number of employees and in the case at bench, in petitioner’s case, as
found by public respondent, petitioner employs more than 500 employees.

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

We disagree to the foregoing ratiocination.

The appellate court’s premise that regular employees are those who perform activities which are
desirable and necessary for the business of the employer is not determinative in this case. For, we
take it that any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter’s business, even without being hired as an
employee. This set-up is precisely true in the case of an independent contractorship as well as in an
agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where,
as here, the very existence of an employment relationship is in dispute.23

Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157
of the Labor Code, and argues that he satisfies all the requirements thereunder. The provision relied
upon reads:

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

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

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

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a
dental clinic, and an infirmary or emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist
who cannot stay in the premises of the establishment for at least two (2) hours, in the case of those
engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-
time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be
engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and attendance in case of emergency.

Had only respondent read carefully the very statutory provision invoked by him, he would have
noticed that in non-hazardous workplaces, the employer may engage the services of a physician "on
retained basis." As correctly observed by the petitioner, while it is true that the provision requires
employers to engage the services of medical practitioners in certain establishments depending on
the number of their employees, nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees,24 adding that the law, as written, only requires the
employer "to retain", not employ, a part-time physician who needed to stay in the premises of the
non-hazardous workplace for two (2) hours.25

Respondent takes no issue on the fact that petitioner’s business of telecommunications is not
hazardous in nature. As such, what applies here is the last paragraph of Article 157 which, to stress,
provides that the employer may engage the services of a physician and dentist "on retained basis",
subject to such regulations as the Secretary of Labor may prescribe. The successive "retainership"
agreements of the parties definitely hue to the very statutory provision relied upon by respondent.

Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free
from doubt. Where the law is clear and unambiguous, it must be taken to mean exactly what it says,
and courts have no choice but to see to it that the mandate is obeyed.26 As it is, Article 157 of the
Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage
"on retained basis" the service of a dentist or physician. Nowhere does the law provide that the
physician or dentist so engaged thereby becomes a regular employee. The very phrase that they
may be engaged "on retained basis", revolts against the idea that this engagement gives rise to an
employer-employee relationship.

With the recognition of the fact that petitioner consistently engaged the services of respondent on a
retainer basis, as shown by their various "retainership contracts", so can petitioner put an end, with
or without cause, to their retainership agreement as therein provided.27

We note, however, that even as the contracts entered into by the parties invariably provide for a 60-
day notice requirement prior to termination, the same was not complied with by petitioner when it
terminated on 17 December 1996 the verbally-renewed retainership agreement, effective at the
close of business hours of 31 December 1996.

Be that as it may, the record shows, and this is admitted by both parties,28 that execution of the
NLRC decision had already been made at the NLRC despite the pendency of the present recourse.
For sure, accounts of petitioner had already been garnished and released to respondent despite the
previous Status Quo Order29 issued by this Court. To all intents and purposes, therefore, the 60-day
notice requirement has become moot and academic if not waived by the respondent himself.

WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals
REVERSED and SET ASIDE. The 21 December 1998 decision of the labor arbiter is REINSTATED.

No pronouncement as to costs.

SO ORDERED.
 FIRST DIVISION

G.R. No. 164156 September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE
LERASAN, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-
G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA
affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC
Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with
modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.

The Antecedents

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business

and owns a network of television and radio stations, whose operations revolve around the broadcast,
transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the
airtime it generates from its radio and television operations. It has a franchise as a broadcasting
company, and was likewise issued a license and authority to operate by the National
Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production

assistants (PAs) on different dates. They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They
were issued ABS-CBN employees’ identification cards and were required to work for a minimum of
eight hours a day, including Sundays and holidays. They were made to perform the following tasks
and duties:

a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart
of respondent ABS-CBN;

b) Coordinate, arrange personalities for air interviews;

c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming
reports;

d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;

e) Assist, anchor program interview, etc; and

f) Record, log clerical reports, man based control radio.4

Their respective working hours were as follows:

Name Time No. of Hours

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½

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

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

3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

9:00 A.M.-6:00 P.M. (WF) 9 hrs.

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and
News Manager Leo Lastimosa.

On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a
Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to
December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining
unit, respondents were not included to the CBA.6

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that
effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB studio
operations would be handled by the studio technician. Thus, their revised schedule and other
assignments would be as follows:

Monday – Saturday

4:30 A.M. – 8:00 A.M. – Marlene Nazareno.

Miss Nazareno will then be assigned at the Research Dept.

From 8:00 A.M. to 12:00

4:30 P.M. – 12:00 MN – Jennifer Deiparine

Sunday

5:00 A.M. – 1:00 P.M. – Jennifer Deiparine

1:00 P.M. – 10:00 P.M. – Joy Sanchez

Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly
to Leo Lastimosa.

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status,
Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay,
and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter
directed the parties to submit their respective position papers. Upon respondents’ failure to file their
position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order
dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the
case. Respondents received a copy of the Order on May 16, 2001.7 Instead of re-filing their
complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest
Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For
Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith
admitted the position paper of the complainants. Respondents made the following allegations:

1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a
continuous period of more than five (5) years with a monthly salary rate of Four Thousand
(P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000.

Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary vouchers are
hereto attached as follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employee’s Identification Card

Exhibit "B", - ABS-CBN Salary Voucher from Nov.

Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Exhibit "B-2"

Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employee’s Identification Card

Exhibit "C"

Exhibit "D"

Exhibit "D-1" &

Exhibit "D-2" - ABS-CBN Salary Voucher from March

1999 to January 2001 at P4,000.00

Date employed: September 1, 1995

Length of service: 5 years & 10 months

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employee’s Identification Card

Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "E-1" & 1999 to December 2000

Exhibit :E-2"

Date employed: April 17, 1996

Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan

Exhibit "F" - ABS-CBN Employee’s Identification Card

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

Exhibit "F-2" & 2000 to Jan. 2001

Exhibit "F-3"

Exhibit "F-4" - Certification dated July 6, 2000

Acknowledging regular status of

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative

Officer May Kima Hife

Date employed: April 15, 1998

Length of service: 3 yrs. and one (1) month9

Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be
given specific assignments at its discretion, and were thus under its direct supervision and control
regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an
order compelling defendants to pay complainants the following:

1. One Hundred Thousand Pesos (P100,000.00) each

and by way of moral damages;

2. Minimum wage differential;

3. Thirteenth month pay differential;

4. Unpaid service incentive leave benefits;

5. Sick leave;
6. Holiday pay;

7. Premium pay;

8. Overtime pay;

9. Night shift differential.

Complainants further pray of this Arbiter to declare them regular and permanent employees of
respondent ABS-CBN as a condition precedent for their admission into the existing union and
collective bargaining unit of respondent company where they may as such acquire or otherwise
perform their obligations thereto or enjoy the benefits due therefrom.

Complainants pray for such other reliefs as are just and equitable under the premises.10

For its part, petitioner alleged in its position paper that the respondents were PAs who basically
assist in the conduct of a particular program ran by an anchor or talent. Among their duties include
monitoring and receiving incoming calls from listeners and field reporters and calls of news sources;
generally, they perform leg work for the anchors during a program or a particular production. They
are considered in the industry as "program employees" in that, as distinguished from regular or
station employees, they are basically engaged by the station for a particular or specific program
broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued
talent information sheets which are updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on to assist. The program assignments of
complainants were as follows:

a. Complainant Nazareno assists in the programs:

1) Nagbagang Balita (early morning edition)

2) Infor Hayupan

3) Arangkada (morning edition)

4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith

2) Serbisyo de Arevalo

3) Arangkada (evening edition)

4) Balitang K (local version)

5) Abante Subu

6) Pangutana Lang
c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays:

(a) Unzanith

(b) Serbisyo de Arevalo

(c) Arangkada (evening edition)

(d) Balitang K (local version)

(e) Abante Sugbu

(f) Pangutana Lang

2) On Thursdays

Nagbagang Balita

3) On Saturdays

(a) Nagbagang Balita

(b) Info Hayupan

(c) Arangkada (morning edition)

(d) Nagbagang Balita (mid-day edition)

4) On Sundays:

(a) Siesta Serenata

(b) Sunday Chismisan

(c) Timbangan sa Hustisya

(d) Sayri ang Lungsod

(e) Haranahan11

Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other
programs they produce, such as drama talents in other productions. As program employees, a PA’s
engagement is coterminous with the completion of the program, and may be extended/renewed
provided that the program is on-going; a PA may also be assigned to new programs upon the
cancellation of one program and the commencement of another. As such program employees, their
compensation is computed on a program basis, a fixed amount for performance services irrespective
of the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were
paid all salaries and benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the
same, especially since respondents were not covered by the bargaining unit.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared
that they were regular employees of petitioner; as such, they were awarded monetary benefits. The
fallo of the decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the
complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and
directing the same respondent to pay complainants as follows:

I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00

III - Jennifer Deiparine 12,025.00

IV - Josephine Sanchez Lerazan 12,025.00

_________

P48,100.00

plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO
THOUSAND NINE HUNDRED TEN (P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.13

However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that
he had no jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of
the Voluntary Arbitrator as provided in Article 261 of the Labor Code.

Respondents’ counsel received a copy of the decision on August 29, 2001. Respondent Nazareno
received her copy on August 27, 2001, while the other respondents received theirs on September 8,
2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001.

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and
considered as an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure.
Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal.

In its appeal, petitioner alleged the following:

1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed
without prejudice for more than thirty (30) calendar days;

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process
of law;
3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration on an
interlocutory order on the ground that the same is a prohibited pleading;

4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the
respondent;

5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay,
service incentive leave pay and salary differential; and

6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney’s fees.14

On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter.
The fallo of the decision reads:

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July
2001 is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN
Broadcasting Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30
September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine
Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49

d. Lerazan, Josephine Sanchez - 413,607.75

Total - P 2,561,948.22

2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September
2002 representing their rice subsidy in the CBA, broken down as follows:

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.

SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted
respondents’ motion to refile the complaint and admit their position paper. Although respondents
were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union,
the NLRC nevertheless granted and computed respondents’ monetary benefits based on the 1999
CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter had
jurisdiction over the complaint of respondents because they acted in their individual capacities and
not as members of the union. Their claim for monetary benefits was within the context of Article
217(6) of the Labor Code. The validity of respondents’ claim does not depend upon the interpretation
of the CBA.

The NLRC ruled that respondents were entitled to the benefits under the CBA because they were
regular employees who contributed to the profits of petitioner through their labor. The NLRC cited
the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations
Commission.16

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising
both procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction
in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in
scrutinizing the reopening and revival of the complaint of respondents with the Labor Arbiter upon
due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor
Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without
jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of
referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC
acted with grave abuse of discretion when it awarded monetary benefits to respondents under the
CBA although they are not members of the appropriate bargaining unit.

On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection
of an appeal shall be upon the expiration of the last day to appeal by all parties, should there be
several parties to a case. Since respondents received their copies of the decision on September 8,
2001 (except respondent Nazareno who received her copy of the decision on August 27, 2001), they
had until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA
declared that respondents’ failure to submit their position paper on time is not a ground to strike out
the paper from the records, much less dismiss a complaint.

Anent the substantive issues, the appellate court stated that respondents are not mere project
employees, but regular employees who perform tasks necessary and desirable in the usual trade
and business of petitioner and not just its project employees. Moreover, the CA added, the award of
benefits accorded to rank-and-file employees under the 1996-1999 CBA is a necessary
consequence of the NLRC ruling that respondents, as PAs, are regular employees.

Finding no merit in petitioner’s motion for reconsideration, the CA denied the same in a
Resolution17 dated June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises the following assignments
of error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY

ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF
THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF

THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18

Considering that the assignments of error are interrelated, the Court shall resolve them
simultaneously.

Petitioner asserts that the appellate court committed palpable and serious error of law when it
affirmed the rulings of the NLRC, and entertained respondents’ appeal from the decision of the
Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same.
Petitioner likewise maintains that the 10-day period to appeal must be reckoned from receipt of a
party’s counsel, not from the time the party learns of the decision, that is, notice to counsel is notice
to party and not the other way around. Finally, petitioner argues that the reopening of a complaint
which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of
the NLRC Rules; such order of dismissal had already attained finality and can no longer be set
aside.

Respondents, on the other hand, allege that their late appeal is a non-issue because it was
petitioner’s own timely appeal that empowered the NLRC to reopen the case. They assert that
although the appeal was filed 10 days late, it may still be given due course in the interest of
substantial justice as an exception to the general rule that the negligence of a counsel binds the
client. On the issue of the late filing of their position paper, they maintain that this is not a ground to
strike it out from the records or dismiss the complaint.

We find no merit in the petition.

We agree with petitioner’s contention that the perfection of an appeal within the statutory or
reglementary period is not only mandatory, but also jurisdictional; failure to do so renders the
assailed decision final and executory and deprives the appellate court or body of the legal authority
to alter the final judgment, much less entertain the appeal. However, this Court has time and again
ruled that in exceptional cases, a belated appeal may be given due course if greater injustice may
occur if an appeal is not given due course than if the reglementary period to appeal were strictly
followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing order
and efficiency if only to serve the greater principles of substantial justice and equity.20

In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of
the Labor Code a liberal application to prevent the miscarriage of justice. Technicality should not be
allowed to stand in the way of equitably and completely resolving the rights and obligations of the
parties.22 We have held in a catena of cases that technical rules are not binding in labor cases and
are not to be applied strictly if the result would be detrimental to the workingman.23

Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within
the reglementary period therefor. However, petitioner perfected its appeal within the period, and
since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due
course to its appeal and render the decision of November 14, 2002. Case law is that the party who
failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a separate
appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both
parties.24
We find no merit in petitioner’s contention that the Labor Arbiter abused his discretion when he
admitted respondents’ position paper which had been belatedly filed. It bears stressing that the
Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case
speedily and objectively, without technicalities of law or procedure, all in the interest of due
process.25 Indeed, as stressed by the appellate court, respondents’ failure to submit a position paper
on time is not a ground for striking out the paper from the records, much less for dismissing a
complaint.26 Likewise, there is simply no truth to petitioner’s assertion that it was denied due process
when the Labor Arbiter admitted respondents’ position paper without requiring it to file a comment
before admitting said position paper. The essence of due process in administrative proceedings is
simply an opportunity to explain one’s side or an opportunity to seek reconsideration of the action or
ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had
absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for reconsideration
of the Labor Arbiter’s admission of respondents’ position paper, and even file a Reply thereto. In
fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the
Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous
employers of the employees’ right to security of tenure by indiscriminately and absolutely ruling out
all written and oral agreements inharmonious with the concept of regular employment defined
therein.28

We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that respondents assailed the Labor Arbiter’s order
dated 18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their
right to procedural due process. That while suggesting that an Order be instead issued by the Labor
Arbiter for complainants to refile this case, respondents impliedly submit that there is not any
substantial damage or prejudice upon the refiling, even so, respondents’ suggestion acknowledges
complainants right to prosecute this case, albeit with the burden of repeating the same procedure,
thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the
same process twice. Respondent’s suggestion, betrays its notion of prolonging, rather than
promoting the early resolution of the case.

Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the
dismissed case without prejudice beyond the ten (10) day reglementary period had inadvertently
failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states:

"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10)
calendar days from receipt of notice of the order dismissing the same; otherwise, his only remedy
shall be to re-file the case in the arbitration branch of origin."

the same is not a serious flaw that had prejudiced the respondents’ right to due process. The case
can still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code
provides:

"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this
Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."

The admission by the Labor Arbiter of the complainants’ Position Paper and Supplemental
Manifestation which were belatedly filed just only shows that he acted within his discretion as he is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure, all in the interest of due process.
Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from
the records, much less for dismissing a complaint in the case of the complainant. (University of
Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No.
144702, July 31, 2001).

"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted within her discretion.
In fact, she is enjoined by law to use every reasonable means to ascertain the facts in each case
speedily and objectively, without technicalities of law or procedure, all in the interest of due process".
(Panlilio vs. NLRC, 281 SCRA 53).

The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact,
the respondents had filed their position paper on 2 April 2001. What is material in the compliance of
due process is the fact that the parties are given the opportunities to submit position papers.

"Due process requirements are satisfied where the parties are given the opportunities to submit
position papers". (Laurence vs. NLRC, 205 SCRA 737).

Thus, the respondent was not deprived of its Constitutional right to due process of law.29

We reject, as barren of factual basis, petitioner’s contention that respondents are considered as its
talents, hence, not regular employees of the broadcasting company. Petitioner’s claim that the
functions performed by the respondents are not at all necessary, desirable, or even vital to its trade
or business is belied by the evidence on record.

Case law is that this Court has always accorded respect and finality to the findings of fact of the CA,
particularly if they coincide with those of the Labor Arbiter and the National Labor Relations
Commission, when supported by substantial evidence.30 The question of whether respondents are
regular or project employees or independent contractors is essentially factual in nature; nonetheless,
the Court is constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.

We agree with respondents’ contention that where a person has rendered at least one year of
service, regardless of the nature of the activity performed, or where the work is continuous or
intermittent, the employment is considered regular as long as the activity exists, the reason being
that a customary appointment is not indispensable before one may be formally declared as having
attained regular status. Article 280 of the Labor Code provides:

ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall
be deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.

