1

1.
FIRST DIVISION
[ G.R. No. 174631, October 19, 2011 ]
JHORIZALDY UY, PETITIONER, VS. CENTRO CERAMICA
CORPORATION AND/OR RAMONITA Y. SY AND MILAGROS U.
GARCIA, RESPONDENTS.

his alleged low output, he was surprised considering that last January
2002, he was informed by Agcaoili that management was satisfied with
his performance and he ranked second to the top performer, Edwin I.
Hirang. By that time, all of the sales people of the company could not
meet the P1.5 Million sales quota, so respondents are clearly zeroing in
on him.
Finally, on March 13, 2002, respondents sent him another memo,
which reads:

DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 assailing
the Decision[1] dated April 21, 2006 and Resolution[2] dated September
7, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 88061. The
CA annulled and set aside the Decision[3] dated July 29, 2004 rendered
by the National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 035557-03 which reversed the Labor Arbiter's ruling that petitioner
was not illegally dismissed.

MEMO OF NOTICE OF CHARGES

Factual Antecedents
Petitioner Jhorizaldy Uy was hired by respondent Centro Ceramica
Corporation as full-time sales executive on March 21, 1999 under
probationary employment for six months. He became a regular
employee on May 1, 2000 with monthly salary of P7,000.00 and
P1,500.00 transportation allowance, plus commission.

Records show that since February 22, 2002, to date, you have failed to
report for work, without informing your employer of the reason therefor
and without securing proper leave in violation of your contract of
employment and existing company rules and regulations. Further, you
have refused to receive any of your monetary entitlements such as
salary, commission and other amounts due to you despite notice that
the same are available to you for payment.

On March 18, 2002, petitioner filed a complaint for illegal dismissal

against the respondent company, its President Ramonita Y. Sy (Sy)
and Vice-President Milagros Uy-Garcia (Garcia).

Further, to this date, you have not submitted any explanation in writing
in response to our Memo dated February 21, 2002, requiring you to
explain your failure to meet your quota as Sales Executive.

Petitioner alleged that his predicament began when former VP Garcia

was rehired by respondent company in the last quarter of
2001. Certain incidents involving longtime clients led to a strained
working relationship between him and Garcia. On February 19, 2002
after their weekly sales meeting, he was informed by his superior,
Sales Supervisor Richard Agcaoili, that he (petitioner) was to assume a
new position in the marketing department, to which he replied that he
will think it over. His friends had warned him to be careful saying
"mainit ka kay Ms. Garcia." That same day, he was summoned by Sy
and Garcia for a closed-door meeting during which Sy informed him of
the termination of his services due to "insubordination" and advised him
to turn over his samples and files immediately. Sy even commented
that "member ka pa naman ng [S]ingles for [C]hrist pero napakatigas
naman ng ulo mo." On February 21, 2002, he was summoned again
by Sy but prior to this he was already informed by Agcaoili that the
spouses Sy will give him all that is due to him plus goodwill money to
settle everything. However, during his meeting with Sy, he asked for
his termination paper and thereupon Sy told him that "If that's what you
want I will give it to you". She added that "pag-isipan mo ang gagawin
mo dahil kilala mo naman kami we are powerful." [4]

In view of the foregoing, please explain in writing twenty four (24) hours
from receipt hereof, why the company should not terminate your
contract of employment for serious violations of your employment
contract as indicated above.[6]

Petitioner further narrated that on February 22, 2002, he turned over

company samples, accounts and receivables to Agcaoili. Thereafter,
he did not report for work anymore. But on March 6, 2002, an
employee of respondent company presented to him at his apartment
the following memorandum:
MEMO OF NOTICE OF CHARGES
MEMORANDUM:
TO: JHORIZALDY B. UY
FROM: RAMONITA Y. SY
RE: FAILURE TO MEET QUOTA FOR SALES EXECUTIVE
DATE: February 21, 2002
Records show that you have failed to meet the quota for sales
executives, set for the period from 1999 to 2001 in violation of your
contract of employment.
In view of the foregoing, please explain in writing within twenty[-]four
(24) hours from receipt hereof, why the company should not terminate
your contract of employment.[5]
He did not receive said memo because it was not written on the
company stationery and besides he had already been dismissed. As to

INTER-OFFICE MEMORANDUM NO. 2:

TO:
THRU:
FROM:
RE:
DATE:

JHORIZALDY B. UY
RICHARD B. AGCAOILI
RAMONITA Y. SY
NOTICE OF CHARGE OF ABSENCE WITHOUT LEAVE
March 13, 2002

He referred the above letter to his counsel who sent the following letterreply:
MS. RAMONITA Y. SY
Centro Ceramica Corporation
225 EDSA, East Greenhills
Mandaluyong City
We are writing you in behalf of Mr. Jhorizaldy B. Uy who used to be a
Sales Executive of your firm.
On February 19, 2002, you informed him that from Sales Executive he
was to assume a new position in the marketing department. He
refused and when he later said that "pag-iisipan ko pa" you charged
him with insubordination. Your Ms. Nita Garcia even lamented in this
wise "single (for Christ) ka pa naman." Right then you terminated his
services and was directed to turn over everything that he had which
was company owned and it was on February 22, 2002 that the turn
over was made.
On or about March 6, 2002 an employee of your company saw him in
his apartment giving him a memorandum to explain his alleged failure
to meet the quota as Sales Executive. He admits with c[a]ndor that he
did not receive the said memorandum because it was written not on the
company stationary. Just the same the contents of the said letter has
bec[o]me irrelevant because he has been already dismissed as of
February 19, 2002 and as regards the low output he says that all of the
sales people could not meet the quota and why zero in on him.
Then on Mach 13, 2002 you sent him a memorandum to explain in
writing within twenty four (24) hours why he should not be dismissed for
his alleged absence without leave.
You must have been advised by someone that your dismissal of Mr. Uy
on February 19, 2002 is doubly illegal, i.e., for lack of due process and
sufficient cause and the March 13, 2002 memorandum is to make up
for such lapse so that if Mr. Uy files a case of illegal dismissal, you can
conveniently say that he violated his contract of employment and that
he was on absence without leave. Nice move, but it may not be nice
later on.

