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[G.R. No.

167622, November 07, 2008]

GREGORIO V. TONGKO, PETITIONER, VS. THE MANUFACTURERS LIFE


INSURANCE CO. (PHILS.), INC. AND RENATO A. VERGEL DE DIOS,
RESPONDENTS.

Facts:

RESPONDENT Manufacturers Life Insurance Co. (Philippines) Inc. (Manulife) is


engaged in life insurance business. On July 1, 1977, petitioner Gregorio V. Tongko
entered into a Career Agent’s Agreement with respondent. As an agent, Tongko was
to canvass for applications for life insurance, annuities, group policies and other
products of Manulife and collect in exchange for provisional receipts issued by him
money due or become due to the company.

In a complaint for illegal dismissal filed by Tongko, Manulife interposed the


defense of lack of employer-employee relationship between them.

Issue: WON employer-employee exist between agent of insurance of


companies?

Ruling: yes.

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 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
product which satisfies those set by the company and sufficiently meets the
volume of new business required of Production Club membership.

Under this provision, an agent of Manulife must comply with three


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. (Gregorio V. Tongko versus The Manufacturers Life
Insurance Co. (Philippines) Inc., and Renato A. Vergel de Dios, G.R. No.
167622, Nov. 7, 2008).

Nota Bene: On motion for Reconsideration, Supreme Court En banc reversed its
ruling promulgated on June 29, 2010. SC declared that NO Employer-employee
existed between Tongko and Manulife.

Ruling in the Motion for Reconsideration

In disposing of this Motion for Reconsideration, the Supreme Court placed heavy significance on
the application of the Civil Code and Insurance provisions on agency. The original Agreement of
Tongko with the company dictates that he is an insurance agent. No other documentary evidence
was found to support subsequent stipulations as to their relationship that would negate the
agency, and not employment, relationship on the original agreement.

It was found by the Court that Tongko declared himself as business or self-employed person in
his income tax return. In a sense, an independent contractor. This bolsters the content of the
Agreement mentioned above that he was an insurance agent in the context of the Insurance Code
and the Civil Code. To the Court, this aspect of the evidence was not considered in its original
decision, which had they been given importance, would have changed the decision as it is an
admission against interest on the part of Tongko.

Another principle that surfaced here is the concept of estoppel. Tongko’s previous admissions in
several years of tax returns as an independent agent, as against his belated claim that he was all
along an employee, are too diametrically opposed to be simply dismissed or ignored.

As to the value of the Code of Conduct relied upon by Tongko in claiming that he is an
employee, the Court posits:

“What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife
imposes on its agents in the sale of insurance. The mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor law control as the law and jurisprudence
teach us.

As already recited above, the Insurance Code imposes obligations on both the insurance
company and its agents in the performance of their respective obligations under the Code,
particularly on licenses and their renewals, on the representations to be made to potential
customers, the collection of premiums, on the delivery of insurance policies, on the matter of
compensation, and on measures to ensure ethical business practice in the industry.

Element of control in principal-agent relationship does not make the agent an employee of
the principal.
The general law on agency, on the other hand, expressly allows the principal an element of
control over the agent in a manner consistent with an agency relationship. In this sense, these
control measures cannot be read as indicative of labor law control. Foremost among these are the
directives that the principal may impose on the agent to achieve the assigned tasks, to the extent
that they do not involve the means and manner of undertaking these tasks. The law likewise
obligates the agent to render an account; in this sense, the principal may impose on the agent
specific instructions on how an account shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed through rules and regulations without
intruding into the labor law concept of control for purposes of employment.”

The Court further held that a commitment to abide by the rules and regulations of an insurance
company does not ipso facto make the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agent’s conduct necessarily indicate “control” as this term
is defined in jurisprudence. Guidelines indicative of labor law “control,” should not merely relate
to the mutually desirable result intended by the contractual relationship; they must have the
nature of dictating the means or methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use of these means. In fact,
results-wise, the principal can impose production quotas and can determine how many agents,
with specific territories, ought to be employed to achieve the company’s objectives. These are
management policy decisions that the labor law element of control cannot reach. Thus, as will be
shown more fully , Manulife’s codes of conduct, all of which do not intrude into the insurance
agents’ means and manner of conducting their sales and only control them as to the desired
results and Insurance Code norms, cannot be used as basis for a finding that the labor law
concept of control existed between Manulife and Tongko.

Thus, the Court did not see the existence of such relationship and reversed its earlier ruling
which granted Tongko millions in backwages and damages, among others.”