In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether
one is a regular employee:

The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or business
of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of
work performed and its relation to the scheme of the particular business or trade in its entirety. Also,
if the employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence,
the employment is considered regular, but only with respect to such activity and while such activity
exists.32

As elaborated by this Court in Magsalin v. National Organization of Working Men:33

Even while the language of law might have been more definitive, the clarity of its spirit and intent,
i.e., to ensure a "regular" worker’s security of tenure, however, can hardly be doubted. In
determining whether an employment should be considered regular or non-regular, the applicable test
is the reasonable connection between the particular activity performed by the employee in relation to
the usual business or trade of the employer. The standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the services rendered and its relation to the general
scheme under which the business or trade is pursued in the usual course. It is distinguished from a
specific undertaking that is divorced from the normal activities required in carrying on the particular
business or trade. But, although the work to be performed is only for a specific project or seasonal,
where a person thus engaged has been performing the job for at least one year, even if the
performance is not continuous or is merely intermittent, the law deems the repeated and continuing
need for its performance as being sufficient to indicate the necessity or desirability of that activity to
the business or trade of the employer. The employment of such person is also then deemed to be
regular with respect to such activity and while such activity exists.34

Not considered regular employees are "project employees," the completion or termination of which is
more or less determinable at the time of employment, such as those employed in connection with a
particular construction project, and "seasonal employees" whose employment by its nature is only
desirable for a limited period of time. Even then, any employee who has rendered at least one year
of service, whether continuous or intermittent, is deemed regular with respect to the activity
performed and while such activity actually exists.

It is of no moment that petitioner hired respondents as "talents." The fact that respondents received
pre-agreed "talent fees" instead of salaries, that they did not observe the required office hours, and
that they were permitted to join other productions during their free time are not conclusive of the
nature of their employment. Respondents cannot be considered "talents" because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They are regular
employees who perform several different duties under the control and direction of ABS-CBN
executives and supervisors.

Thus, there are two kinds of regular employees under the law: (1) those engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2)
those casual employees who have rendered at least one year of service, whether continuous or
broken, with respect to the activities in which they are employed.35

The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determines whether a certain
employment is regular or otherwise is not the will or word of the employer, to which the worker
oftentimes acquiesces, much less the procedure of hiring the employee or the manner of paying the
salary or the actual time spent at work. It is the character of the activities performed in relation to the
particular trade or business taking into account all the circumstances, and in some cases the length
of time of its performance and its continued existence.36 It is obvious that one year after they were
employed by petitioner, respondents became regular employees by operation of law.37

Additionally, respondents cannot be considered as project or program employees because no

evidence was presented to show that the duration and scope of the project were determined or
specified at the time of their engagement. Under existing jurisprudence, project could refer to two
distinguishable types of activities. First, a project may refer to a particular job or undertaking that is
within the regular or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins
and ends at determined or determinable times. Second, the term project may also refer to a
particular job or undertaking that is not within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at determined or
determinable times.38

The principal test is whether or not the project employees were assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the employees
were engaged for that project.39

In this case, it is undisputed that respondents had continuously performed the same activities for an
average of five years. Their assigned tasks are necessary or desirable in the usual business or trade
of the petitioner. The persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioner’s business or trade.40 While length of time may not be a
sole controlling test for project employment, it can be a strong factor to determine whether the
employee was hired for a specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual trade or business of the employer.41 We note further that
petitioner did not report the termination of respondents’ employment in the particular "project" to the
Department of Labor and Employment Regional Office having jurisdiction over the workplace within
30 days following the date of their separation from work, using the prescribed form on employees’
termination/ dismissals/suspensions.42

As gleaned from the records of this case, petitioner itself is not certain how to categorize
respondents. In its earlier pleadings, petitioner classified respondents as program employees, and in
later pleadings, independent contractors. Program employees, or project employees, are different
from independent contractors because in the case of the latter, no employer-employee relationship
exists.

Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is
misplaced. In that case, the Court explained why Jose Sonza, a well-known television and radio
personality, was an independent contractor and not a regular employee:

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’S services to co-host its television and radio programs because of
SONZA’S peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement
with SONZA but would have hired him through its personnel department just like any other
employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have
enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which the law automatically
incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee relationship.

SONZA’s talent fees, amounting to P317,000 monthly in the second and third year, are so huge and
out of the ordinary that they indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA’S unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment.
Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.44

In the case at bar, however, the employer-employee relationship between petitioner and
respondents has been proven.

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioner’s personnel
department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an
employer-employee relationship. Respondents did not have the power to bargain for huge talent
fees, a circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent business
or professional service, such work is a regular employment of such employee and not an
independent contractor.45 The Court will peruse beyond any such agreement to examine the facts
that typify the parties’ actual relationship.46

It follows then that respondents are entitled to the benefits provided for in the existing CBA between
petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the
benefits granted to all other regular employees of petitioner under the CBA.47 We quote with
approval the ruling of the appellate court, that the reason why production assistants were excluded
from the CBA is precisely because they were erroneously classified and treated as project
employees by petitioner:

x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees
of ABS-CBN under the 1996-1999 CBA is a necessary consequence of public respondent’s ruling
that private respondents as production assistants of petitioner are regular employees. The monetary
award is not considered as claims involving the interpretation or implementation of the collective
bargaining agreement. The reason why production assistants were excluded from the said
agreement is precisely because they were classified and treated as project employees by petitioner.

As earlier stated, it is not the will or word of the employer which determines the nature of
employment of an employee but the nature of the activities performed by such employee in relation
to the particular business or trade of the employer. Considering that We have clearly found that
private respondents are regular employees of petitioner, their exclusion from the said CBA on the
misplaced belief of the parties to the said agreement that they are project employees, is therefore
not proper. Finding said private respondents as regular employees and not as mere project
employees, they must be accorded the benefits due under the said Collective Bargaining
Agreement.

A collective bargaining agreement is a contract entered into by the union representing the
employees and the employer. However, even the non-member employees are entitled to the
benefits of the contract. To accord its benefits only to members of the union without any valid reason
would constitute undue discrimination against non-members. A collective bargaining agreement is
binding on all employees of the company. Therefore, whatever benefits are given to the other
employees of ABS-CBN must likewise be accorded to private respondents who were regular
employees of petitioner.48

Besides, only talent-artists were excluded from the CBA and not production assistants who are
regular employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case
of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living of the laborer."

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against
petitioner.

SO ORDERED.

Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.

 FIRST DIVISION

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO
TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and
RAMON ESCUETA, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside
the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7,
2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal
filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the
Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR
CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31,
2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for
constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the accounting
needs of the company. She was also designated as Liaison Officer to the City of Makati to secure
business permits, construction permits and other licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate
documents; neither did she attend any board meeting nor required to do so. She never prepared any
legal document and never represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as
accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of
all employees and perform management administration functions; represent the company in all
dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social
Security System (SSS) and in the city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her
salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei
Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she
was required to sign a prepared resolution for her replacement but she was assured that she would
still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a
meeting of all employees of Kasei Corporation and announced that nothing had changed and that
petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in
charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to
September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid
her mid-year bonus allegedly because the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she
was informed that she is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged
that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act
concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her
own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted. The company never interfered with her work
except that from time to time, the management would ask her opinion on matters relating to her
profession. Petitioner did not go through the usual procedure of selection of employees, but her
services were engaged through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee subject to the 10%
expanded withholding tax on professionals, and that she was not one of those reported to the BIR or
SSS as one of the company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As
such, her consultancy may be terminated any time considering that her services were only
temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list
of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not
among the employees reported to the BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were also submitted showing that petitioner’s
latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights
and jointly and severally pay complainant her money claims in accordance with the following
computation:

a. Backwages 10/2001 – 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay
with additional backwages that would accrue up to actual payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of
service in addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorney’s fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month
pay are AFFIRMED.

SO ORDERED. 15

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

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

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee
relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative,
(2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the
records to determine which of the propositions espoused by the contending parties is supported by
substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee relation. Generally, courts have relied on the so-
called right of control test where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in reaching such end. In
addition to the standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an
employer-employee relationship.

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

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employer’s power to control the employee with respect to the means and methods by which the work
is to be accomplished; and (2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship between
the parties. This is especially appropriate in this case where there is no written agreement or terms
of reference to base the relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the latter’s employment.

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

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions
prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the
employee in the payrolls, to give a clearer picture in determining the existence of an employer-
employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, 22 such as: (1) the extent to which the services
performed are an integral part of the employer’s business; (2) the extent of the worker’s investment
in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the
worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight
required for the success of the claimed independent enterprise; (6) the permanency and duration of
the relationship between the worker and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged
employer for his continued employment in that line of business. 24 In the United States, the
touchstone of economic reality in analyzing possible employment relationships for purposes of the
Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the Labor Code ought to be the
economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation
because she was under the direct control and supervision of Seiji Kamura, the corporation’s
Technical Consultant. She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax services to the company
and performing functions necessary and desirable for the proper operation of the corporation such
as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to
December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of
Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the
existence of an employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her
continued employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an

identification card is provided not only as a security measure but mainly to identify the holder thereof
as a bona fide employee of the firm that issues it. Together with the cash vouchers covering
petitioner’s salaries for the months stated therein, these matters constitute substantial evidence
adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is
proof that the latter were the former’s employees. The coverage of Social Security Law is predicated
on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that
petitioner never acted as Corporate Secretary and that her designation as such was only for
convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of
acting as Liaison Officer in representing the company to secure construction permits, license to
operate and other requirements imposed by government agencies. Petitioner was never entrusted
with corporate documents of the company, nor required to attend the meeting of the corporation.
She was never privy to the preparation of any document for the corporation, although once in a while
she was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001
affidavit has been allegedly withdrawn by Kamura himself from the records of the
case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are
sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally
look with favor on any retraction or recanted testimony, for it could have been secured by
considerations other than to tell the truth and would make solemn trials a mockery and place the
investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected and engaged by the company for compensation,
and is economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement. Respondent corporation
hired and engaged petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the means and methods
by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month
from January to September 2001. This amounts to an illegal termination of employment, where the
petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust
and confidence, and under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.

Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when
continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that
where an employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment rendering it impossible
for such employee to continue working for her employer. Hence, her severance from the company
was not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of
sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship
between employees and employers, we are mindful of the fact that the policy of the law is to apply
the Labor Code to a greater number of employees. This would enable employees to avail of the
benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a primary social economic force in
furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals
dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515
are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated
April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time
she was illegally terminated until the date of finality of this decision, and separation pay representing
one-half month pay for every year of service, where a fraction of at least six months shall be
considered as one whole year.
SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

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

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

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

ARTEMIO V. PANGANIBAN
Chief Justice
 THIRD DIVISION

G.R. No. 142625 December 19, 2006

ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY,
ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners,
vs.
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY,
DR. JOEL ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J.
DUMLAO, respondents.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 6 February 1998 Decision2 and 21 March 2000 Resolution3 of the
Court of Appeals in CA-G.R. CV No. 45641. The Court of Appeals affirmed in toto the 22 November
1993 Decision4 of the Regional Trial Court of Manila, Branch 33, finding Dr. Oscar Estrada solely
liable for damages for the death of his patient, Corazon Nogales, while absolving the remaining
respondents of any liability. The Court of Appeals denied petitioners' motion for reconsideration.

The Facts

Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was under
the exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourth month of
pregnancy or as early as December 1975. While Corazon was on her last trimester of pregnancy,
Dr. Estrada noted an increase in her blood pressure and development of leg edema5 indicating
preeclampsia,6 which is a dangerous complication of pregnancy.7

Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon
and Rogelio Nogales ("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon,
Dr. Estrada advised her immediate admission to the Capitol Medical Center ("CMC").

On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the
written admission request8 of Dr. Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales
("Rogelio") executed and signed the "Consent on Admission and Agreement"9 and "Admission
Agreement."10 Corazon was then brought to the labor room of the CMC.

Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internal
examination of Corazon. Dr. Uy then called up Dr. Estrada to notify him of her findings.

Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valium to
be administered immediately by intramuscular injection. Dr. Estrada later ordered the start of
intravenous administration of syntocinon admixed with dextrose, 5%, in lactated Ringers' solution, at
the rate of eight to ten micro-drops per minute.

According to the Nurse's Observation Notes,12 Dr. Joel Enriquez ("Dr. Enriquez"), an
anesthesiologist at CMC, was notified at 4:15 a.m. of Corazon's admission. Subsequently, when
asked if he needed the services of an anesthesiologist, Dr. Estrada refused. Despite Dr. Estrada's
refusal, Dr. Enriquez stayed to observe Corazon's condition.

At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m., Corazon's
bag of water ruptured spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m.,
Corazon started to experience convulsions.

At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely
Villaflor ("Dr. Villaflor"), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium
sulfate.

At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby. In
the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in an
apnic, cyanotic, weak and injured condition. Consequently, the baby had to be intubated and
resuscitated by Dr. Enriquez and Dr. Payumo.

At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse.
Corazon's blood pressure dropped from 130/80 to 60/40 within five minutes. There was continuous
profuse vaginal bleeding. The assisting nurse administered hemacel through a gauge 19 needle as a
side drip to the ongoing intravenous injection of dextrose.

At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took
approximately 30 minutes for the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr. Lacson"), to
comply with Dr. Estrada's order and deliver the blood.

At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-Gynecology Department of
the CMC, was apprised of Corazon's condition by telephone. Upon being informed that Corazon was
bleeding profusely, Dr. Espinola ordered immediate hysterectomy. Rogelio was made to sign a
"Consent to Operation."13

Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by an
ambulance, arrived at the CMC about an hour later or at 9:00 a.m. He examined the patient and
ordered some resuscitative measures to be administered. Despite Dr. Espinola's efforts, Corazon
died at 9:15 a.m. The cause of death was "hemorrhage, post partum."14

On 14 May 1980, petitioners filed a complaint for damages15 with the Regional Trial Court16 of Manila
against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain
Nurse J. Dumlao for the death of Corazon. Petitioners mainly contended that defendant physicians
and CMC personnel were negligent in the treatment and management of Corazon's condition.
Petitioners charged CMC with negligence in the selection and supervision of defendant physicians
and hospital staff.

For failing to file their answer to the complaint despite service of summons, the trial court declared
Dr. Estrada, Dr. Enriquez, and Nurse Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola,
and Dr. Lacson filed their respective answers denying and opposing the allegations in the complaint.
Subsequently, trial ensued.
After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 finding Dr.
Estrada solely liable for damages. The trial court ruled as follows:

The victim was under his pre-natal care, apparently, his fault began from his incorrect and
inadequate management and lack of treatment of the pre-eclamptic condition of his patient. It
is not disputed that he misapplied the forceps in causing the delivery because it resulted in a
large cervical tear which had caused the profuse bleeding which he also failed to control with
the application of inadequate injection of magnesium sulfate by his assistant Dra. Ely
Villaflor. Dr. Estrada even failed to notice the erroneous administration by nurse Dumlao of
hemacel by way of side drip, instead of direct intravenous injection, and his failure to consult
a senior obstetrician at an early stage of the problem.

On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr.
Espinola, nurse J. Dumlao and CMC, the Court finds no legal justification to find them civilly
liable.

On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal
physician of Corazon Nogales. She can only make suggestions in the manner the patient
maybe treated but she cannot impose her will as to do so would be to substitute her good
judgment to that of Dr. Estrada. If she failed to correctly diagnose the true cause of the
bleeding which in this case appears to be a cervical laceration, it cannot be safely concluded
by the Court that Dra. Villaflor had the correct diagnosis and she failed to inform Dr. Estrada.
No evidence was introduced to show that indeed Dra. Villaflor had discovered that there was
laceration at the cervical area of the patient's internal organ.

On the part of nurse Dumlao, there is no showing that when she administered the hemacel
as a side drip, she did it on her own. If the correct procedure was directly thru the veins, it
could only be because this was what was probably the orders of Dr. Estrada.

While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the
Department of Obstetrics and Gynecology who attended to the patient Mrs. Nogales, it was
only at 9:00 a.m. That he was able to reach the hospital because of typhoon Didang (Exhibit
2). While he was able to give prescription in the manner Corazon Nogales may be treated,
the prescription was based on the information given to him by phone and he acted on the
basis of facts as presented to him, believing in good faith that such is the correct remedy. He
was not with Dr. Estrada when the patient was brought to the hospital at 2:30 o'clock a.m.
So, whatever errors that Dr. Estrada committed on the patient before 9:00 o'clock a.m. are
certainly the errors of Dr. Estrada and cannot be the mistake of Dr. Noe Espinola. His failure
to come to the hospital on time was due to fortuitous event.

On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not
incumbent upon him to call the attention of Dr. Estrada, Dra. Villaflor and also of Nurse
Dumlao on the alleged errors committed by them. Besides, as anesthesiologist, he has no
authority to control the actuations of Dr. Estrada and Dra. Villaflor. For the Court to assume
that there were errors being committed in the presence of Dr. Enriquez would be to dwell on
conjectures and speculations.