2
x x x x[7]

NLRC's Ruling

For his illegal termination, petitioner asserted that he is entitled to his

unpaid commission, tax refund, back wages and reinstatement.

Petitioner appealed to the NLRC which reversed the Labor Arbiter's

ruling. The NLRC found that the dismissal of petitioner was made
under questionable circumstances, thus giving weight to petitioner's
assertion that he was being singled out notwithstanding that all sales
personnel similarly could not meet the P1.5 million monthly sales
quota. Such finding is reinforced by the fact that no sanction was
imposed on petitioner or any other employee for the supposed failure to
meet the quota, thereby creating the impression that the situation was
tolerated by the respondents. The NLRC thus decreed:

On the other hand, respondents denied dismissing petitioner. They

countered that petitioner's poor sales performance did not improve
even after he was regularized. On February 18, 2002, management
met with the Sales Group on a per agent basis to discuss sales
performance, possible salary realignment and revamp of the Sales
Group. Agcaoili relayed to petitioner the poor assessment of his sales
performance and the possibility that he will be transferred to another
department although there was yet no official decision on the matter.
Petitioner then told Agcaoili that he was aware of the problem and his
possible termination, prompting the latter to convince the former to
consider voluntarily resigning from the company rather than be
terminated. The next day, February 19, 2002, petitioner talked anew to
Agcaoili and informed the latter that he will just resign from the
company and sought an appointment with Sy. When petitioner inquired
how much he will get if he will resign, Sy advised him that he would get
salaries and commissions to which he is legally entitled; hence, for
items sold and already delivered, he will be receiving the commission in
full, but for those sold but yet to be delivered, as per company policy,
he will receive the commissions only upon delivery of the items. Upon
hearing this, petitioner suddenly got mad and said that if that is the
case, the company president should just terminate him and walked
out. Petitioner was given a chance, through the two memos issued to
him, to explain his failure to meet the prescribed sales quota and his
failure to report for work without informing the company of the reason
therefor. But he never submitted his explanations to his violations of the
contract of employment, and abandoned his job which is another
ground for terminating his employment. While it would appear that
petitioner aimed to secure his alleged money claims from the
respondents, this does not justify abandonment of his work as
respondents never had the intention of terminating his services.
Respondents maintained that petitioner voluntarily left his workplace
and refused to report for work as in fact he indicated to his sales
supervisor that he will just resign; however, he never submitted a letter
of resignation.[8]
Respondents also denied the claims of petitioner regarding an alleged
souring of his relations with Garcia, as in fact it was petitioner who
clearly had a personal grudge against her and not the other way
around. The alleged incidents with client actually showed it was
petitioner who was discourteous and abusive. There was likewise no
reason for respondent Sy to say they were powerful because petitioner
did not at all threaten to sue or do something to their prejudice. To
refute petitioner's unfounded allegations, respondents presented the
affidavits of the following: (1) co-employee Rommel Azarraga who
admitted he was the person who warned petitioner to be careful and
told him "mainit ka kay Mrs. Garcia" and explained that he only made
such statement in order to scare petitioner and convince him to change
his attitude; the truth is that Mrs. Garcia had not spoken to him about
harbouring any ill feelings towards petitioner and neither does he know
of any incident or circumstance which may give rise to such ill feeling of
Mrs. Garcia towards petitioner; (2) Richard Agcaoili who corroborated
the respondents' claims, denying that petitioner was terminated due to
insubordination; he further denied having told petitioner that
management was satisfied with his performance, the truth being that
while petitioner may have ranked second to the top performer, there
was actually only two remaining senior sales agents while the rest have
more or less six months experience; considering the number of years of
his service to the company, petitioner should have improved as against
other agents most of whom were newly-hired and still under probation;
and (3) Arnulfo Merecido, respondent company's employee
(warehouse helper) who claimed that he had a fistfight with petitioner
sometime in June 2000 which arose from the latter's insulting remarks
regarding his family.[9]
Labor Arbiter's Ruling
In his decision[10] dated April 8, 2003, Labor Arbiter Elias H. Salinas
dismissed petitioner's complaint on the basis of his finding that it was
petitioner who opted not to report for work since February 22, 2002,
after offering to resign (as told to his supervisor) because he could not
accept his possible transfer to another department.