On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the
blood bank of the CMC. The Court cannot accept the theory of the plaintiffs that there was
delay in delivering the blood needed by the patient. It was testified, that in order that this
blood will be made available, a laboratory test has to be conducted to determine the type of
blood, cross matching and other matters consistent with medical science so, the lapse of 30
 minutes maybe considered a reasonable time to do all of these things, and not a delay as the
plaintiffs would want the Court to believe.

Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was
sued because of her alleged failure to notice the incompetence and negligence of Dr.
Estrada. However, there is no evidence to support such theory. No evidence was adduced to
show that Dra. Rosa Uy as a resident physician of Capitol Medical Center, had knowledge of
the mismanagement of the patient Corazon Nogales, and that notwithstanding such
knowledge, she tolerated the same to happen.

In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand
or participation in the selection or hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as
attending physician[s] of the deceased. In other words, the two (2) doctors were not
employees of the hospital and therefore the hospital did not have control over their
professional conduct. When Mrs. Nogales was brought to the hospital, it was an emergency
case and defendant CMC had no choice but to admit her. Such being the case, there is
therefore no legal ground to apply the provisions of Article 2176 and 2180 of the New Civil
Code referring to the vicarious liability of an employer for the negligence of its employees. If
ever in this case there is fault or negligence in the treatment of the deceased on the part of
the attending physicians who were employed by the family of the deceased, such civil liability
should be borne by the attending physicians under the principle of "respondeat superior".

WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr.

Estrada of Number 13 Pitimini St. San Francisco del Monte, Quezon City civilly liable to pay
plaintiffs: 1) By way of actual damages in the amount of P105,000.00; 2) By way of moral
damages in the amount of P700,000.00; 3) Attorney's fees in the amount of P100,000.00
and to pay the costs of suit.

For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the other
defendants, the complaint is hereby ordered dismissed. While the Court looks with disfavor
the filing of the present complaint against the other defendants by the herein plaintiffs, as in a
way it has caused them personal inconvenience and slight damage on their name and
reputation, the Court cannot accepts [sic] however, the theory of the remaining defendants
that plaintiffs were motivated in bad faith in the filing of this complaint. For this reason
defendants' counterclaims are hereby ordered dismissed.

SO ORDERED.18

Petitioners appealed the trial court's decision. Petitioners claimed that aside from Dr. Estrada, the
remaining respondents should be held equally liable for negligence. Petitioners pointed out the
extent of each respondent's alleged liability.

On 6 February 1998, the Court of Appeals affirmed the decision of the trial court.19 Petitioners filed a
motion for reconsideration which the Court of Appeals denied in its Resolution of 21 March 2000.20

Hence, this petition.

Meanwhile, petitioners filed a Manifestation dated 12 April 200221 stating that respondents Dr.
Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao "need no longer be notified of the petition
because they are absolutely not involved in the issue raised before the [Court], regarding the liability
of [CMC]."22 Petitioners stressed that the subject matter of this petition is the liability of CMC for the
negligence of Dr. Estrada.23
The Court issued a Resolution dated 9 September 200224 dispensing with the requirement to submit
the correct and present addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse
Dumlao. The Court stated that with the filing of petitioners' Manifestation, it should be understood
that they are claiming only against respondents CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who
have filed their respective comments. Petitioners are foregoing further claims against respondents
Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.

The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming the
decision of the Regional Trial Court. Accordingly, the decision of the Court of Appeals, affirming the
trial court's judgment, is already final as against Dr. Oscar Estrada.

Petitioners filed a motion for reconsideration25 of the Court's 9 September 2002 Resolution claiming
that Dr. Enriquez, Dr. Villaflor and Nurse Dumlao were notified of the petition at their counsels' last
known addresses. Petitioners reiterated their imputation of negligence on these respondents. The
Court denied petitioners' Motion for Reconsideration in its 18 February 2004 Resolution.26

The Court of Appeals' Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld the trial court's ruling. The Court of
Appeals rejected petitioners' view that the doctrine in Darling v. Charleston Community Memorial
Hospital27 applies to this case. According to the Court of Appeals, the present case differs from
the Darling case since Dr. Estrada is an independent contractor-physician whereas the Darling case
involved a physician and a nurse who were employees of the hospital.

Citing other American cases, the Court of Appeals further held that the mere fact that a hospital
permitted a physician to practice medicine and use its facilities is not sufficient to render the hospital
liable for the physician's negligence.28 A hospital is not responsible for the negligence of a physician
who is an independent contractor.29

The Court of Appeals found the cases of Davidson v. Conole30 and Campbell v. Emma Laing
Stevens Hospital31applicable to this case. Quoting Campbell, the Court of Appeals stated that where
there is no proof that defendant physician was an employee of defendant hospital or that defendant
hospital had reason to know that any acts of malpractice would take place, defendant hospital could
not be held liable for its failure to intervene in the relationship of physician-patient between
defendant physician and plaintiff.

On the liability of the other respondents, the Court of Appeals applied the "borrowed servant"
doctrine considering that Dr. Estrada was an independent contractor who was merely exercising
hospital privileges. This doctrine provides that once the surgeon enters the operating room and
takes charge of the proceedings, the acts or omissions of operating room personnel, and any
negligence associated with such acts or omissions, are imputable to the surgeon.32 While the
assisting physicians and nurses may be employed by the hospital, or engaged by the patient, they
normally become the temporary servants or agents of the surgeon in charge while the operation is in
progress, and liability may be imposed upon the surgeon for their negligent acts under the doctrine
of respondeat superior.33

The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physician
of his wife, any liability for malpractice must be Dr. Estrada's sole responsibility.

While it found the amount of damages fair and reasonable, the Court of Appeals held that no interest
could be imposed on unliquidated claims or damages.
 The Issue

Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr.
Estrada. The resolution of this issue rests, on the other hand, on the ascertainment of the
relationship between Dr. Estrada and CMC. The Court also believes that a determination of the
extent of liability of the other respondents is inevitable to finally and completely dispose of the
present controversy.

The Ruling of the Court

The petition is partly meritorious.

On the Liability of CMC

Dr. Estrada's negligence in handling the treatment and management of Corazon's condition which
ultimately resulted in Corazon's death is no longer in issue. Dr. Estrada did not appeal the decision
of the Court of Appeals which affirmed the ruling of the trial court finding Dr. Estrada solely liable for
damages. Accordingly, the finding of the trial court on Dr. Estrada's negligence is already final.

Petitioners maintain that CMC is vicariously liable for Dr. Estrada's negligence based on Article 2180
in relation to Article 2176 of the Civil Code. These provisions pertinently state:

Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.

Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.

Similarly, in the United States, a hospital which is the employer, master, or principal of a physician
employee, servant, or agent, may be held liable for the physician's negligence under the doctrine
of respondeat superior.34

In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit
patients at CMC, should be liable for Dr. Estrada's malpractice. Rogelio claims that he knew Dr.
Estrada as an accredited physician of CMC, though he discovered later that Dr. Estrada was not a
salaried employee of the CMC.35 Rogelio further claims that he was dealing with CMC, whose
primary concern was the treatment and management of his wife's condition. Dr. Estrada just
happened to be the specific person he talked to representing CMC.36 Moreover, the fact that CMC
made Rogelio sign a Consent on Admission and Admission Agreement37 and a Consent to
Operation printed on the letterhead of CMC indicates that CMC considered Dr. Estrada as a member
of its medical staff.

On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting
physician and that it admitted Corazon because her physical condition then was classified an
emergency obstetrics case.38

CMC alleges that Dr. Estrada is an independent contractor "for whose actuations CMC would be a
total stranger." CMC maintains that it had no control or supervision over Dr. Estrada in the exercise
of his medical profession.

The Court had the occasion to determine the relationship between a hospital and a consultant or
visiting physician and the liability of such hospital for that physician's negligence in Ramos v. Court
of Appeals,39 to wit:

In the first place, hospitals exercise significant control in the hiring and firing of consultants
and in the conduct of their work within the hospital premises. Doctors who apply for
"consultant" slots, visiting or attending, are required to submit proof of completion of
residency, their educational qualifications; generally, evidence of accreditation by the
appropriate board (diplomate), evidence of fellowship in most cases, and references. These
requirements are carefully scrutinized by members of the hospital administration or by a
review committee set up by the hospital who either accept or reject the application. This is
particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is normally

required to attend clinico-pathological conferences, conduct bedside rounds for clerks,
interns and residents, moderate grand rounds and patient audits and perform other tasks
and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or
for the privilege of admitting patients into the hospital. In addition to these, the physician's
performance as a specialist is generally evaluated by a peer review committee on the basis
of mortality and morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly falls short of the
minimum standards acceptable to the hospital or its peer review committee, is normally
politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically employees, a point
which respondent hospital asserts in denying all responsibility for the patient's
condition, the control exercised, the hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of the foregoing, we
rule that for the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending
and visiting physicians.This being the case, the question now arises as to whether or not
respondent hospital is solidarily liable with respondent doctors for petitioner's condition.

The basis for holding an employer solidarily responsible for the negligence of its employee is
found in Article 2180 of the Civil Code which considers a person accountable not only for his
own acts but also for those of others based on the former's responsibility under a relationship
of patria potestas. x x x40 (Emphasis supplied)
While the Court in Ramos did not expound on the control test, such test essentially determines
whether an employment relationship exists between a physician and a hospital based on the
exercise of control over the physician as to details. Specifically, the employer (or the hospital) must
have the right to control both the means and the details of the process by which the employee (or
the physician) is to accomplish his task.41

After a thorough examination of the voluminous records of this case, the Court finds no single
evidence pointing to CMC's exercise of control over Dr. Estrada's treatment and management of
Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she was under the
exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her
delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no
showing that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff
privileges at CMC, such fact alone did not make him an employee of CMC.42 CMC merely allowed
Dr. Estrada to use its facilities43 when Corazon was about to give birth, which CMC considered an
emergency. Considering these circumstances, Dr. Estrada is not an employee of CMC, but an
independent contractor.

The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada
is an independent contractor-physician.

In general, a hospital is not liable for the negligence of an independent contractor-physician. There
is, however, an exception to this principle. The hospital may be liable if the physician is the
"ostensible" agent of the hospital.44 This exception is also known as the "doctrine of apparent
authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the Illinois Supreme Court explained the
doctrine of apparent authority in this wise:

[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the
negligent acts of a physician providing care at the hospital, regardless of whether the
physician is an independent contractor, unless the patient knows, or should have known, that
the physician is an independent contractor. The elements of the action have been set out as
follows:

"For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show
that: (1) the hospital, or its agent, acted in a manner that would lead a reasonable person to
conclude that the individual who was alleged to be negligent was an employee or agent of
the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff
must also prove that the hospital had knowledge of and acquiesced in them; and (3) the
plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence."

The element of "holding out" on the part of the hospital does not require an express
representation by the hospital that the person alleged to be negligent is an employee.
Rather, the element is satisfied if the hospital holds itself out as a provider of emergency
room care without informing the patient that the care is provided by independent contractors.

The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies
upon the hospital to provide complete emergency room care, rather than upon a specific
physician.

The doctrine of apparent authority essentially involves two factors to determine the liability of an
independent-contractor physician.
The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry
whether the hospital acted in a manner which would lead a reasonable person to conclude that the
individual who was alleged to be negligent was an employee or agent of the hospital.47 In this
regard, the hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general and
implied.48

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil
Code provides that "[t]hrough estoppel, an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying thereon."
Estoppel rests on this rule: "Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to
falsify it."49

In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through
CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales
to believe that Dr. Estrada was an employee or agent of CMC. CMC cannot now repudiate such
authority.

First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr.
Estrada. Upon Dr. Estrada's request for Corazon's admission, CMC, through its personnel, readily
accommodated Corazon and updated Dr. Estrada of her condition.

Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazon's
admission and supposed hysterectomy, CMC asked Rogelio to sign release forms, the contents of
which reinforced Rogelio's belief that Dr. Estrada was a member of CMC's medical staff.50 The
Consent on Admission and Agreement explicitly provides:

KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/ guardian/or person in custody of Ma. Corazon,
and representing his/her family, of my own volition and free will, do consent and submit said
Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to as Physician) for cure, treatment,
retreatment, or emergency measures, that the Physician, personally or by and through
the Capitol Medical Center and/or its staff, may use, adapt, or employ such means,
forms or methods of cure, treatment, retreatment, or emergency measures as he may
see best and most expedient; that Ma. Corazon and I will comply with any and all
rules, regulations, directions, and instructions of the Physician, the Capitol Medical
Center and/or its staff; and, that I will not hold liable or responsible and hereby waive and
forever discharge and hold free the Physician, the Capitol Medical Center and/or its staff,
from any and all claims of whatever kind of nature, arising from directly or indirectly, or by
reason of said cure, treatment, or retreatment, or emergency measures or intervention of
said physician, the Capitol Medical Center and/or its staff.

x x x x51 (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, x x x, of my own volition and free will, do consent and submit said
CORAZON NOGALES to Hysterectomy, by the Surgical Staff and Anesthesiologists of
 Capitol Medical Center and/or whatever succeeding operations, treatment, or emergency
measures as may be necessary and most expedient; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold free the Surgeon, his
assistants, anesthesiologists, the Capitol Medical Center and/or its staff, from any and all
claims of whatever kind of nature, arising from directly or indirectly, or by reason of said
operation or operations, treatment, or emergency measures, or intervention of the Surgeon,
his assistants, anesthesiologists, the Capitol Medical Center and/or its staff.52 (Emphasis
supplied)

Without any indication in these consent forms that Dr. Estrada was an independent contractor-
physician, the Spouses Nogales could not have known that Dr. Estrada was an independent
contractor. Significantly, no one from CMC informed the Spouses Nogales that Dr. Estrada was an
independent contractor. On the contrary, Dr. Atencio, who was then a member of CMC Board of
Directors, testified that Dr. Estrada was part of CMC's surgical staff.53

Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr. Espinola, who was then the
Head of the Obstetrics and Gynecology Department of CMC, gave the impression that Dr. Estrada
as a member of CMC's medical staff was collaborating with other CMC-employed specialists in
treating Corazon.

The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry on
whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence.54

The records show that the Spouses Nogales relied upon a perceived employment relationship with
CMC in accepting Dr. Estrada's services. Rogelio testified that he and his wife specifically chose Dr.
Estrada to handle Corazon's delivery not only because of their friend's recommendation, but more
importantly because of Dr. Estrada's "connection with a reputable hospital, the [CMC]."55 In other
words, Dr. Estrada's relationship with CMC played a significant role in the Spouses Nogales'
decision in accepting Dr. Estrada's services as the obstetrician-gynecologist for Corazon's delivery.
Moreover, as earlier stated, there is no showing that before and during Corazon's confinement at
CMC, the Spouses Nogales knew or should have known that Dr. Estrada was not an employee of
CMC.

Further, the Spouses Nogales looked to CMC to provide the best medical care and support services
for Corazon's delivery. The Court notes that prior to Corazon's fourth pregnancy, she used to give
birth inside a clinic. Considering Corazon's age then, the Spouses Nogales decided to have their
fourth child delivered at CMC, which Rogelio regarded one of the best hospitals at the time.56 This is
precisely because the Spouses Nogales feared that Corazon might experience complications during
her delivery which would be better addressed and treated in a modern and big hospital such as
CMC. Moreover, Rogelio's consent in Corazon's hysterectomy to be performed by a different
physician, namely Dr. Espinola, is a clear indication of Rogelio's confidence in CMC's surgical staff.

CMC's defense that all it did was "to extend to [Corazon] its facilities" is untenable. The Court cannot
close its eyes to the reality that hospitals, such as CMC, are in the business of treatment. In this
regard, the Court agrees with the observation made by the Court of Appeals of North Carolina in
Diggs v. Novant Health, Inc.,57 to wit:

"The conception that the hospital does not undertake to treat the patient, does not undertake
to act through its doctors and nurses, but undertakes instead simply to procure them to act
upon their own responsibility, no longer reflects the fact. Present day hospitals, as their
manner of operation plainly demonstrates, do far more than furnish facilities for
 treatment. They regularly employ on a salary basis a large staff of physicians, nurses
and internes [sic], as well as administrative and manual workers, and they charge
patients for medical care and treatment, collecting for such services, if necessary, by
legal action. Certainly, the person who avails himself of 'hospital facilities' expects
that the hospital will attempt to cure him, not that its nurses or other employees will
act on their own responsibility." x x x (Emphasis supplied)

Likewise unconvincing is CMC's argument that petitioners are estopped from claiming damages
based on the Consent on Admission and Consent to Operation. Both release forms consist of two
parts. The first part gave CMC permission to administer to Corazon any form of recognized medical
treatment which the CMC medical staff deemed advisable. The second part of the documents, which
may properly be described as the releasing part, releases CMC and its employees "from any and all
claims" arising from or by reason of the treatment and operation.

The documents do not expressly release CMC from liability for injury to Corazon due to negligence
during her treatment or operation. Neither do the consent forms expressly exempt CMC from liability
for Corazon's death due to negligence during such treatment or operation. Such release forms,
being in the nature of contracts of adhesion, are construed strictly against hospitals. Besides, a
blanket release in favor of hospitals "from any and all claims," which includes claims due to bad faith
or gross negligence, would be contrary to public policy and thus void.

Even simple negligence is not subject to blanket release in favor of establishments like hospitals but
may only mitigate liability depending on the circumstances.58 When a person needing urgent medical
attention rushes to a hospital, he cannot bargain on equal footing with the hospital on the terms of
admission and operation. Such a person is literally at the mercy of the hospital. There can be no
clearer example of a contract of adhesion than one arising from such a dire situation. Thus, the
release forms of CMC cannot relieve CMC from liability for the negligent medical treatment of
Corazon.

On the Liability of the Other Respondents

Despite this Court's pronouncement in its 9 September 200259 Resolution that the filing of petitioners'
Manifestation confined petitioners' claim only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy,
who have filed their comments, the Court deems it proper to resolve the individual liability of the
remaining respondents to put an end finally to this more than two-decade old controversy.

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazon's bleeding and to
suggest the correct remedy to Dr. Estrada.60 Petitioners assert that it was Dr. Villaflor's duty to
correct the error of Nurse Dumlao in the administration of hemacel.

The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesium
sulfate. However, this was after informing Dr. Estrada that Corazon was no longer in convulsion and
that her blood pressure went down to a dangerous level.61 At that moment, Dr. Estrada instructed Dr.
Villaflor to reduce the dosage of magnesium sulfate from 10 to 2.5 grams. Since petitioners did not
dispute Dr. Villaflor's allegation, Dr. Villaflor's defense remains uncontroverted. Dr. Villaflor's act of
administering a lower dosage of magnesium sulfate was not out of her own volition or was in
contravention of Dr. Estrada's order.

b) Dr. Rosa Uy
Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada on
the incorrect dosage of magnesium sulfate administered by Dr. Villaflor; (2) to take corrective
measures; and (3) to correct Nurse Dumlao's wrong method of hemacel administration.

The Court believes Dr. Uy's claim that as a second year resident physician then at CMC, she was
merely authorized to take the clinical history and physical examination of Corazon.62 However, that
routine internal examination did not ipso facto make Dr. Uy liable for the errors committed by Dr.
Estrada. Further, petitioners' imputation of negligence rests on their baseless assumption that Dr. Uy
was present at the delivery room. Nothing shows that Dr. Uy participated in delivering Corazon's
baby. Further, it is unexpected from Dr. Uy, a mere resident physician at that time, to call the
attention of a more experienced specialist, if ever she was present at the delivery room.

c) Dr. Joel Enriquez

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor, and
Nurse Dumlao about their errors.63 Petitioners insist that Dr. Enriquez should have taken, or at least
suggested, corrective measures to rectify such errors.

The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise is definitely
not obstetrics and gynecology. As such, Dr. Enriquez was not expected to correct Dr. Estrada's
errors. Besides, there was no evidence of Dr. Enriquez's knowledge of any error committed by Dr.
Estrada and his failure to act upon such observation.

d) Dr. Perpetua Lacson

Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazon
needed.64 Petitioners claim that Dr. Lacson was remiss in her duty of supervising the blood bank
staff.

As found by the trial court, there was no unreasonable delay in the delivery of blood from the time of
the request until the transfusion to Corazon. Dr. Lacson competently explained the procedure before
blood could be given to the patient.65 Taking into account the bleeding time, clotting time and cross-
matching, Dr. Lacson stated that it would take approximately 45-60 minutes before blood could be
ready for transfusion.66 Further, no evidence exists that Dr. Lacson neglected her duties as head of
the blood bank.

e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy without
determining the underlying cause of Corazon's bleeding. Dr. Espinola should have first considered
the possibility of cervical injury, and advised a thorough examination of the cervix, instead of
believing outright Dr. Estrada's diagnosis that the cause of bleeding was uterine atony.

Dr. Espinola's order to do hysterectomy which was based on the information he received by phone is
not negligence. The Court agrees with the trial court's observation that Dr. Espinola, upon hearing
such information about Corazon's condition, believed in good faith that hysterectomy was the correct
remedy. At any rate, the hysterectomy did not push through because upon Dr. Espinola's arrival, it
was already too late. At the time, Corazon was practically dead.

f) Nurse J. Dumlao
In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals, Fourth Circuit, held that to recover, a
patient complaining of injuries allegedly resulting when the nurse negligently injected medicine to
him intravenously instead of intramuscularly had to show that (1) an intravenous injection constituted
a lack of reasonable and ordinary care; (2) the nurse injected medicine intravenously; and (3) such
injection was the proximate cause of his injury.

In the present case, there is no evidence of Nurse Dumlao's alleged failure to follow Dr. Estrada's
specific instructions. Even assuming Nurse Dumlao defied Dr. Estrada's order, there is no showing
that side-drip administration of hemacel proximately caused Corazon's death. No evidence linking
Corazon's death and the alleged wrongful hemacel administration was introduced. Therefore, there
is no basis to hold Nurse Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed under Article 2211 of the Civil Code, which
states that in crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be
adjudicated in the discretion of the court.68

WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent Capitol
Medical Center vicariously liable for the negligence of Dr. Oscar Estrada. The amounts of P105,000
as actual damages and P700,000 as moral damages should each earn legal interest at the rate of
six percent (6%) per annum computed from the date of the judgment of the trial court. The Court
affirms the rest of the Decision dated 6 February 1998 and Resolution dated 21 March 2000 of the
Court of Appeals in CA-G.R. CV No. 45641.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio Morales, Tinga, and Velasco, Jr., JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 146881 February 5, 2007

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

vs.
DR. DEAN N. CLIMACO, Respondent.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July
7, 2000, and its Resolution promulgated on January 30, 2001, denying petitioner’s motion for
reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that
respondent was illegally dismissed.

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

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

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

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

2. The compensation to be paid by the company for the services of the DOCTOR is hereby
fixed at PESOS: Three Thousand Eight Hundred (₱3,800.00) per month. The DOCTOR may
charge professional fee for hospital services rendered in line with his specialization. All
payments in connection with the Retainer Agreement shall be subject to a withholding tax of
ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax
System. In the event the withholding tax rate shall be increased or decreased by appropriate
laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to
such laws.

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

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

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

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

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

A. OBJECTIVE

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

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

diseases.

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

3. To encourage employees [to] maintain good personal health by setting up employee

orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first
aid training, accident prevention and personnel safety.

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

5. To give family planning motivations.

B. COVERAGE

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

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities
such as group health education program, safety and first aid classes, organization of health
and safety committees.
 3. Periodically, this program will be reviewed and adjusted based on employees’ needs.

C. ACTIVITIES

1. Annual Physical Examination.

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

and injuries.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

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

7. Give family planning motivations.

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

9. Visiting and follow-up treatment of Company employees and their dependents confined in
the hospital.

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

It is noted that as early as September 1992, petitioner was already making inquiries regarding his
status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting
President and Chairperson of the Committee on Membership, Philippine College of Occupational
Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils.,
Bacolod City, stating that respondent should be considered as a regular part-time physician, having
served the company continuously for four (4) years. He likewise stated that respondent must receive
all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made another inquiry
directed to the Assistant Regional Director, Bacolod City District Office of the Department of Labor
and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he
believed that an employer-employee relationship existed between petitioner and respondent based
on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-
fold" test. However, Director Ancheta emphasized that the existence of employer-employee
relationship is a question of fact. Hence, termination disputes or money claims arising from
employer-employee relations exceeding ₱5,000 may be filed with the National Labor Relations
Commission (NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R.
Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers
Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of
respondent partake of the nature of work of a regular company doctor and that he was, therefore,
subject to social security coverage.

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

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

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

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

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

SO ORDERED.11

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

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

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

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on
August 7, 1998.

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

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

The Court of Appeals held:

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

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

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

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

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

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

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

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

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

To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is
dictated, as in this case where the objectives and activities were laid out, and the specific time for
performing them was fixed by the controlling party.15

Moreover, the Court of Appeals declared that respondent should be classified as a regular employee
having rendered six years of service as plant physician by virtue of several renewed retainer
agreements. It underscored the provision in Article 28016 of the Labor Code stating that "any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed,
and his employment shall continue while such activity exists." Further, it held that the termination of
respondent’s services without any just or authorized cause constituted illegal dismissal.

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

The dispositive portion of the Decision reads:

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

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

2. Pay petitioner moral damages in the amount of ₱50,000.00.

3. Pay petitioner exemplary damages in the amount of ₱50,000.00.

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

SO ORDERED.17

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

In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner
company noted that its Decision failed to mention whether respondent was a full-time or part-time
regular employee. It also questioned how the benefits under their Collective Bargaining Agreement
which the Court awarded to respondent could be given to him considering that such benefits were
given only to regular employees who render a full day’s work of not less that eight hours. It was
admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be
accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation
under the CBA." It sustained its decision on all other matters sought to be reconsidered.

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

The issues are:

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

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

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

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF
THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND
DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO
THE RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES.

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF
THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE
WORK OF THE RESPONDENT.

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

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

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

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

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

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

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

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF
THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY
DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship
between the parties. The resolution of the main issue will determine whether the termination of
respondent’s employment is illegal.

The Court, in determining the existence of an employer-employee relationship, has invariably

adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-
called "control test," considered to be the most important element.18

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

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

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

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

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent
was on call during emergency cases did not make him a regular employee. He explained, thus:

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

In addition, the Court finds that the schedule of work and the requirement to be on call for
emergency cases do not amount to such control, but are necessary incidents to the Retainership
Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to terminate
their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole
power of dismissal or termination.

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

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

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

No costs.

SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chairperson
Chief Justice

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Asscociate Justice
Working Chairperson

CANCIO C. GARCIA
Associate Justice

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 176484 November 25, 2008

CALAMBA MEDICAL CENTER, INC., petitioner

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

DECISION

CARPIO MORALES, J.:

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

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

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

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

As a Licensed Resident Physician employed in Calamba Medical Center since several

years ago, the hospital management has committed upon you utmost confidence in the
performance of duties pursuant thereto. This is the reason why you were awarded the privilege to
practice in the hospital and were entrusted hospital functions to serve the interest of both the
hospital and our patients using your capability for independent judgment.

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

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

Pending investigation of your case, you are hereby placed under 30-days [sic] preventive
suspension effective upon receipt hereof.7 (Emphasis, italics and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident,
any work schedule after sending her husband Dr. Lanzanas the memorandum, 8 nor inform her the reason
therefor, albeit she was later informed by the Human Resource Department (HRD) officer that that was
part of petitioner's cost-cutting measures.9

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

On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to unresolved
grievances over terms and conditions of employment.12

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension13 before the National Labor
Relations Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
complaint for illegal dismissal.14

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

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

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

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

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

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

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

By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for
want of jurisdiction upon a finding that there was no employer-employee relationship between the parties,
the fourth requisite or the "control test" in the determination of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as
follows:

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

SO ORDERED.21

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

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

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

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

The appellate court thus declared that respondents were illegally dismissed.

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

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

The fallo of the appellate court's decision reads:

WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision
dated June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:
 WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and
order dated September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are
AFFIRMED with the MODIFICATION that the moral and exemplary damages are
reduced to P100,000.00 each and P50,000.00 each, respectively.

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

Preliminarily, the present petition calls for a determination of whether there exists an employer-employee
relationship27between petitioner and the spouses-respondents.

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

This Court is unimpressed.

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

Where a person who works for another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work, and is compensated according to the result of his efforts and not the
amount thereof, the element of control is absent.30

As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner

through its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and
which were strictly to be observed under pain of administrative sanctions.

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

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

"Wage" paid to any employee shall mean the remuneration or earning, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. x x x (Emphasis and underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics,32 the provisions of which
cover administrative and disciplinary measures on negligence of duties, personnel conduct and behavior,
and offenses against persons, property and the hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of
respondents, namely, the identification cards it issued them, the payslips 33 and BIR W-2 (now 2316)
Forms which reflect their status as employees, and the classification as "salary" of their remuneration.
Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program. It bears noting at this
juncture that mandatory coverage under the SSS Law34 is premised on the existence of an employer-
employee relationship,35 except in cases of compulsory coverage of the self-employed. It would be
preposterous for an employer to report certain persons as employees and pay their SSS premiums as
well as their wages if they are not its employees.36

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

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

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

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

xxxx

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

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

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

xxxx

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

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

xxxx
 (g) x x x x

x x x x. In labor disputes adversely affecting the continued operation of such hospitals,

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

x x x x (Emphasis and underscoring supplied)

An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of

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

Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in
order to justify immediate dismissal in a "national interest" case. As the appellate court as well as the
NLRC observed, however, there is nothing in the records that would bear out Dr. Lanzanas' actual
participation in the strike. And the medical director's Memorandum 41 of April 22, 1998 contains nothing
more than a general directive to all union officers and members to return-to-work. Mere membership in a
labor union does not ipso facto mean participation in a strike.

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

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

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

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or
authorized cause and without observance of due process. In fact, petitioner never proferred any valid
cause for her dismissal except its view that "her marriage to [Dr. Lanzanas] has given rise to the
presumption that her sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared that he
was going to boycott the scheduling of their workload by the medical doctor, he was presumed to be
speaking for himself [and] for his wife Merceditha."46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike
remained just that. Its termination of her employment on the basis of her conjugal relationship is not
analogous to

any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no matter how
strong, cannot substitute for factual findings carefully established through orderly procedure. 48

The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr.
Merceditha's case. There is thus no gainsaying that her dismissal was both substantively and
procedurally infirm.

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

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

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

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

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

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

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

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871

is AFFIRMED with MODIFICATION in that the award by the National Labor Relations Commission of
10% of the total judgment award as attorney's fees is reinstated. In all other aspects, the decision of the
appellate court is affirmed.

SO ORDERED.
 CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

DANTE O. TINGA PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

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

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178827 March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,

vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, Respondents.

DECISION

CARPIO MORALES, J.:

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

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional
Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint1 for regularization, underpayment of
wages, non-payment of holiday pay, night shift differential and 13th month pay differential against
respondents, claiming that they are regular employees of Shangri-la. The case was docketed as
RAB Case No. 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom
it retained via Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor Code, as
amended.

Respondent doctor for her part claimed that petitioners were already working for the previous
retained physicians of Shangri-la before she was retained by Shangri-la; and that she maintained
petitioners’ services upon their request.

By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular
employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages and benefits
due them as regular employees from the time their services were engaged.

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

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with
respect to the non-award to them of some of the benefits they were claiming.
By Decision4 dated March 31, 2005, the NLRC granted Shangri-la’s and respondent doctor’s appeal
and dismissed petitioners’ complaint for lack of merit, it finding that no employer-employee
relationship exists between petitioner and Shangri-la. In so deciding, the NLRC held that the Arbiter
erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as what is required under
Article 157 is that the employer should provide the services of medical personnel to its employees,
but nowhere in said article is a provision that nurses are required to be employed; that contrary to
the finding of the Arbiter, even if Article 280 states that if a worker performs work usually necessary
or desirable in the business of the employer, he cannot be automatically deemed a regular
employee; and that the MOA amply shows that respondent doctor was in fact engaged by Shangri-la
on a retainer basis, under which she could hire her own nurses and other clinic personnel.

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

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of
petitioners’ wages were recommended by Shangri-la’s HRD did not prove that it was Shangri-la
which pays their wages. It thus credited respondent doctor’s explanation that the recommendations
for payment were based on the billings she prepared for salaries of additional nurses during Shangri-
la’s peak months of operation, in accordance with the retainership agreement, the guests’ payments
for medical services having been paid directly to Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals which, by Decision5 of May 22, 2007,
affirmed the NLRC Decision that no employer-employee relationship exists between Shangri-la and
petitioners. The appellate court concluded that all aspects of the employment of petitioners being
under the supervision and control of respondent doctor and since Shangri-la is not principally
engaged in the business of providing medical or healthcare services, petitioners could not be
regarded as regular employees of Shangri-la.

Petitioners’ motion for reconsideration having been denied by Resolution6 of July 10, 2007, they
interposed the present recourse.