WHEREFORE, premises considered, the Decision dated April 8, 2003

is set aside and reversed. A new one is entered finding complainant to
have been illegally dismissed and thus entitled to reinstatement with
backwages. Respondent Centro Ceramica Corporation is hereby
ordered to pay complainant his backwages reckoned from the date of
his dismissal on February 19, 2002 up to the date of the promulgation
of this decision. As reinstatement is no longer feasible, complainant
should instead be paid separation pay equivalent to one half (1/2)
month pay for every year of service. In addition, respondents company
should pay complainant his unpaid commission in the amount of
P16,581.00.
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Court of Appeals Ruling
Respondents elevated the case to the CA which reversed the NLRC
and dismissed petitioner's complaint. According to the CA, petitioner by
his own account had admitted that it was he who asked for his
dismissal when he narrated that during his meeting with Sy, he had
asked for his termination paper and she threatened to do so if that was
what he wanted. It also noted the affidavit of Agcaoili who attested that
petitioner was merely informed of the decision to transfer him to
another department, which is not denied by the petitioner; said witness
also said that the turnover of company documents and files was
voluntary on the part of petitioner who expressed desire to resign from
the company. Another statement considered by the CA is that made by
witness Azarraga who explained that he only mentioned the name of
Ms. Garcia to petitioner when he warned the latter to be careful, simply
because she is a member of the Couples for Christ who may have an
influence over petitioner who is a member of the Singles for Christ. As
to the memos sent by the company to petitioner's residence, this shows
that it has not yet terminated the employment of petitioner. Thus, the
CA held that the evidence on record supports the Labor Arbiter's
finding that petitioner "informally severed" the employment relationship
as manifested by his voluntary transfer of his accountabilities to his
supervisor and thereafter his act of not reporting for work anymore.
Petitioner's motion for reconsideration having been denied, the present
petition was filed in this Court.
Issue
The sole issue to be addressed is whether petitioner was dismissed by
the respondents or voluntarily severed his employment by abandoning
his job.
Arguments of the Parties
Petitioner assails the CA's misappreciation of the facts, completely
relying on respondents' allegations particularly on what transpired
during the meeting with respondents Sy and Garcia, of which the
appellate court made a "twisted" interpretation of their
conversation. Hence, instead of decreeing petitioner's illegal
termination based on Sy's verbal dismissal without just cause and due
process, the CA proceeded to conclude that petitioner voluntarily and
informally severed his relation with the company. As to the affidavit of
Agcaoili, his statement that he merely informed petitioner of the
decision to transfer him to another department is of no moment
because what matters is the action of Sy who dismissed petitioner
outright. Moreover, Agcaoili, being under the employ of respondents,
would logically be biased and he would naturally tend to protect the

3
company by his statements regarding petitioner's case. On the other
hand, Azarraga's confusing and inconsistent statements only confirmed
that Garcia indeed had a grudge against petitioner, as he could not
give a rational explanation for warning petitioner to be careful with
Garcia.
Petitioner further contends that his act of turning over his
accountabilities to his supervisor cannot be considered voluntary on his
part as it was done by him knowing that he was already terminated and
upon the specific instructions of Sy and Garcia. The CA therefore erred
in relying on the unbelievable submission of respondents that such
transfer of company documents and samples was indicative of
petitioner's desire to resign. It failed to see that petitioner's reaction to
his impending transfer to another department ("pag-iisipan ko pa") was
due to his not coming to terms with Garcia and aware of the warning
earlier given by his friends. Under this scenario, the animosity between
petitioner and Garcia was evident such that Garcia eventually prevailed
upon Sy to terminate petitioner's services. Unfortunately, it was on the
very same day that petitioner was verbally terminated by Sy on the
ground of insubordination and ordered to immediately turn over his files
and samples. It was on February 21, 2002 that Agcaoili told petitioner
that the company will give him all that is due him plus goodwill money,
and in a meeting with Sy he had asked for his termination paper
because he was in fact already terminated on February 19, 2002 but
she responded by saying that if that was what he wanted she will give it
to him and even threatened him to think because respondents are
powerful.
In their Comment, respondents assert that the CA committed no
reversible error in concluding that petitioner was not illegally
terminated. They stress that the evidence clearly established that
petitioner was not dismissed but required merely to explain why he
failed to report for work after meeting the company president. As to
petitioner's act of turning over his accountabilities, respondents argue
that this cannot be considered proof of his illegal dismissal because it
was done voluntarily in line with his proposed resignation. Respondent
company was about to conduct its investigation on petitioner who went
AWOL since February 19, 2002 but then he refused to accept the
memos sent to him, thus confirming categorically that respondents
were investigating his failure to report for work and giving him all the
opportunity to explain his absence.
The Court's Ruling
We grant the petition.
As a general rule, only questions of law may be allowed in a petition for
review on certiorari.[12]Considering, however, that the Labor Arbiter's
findings were reversed by the NLRC, whose Decision was in turn
overturned by the CA, reinstating the Labor Arbiter's Decision, it
behooves the Court to reexamine the records and resolve the
conflicting rulings.[13]
Scrutinizing the records, we find that the NLRC's finding of illegal
dismissal is supported by the totality of evidence and more consistent
with logic and ordinary human experience than the common finding of
the CA and Labor Arbiter that petitioner informally severed his
employment relationship with the company. It hardly convinces us that
after declining his supposed transfer to another department as per the
information relayed to him by his supervisor, petitioner would readily
turn over his files and samples unless something critical indeed took
place in his subsequent closed-door meeting with Sy and Garcia. As
correctly pointed out by petitioner, it is irrelevant whether or not he had
earlier inquired from his supervisor what he will receive if he offers
instead to resign upon being told of his impending transfer, for what
matters is the action of Sy on his employment status. If ever petitioner
momentarily contemplated resignation and such was the impression he
conveyed in his talk with his supervisor prior to the meeting with Sy,
such is borne by circumstances indicating Garcia's antagonism towards
petitioner. In any event, whether such perception of a strained working
relationship with Garcia was mistaken or not is beside the point. The
crucial factor is the verbal order directly given by Sy, the company
president, for petitioner to immediately turn over his accountabilities.
Notably, Sy got irked when petitioner asked for his termination
paper. Petitioner apparently wanted to ascertain whether such
summary dismissal was official, and it was well within his right to
demand that he be furnished with a written notice in order to apprise

him of the real ground for his termination.

Contrary to respondents' theory that petitioner's act of turning over the
company files and samples is proof of his voluntary informal resignation
rather than of the summary dismissal effected by management, no
other plausible explanation can be made of such immediate turn over
except that petitioner directly confirmed from the company president
herself that he was already being dismissed. The subsequent memos
sent to petitioner's residence after he did not anymore report for work
only reinforce the conclusion that the belated written notice of the
charge against him - his alleged failure to meet the prescribed sales
quota - was an afterthought on the part of respondents who may have
realized that they failed to observe due process in terminating
him. That respondents would still require a written explanation for
petitioner's poor sales performance after the latter already complied
with Sy's directive to turn over all his accountabilities is simply
inconsistent with their claim that petitioner offered to resign and
voluntarily relinquished possession of company files and samples when
told of his impending transfer. In other words, petitioner was not given
any opportunity to defend himself from whatever charges hurled by
management against him, such as poor sales performance as relayed
to him by his supervisor, when Sy unceremoniously terminated him
which must have shocked him considering that his supervisor earlier
advised that he would just be transferred to another
department. Under this scenario, petitioner's decision not to report for
work anymore was perfectly understandable, as the sensible reaction
of an employee fired by no less than the company president. It was
indeed a classic case of dismissal without just cause and due process,
which is proscribed under our labor laws.
As to the affidavits submitted by the respondents, these are at best
self-serving having been executed by employees beholden to their
employer and which evidence by themselves did not refute petitioner's
main cause of action -- the fact of his summary dismissal on February
19, 2002. Respondents' effort to present the case as one of an erring
employee about to be investigated for poor sales performance must
likewise fail. The NLRC duly noted the discriminatory treatment
accorded to petitioner when it declared that there is no evidence at all
that other sales personnel who failed to meet the prescribed sales
quota were similarly reprimanded or penalized. Incidentally, the
question may be asked if petitioner whose performance was assessed
by management as "poor" yet admittedly ranked second to the top
sales agent of the company, why was it that no evidence was
submitted by respondents to show the comparative sales performance
of all sales agents? Given the strained working relationship with Garcia,
or at least a perception of such gap on the part of petitioner, the latter
could not have been properly informed of the actual ground for his
dismissal. But more importantly, respondents terminated petitioner first
and only belatedly sent him written notices of the charge against him.
Fairness requires that dismissal, being the ultimate penalty that can be
meted out to an employee, must have a clear basis. Any ambiguity in
the ground for the termination of an employee should be interpreted
against the employer, who ordained such ground in the first place. [14]
Resignation is defined as"the voluntary act of employees who are
compelled by personal reasons to disassociate themselves from their
employment. It must be done with the intention of relinquishing an
office, accompanied by the act of abandonment."[15] In this case, the
evidence on record suggests that petitioner did not resign; he was
orally dismissed by Sy. It is this lack of clear, valid and legal cause, not
to mention due process, that made his dismissal illegal, warranting
reinstatement and the award of backwages. [16] Moreover, the filing of a
complaint for illegal dismissal just three weeks later is difficult to
reconcile with voluntary resignation. Had petitioner intended to
voluntarily relinquish his employment after being unceremoniously
dismissed by no less than the company president, he would not have
sought redress from the NLRC and vigorously pursued this case
against the respondents.[17]
When there is no showing of a clear, valid and legal cause for the
termination of employment, the law considers it a case of illegal
dismissal. Furthermore, Article 4 of the Labor Code expresses the
basic principle that all doubts in the interpretation and implementation
of the Labor Code should be interpreted in favor of the
workingman. This principle has been extended by jurisprudence to
cover doubts in the evidence presented by the employer and the
employee.[18] Thus we have held that if the evidence presented by the

4
employer and the employee are in equipoise, the scales of justice must
be tilted in favor of the latter.[19] Accordingly, the NLRC's finding of
illegal dismissal must be upheld.
However, the award of back wages and separation pay in lieu of
reinstatement should be modified. Under the doctrine of strained
relations, the payment of separation pay has been considered an
acceptable alternative to reinstatement when the latter option is no
longer desirable or viable.[20] Under the facts established, petitioner is
entitled to the payment of full back wages, inclusive of allowances, and
other benefits or their monetary equivalent, computed from the date of
his dismissal on February 19, 2002 up to the finality of this decision,
and separation pay in lieu of reinstatement equivalent to one
month salary for every year of service, computed from the time of his
engagement by respondents on March 21, 1999 up to the finality of this
decision.[21]
WHEREFORE, the petition for review on certiorari is GRANTED. The
Decision dated April 21, 2006 and Resolution dated September 7, 2006
of the Court of Appeals in CA-G.R. SP No. 88061 are SET
ASIDE. The Decision dated July 29, 2004 of the National Labor
Relations Commission in NLRC NCR CA No. 035557-03
is REINSTATED andAFFIRMED WITH MODIFICATIONS in that in
addition to the unpaid commission of P16,581.00, respondent Centro
Ceramica Corporation is hereby ordered to pay petitioner Jhorizaldy Uy
his full back wages, inclusive of allowances, and other benefits or their
monetary equivalent, computed from the date of his dismissal on
February 19, 2002 up to the finality of this decision, and separation pay
in lieu of reinstatement equivalent to one monthsalary for every year of
service, computed from the time of his engagement by respondent
corporation on March 21, 1999 up to the finality of this decision.