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

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

Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she
does in substantial capital, the clinic having been set-up and already operational when she took over
as retained physician; that respondent doctor has no control over how the clinic is being run, as
shown by the different orders issued by officers of Shangri-la forbidding her from receiving cash
payments and several purchase orders for medicines and supplies which were coursed thru
Shangri-la’s Purchasing Manager, circumstances indubitably showing that she is not an independent
contractor but a mere agent of Shangri-la.
In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the
petition for being inadequate. On the merits, it prays for the disallowance of the petition, contending
that it raises factual issues, such as the validity of the MOA, which were never raised during the
proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article 157 of the
Labor Code does not make it mandatory for a covered establishment to employ health personnel;
that the services of nurses is not germane nor indispensable to its operations; and that respondent
doctor is a legitimate individual independent contractor who has the power to hire, fire and supervise
the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art.
280 and the provisions on permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners’ postulation, Art. 157 does not require the
engagement of full-time nurses as regular employees of a company employing not less than
50 workers. Thus, the Article provides:

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

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

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

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

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

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to
"furnish" its employees with the services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic which means that it should provide or make available such medical
and allied services to its employees, not necessarily to hire or employ a service provider. As held in
Philippine Global Communications vs. De Vera:8

x x x while it is true that the provision requires employers to engage the services of medical
practitioners in certain establishments depending on the number of their employees, nothing is there
in the law which says that medical practitioners so engaged be actually hired as employees, adding
that the law, as written, only requires the employer "to retain", not employ, a part-time physician who
needed to stay in the premises of the non-hazardous workplace for two (2) hours. (Emphasis and
underscoring supplied) 1avv phi 1

The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the
person engaged to provide the services, for Article 157 must not be read alongside Art. 2809 in order
to vest employer-employee relationship on the employer and the person so engaged. So De Vera
teaches:

x x x For, we take it that any agreement may provide that one party shall render services for and in
behalf of another, no matter how necessary for the latter’s business, even without being hired as
an employee. This set-up is precisely true in the case of an independent contractorship as well as in
an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not
the yardstick for determining the existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e., regular and casual. x x x10 (Emphasis
and underscoring supplied)

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

As to whether respondent doctor can be considered a legitimate independent contractor, the

pertinent sections of DOLE Department Order No. 10, series of 1997, illuminate:

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

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

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

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

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

(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
 (c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs of the employer and
the rights of the workers involved. In such case, he may prescribe conditions and restrictions
to insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by

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

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

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

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS
contributions and other benefits of the staff13; group life, group personal accident insurance and
life/death insurance14 for the staff with minimum benefit payable at 12 times the employee’s last
drawn salary, as well as value added taxes and withholding taxes, sourced from her ₱60,000.00
monthly retainer fee and 70% share of the service charges from Shangri-la’s guests who avail of the
clinic services. It is unlikely that respondent doctor would report petitioners as workers, pay their
SSS premium as well as their wages if they were not indeed her employees.15

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a
document, "Clinic Policies and Employee Manual"16 claimed to have been prepared by respondent
doctor exists, to which petitioners gave their conformity17 and in which they acknowledged their co-
terminus employment status. It is thus presumed that said document, and not the employee manual
being followed by Shangri-la’s regular workers, governs how they perform their respective tasks and
responsibilities.

Contrary to petitioners’ contention, the various office directives issued by Shangri-la’s officers do not
imply that it is Shangri-la’s management and not respondent doctor who exercises control over them
or that Shangri-la has control over how the doctor and the nurses perform their work. The
letter18 addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving
instructions regarding the replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter19 dated May 17, 2004 from Shangri-la’s Assistant
Financial Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments from the
resort’s guests is a matter of financial policy in order to ensure proper sharing of the proceeds,
considering that Shangri-la and respondent doctor share in the guests’ payments for medical
services rendered. In fine, as Shangri-la does not control how the work should be performed by
petitioners, it is not petitioners’ employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22,
2007 and the Resolution dated July 10, 2007 are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
ANTONIO EDUARDO B. NACHURA*
Associate Justice
Associate Justice
Chairperson

ARTURO D. BRION DIOSDADO M. PERALTA**

Associate Justice Associate Justice

ATTESTATION

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

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 167622 November 7, 2008

GREGORIO V. TONGKO, petitioner

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

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life
Insurance Co. (Phils.), Inc. v. National Labor Relations Commission and Gregorio V. Tongko. The
assailed decision set aside the Decision dated September 27, 2004 and Resolution dated December 16,
2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-04.

The Facts

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
insurance business. Renato A. Vergel De Dios was, during the period material, its President and Chief
Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977
by virtue of a Career Agent's Agreement2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

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

xxxx

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

xxxx

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

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

In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he
became a Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife,
consisting of commissions, persistency income, and management overrides, may be summarized as
follows:

January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.003

The problem started sometime in 2001, when Manulife instituted manpower development programs in the
regional sales management level. Relative thereto, De Dios addressed a letter dated November 6,
20014 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De
Dios stated:

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

xxxx

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

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

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In
those subsequent meetings you reiterated certain views, the validity of which we challenged and
subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North
Managers may be a bit confused as to the directions the company was taking. For this reason, I
sought a meeting with everyone in your management team, including you, to clear the air, so to
speak.

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

xxxx

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

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

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

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

xxxx

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

xxxx

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

xxxx

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

1. You will hire at your expense a competent assistant who can unload you of much of
the routine tasks which can be easily delegated. This assistant should be so chosen as to
complement your skills and help you in the areas where you feel "may not be your cup of
tea".
 You have stated, if not implied, that your work as Regional Manager may be too taxing
for you and for your health. The above could solve this problem.

xxxx

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

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

xxxx

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

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, 5 terminating Tongko's
services, thus:

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

xxxx

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

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal
dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita
V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios
gave him specific directives on how to manage his area of responsibility in the latter's letter dated
November 6, 2001. He further claimed that Manulife exercised control over him as follows:

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

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

Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He
also cited the Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003, 9 in which it alleged
that Tongko is not its employee, and that it did not exercise "control" over him. Thus, Manulife claimed
that the NLRC has no jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an
employer-employee relationship. Padolina found that applying the four-fold test in determining the
existence of an employer-employee relationship, none was found in the instant case. The dispositive
portion thereof states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant

complaint for lack of jurisdiction, there being no employer-employee relationship between the
parties.

SO ORDERED.

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

The NLRC's First Division, while finding an employer-employee relationship between Manulife and
Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife
exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios and wrote:

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

More importantly, the letter contains an abundance of directives or orders that are intended to
directly affect complainant's authority and manner of carrying out his functions as Regional Sales
Manager.10 x x x

Additionally, the First Division also ruled that:

Further evidence of [respondents'] control over complainant can be found in the records of the
case. [These] are the different codes of conduct such as the Agent Code of Conduct, the Manulife
Financial Code of Conduct, and the Manulife Financial Code of Conduct Agreement, which serve
as the foundations of the power of control wielded by respondents over complainant that is further
manifested in the different administrative and other tasks that he is required to perform. These
codes of conduct corroborate and reinforce the display of respondents' power of control in their
06 November 2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:

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

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

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

xxxx

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

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First
Division in a Resolution dated December 16, 2004.12

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

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

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

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

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the
Decision dated September 27, 2004 and Resolution dated December 16, 2004 in finding that
there is no employer-employee relationship between petitioner and respondent.

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the
Decision dated September 27, 2004 and Resolution dated December 16, 2004 which found
petitioner to have been illegally dismissed and ordered his reinstatement with payment of
backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and
Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?

The Court's Ruling

This petition is meritorious.

Tongko Was An Employee of Manulife

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

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

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in

dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee's conduct. It is the so-called "control test" which constitutes the most
important index of the existence of the employer-employee relationship that is, whether the
employer controls or has reserved the right to control the employee not only as to the result of the
work to be done but also as to the means and methods by which the same is to be accomplished.
Stated otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but also the
means to be used in reaching such end.14

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

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

1. You will hire at your expense a competent assistant who can unload you of much of the routine
tasks which can be easily delegated. x x x

xxxx

This assistant should be hired immediately.

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

xxxx
 I have decided to make this change so as to reduce your span of control and allow you to
concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit
and the rest of the Sales Managers in Metro North. x x x

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

4. I have been straightforward in this my letter and I know that we can continue to work
together… but it will have to be on my terms. Anything else is unacceptable!

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

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

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

The CA, however, considered the finding of the existence of an employer-employee relationship by the
NLRC as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA
did not concur with the NLRC's ruling that the elements of control as pointed out by the NLRC are
"sufficient indicia of control that negates independent contractorship and conclusively establish an
employer-employee relationship between"15 Tongko and Manulife. The CA ruled that there is no
employer-employee relationship between Tongko and Manulife.

An impasse appears to have been reached between the CA and the NLRC on the sole issue of control
over an employee's conduct. It bears clarifying that such control not only applies to the work or goal to be
done but also to the means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting
Corporation, we explained that not all forms of control would establish an employer-employee
relationship, to wit:

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

Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used
to achieve it.17(Emphasis supplied.)

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

It is, therefore, usual and expected for an insurance company to promulgate a set of rules to
guide its commission agents in selling its policies that they may not run afoul of the law and what
it requires or prohibits. Of such a character are the rules which prescribe the qualifications of
persons who may be insured, subject insurance applications to processing and approval by the
 Company, and also reserve to the Company the determination of the premiums to be paid and
the schedules of payment. None of these really invades the agent's contractual prerogative to
adopt his own selling methods or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee relationship between him and the
company.18

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

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

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

[I]t cannot be gain said that Grepalife had control over private respondents' performance as well
as the result of their efforts. A cursory reading of their respective functions as enumerated in
their contracts reveals that the company practically dictates the manner by which their
jobs are to be carried out. For instance, the District Manager must properly account, record and
document the company's funds spot-check and audit the work of the zone supervisors, conserve
the company's business in the district through ‘reinstatements', follow up the submission of
weekly remittance reports of the debit agents and zone supervisors, preserve company property
in good condition, train understudies for the position of district manager, and maintain his quota of
sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must
direct and supervise the sales activities of the debit agents under him, conserve company
property through "reinstatements", undertake and discharge the functions of absentee debit
agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.20 (Emphasis supplied.)

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

In the instant case, Manulife had the power of control over Tongko that would make him its employee.
Several factors contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:

The Agent hereby agrees to comply with all regulations and requirements of the Company as
herein provided as well as maintain a standard of knowledge and competency in the sale of the
Company's products which satisfies those set by the Company and sufficiently meets the volume
of new business required of Production Club membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with
the regulations and requirements of the company; (2) maintenance of a level of knowledge of the
company's products that is satisfactory to the company; and (3) compliance with a quota of new
businesses.

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

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

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

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

In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales

Manager ("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have
the following functions:

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 23 that:

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

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

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of
other commission agents;

d. Achieve agreed production objectives in terms of Net Annualized Commissions and

Case Count and recruitment goals; and

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

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28,
200324 that:

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

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

a. To render or recommend prospective agents to be licensed, trained and contracted to

sell Manulife products and who will be part of my Unit;

b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly
selling activities, making sure that their respective sales targets are met;

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

d. To assist my agents with their sales activities by way of joint fieldwork, consultations
and one-on- one evaluation and analysis of particular accounts.

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

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

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

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

A comparison of the above functions and those contained in the Agreement with those cited in Great
Pacific Life Assurance Corporation25 reveals a striking similarity that would more than support a similar
finding as in that case. Thus, there was an employer-employee relationship between the parties.

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

In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major
agency-led distribution company whereby greater agency recruitment is required of the managers,
including Tongko. De Dios made it clear that agent recruitment has become the primary means by which
Manulife intends to sell more policies. More importantly, it is Tongko's alleged failure to follow this
principle of recruitment that led to the termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.

Tongko Was Illegally Dismissed

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

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

As private respondent has patently failed to perform a very fundamental duty, and that is to yield
obedience to all reasonable rules, orders and instructions of the Company, as well as gross
failure to reach at least minimum quota, the termination of his engagement from Manulife is highly
warranted and therefore, there is no illegal dismissal to speak of.

It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single iota
of evidence to support its claims. Manulife did not even point out which order or rule that Tongko
disobeyed. More importantly, Manulife did not point out the specific acts that Tongko was guilty of that
would constitute gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's
alleged "laggard performance," without substantiating such claim, and equated the same to disobedience
and neglect of duty.

We cannot, therefore, accept Manulife's position.

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

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

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

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

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

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

The Labor Code provides that an employer may terminate the services of an employee for just
cause and this must be supported by substantial evidence. The settled rule in administrative and
quasi-judicial proceedings is that proof beyond reasonable doubt is not required in determining
the legality of an employer's dismissal of an employee, and not even a preponderance of
evidence is necessary as substantial evidence is considered sufficient. Substantial evidence is
more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably
opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed to
identify the specific acts by which Tongko's employment was terminated much less support the same with
substantial evidence. To repeat, mere conjectures cannot work to deprive employees of their means of
livelihood. Thus, it must be concluded that Tongko was illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being its
employee is not entitled to such notices. Since we have ruled that Tongko is its employee, however,
Manulife clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal
dismissal. In Quebec, Sr., we also stated:

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

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as
indemnity in the form of nominal damages.31

Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by
the NLRC by claiming that Songco v. National Labor Relations Commission32 is inapplicable to the instant
case, considering that Songco was dismissed on the ground of retrenchment.

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

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

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

In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed
employee shall be entitled to backwages and separation pay, if reinstatement is no longer viable:

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

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

WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-
G.R. SP No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the
NLRC is REINSTATED with the following modifications:

Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from
January 2, 2002 up to the finality of this Decision;

(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001
amounting to PhP 12,435,474.24;

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

(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and
separation pay.

Costs against respondent Manulife.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

DISSENTING OPINION
LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

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

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice

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

SECOND DIVISION

G.R. No. 167622 November 7, 2008

GREGORIO V. TONGKO, petitioner

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

DISSENTING OPINION

QUISUMBING, J.:

With due respect, I cannot concur in the majority opinion. I vote to deny the petition and affirm the
decision of the Court of Appeals holding that the National Labor Relations Commission had no jurisdiction
over this case due to the absence of an employer-employee relationship between petitioner Gregorio V.
Tongko and respondent Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife).

The majority opinion states that Manulife had the power of control over petitioner that would make him its
employee. It advances several reasons that do not persuade me.

In my view, two points require stressing: (1) Manulife has no power of control over petitioner in the pursuit
of his own business; and (2) petitioner is compensated through sales agency commissions and not
through fixed wages or salary.
Time and again, the Court has indeed applied the "four-fold" test in determining the existence of an
employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most
important element.1

The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of
control.2 The company's codes of conduct such as the Agent Code of Conduct, Manulife Financial Code
of Conduct, and Manulife Financial Code of Conduct Agreement cannot be justifiably said to establish an
employer-employee relationship. These merely served as general guidelines for agents in selling Manulife
policies in keeping with ethical principles governing the insurance business and in accordance with the
rules promulgated by the Insurance Commissioner for proper regulation of the industry. None of these
rules and regulations negated petitioner's contractual prerogative to adopt his own selling methods or to
sell insurance at his own time and convenience.4 Nor did it overturn company or industry practices.
Petitioner made his own strategy on how to generate more insurance sales. In fact, he derived his income
from the agents under him through their sales volume. He was not bound to observe any work schedule
or any working hours. He had freedom to adopt his own methods in selling insurance policies, so long as
he and his recruited agents meet their quotas.

So too, petitioner's administrative functions are not indicative of control. Such functions which consisted of
recruitment of new agents, training, and supervision were exercised over other sales agents and not
employees of Manulife. Such functions relate to the insurance agents' work in pursuit of their agency's
contractual obligations.

Neither can the Letter dated November 6, 20014 addressed by Renato A. Vergel De Dios, Manulife's
President and Chief Executive Officer, to petitioner regarding greater agency recruitment be considered
as control. While the letter reminded petitioner that his Region was the lowest performer in terms of
agency recruitment, it did not dictate how petitioner would achieve this goal. Contrary to the finding of the
main opinion,5 the letter did not contain "an abundance of directives or orders" other than suggesting to
petitioner to hire a competent assistant to whom he could unload routine tasks. It is obvious that said
assistant would be paid by petitioner as part of his agency's staff, not of the company's office personnel.

Clearly, following industry practice, petitioner had never been an employee of Manulife. He is an
independent contractor as stated in the Career Agent's Agreement. Although he was eventually promoted
as Regional Sales Manager, the Agreement subsisted since he still received commissions from insurance
he directly sold to third persons aside from the override commissions he received from his own recruited
agents' sales. The Agreement was never changed or altered by the parties.

Anent petitioner's compensation, he was paid through commissions from premium payments instead of
fixed wages or salary. Petitioner's commissions varied, based on the computed premiums paid in full and
actually received on policies obtained through his agency. His summary of commission, persistency, and
management overrides constituted the income earned 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, petitioner's 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 petitioner's 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 employee's salary in the computation
of separation pay. Here, there exists no employer-employee relationship. A contrary ruling will reverse an
industry practice long accepted in the insurance business. Such reversal could prove detrimental to the
insurance public.

To reiterate, the present case does not involve an employer-employee relationship which warrants the
application of the Labor Code provisions; rather, it calls for the implementation of the Career Agent's
Agreement that should be construed in an ordinary civil action.

I vote to DENY the petition.

LEONARDO A. QUISUMBING
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179428 January 26, 2011

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, and LORIANO D. DALUYON, Petitioners,

vs.
AVELINO REGUALOS, Respondent.

DECISION

NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in their boundary obligations
reasonable? The Court of Appeals (CA) answered the question in the affirmative in its
Decision1 dated December 14, 2006 and Resolution dated July 16, 2007. In this petition for review
on certiorari, we take a second look at the issue and determine whether the situation at bar merits
the relaxation of the application of the said policy.

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano D. Daluyon
(Daluyon) were employed by respondent Avelino Regualos under a boundary agreement, as drivers
of his jeepneys. In November 2001, they filed separate complaints2 for illegal dismissal against
respondent who barred them from driving the vehicles due to deficiencies in their boundary
payments.