In his answer, the petitioner denied the allegations against him

contained in the affidavits of respondents' witnesses, Vicente Niguidula
(Niguidula) and Gil Balais (Balais).[5] The petitioner labeled all of the
respondents' accusations as completely baseless and sham, designed
to protect Niguidula and Balais who were the favorite boys of
respondent Edgardo Quiogue (Quiogue), the Executive Vice President
of the respondent company. At the petitioner's request, the respondent
company scheduled a formal hearing at 2:00 p.m. of May 28, 1996.
However, the petitioner sent a notice that he would not participate
when he learned through his wife that criminal cases forestafa and
qualified theft had been filed against him at the Makati Prosecutor's
Office. He felt that the hearing was a "moro-moro" investigation. On
May 24, 1996, the respondent company further charged the petitioner
with "Violation of Company Code of Conduct," based on the affidavits
of Balais, Cristino Samarita (Samarita), and Jose Aying (Aying).[6]
On May 31, 1996, the respondent company issued a Notice of
Dismissal to the petitioner based on the following grounds: [7]
1. Soliciting and/or receiving money for his own benefit from
suppliers/dealers/traders Aying and Samarita, representing
"commissions" for job contracts involving the repair,
reconditioning and replacement of parts of the airconditioning
units at the company's Antipolo Station, as well as the installation
of fire exits at the Technology Centre;
2.

Diversion of company funds by soliciting and receiving on

different occasions a total of P14,000.00 in "commissions" from
Aying for a job contract in the company's Antipolo Station;

3.

Theft of company property involving the unauthorized removal of

one gallon of Delo oil from the company storage room;

4.

Disrespect/discourtesy towards a co-employee, for using

offensive language against Niguidula;

5.

Disorderly behavior, for challenging Niguidula to a fight during

working hours within company premises, thereby creating a
disturbance that interrupted the normal flow of activities in the
company;

6.

Threat and coercion, for threatening to inflict bodily harm on the

person of Niguidula and for coercing Balais, a subordinate, into
soliciting money in his (the petitioner's) behalf from
suppliers/contractors;

7.

Abuse of authority, for instructing Balais to collect commissions

from Aying and Samarita, and for requiring Raul Pacaldo
(Pacaldo) to exact 2%-5% of the price of the contracts awarded to
suppliers; and

No pronouncement as to costs.
SO ORDERED.
Corona, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Del
Castillo, JJ., concur.

2.
SECOND DIVISION
[ G.R. No. 165153, September 23, 2008 ]
CARLOS C. DE CASTRO, PETITIONER, VS. LIBERTY
BROADCASTING NETWORK, INC. AND EDGARDO QUIOGUE,
RESPONDENTS.
DECISION
BRION, J.:
Before us is the Petition for Review on Certiorari[1] filed by petitioner
Carlos C. de Castro (petitioner) to annul, reverse and/or set aside the
Decision[2] dated May 25, 2004 and the Resolution[3] dated August 30,
2004 of the Former Special Third Division of the Court of Appeals (CA)
in CA-G.R. SP No. 79207 entitled "Liberty Broadcasting Network, Inc.
and Edgardo B. Quiogue v. National Labor Relations Commission and
Carlos C. de Castro."
FACTUAL BACKGROUND
The facts of the case as gathered from the records are briefly
summarized below.
The petitioner commenced his employment with respondent Liberty
Broadcasting Network, Inc. (respondent company) as Building
Administrator on August 7, 1995. On May 16, 1996, the respondent
company, through its HRM Senior Manager (Personnel Manager)
Bernard Mandap, sent a notice to the petitioner requiring him to explain
within forty-eight (48) hours why he should not be made liable for
violation of the Company Code of Conduct for acts constituting serious
misconduct, fraud and willful breach of the trust reposed in him as a
managerial employee.[4]

8. Slander, for uttering libelous statements against Niguidula.

The petitioner filed a complaint for illegal dismissal against the
respondents with the National Labor Relations Commission (NLRC)
Arbitration Branch in the National Capital Region. At the arbitration, he
denied committing the offenses charged. He maintained that: he could
not encourage solicitation of commissions from suppliers considering
that he was quite new in the company; the accusations are belated
because the imputed acts happened in 1995; the one gallon of Delo oil
he allegedly carted away was at the room of Balais at the time, which
circumstance he immediately relayed to Mandap; the affidavits of
Niguidula and Balais are not reliable because he had altercations with
them; in the first week of May 1996, he reprimanded Balais for incurring
unnecessary overtime work, which Balais resented; on May 9, 1996,
Niguidula verbally assaulted and challenged him to a fight, which he
reported to respondent Quiogue and to the Makati Police. Attached to
the petitioner's position paper were the affidavits[8] of Aying and
Ronalisa O. Rosana, a telephone operator of the company.
On April 30, 1999, Labor Arbiter Felipe Pati rendered a Decision in the
petitioner's favor, holding the respondent company liable for illegal
dismissal.[9] Arbiter Pati disbelieved the affidavits of Niguidula, Balais,
Pacaldo, Samarita, and Aying in view of the circumstances prior to their
execution. The Arbiter noted that Niguidula and Balais had altercations
with petitioner prior to the issuance of the notice of violation to the
latter; the affidavit of Samarita showed that it was not petitioner who