Caong was hired by respondent in September 1998 and became a permanent driver sometime in
2000. In July 2001, he was assigned a brand- new jeepney for a boundary fee of ₱550.00 per day.
He was suspended on October 9-15, 2001 for failure to remit the full amount of the boundary.
Consequently, he filed a complaint for illegal suspension. Upon expiration of the suspension period,
he was readmitted by respondent, but he was reassigned to an older jeepney for a boundary fee of
₱500.00 per day. He claimed that, on November 9, 2001, due to the scarcity of passengers, he was
only able to remit ₱400.00 to respondent. On November 11, 2001, he returned to work after his rest
day, but respondent barred him from driving because of the deficiency in the boundary payment. He
pleaded with respondent but to no avail.3

Tresquio was employed by respondent as driver in August 1996. He became a permanent driver in
1997. In 1998, he was assigned to drive a new jeepney for a boundary fee of ₱500.00 per day. On
November 6, 2001, due to the scarcity of passengers, he was only able to remit ₱450.00. When he
returned to work on November 8, 2001 after his rest day, he was barred by respondent because of
the deficiency of ₱50.00. He pleaded with respondent but the latter was adamant.4

On the other hand, Daluyon started working for respondent in March 1998. He became a permanent
driver in July 1998. He was assigned to a relatively new jeepney for a boundary fee of ₱500.00 per
day. On November 7, 2001, due to the scarcity of passengers, he was only able to pay ₱470.00 to
respondent. The following day, respondent barred him from driving his jeepney. He pleaded but to
no avail.5
During the mandatory conference, respondent manifested that petitioners were not dismissed and
that they could drive his jeepneys once they paid their arrears. Petitioners, however, refused to do
so.

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

In his Position Paper, respondent alleged that petitioners were lessees of his vehicles and not his
employees; hence, the Labor Arbiter had no jurisdiction. He claimed that he noticed that some of his
lessees, including petitioners, were not fully paying the daily rental of his jeepneys. In a list which he
attached to the Position Paper, it was shown that petitioners had actually incurred arrears since they
started working. The list showed that Caong’s total arrears amounted to ₱10,315.00, that of Tresquio
was ₱10,760.00, while that of Daluyon was ₱6,890.00. He made inquiries and discovered that his
lessees contracted loans with third parties and used the income of the jeepneys in paying the loans.
Thus, on November 4, 2001, he gathered all the lessees in a meeting and informed them that,
effective November 5, 2001, those who would fail to fully pay the daily rental would not be allowed to
rent a jeepney on the following day. He explained to them that the jeepneys were acquired on
installment basis, and that he was paying the monthly amortizations through the lease income. Most
of the lessees allegedly accepted the condition and paid their arrears. Petitioners, however, did not
settle their arrears. Worse, their remittances were again short of the required boundary fee.
Petitioner Daluyon’s rent payment was short of ₱20.00 on November 5, 2001 and ₱80.00 on
November 7, 2001. On November 6, 2001, it was Tresquio who incurred an arrear of ₱100.00. On
November 7 and 9, 2001, petitioner Caong was in arrear of ₱50.00 and ₱100.00, respectively.
Respondent stressed that, during the mandatory conference, he manifested that he would renew his
lease with petitioners if they would pay the arrears they incurred during the said dates.6

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

WHEREFORE, judgment is hereby rendered, DISMISSING the above-entitled cases for lack of
merit. However, respondent Regualos is directed to accept back complainants Caong, Tresquio and
Daluyon, as regular drivers of his passenger jeepneys, after complainants have paid their respective
arrearages they have incurred in the remittance of their respective boundary payments, in the
amount of ₱150.00, ₱100.00 and ₱100.00. Complainants, if still interested to work as drivers, are
hereby ordered to report to respondent Regualos within fifteen (15) days from the finality of this
decision. Otherwise, failure to do so means forfeiture of their respective employments.

Other claims of complainants are dismissed for lack of merit.

SO ORDERED.7

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

Petitioners appealed the decision to the National Labor Relations Commission (NLRC). In its
resolution9 dated March 31, 2004, the NLRC agreed with the Labor Arbiter and dismissed the
appeal. It also denied petitioners’ motion for reconsideration.10

Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision11 dated December 14, 2006, the CA found no grave abuse of discretion on the part of
the NLRC. According to the CA, the employer-employee relationship of the parties has not been
severed, but merely suspended when respondent refused to allow petitioners to drive the jeepneys
while there were unpaid boundary obligations. The CA pointed out that the fact that it was within the
power of petitioners to return to work is proof that there was no termination of employment. The
condition that petitioners should first pay their arrears only for the period of November 5-9, 2001
before they can be readmitted to work is neither impossible nor unreasonable if their total unpaid
boundary obligations and the need to sustain the financial viability of the employer’s enterprise—
which would ultimately redound to the benefit of the employees—are taken into consideration.12

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

Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the motion in its
Resolution dated July 16, 2007.14

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

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible error, but grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of respondent. Mere abuse of
discretion is not enough. It must be shown that public respondent exercised its power in an arbitrary
or despotic manner by reason of passion or personal hostility, and this must be so patent and so
gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law.15

As correctly held by the CA, petitioners failed to establish that the NLRC committed grave abuse of
discretion in affirming the Labor Arbiter’s ruling, which is supported by the facts on record.

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

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

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

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

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate
all aspects of employment, including the prerogative to instill discipline on his employees and to
impose penalties, including dismissal, if warranted, upon erring employees. This is a management
prerogative. Indeed, the manner in which management conducts its own affairs to achieve its
purpose is within the management’s discretion. The only limitation on the exercise of management
prerogative is that the policies, rules, and regulations on work-related activities of the employees
must always be fair and reasonable, and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction.18

Petitioners argue that the policy is unsound as it does not consider the times when passengers are
scarce and the drivers are not able to raise the amount of the boundary.

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

In the present case, petitioners merely alleged that there were only few passengers during the dates
in question. Such excuse is not acceptable without any proof or, at least, an explanation as to why
passengers were scarce at that time. It is simply a bare allegation, not worthy of belief. We also find
the excuse unbelievable considering that petitioners incurred the shortages on separate days, and it
appears that only petitioners failed to remit the full boundary payment on said dates.
Under a boundary scheme, the driver remits the "boundary," which is a fixed amount, to the
owner/operator and gets to earn the amount in excess thereof. Thus, on a day when there are many
passengers along the route, it is the driver who actually benefits from it. It would be unfair then if,
during the times when passengers are scarce, the owner/operator will be made to suffer by not
getting the full amount of the boundary. Unless clearly shown or explained by an event that
irregularly and negatively affected the usual number of passengers within the route, the scarcity of
passengers should not excuse the driver from paying the full amount of the boundary.

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

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

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

Due process is not a matter of strict or rigid or formulaic process. The essence of due process is
1âwphi1

simply the opportunity to be heard, or as applied to administrative proceedings, an opportunity to

explain one’s side or an opportunity to seek a reconsideration of the action or ruling complained of. A
formal or trial-type hearing is not at all times and in all instances essential, as the due process
requirements are satisfied where the parties are afforded fair and reasonable opportunity to explain
their side of the controversy at hand. x x x.

xxxx

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

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

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

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

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

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

RENATO C. CORONA
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169510 August 8, 2011

ATOK BIG WEDGE COMPANY, INC., Petitioner,

vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision1 dated May
31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August
23, 2005 denying petitioner’s motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on
retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and
Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted
petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal
surface occupants within the area covered by the company's mineral claims. Respondent was
likewise tasked to perform liaison work with several government agencies, which he said was his
expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of ₱3,000.00 a
month,3 which was delivered to him either at his residence or in a local restaurant. The parties
executed a retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request. He
later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint4 with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum5advising respondent that within 30 days from receipt thereof, petitioner is terminating
his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint6 for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the
National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera
Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was
docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok
Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the
company’s problem involving the 700 million pesos crop damage claims of the residents living at the
minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres
offered to pay him ₱3,000.00 per month plus representation expenses. It was also agreed upon by
him and Torres that his participation in resolving the problem was temporary and there will be no
employer-employee relationship between him and Atok. It was also agreed upon that his
compensation, allowances and other expenses will be paid through disbursement vouchers.

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

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its
partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties
acquired by the partnership and some receivables by Benguet Corporation was the problem. He was
again entangled with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the properties of the
partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s
accountabilities with Benguet Corporation in the amount of ₱900,000.00.

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

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

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

In the succeeding years of his employment, he was designated as liaison officer, public relation
officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of
Atok.
Since he was getting older, being already 56 years old, he reiterated his request to the company to
cause his registration with the SSS. His request was again ignored and so he filed a complaint with
the SSS. After filing his complaint with the SSS, respondents terminated his services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter
Rolando D. Gambito rendered a Decision8 ruling in favor of the petitioner. Finding no employer-
employee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint
for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution9 affirming the decision of the
Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the
Resolution10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA
questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No.
87846. In support of his petition, respondent raised the following issues:

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

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

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

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

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter
and the NLRC may have overlooked Article 280 of the Labor Code,13 or the provision which
distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the
provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse
of one year from his employment. Considering also that respondent had been performing services
for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular
employee.
The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same by
repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have
waived his right to attain a regular status of employment when he agreed to perform these tasks on
a temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

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

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

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

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

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

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

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

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT
THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND
CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition
for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or
not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming
the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining
whether there was an employer-employee relationship between the petitioner and the respondent.
Petitioner contends that where the existence of an employer-employee relationship is in dispute,
Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a
casual employee from a regular employee for purposes of determining the rights of an employee to
be entitled to certain benefits.

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

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

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of
the NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As
this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special civil action
of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper
vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the
Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum
for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous
factual findings should be left to the CA as it is procedurally equipped for that purpose. From the
decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure
before the Supreme Court may be resorted to by the parties. Hence, respondent's resort to the CA
was appropriate under the circumstances.

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

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately

a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded
not only respect but even finality when supported by substantial evidence.17 Being a question of fact,
the determination whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence,
such determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably

adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct,
or the so-called "control test."18 Of these four, the last one is the most important.19 The so-called
"control test" is commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to
control not only the end achieved, but also the manner and means to be used in reaching that end.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the

case at bar. Among other things, respondent was not required to report everyday during regular
office hours of petitioner. Respondent's monthly retainer fees were paid to him either at his
residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which
respondent would accomplish any of the tasks in which his expertise as a liaison officer was needed;
respondent was left alone and given the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but petitioner did not control the manner and
methods by which respondent performed these tasks. Verily, the absence of the element of control
on the part of the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly
admitted that petitioner hired him in a limited capacity only and that there will be no employer-
employee relationship between them. As averred in respondent's Position Paper:21

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

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of
the petitioner and he agreed to perform tasks for the petitioner on a temporary employment status
only. However, respondent anchors his claim that he became a regular employee of the petitioner
based on his contention that the "temporary" aspect of his job and its "limited" nature could not have
lasted for eleven years unless some time during that period, he became a regular employee of the
petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not determinative in
this case. In fact, any agreement may provide that one party shall render services for and in behalf
of another, no matter how necessary for the latter's business, even without being hired as an
employee.23 Hence, respondent's length of service and petitioner's repeated act of assigning
respondent some tasks to be performed did not result to respondent's entitlement to the rights and
privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven
years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits, to join or form a
union, or to security of tenure; it does not apply where the existence of an employment relationship
is in dispute.24 It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in
determining whether an employer-employee relationship exists between respondent and the
petitioner

Considering that there is no employer-employee relationship between the parties, the termination of
respondent's services by the petitioner after due notice did not constitute illegal dismissal warranting
his reinstatement and the payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions
dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are
REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO*
Associate Justice
 PRESBITERO J. VELASCO, JR. ARTURO D. BRION**
Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO***

Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 196426 August 15, 2011

MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,

vs.
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION, GALLERA DE
MANDAUE / SPOUSES VICENTE and MARIA LUISA LOOT, Respondents.

DECISION

VELASCO, JR., J.:

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the
Decision1 and Resolution2 dated May 29, 2009 and February 23, 2010, respectively, of the Court of
Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed the October 18, 2006 Resolution3 of the
National Labor Relations Commission (NLRC), Fourth Division (now Seventh Division), in NLRC
Case No. V-000673-2004.

Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by
respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the
cockpit), as the official masiador and sentenciador, respectively, of the cockpit sometime in 1993.

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

For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total
of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work
every Tuesday, Wednesday, Saturday, and Sunday every week, excluding monthly derbies and
cockfights held on special holidays. Their working days start at 1:00 p.m. and last until 12:00
midnight, or until the early hours of the morning depending on the needs of the cockpit. Petitioners
had both been issued employees’ identification cards5 that they wear every time they report for duty.
They alleged never having incurred any infraction and/or violation of the cockpit rules and
regulations.

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

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

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

Respondents’ counsel received the Labor Arbiter’s Decision on September 14, 2004. And within the
10-day appeal period, he filed the respondents’ appeal with the NLRC on September 24, 2004, but
without posting a cash or surety bond equivalent to the monetary award granted by the Labor
Arbiter.8

It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004.
Hence, in a Resolution9 dated August 25, 2005, the NLRC denied the appeal for its non-perfection.

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

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

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

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

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

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

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

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

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

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

xxxx

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

Time and again, however, this Court, considering the substantial merits of the case, has relaxed this
rule on, and excused the late posting of, the appeal bond when there are strong and compelling
reasons for the liberality,14 such as the prevention of miscarriage of justice extant in the case15 or the
special circumstances in the case combined with its legal merits or the amount and the issue
involved.16 After all, technical rules cannot prevent courts from exercising their duties to determine
and settle, equitably and completely, the rights and obligations of the parties.17This is one case
where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period provided above, it is
evident, on the other hand, that petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of employment We have repeatedly mentioned in
countless decisions: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee’s conduct, which is the most
important element.18 1avv phi1
As found by both the NLRC and the CA, respondents had no part in petitioners’ selection and
management;19petitioners’ compensation was paid out of the arriba (which is a percentage deducted
from the total bets), not by petitioners;20 and petitioners performed their functions as masiador and
sentenciador free from the direction and control of respondents.21 In the conduct of their work,
petitioners relied mainly on their "expertise that is characteristic of the cockfight gambling,"22 and
were never given by respondents any tool needed for the performance of their work.23

Respondents, not being petitioners’ employers, could never have dismissed, legally or illegally,
petitioners, since respondents were without power or prerogative to do so in the first place. The rule
on the posting of an appeal bond cannot defeat the substantive rights of respondents to be free from
an unwarranted burden of answering for an illegal dismissal for which they were never responsible. 1avvphi1

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

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

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO*
Associate Justice

ARTURO D. BRION** DIOSDADO M. PERALTA

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO***

Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 192084 September 14, 2011

JOSE MEL BERNARTE, Petitioner,

vs.
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and PERRY
MARTINEZ,Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the
National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and
held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of
respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez.
The Court of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA
as referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign
contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were
made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of
the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during the second
conference when he was made to sign a one and a half month contract for the period July 1 to
August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him
that his contract would not be renewed citing his unsatisfactory performance on and off the court. It
was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the
dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of
referees in February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he
signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a
memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of
referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a
contract.
Respondents aver, on the other hand, that complainants entered into two contracts of retainer with
the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and
the second was for September 1 to December 2003. After the lapse of the latter period, PBA
decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their
respective contracts of retainer were simply not renewed. PBA had the prerogative of whether or not
to renew their contracts, which they knew were fixed.4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal
by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner
and the payment of backwages, moral and exemplary damages and attorney’s fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed
complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from the date
of receipt of this decision and to solidarily pay complainants:

JOSE MEL RENATO

BERNARTE GUEVARRA

1. backwages from January 1, 2004 up ₱536,250.00 ₱211,250.00

to the finality of this Decision, which to
date is

2. moral damages 100,000.00 50,000.00

3. exemplary damages 100,000.00 50,000.00

4. 10% attorney's fees 68,625.00 36,125.00

TOTAL ₱754,875.00 ₱397,375.00

or a total of ₱1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s judgment. The dispositive
portion of the NLRC’s decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D.
Castillon-Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions
of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008
and Resolutiondated August 26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents’ complaint before the Labor Arbiter
is DISMISSED.

SO ORDERED.10

The Court of Appeals’ Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise
any form of control over the means and methods by which petitioner performed his work as a
basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees’ acts of blowing the whistle
and making calls during basketball games, it, nevertheless, theorized that the said acts refer to the
means and methods employed by the referees in officiating basketball games for the illogical reason
that said acts refer only to the referees’ skills. How could a skilled referee perform his job without
blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiter’s finding (as affirmed by the NLRC) that the
Contracts of Retainer show that petitioners have control over private respondents.

xxxx

Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s conclusion that private
respondents’ repeated hiring made them regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn
determines whether petitioner was illegally dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiter’s decision has become final and
executory for failure of respondents to appeal with the NLRC within the reglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005 became final and executory
for failure of respondents to appeal with the NLRC within the prescribed period. Petitioner claims that
the Labor Arbiter’s decision was constructively served on respondents as early as August 2005 while
respondents appealed the Arbiter’s decision only on 31 March 2006, way beyond the reglementary
period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed
complete five days from the date of first notice of the post master. In this case three notices were
issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmaster’s Certification to prove
constructive service of the Labor Arbiter’s decision on respondents. The Postmaster certified:

xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately
issued the first registry notice to claim on July 12, 2005 by the addressee. The second and third
notices were issued on July 21 and August 1, 2005, respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to
claim it after our one month retention period elapsed. Said registered letter was dispatched from this
office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. – Personal service is complete upon actual delivery. Service by
ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court
otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or
after five (5) days from the date he received the first notice of the postmaster, whichever date is
earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the
completeness of which is determined upon receipt by the addressee of the registered mail; and (2)
constructive service the completeness of which is determined upon expiration of five days from the
date the addressee received the first notice of the postmaster.13

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was
duly sent by the postmaster to the addressee.14 Not only is it required that notice of the registered
mail be issued but that it should also be delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is not applicable in this situation. It is
incumbent upon a party who relies on constructive service to prove that the notice was sent to, and
received by, the addressee.16

The best evidence to prove that notice was sent would be a certification from the postmaster, who
should certify not only that the notice was issued or sent but also as to how, when and to whom the
delivery and receipt was made. The mailman may also testify that the notice was actually delivered.17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the
delivery and receipt of the three notices issued by the post office was made. There is no conclusive
evidence showing that the post office notices were actually received by respondents, negating
petitioner’s claim of constructive service of the Labor Arbiter’s decision on respondents. The
Postmaster’s Certification does not sufficiently prove that the three notices were delivered to and
received by respondents; it only indicates that the post office issued the three notices. Simply put,
the issuance of the notices by the post office is not equivalent to delivery to and receipt by the
addressee of the registered mail. Thus, there is no proof of completed constructive service of the
Labor Arbiter’s decision on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiter’s decision moot as
respondents’ appeal was considered in the interest of substantial justice. We agree with the NLRC.
The ends of justice will be better served if we resolve the instant case on the merits rather than
allowing the substantial issue of whether petitioner is an independent contractor or an employee
linger and remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general

rule, factual issues are beyond the province of this Court. However, this rule admits of exceptions,
one of which is where there are conflicting findings of fact between the Court of Appeals, on one
hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law has consistently applied
the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on the
means and methods by which the work is accomplished. The so-called "control test" is the most
important indicator of the presence or absence of an employer-employee relationship.19

In this case, PBA admits repeatedly engaging petitioner’s services, as shown in the retainer
contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in
the retainer contract. PBA can terminate the retainer contract for petitioner’s violation of its terms
and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making
petitioner an independent contractor and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the
latter exercise control over the performance of his work. Petitioner cites the following stipulations in
the retainer contract which evidence control: (1) respondents classify or rate a referee; (2)
respondents require referees to attend all basketball games organized or authorized by the PBA, at
least one hour before the start of the first game of each day; (3) respondents assign petitioner to
officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to observe and
comply with all the requirements of the PBA governing the conduct of the referees whether on or off
the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition
during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA,
and not to officiate as referee in any basketball game outside of the PBA, without written prior
consent of the Commissioner; (c) always to conduct himself on and off the court according to the
highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the
terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which
petitioner performs his work as a referee officiating a PBA basketball game. The contractual
stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and
make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain
the integrity of the professional basketball league. As correctly observed by the Court of Appeals,
"how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow
can the PBA control the performance of work of a referee without controlling his acts of blowing the
whistle and making calls?"20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a

television and radio station and one of its talents, the Court held that not all rules imposed by the
hiring party on the hired party indicate that the latter is an employee of the former. The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio programs that comply with standards of the
industry. We have ruled that:

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

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it.22

We agree with respondents that once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as to when and how a call or decision is to
be made. The referees decide whether an infraction was committed, and the PBA cannot overrule
them once the decision is made on the playing court. The referees are the only, absolute, and final
authority on the playing court. Respondents or any of the PBA officers cannot and do not determine
which calls to make or not to make and cannot control the referee when he blows the whistle
because such authority exclusively belongs to the referees. The very nature of petitioner’s job of
officiating a professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the
referees are required to report for work only when PBA games are scheduled, which is three times a
week spread over an average of only 105 playing days a year, and they officiate games at an
average of two hours per game; and (2) the only deductions from the fees received by the referees
are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for five
days a week, petitioner is required to report for work only when PBA games are scheduled or three
times a week at two hours per game. In addition, there are no deductions for contributions to the
Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees’
salaries. These undisputed circumstances buttress the fact that petitioner is an independent
contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor,
whose special skills and independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held
that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant
which is the statutory body that governs soccer in the United States. As such, plaintiff was not
entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:

Generally, "if an employer has the right to control and direct the work of an individual, not only as to
the result to be achieved, but also as to details by which the result is achieved, an
employer/employee relationship is likely to exist." The Court must be careful to distinguish between
"control[ling] the conduct of another party contracting party by setting out in detail his obligations"
consistent with the freedom of contract, on the one hand, and "the discretionary control an employer
daily exercises over its employee’s conduct" on the other.

Yonan asserts that the Federation "closely supervised" his performance at each soccer game he
officiated by giving him an assessor, discussing his performance, and controlling what clothes he
wore while on the field and traveling. Putting aside that the Federation did not, for the most part,
control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his
performance after matches. That the Federation evaluated Yonan as a referee does not mean that
he was an employee. There is no question that parties retaining independent contractors may judge
the performance of those contractors to determine if the contractual relationship should continue. x x
x
It is undisputed that the Federation did not control the way Yonan refereed his games. He had full
1âwphi1

discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a
similar vein, subjecting Yonan to qualification standards and procedures like the Federation’s
registration and training requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent
contractor status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x
x Here, it is undisputed that soccer refereeing, especially at the professional and international level,
requires "a great deal of skill and natural ability." Yonan asserts that it was the Federation’s training
that made him a top referee, and that suggests he was an employee. Though substantial training
supports an employment inference, that inference is dulled significantly or negated when the putative
employer’s activity is the result of a statutory requirement, not the employer’s choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of
the Tennessee Secondary School Athletic Association (TSSAA), so the player’s vicarious liability
claim against the association should be dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played
between TSSAA member schools. The TSSAA does not supervise regular season games. It does
not tell an official how to conduct the game beyond the framework established by the rules. The
TSSAA does not, in the vernacular of the case law, control the means and method by which the
umpires work.

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

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

MARIANO C. DEL CASTILLO* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice
 MARIA LOURDES P. A. SERENO
Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169757 November 23, 2011

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

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No.
88899 dated August 4, 2005 and its Resolution dated September 21, 2005, denying petitioner’s
motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision
of the Labor Arbiter with modification, finding that respondent is an employee of petitioner, and that
respondent was illegally dismissed and entitled to the payment of backwages and separation pay in
lieu of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio
and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission and
award of moral and exemplary damages.

In his Position Paper,1 respondent Genovia alleged, among others, that on August 15, 2001, he was
hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor).
He was employed to manage and operate Celkor and to promote and sell the recording studio's
services to music enthusiasts and other prospective clients. He received a monthly salary of
₱7,000.00. They also agreed that he was entitled to an additional commission of ₱100.00 per hour
as recording technician whenever a client uses the studio for recording, editing or any related work.
He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he
was required to work half-day only, but most of the time, he still rendered eight hours of work or
more. All the employees of petitioner, including respondent, rendered overtime work almost
everyday, but petitioner never kept a daily time record to avoid paying the employees overtime pay.

Respondent stated that a few days after he started working as a studio manager, petitioner
approached him and told him about his project to produce an album for his 15-year-old daughter,
Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked respondent to compose
and arrange songs for Celine and promised that he (Lirio) would draft a contract to assure
respondent of his compensation for such services. As agreed upon, the additional services that
respondent would render included composing and arranging musical scores only, while the technical
aspect in producing the album, such as digital editing, mixing and sound engineering would be
performed by respondent in his capacity as studio manager for which he was paid on a monthly
basis. Petitioner instructed respondent that his work on the album as composer and arranger would
only be done during his spare time, since his other work as studio manager was the priority.
Respondent then started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his
compensation as composer and arranger of the album. Petitioner verbally assured him that he would
be duly compensated. By mid-November 2001, respondent finally finished the compositions and
musical arrangements of the songs to be included in the album. Before the month ended, the lead
and back-up vocals in the ten (10) songs were finally recorded and completed. From December
2001 to January 2002, respondent, in his capacity as studio manager, worked on digital editing,
mixing and sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish

contacts and negotiate with various radio stations, malls, publishers, record companies and
manufacturers, record bars and other outlets in preparation for the promotion of the said album. By
early February 2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of
CDs and cassette tapes, was tapped to do the job. The carrier single of the album, which respondent
composed and arranged, was finally aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told respondent that since he was
practically a nobody and had proven nothing yet in the music industry, respondent did not deserve a
high compensation, and he should be thankful that he was given a job to feed his family. Petitioner
informed respondent that he was entitled only to 20% of the net profit, and not of the gross sales of
the album, and that the salaries he received and would continue to receive as studio manager of
Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that
he be properly compensated. On March 14, 2002, petitioner verbally terminated respondent’s
services, and he was instructed not to report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds,
and no hearing was conducted before he was terminated, in violation of his constitutional right to due
process. Having worked for more than six months, he was already a regular employee. Although he
was a so called "studio manager," he had no managerial powers, but was merely an ordinary
employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he
be paid separation pay, backwages and overtime pay; and that he be awarded unpaid commission
in the amount of ₱2,000.00 for services rendered as a studio technician as well as moral and
exemplary damages.

Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was
certified correct by petitioner,2 and Petty Cash Vouchers3 evidencing receipt of payroll payments by
respondent from Celkor.

In defense, petitioner stated in his Position Paper4 that respondent was not hired as studio manager,
composer, technician or as an employee in any other capacity of Celkor. Respondent could not have
been hired as a studio manager, since the recording studio has no personnel except petitioner.
Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star
Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he
decided to produce an album for his daughter and established a recording studio, which he named
Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the
songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent,
who claimed to be an amateur composer, an arranger with limited experience and musician without
any formal musical training. According to petitioner, respondent had no track record as a composer,
and he was not known in the field of music. Nevertheless, after some discussion, respondent
verbally agreed with petitioner to co-produce the album based on the following terms and conditions:
(1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio
shall sing all the songs; (3) respondent shall act as composer and arranger of all the lyrics and the
music of the five songs he already composed and the revival songs; (4) petitioner shall have
exclusive right to market the album; (5) petitioner was entitled to 60% of the net profit, while
respondent and Celine Mei Lirio were each entitled to 20% of the net profit; and (6) respondent shall
be entitled to draw advances of ₱7,000.00 a month, which shall be deductible from his share of the
net profits and only until such time that the album has been produced.

According to petitioner, they arrived at the foregoing sharing of profits based on the mutual
understanding that respondent was just an amateur composer with no track record whatsoever in
the music industry, had no definite source of income, had limited experience as an arranger, had no
knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach
him how to use the studio equipment; that petitioner would shoulder all the expenses of production
and provide the studio and equipment as well as his knowledge in the use thereof; and Celine Mei
Lirio would sing the songs. They embarked on the production of the album on or about the third
week of August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is
one of an informal partnership under Article 17675 of the New Civil Code, since they agreed to
contribute money, property or industry to a common fund with the intention of dividing the profits
among themselves. Petitioner had no control over the time and manner by which respondent
composed or arranged the songs, except on the result thereof. Respondent reported to the recording
studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-employee
relationship existed between him and the respondent, and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision,6 finding that an
employer-employee relationship existed between petitioner and respondent, and that respondent
was illegally dismissed. The dispositive portion of the decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX

RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in
his status as regular employee and, consequently, ORDERING said respondents:

1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of
this decision and, in lieu of reinstatement, to [pay] his separation pay of one (1) month pay
per year of service reckoned from [the] date of hire on August 15, 2001 until finality of this
decision, which as of date amounts to full backwages total of 145,778.6 (basic ₱7,000.00 x
19.6 mos.=₱133,000.00 + 1/12 thereof as 13th month pay of ₱11,083.33 + SILP
₱7,000/32.62 days=₱214.59/day x 5=₱1,072.96 x 1.58 yrs.=₱1,695.27); separation pay of
₱22,750.00 (₱7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of ₱2,000.00;

3) To pay him moral and exemplary damages in the combined amount of ₱75,000.00.

Other monetary claims of complainant are dismissed for lack of merit.7

The Labor Arbiter stated that petitioner’s denial of the employment relationship cannot overcome
respondent’s positive assertion and documentary evidence proving that petitioner hired respondent
as his employee.8

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission
(NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor
Arbiter. The dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed
from is REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case
for lack of merit.9

The NLRC stated that respondent failed to prove his employment tale with substantial evidence.
Although the NLRC agreed that respondent was able to prove that he received gross pay less
deduction and net pay, with the corresponding Certification of Correctness by petitioner, covering the
period from July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved with
substantial evidence that he was selected and engaged by petitioner, that petitioner had the power
to dismiss him, and that they had the power to control him not only as to the result of his work, but
also as to the means and methods of accomplishing his work.

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution9 dated December
14, 2004.

Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision10 reversing and setting aside the
resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with modification in regard
to the award of commission and damages. The Court of Appeals deleted the award of commission,
and moral and exemplary damages as the same were not substantiated. The dispositive portion of
the Court of Appeals’ decision reads:

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and
December 14, 2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated
October 31, 2003 of the Labor Arbiter is REINSTATED, with the modification that the awards of
commission and damages are deleted.11(Emphasis supplied.)

Petitioner’s motion for reconsideration was denied for lack of merit by the Court of Appeals in its
Resolution12 dated September 21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under
Rule 65, which will prosper only if there is a showing of grave abuse of discretion or an act without or
in excess of jurisdiction on the part of the NLRC.13 However, petitioner contends that the Court of
Appeals decided the case not in accordance with law and applicable rulings of this Court as
petitioner could not find any portion in the Decision of the Court of Appeals ruling that the NLRC
acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of
judgment by the NLRC raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of
Civil Procedure. Moreover, petitioner contends that it was error on the part of the Court of Appeals to
review the finding of facts of the NLRC on whether there exists an employer-employee relationship
between the parties.

Petitioner’s argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition
for certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with
the decision of the Court in St. Martin Funeral Home v. NLRC,14 which held:

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the
NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for
certiorari under Rule 65. Consequently, all such petitions should henceforth be initially filed in the
Court of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate
forum for the relief desired.15

The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the
public respondent [NLRC] committed grave abuse of discretion when it declared that no employer-
employee relationship exists between the petitioner and the private respondents, since the petitioner
failed to prove such fact by substantial evidence."16

Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a
special civil action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of
discretion.17 By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically.18

The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its
assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or
arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot make
this determination without looking into the evidence of the parties.19 Necessarily, the appellate court
can only evaluate the materiality or significance of the evidence, which is alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on
record.20 Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding of
facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its
discretion in finding that no employer-employee relationship existed between petitioner and
respondent.21

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE

OF DISCRETION IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS
EXISTED BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER,
IN VIOLATION OF ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE

OF DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE

OF DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH
VOUCHERS AS AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE
PRIVATE RESPONDENTS.22

Between the documentary evidence presented by respondent and the mere allegation of petitioner
without any proof by way of any document evincing their alleged partnership agreement, the Court of
Appeals agreed with the Labor Arbiter that petitioner failed to substantiate his claim that he had a
partnership with respondent, citing the Labor Arbiter’s finding, thus:

In this case, complainant's evidence is substantial enough to prove the employment relationship that
on August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate
the recording studio and to promote and sell its services to music enthusiasts and clients, proven by
his receipt for this purpose from said respondent a fixed monthly compensation of ₱7,000.00, with
commission of ₱100.00 per hour when serving as recording technician, shown by the payroll from
July 31, 2001-March 15, 2002. The said evidence points to complainant's hiring as employee so that
the case comes within the purview of our jurisdiction on labor disputes between an employer and an
employee. x x x.