5
personally asked commission from him but Balais; Aying's credibility
had been placed in serious doubt because he recanted his previous
affidavit and issued another stating that the petitioner did not actually
ask commission from him; and Pacaldo's affidavit should not also be
believed because he was a subordinate of Niguidula who had an ax to
grind against the petitioner.
On appeal, the NLRC reversed the Labor Arbiter's decision and
adopted the findings of Labor Arbiter Tamayo who had reviewed the
appeal on the NLRC's instructions.[10] It ruled that Arbiter Pati erred in
disregarding the affidavits of the respondents' witnesses.
The petitioner filed a motion for reconsideration which the NLRC
granted in a Resolution promulgated on September 20, 2002. [11] The
NLRC held that the charges against petitioner "were never really
substantiated other than by the `bare allegations' in the affidavits of
witnesses" who were the company's employees and who had
altercations with petitioner prior to the execution of their affidavits.
The NLRC turned down the motion for reconsideration that the
respondent company subsequently filed.[12] The respondent company
thus elevated the case to the CA via a petition for certiorari under Rule
65 of the Rules of Court. The CA granted the petition in its Decision
promulgated on May 25, 2004,[13] thereby effectively confirming the
validity of the petitioner's dismissal. The appellate court found that the
NLRC gravely abused its discretion when it disregarded the affidavits of
all the respondents' witnesses, particularly those of Balais, Samarita,
Niguidula, and Pacaldo who were one in saying that the petitioner
demanded commissions from the company's job contractors. The CA
observed that it could not have been possible that Balais and Niguidula
(who had previous altercations with the petitioner), and Samarita (who
did not previously know Quiogue) all committed perjury to execute
respondent Quiogue's scheme of removing the petitioner from the
company.
The petitioner moved but failed to secure a reconsideration of the CA
Decision; hence, he came to us through the present petition.
THE PETITION
The petitioner submits that the CA erred when it acted as a trial court
and interfered without sufficient basis with the NLRC's findings. Citing
our ruling in Cosmos Bottling Corporation v. NLRC, et al.,[14] he points
out that factual findings of the NLRC, particularly when they coincide
with those of the Labor Arbiter, are accorded respect and finality and
should not be disturbed if they are supported by substantial evidence.
The petitioner points out, too, that Rule 65 of the Rules of Court finds
full application only when an administrative tribunal has acted with
grave abuse of discretion amounting to lack of or in excess of
jurisdiction, or when such finding is not supported by the evidence. He
argues that the respondent company failed to raise any jurisdictional
question of jurisdiction or grave abuse of discretion before the CA.
What the respondent company effectively sought from the CA, citing
our ruling in Flores v. NLRC,[15] was a judicial re-evaluation of the
adequacy or inadequacy of the evidence on record - an improper
exercise of power outside the scope of the extraordinary writ
of certiorari.
The petitioner further argues that the CA erred when it substituted its
judgment for that of the Labor Arbiter and the NLRC who were the
"triers of facts" who had the opportunity to review the evidence
extensively.
The petitioner theorizes that his termination from employment was a
hatchet job maliciously concocted by the respondents, with Quiogue at
the helm. He had offended Quiogue when he questioned the latter's
award of the fire exit contract to Samarita; as a result, Quiogue
fabricated charges against him, using his underlings Niguidula and
Balais. He particularly questions the charge that he conspired with his
fellow managers (such as Niguidula, Pacaldo and even Personnel
Manager Mandap) in December 1995, and asks why his investigation
and the supporting evidence came only in May 1996.
The petitioner likewise cites Aying's change of statement as evidence
that the respondents' charges have been concoctions. He belies that
he slandered and challenged Niguidula to a fight; it was in fact
Niguidula who had defamed him. He stresses that he complained in

writing to respondent Quiogue about the incident immediately after it

happened, copy furnished B. P. Mandap, F. A. Domingo and R. M.
Moreno, the Personnel Manager, Head of Human Relations and
President of the company, respectively. He likewise reported the matter
to the police and to the barangay covering the workplace, and lodged a
complaint for grave oral defamation against Niguidula before the Makati
Prosecutor's Office. His co-employee, Ronalisa Rosana, corroborated
all these allegations. He points out that Niguidula never reported the
incident to Quiogue or to anyone for that matter, thus, proving the
falsity of his (Niguidula's) complaint.
Finally, the petitioner draws attention to Quiogue's failure to act on his
complaint against Niguidula, only to resurrect it under the Notice of
Violation served on him on May 16, 1996.[16] This time, however,
Niguidula was already the victim. As to the notice of violation itself, the
petitioner laments that although he was given 48 hours to explain,
Quiogue, in bad faith, immediately filed complaints for estafa and
qualified theft against him. Mandap even went to his residence and
warned his wife not to file charges against the company, or else,
Quiogue would file cases against him in the regular courts.
THE CASE FOR THE RESPONDENTS
The respondents submit that the CA correctly ruled as the NLRC
committed grave abuse of discretion when it flip-flopped in its factual
findings. They further stress that the positive testimonies of Balais,
Pacaldo, and Samarita should be given credence over the negative
testimony of the petitioner. Even granting that the testimony of
Niguidula was tainted with malice and bad faith, the affidavit of Balais
should stand because no evidence supports the petitioner's claim that
Balais also had altercations with him before he (Balais) executed his
two affidavits.
With respect to the testimony of Samarita, the respondents point out
that Samarita stated in no uncertain terms that he was forced to
increase his quotation for the construction of the company fire exits
from P70,091.00 to P87,000.00 because the petitioner had asked for
commissions. The petitioner failed to rebut this. They brush aside the
insinuation that Samarita and Pacaldo suffer from bias as the petitioner
failed to show by evidence that their personal interests led them to
favor the company.
The respondents lastly maintain that petitioner's claim - that Quiogue
orchestrated the petitioner's dismissal after he (the petitioner)
questioned Quiogue's award of a contract to Samarita Enterprises for a
questionable price - is not supported by evidence. They reiterate the
gravity of the charges the petitioner faces; they constitute serious
misconduct and fraud or willful breach of trust reposed in him by his
employer and are just causes for termination of employment under
Article 282 of the Labor Code, as well as serious breaches of company
rules and the trust reposed in him by the respondent company.
OUR RULING
As a rule, and as recently held in Rudy A. Palecpec, Jr. v. Hon.
Corazon C. Davis, et al.[17] (a 2007 case), this Court is not a trier of
facts and can review a Rule 45 petition only on questions of law. We
wade, however, into questions of facts when there are substantial
conflicts in the factual findings of the CA, on the one hand, and the trial
court or government agency concerned, on the other. This is precisely
the situation that we have before us since the NLRC and the CA have
diametrically opposed factual findings leading to differing conclusions.
Hence, we are left with no option but to undertake a review of the facts
in this Rule 45 case.
We find the petition meritorious. To our mind, the CA erred in the
appreciation of the evidence surrounding petitioner's termination from
employment. The cited grounds are at best doubtful under the proven
surrounding circumstances, and should have been interpreted in the
petitioner's favor pursuant to Article 4 of the Labor Code.
1. The petitioner had not stayed long in the company and had not even
passed his probationary period when the acts charged allegedly took
place.[18] This fact carries several significant implications. First, being
new, his natural motivation was to make an early positive impression
on his employer. Thus, it is believable that as building administrator, he
diligently, zealously, and faithfully performed his tasks, working in
excess of eight hours per day to maintain the company buildings and
facilities in excellent shape; he even lent the company his personal