Respondent Lirio's so-called existence of a partnership agreement was not substantiated and
his assertion thereto, in the face of complainant's evidence, constitute but a self-serving
assertion, without probative value, a mere invention to justify the illegal dismissal.

xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his
refusal to respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of
the album which he composed and arranged during his free time and, moreover, that salaries which
he received would be deducted therefrom, which obviously, soured the relations from the point of
view of respondent Lirio.23

Hence, based on the finding above and the doctrine that "if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter,"24 the Court of Appeals reversed the resolution of the NLRC and reinstated the decision of the
Labor Arbiter with modification. Even if the Court of Appeals was remiss in not stating it in definite
terms, it is implied that the Court of Appeals found that the NLRC gravely abused its discretion in
finding that no employer-employee relationship existed between petitioner and respondent based on
the evidence on record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court
of Appeals is in accordance with law, or whether or not the Court of Appeals erred in reversing and
setting aside the decision of the NLRC, and reinstating the decision of the Labor Arbiter with
modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is
not ironclad.25Where the issue is shrouded by a conflict of factual perceptions by the lower court or
the lower administrative body, in this case, the NLRC, this Court is constrained to review the factual
findings of the Court of Appeals.26

Before a case for illegal dismissal can prosper, it must first be established that an employer-
employee relationship existed between petitioner and respondent.27

The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee’s conduct. The most important element is the employer’s
control of the employee’s conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.28

It is settled that no particular form of evidence is required to prove the existence of an employer-
employee relationship.29 Any competent and relevant evidence to prove the relationship may be
admitted.30

In this case, the documentary evidence presented by respondent to prove that he was an employee
of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March
15, 2002) certified correct by petitioner,31 which showed that respondent received a monthly salary of
₱7,000.00 (₱3,500.00 every 15th of the month and another ₱3,500.00 every 30th of the month) with
the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash
vouchers,32 showing the amounts he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid
monthly wages of ₱7,000.00. Petitioner wielded the power to dismiss as respondent stated that he
was verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal
against petitioner. The power of control refers merely to the existence of the power.33 It is not
essential for the employer to actually supervise the performance of duties of the employee, as it is
sufficient that the former has a right to wield the power.34Nevertheless, petitioner stated in his
Position Paper that it was agreed that he would help and teach respondent how to use the studio
equipment. In such case, petitioner certainly had the power to check on the progress and work of
respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of
partnership. Such claim was not supported by any written agreement. The Court notes that in the
1âwphi1

payroll dated July 31, 2001 to March 15, 2002,35 there were deductions from the wages of
respondent for his absence from work, which negates petitioner’s claim that the wages paid were
advances for respondent’s work in the partnership. In Nicario v. National Labor Relations
Commission,36 the Court held:

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be resolved in the former’s favor. The policy is to
extend the doctrine to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection of
labor. This rule should be applied in the case at bar, especially since the evidence presented by the
private respondent company is not convincing. x x x37

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by
the parties showed that an employer-employee relationship existed between petitioner and
respondent.

In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made.38 Article 277 (b) of the Labor Code39 puts the
burden of proving that the dismissal of an employee was for a valid or authorized cause on the
employer, without distinction whether the employer admits or does not admit the dismissal.40 For an
employee’s dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee
must be afforded due process.41 Procedural due process requires the employer to furnish an
employee with two written notices before the latter is dismissed: (1) the notice to apprise the
employee of the particular acts or omissions for which his dismissal is sought, which is the
equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after
the employee has been given reasonable opportunity to answer and to be heard on his
defense.42 Petitioner failed to comply with these legal requirements; hence, the Court of Appeals
correctly affirmed the Labor Arbiter’s finding that respondent was illegally dismissed, and entitled to
the payment of backwages, and separation pay in lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
88899, dated August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED.

No costs.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE PORTUGAL PEREZ*

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice
 Republic of the Philippines
SUPREME COURT
Baguio

FIRST DIVISION

G.R. No. 163700 April 18, 2012

CHARLIE JAO, Petitioner,

vs.
BCC PRODUCTS SALES INC., and TERRANCE TY, Respondents.

DECISION

BERSAMIN, J.:

The issue is whether petitioner was respondents’ employee or not. Respondents denied an
employer-employee relationship with petitioner, who insisted the contrary.

Through his petition for review on certiorari, petitioner appeals the decision promulgated by the
Court of Appeals (CA) on February 27, 2004,1 finding no employee-employer relationship between
him and respondents, thereby reversing the ruling by the National Labor Relations Commission
(NLRC) to the effect that he was the employee of respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent
Terrance Ty (Ty), employed him as comptroller starting from September 1995 with a monthly salary
of ₱20,000.00 to handle the financial aspect of BCC’s business;2 that on October 19,1995, the
security guards of BCC, acting upon the instruction of Ty, barred him from entering the premises of
BCC where he then worked; that his attempts to report to work in November and December 12,
1995 were frustrated because he continued to be barred from entering the premises of BCC;3 and
that he filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement with full
backwages, non-payment of wages, damages and attorney’s fees.4

Respondents countered that petitioner was not their employee but the employee of Sobien Food
Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted him as its
comptroller in BCC to oversee BCC’s finances and business operations and to look after SFC’s
interests or investments in BCC.5

Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996,6 the NLRC vacated
the ruling and remanded the case for further proceedings.7 Thereafter, Labor Arbiter Jovencio Ll.
Mayor rendered a new decision on September 20, 2001, dismissing petitioner’s complaint for want of
an employer-employee relationship between the parties.8 Petitioner appealed the September 20,
2001 decision of Labor Arbiter Mayor.

On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayor’s decision, and
declaring that petitioner had been illegally dismissed. It ordered the payment of unpaid salaries,
backwages and 13th month pay, separation pay and attorney’s fees.9 Respondents moved for the
reconsideration of the NLRC decision, but their motion for reconsideration was denied on September
30, 2002.10 Thence, respondents assailed the NLRC decision on certiorari in the CA.
 Ruling of the CA

On February 27, 2004, the CA promulgated its assailed decision,11 holding:

After a judicious review of the records vis-à-vis the respective posturing of the contending parties,
we agree with the finding that no employer-employee relationship existed between petitioner BCC
and the private respondent. On this note, the conclusion of the public respondent must be reversed
for being issued with grave abuse of discretion.

"Etched in an unending stream of cases are the four (4) standards in determining the existence of an
employer-employee relationship, namely, (a) the manner of selection and engagement of the
putative employee; (b) the mode of payment of wages; (c) the presence or absence of power of
dismissal; and, (d) the presence or absence of control of the putative employee’s conduct." Of these
powers the power of control over the employee’s conduct is generally regarded as determinative of
the existence of the relationship.

Apparently, in the case before us, all these four elements are absent. First, there is no proof that the
services of the private respondent were engaged to perform the duties of a comptroller in the
petitioner company. There is no proof that the private respondent has undergone a selection
procedure as a standard requisite for employment, especially with such a delicate position in the
company. Neither is there any proof of his appointment nor is there any showing that the parties
entered into an employment contract, stipulating thereof that he will receive P20,000.00/month
salary as comptroller, before the private respondent commenced with his work as such. Second, as
clearly established on record, the private respondent was not included in the petitioner company’s
payroll during the time of his alleged employment with the former. True, the name of the private
respondent Charlie Jao appears in the payroll however it does not prove that he has received his
remuneration for his services. Notably, his name was not among the employees who will receive
their salaries as represented by the payrolls. Instead, it appears therein as a comptroller who is
authorized to approve the same. Suffice it to state that it is rather obscure for a certified public
accountant doing the functions of a comptroller from September 1995 up to December 1995 not to
receive his salary during the said period. Verily, such scenario does not conform with the usual and
ordinary experience of man. Coming now to the most controlling factor, the records indubitably
reveal the undisputed fact that the petitioner company did not have nor did not exercise the power of
control over the private respondent. It did not prescribe the manner by which the work is to be
carried out, or the time by which the private respondent has to report for and leave from work. As
already stated, the power of control is such an important factor that other requisites may even be
disregarded. In Sevilla v. Court of Appeals, the Supreme Court emphatically held, thus:

"The "control test," under which the person for whom the services are rendered reserves the
right to direct not only the end to be achieved but also the means for reaching such end, is
generally relied on by the courts."

We have carefully examined the evidence submitted by the private respondent in the formal offer of
evidence and unfortunately, other than the bare assertions of the private respondent which he
miserably failed to substantiate, we find nothing therein that would decisively indicate that the
petitioner BCC exercised the fundamental power of control over the private respondent in relation to
his employment—not even the ID issued to the private respondent and the affidavits executed by
Bertito Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest the
existence of employer-employee relationship as intimated by the NLRC. On the contrary, it would
appear that the said sworn statement provided a substantial basis to support the contention that the
private respondent worked at the petitioner BCC as SFC’s representative, being its major creditor
and supplier of goods and merchandise. Moreover, as clearly pointed out by the petitioner in his
Reply to the private respondent’s Comment, it is unnatural for SFC to still employ the private
respondent "to oversee and supervise collections of account receivables due SFC from its
customers or clients" like the herein petitioner BCC on a date later than December, 1995 considering
that a criminal complaint has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal
certainty that employee-employer relationship existed between the parties. On the other hand, it was
clearly shown by the petitioner that it neither exercised control nor supervision over the conduct of
the private respondent’s employment. Hence, the allegation that there is employer-employee
relationship must necessarily fail.

Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public
respondent NLRC dated July 31, 2002 and the Resolution dated September 30, 2002 are
REVERSED and SET ASIDE. Accordingly, the decision of the Labor Arbiter dated September 20,
2001 is hereby REINSTATED.

SO ORDERED.

After the CA denied petitioner’s motion for reconsideration on May 14, 2004,12 he filed a motion for
extension to file petition for review, which the Court denied through the resolution dated July 7, 2004
for failure to render an explanation on why the service of copies of the motion for extension on
respondents was not personally made.13 The denial notwithstanding, he filed his petition for review on
certiorari. The Court denied the petition on August 18, 2004 in view of the denial of the motion for
extension of time and the continuing failure of petitioner to render the explanation as to the non-
personal service of the petition on respondents.14 However, upon a motion for reconsideration, the
Court reinstated the petition for review on certiorari and required respondents to comment.15

Issue

The sole issue is whether or not an employer-employee relationship existed between petitioner and
BCC. A finding on the existence of an employer-employee relationship will automatically warrant a
finding of illegal dismissal, considering that respondents did not state any valid grounds to dismiss
petitioner.

Ruling

The petition lacks merit.

The existence of an employer-employee relationship is a question of fact. Generally, a re-

examination of factual findings cannot be done by the Court acting on a petition for review on
certiorari because the Court is not a trier of facts but reviews only questions of law. Nor may the
Court be bound to analyze and weigh again the evidence adduced and considered in the
proceedings below.16 This rule is not absolute, however, and admits of exceptions. For one, the Court
may look into factual issues in labor cases when the factual findings of the Labor Arbiter, the NLRC,
and the CA are conflicting.17

Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict
among such adjudicating offices compels the Court’s exercise of its authority to review and pass
upon the evidence presented and to draw its own conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID)
issued to him stating his name and his position as "comptroller," and bearing his picture, his
signature, and the signature of Ty; (b) a payroll of BCC for the period of October 1-15, 1996 that
petitioner approved as comptroller; (c) various bills and receipts related to expenditures of BCC
bearing the signature of petitioner; (d) various checks carrying the signatures of petitioner and Ty,
and, in some checks, the signature of petitioner alone; (e) a court order showing that the issuing
court considered petitioner’s ID as proof of his employment with BCC; (f) a letter of petitioner dated
March 1, 1997 to the Department of Justice on his filing of a criminal case for estafa against Ty for
non-payment of wages; (g) affidavits of some employees of BCC attesting that petitioner was their
co-employee in BCC; and (h) a notice of raffle dated December 5, 1995 showing that petitioner,
being an employee of BCC, received the notice of raffle in behalf of BCC.18

Respondents denied that petitioner was BCC’s employee. They affirmed that SFC had installed
petitioner as its comptroller in BCC to oversee and supervise SFC’s collections and the account of
BCC to protect SFC’s interest; that their issuance of the ID to petitioner was only for the purpose of
facilitating his entry into the BCC premises in relation to his work of overseeing the financial
operations of BCC for SFC; that the ID should not be considered as evidence of petitioner’s
employment in BCC;19 that petitioner executed an affidavit in March 1996,20 stating, among others, as
follows:

1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or

employed by, Sobien Food Corporation with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC,
for short), I have been entrusted by my employer to oversee and supervise collections on
account of receivables due SFC from its customers or clients; for instance, certain checks
due and turned over by one of SFC’s customers is BCC Product Sales, Inc., operated or run
by one Terrance L. Ty, (President and General manager), pursuant to, or in accordance with,
arrangements or agreement thereon; such arrangement or agreement is duly confirmed by
said Terrance Ty, as shown or admitted by him in a public instrument executed therefor,
particularly par. 2 of that certain Counter-Affidavit executed and subscribed on December 11,
1995, xerox copy of which is hereto attached, duly marked as Annex "A" and made integral
part hereof.

3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were

delivered to, or turned over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my
reputation or to cause me dishonor as well as to impute unto myself the commission of a
crime, state in another public instrument executed therefor in that:

"3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely
without any authority from BCC and the same were reportedly turned over by said Mr. Jao to a
person who is not an agent or is not authorized representative of BCC."

xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex "B" and made
integral part hereof. (emphasis supplied)

and that the affidavit constituted petitioner’s admission of the arrangement or agreement between
BCC and SFC for the latter to appoint a comptroller to oversee the former’s operations.

Petitioner counters, however, that the affidavit did not establish the absence of an employer-
employee relationship between him and respondents because it had been executed in March 1996,
or after his employment with respondents had been terminated on December 12, 1995; and that the
affidavit referred to his subsequent employment by SFC following the termination of his employment
by BCC.21

We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and
the Labor Arbiter to the effect that the affidavit actually supported the contention that petitioner had
really worked in BCC as SFC’s representative. It does seem more natural and more believable that
petitioner’s affidavit was referring to his employment by SFC even while he was reporting to BCC as
a comptroller in behalf of SFC. As respondents pointed out, it was implausible for SFC to still post
him to oversee and supervise the collections of accounts receivables due from BCC beyond
December 1995 if, as he insisted, BCC had already illegally dismissed him and had even prevented
him from entering the premises of BCC. Given the patent animosity and strained relations between
him and respondents in such circumstances, indeed, how could he still efficiently perform in behalf of
SFC the essential responsibility to "oversee and supervise collections" at BCC? Surely, respondents
would have vigorously objected to any arrangement with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in
his own affidavit dated December 11, 1995 to the effect that petitioner had illegally appropriated
some checks without authority from BCC.22 Petitioner thereby sought to show that he had the
authority to receive the checks pursuant to the arrangements between SFC and BCC. This showing
would aid in fending off the criminal charge respondents filed against him arising from his
mishandling of the checks. Naturally, the circumstances petitioner adverted to in his March 1996
affidavit concerned those occurring before December 11, 1995, the same period when he actually
worked as comptroller in BCC.

Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner
offered as a rebuttal witness, lent credence to respondents’ denial of petitioner’s employment. So
declared in that affidavit, among others, that he had known petitioner for being "earlier his retained
accountant having his own office but did not hold office" in SFC’s premises; that Ty had approached
him (So) "looking for an accountant or comptroller to be employed by him (Ty) in [BCC’s] distribution
business" of SFC’s general merchandise, and had later asked him on his opinion about petitioner;
and that he (So) had subsequently learned that "Ty had already employed [petitioner] as his
comptroller as of September 1995."23

The statements of So really supported respondents’ position in that petitioner’s association with SFC
prior to his supposed employment by BCC went beyond mere acquaintance with So. That So, who
had earlier merely "retained" petitioner as his accountant, thereafter employed petitioner as a
"retained" accountant after his supposed illegal dismissal by BCC raised a doubt as to his
employment by BCC, and rather confirmed respondents’ assertion of petitioner being an employee
of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the Court

has consistently looked for the following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee on the means and methods by which the work is accomplished. The last
element, the so-called control test, is the most important element.24

Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly
employed by BCC that debunked his claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his
authority to deliver some 158 checks to SFC. Considering that he contested respondents’ challenge
by pointing to the existing arrangements between BCC and SFC, it should be clear that respondents
did not exercise the power of control over him, because he thereby acted for the benefit and in the
interest of SFC more than of BCC.

In addition, petitioner presented no document setting forth the terms of his employment by
BCC. The failure to present such agreement on terms of employment may be understandable and
1âwphi1

expected if he was a common or ordinary laborer who would not jeopardize his employment by
demanding such document from the employer, but may not square well with his actual status as a
highly educated professional.

Petitioner’s admission that he did not receive his salary for the three months of his employment by
BCC, as his complaint for illegal dismissal and non-payment of wages25 and the criminal case for
estafa he later filed against the respondents for non-payment of wages26 indicated, further raised
grave doubts about his assertion of employment by BCC. If the assertion was true, we are puzzled
how he could have remained in BCC’s employ in that period of time despite not being paid the first
salary of ₱20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him
having approved the payroll as comptroller.

Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the
insincerity of petitioner’s assertion of employment by BCC. In the petition for review on certiorari, he
averred that he had been barred from entering the premises of BCC on October 19, 1995,27 and thus
was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had been illegally
dismissed on December 12, 1995 when respondents’ security guards barred him from entering the
premises of BCC,28 causing him to bring his complaint only on December 29, 1995, and after BCC
had already filed the criminal complaint against him. The wide gap between October 19, 1995 and
December 12, 1995 cannot be dismissed as a trivial inconsistency considering that the several
incidents affecting the veracity of his assertion of employment by BCC earlier noted herein
transpired in that interval.

With all the grave doubts thus raised against petitioner’s claim, we need not dwell at length on the
other proofs he presented, like the affidavits of some of the employees of BCC, the ID, and the
signed checks, bills and receipts. Suffice it to be stated that such other proofs were easily
explainable by respondents and by the aforestated circumstances showing him to be the employee
of SFC, not of BCC.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to
pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson
 TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO
Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

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

RENATO C. CORONA
Chief Justice