6
tools and equipment to facilitate urgent repairs and maintenance work
on company properties.[19]Second, because of his natural motivation as
a new employee and his lack of awareness of the dynamics of
relationships within the company, he must have been telling the truth
when he said that he objected to the way the contract for the
installation of fire escapes was awarded to Samarita. Third, his being
new somehow rendered doubtful the charge that he had already
encouraged solicitation of commission from suppliers, especially if
considered with the timing of the charges against him and the
turnaround of witness Aying's testimony.
2. The relationships within the company at the time the charges were
filed showed that he was a stranger who might not have known the
dynamics of company inter-relationships and might have stepped on
the wrong toes in the course of performing his duties.
Respondent Quiogue was the Executive Vice-President of the
company,[20] a very powerful official with a lot of say in company
operations. Since Samarita was doing the fabrication of steel balusters
for Quiogue's home in New Manila, Quezon City, [21] there is a lot of
hidden dynamics in their relationship and it is not surprising that
Samarita testified against the petitioner. Both Samarita and Quioque
have motives to resent the petitioner's comments about the irregular
award of a contract to Samarita.
Mandap, as Personnel Manager, is a subordinate of Quiogue. The
proposal to secure commissions from company suppliers reportedly
took place in a very public gathering - a drinking session - in his house.
Why Mandap did not take immediate action when he knew of the
alleged plan as early as December 1995 was never explained although
the petitioner raised the issue squarely.[22] The time gap - from
December 1995 to May 1996 - is an incredibly long time under the
evidence available and can be accounted for only by the fact that there
was no intention to terminate the services of the petitioner in
December; the motivation and the scheme to do this came only
sometime in April - May 1996 as the discussions below will show.
Niguidula, as Purchasing Manager, occupies a position that deals with
supplies and suppliers. He, not the petitioner, is one who might be
expected to be in the middle of all the actions regarding supply deals.
He would not welcome a new and over-zealous building administrator
since the building facilities generate the need for supplies and the
building administrator is the end-user who can see how supplies are
procured and used. It is significant that Niguidula and the petitioner had
a dispute regarding the accounting of company items and had a nearfight that "interrupted the normal flow of activities in the company." [23]

week of May 1996 for unnecessary overtime work and the two had a
verbal altercation, an incident that the petitioner reported to
Quiogue.[29] On May 9, 1996, petitioner also had an altercation with
Niguidula, the company's Purchasing Manager, who verbally assaulted,
slandered, and challenged him to a fight, another incident which he
likewise reported to Quiogue and to the Makati Police. [30] All these
strangely coincided with the time the charges were filed. The
respondents never successfully accounted for the coincidences.
All these considerations, to our mind, render the cited causes for the
petitioner's dismissal tenuous as the evidence supporting these
grounds come from highly suspect sources: they come either from
people who harbor resentment against the petitioner; those whose
positions have inherent conflict points with that of the petitioner; or from
people with business dealings with the company. Thus, it was not
surprising for the NLRC to observe:
From the above, the Commission believes that the Motion for
Reconsideration should be granted. Respondents' charges against
complainant were never substantiated by any evidence other than the
barefaced allegations in the affidavits of respondents' witnesses who
are employees of the company and who had an altercation with
complainant prior to the execution of their affidavits and charges. The
other witnesses are contractors having business deals with respondent
company and in fact, Jose Aying has made a turn around and denied
the complainant has been asking commission from him.
Under the circumstances, we join the NLRC in concluding that the
employer failed to prove a just cause for the termination of the
petitioner's employment - a burden the company, as employer, carries
under the Labor
Code[31] - and the CA erred when it saw grave abuse of discretion in the
NLRC's ruling. The evidentiary situation, at the very least, brings to the
fore the dictum we stated in Prangan v. NLRC[32] and in Ni cario v.
NLRC[33] 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 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."
WHEREFORE, premises considered, we hereby GRANT the petition.
Accordingly, we REVERSE and SET ASIDE the Decision and
Resolution of the CA promulgated on May 25, 2004 and August 30,
2004, respectively, andREINSTATE in all respects the Resolution of
the National Labor Relations Commission dated September 20, 2002.
Costs against the respondents.
SO ORDERED.

Pacaldo, a Purchasing Officer and a subordinate of Niguidula, under

usual conditions would side with Niguidula. He and Niguidula, not the
petitioner, occupy the positions critical in the purchase of supplies for
the company and were the people who could exact commissions from
suppliers.

Quisumbing, (Chairperson), Carpio Morales, Tinga, and Velasco, Jr.,

JJ., Concur.
3.
SECOND DIVISION

Balais is an air-con maintenance man whom petitioner reprimanded for

unauthorized overtime work on an air-conditioning unit; for failure to
monitor a newly overhauled compressor unit contrary to standard
practice; and for over-pricing his purchases; and thus, Balais had every
reason to testify against the petitioner. [24]
As already mentioned, Aying - the contractor who had earlier testified
against the petitioner - recanted his earlier statement that petitioner
asked for commissions from him.[25] Aying, in his second statement,
exonerated the petitioner.[26] This turnaround by itself is significant,
more so if considered with other circumstances, [27]particularly the
possibility that the charges might have been orchestrated owing to the
confluence of the people who were allied against the petitioner, their
respective motivations and the timing of events.
3. The timing of the filing of charges was, as the petitioner pointed out,
unusual. Indeed, if the proposal to solicit commissions had transpired in
December, the charges were quite late when they came in May.
Interestingly, it was in April 1996 that the petitioner questioned the
soundness of respondent Quiogue's decision to award the fabrication
and installation of six (6) units of fire escape to Samarita Enterprises
without observing company procedure of requiring at least three
quotations from suppliers and contractors.[28] The petitioner
reprimanded air-con maintenance man Balais sometime in the first

[ G.R. No. 177114, January 21, 2010 ]

MANOLO A. PEAFLOR, PETITIONER, VS. OUTDOOR CLOTHING
MANUFACTURING CORPORATION, NATHANIEL T. SYFU,
PRESIDENT, MEDYLENE M. DEMOGENA, FINANCE MANAGER,
AND PAUL U. LEE, CHAIRMAN, RESPONDENTS.
DECISION
BRION, J.:
Petitioner Manolo A. Peaflor (Peaflor) seeks the reversal of the Court
of Appeals (CA) decision[1] dated December 29, 2006 and its
resolution[2] dated March 14, 2007, through the present petition for
review on certiorarifiled under Rule 45 of the Rules of Court. The
assailed CA decision affirmed the September 24, 2002 decision[3]of the
National Labor Relations Commission (NLRC) that in turn reversed the
August 15, 2001 decision[4] of the Labor Arbiter.[5]
THE FACTUAL ANTECEDENTS
Peaflor was hired on September 2, 1999 as probationary Human
Resource Department (HRD) Manager of respondent Outdoor Clothing
Manufacturing Corporation (Outdoor Clothing or the company). As HRD
head, Peaflor was expected to (1) secure and maintain the right

7
quality and quantity of people needed by the company; (2) maintain the
harmonious relationship between the employees and management in a
role that supports organizational goals and individual aspirations; and
(3) represent the company in labor cases or proceedings. Two staff
members were assigned to work with him to assist him in undertaking
these functions.
Peaflor claimed that his relationship with Outdoor Clothing went well
during the first few months of his employment; he designed and
created the company's Policy Manual, Personnel Handbook, Job
Expectations, and Organizational Set-Up during this period. His woes
began when the company's Vice President for Operations, Edgar Lee
(Lee), left the company after a big fight between Lee and Chief
Corporate Officer Nathaniel Syfu (Syfu). Because of his close
association with Lee, Peaflor claimed that he was among those who
bore Syfu's ire.
When Outdoor Clothing began undertaking its alleged downsizing
program due to negative business returns, Peaflor alleged that his
department had been singled out. On the pretext of retrenchment,
Peaflor's two staff members were dismissed, leaving him as the only
member of Outdoor Clothing's HRD and compelling him to perform all
personnel-related work. He worked as a one-man department, carrying
out all clerical, administrative and liaison work; he personally went to
various government offices to process the company's papers.
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered
injuries in a bombing incident, the company required Peaflor to attend
to her hospitalization needs; he had to work outside office premises to
undertake this task. As he was acting on the company's orders,
Peaflor considered himself to be on official business, but was
surprised when the company deducted six days' salary corresponding
to the time he assisted Padilla. According to Finance Manager
Medylene Demogena (Demogena), he failed to submit his trip ticket,
but Peaflor belied this claim as a trip ticket was required only when a
company vehicle was used and he did not use any company vehicle
when he attended to his off-premises work.[6]
After Peaflor returned from his field work on March 13, 2000, his
officemates informed him that while he was away, Syfu had appointed
Nathaniel Buenaobra (Buenaobra) as the new HRD Manager. This
information was confirmed by Syfu's memorandum of March 10, 2000
to the entire office stating that Buenaobra was the concurrent HRD and
Accounting Manager.[7] Peaflor was surprised by the news; he also felt
betrayed and discouraged. He tried to talk to Syfu to clarify the matter,
but was unable to do so. Peaflor claimed that under these
circumstances, he had no option but to resign. He submitted a letter to
Syfu declaring his irrevocable resignation from his employment with
Outdoor Clothing effective at the close of office hours on March 15,
2000.[8]
Peaflor then filed a complaint for illegal dismissal with the labor
arbiter, claiming that he had been constructively dismissed. He
included in his complaint a prayer for reinstatement and payment of
backwages, illegally deducted salaries, damages, attorney's fees, and
other monetary claims.
Outdoor Clothing denied Peaflor's allegation of constructive dismissal.
It posited instead that Peaflor had voluntarily resigned from his work.
Contrary to Peaflor's statement that he had been dismissed from
employment upon Syfu's appointment of Buenaobra as the new HRD
Manager on March 10, 2000, Peaflor had in fact continued working for
the company until his resignation on March 15, 2000. The company
cited as evidence the security report that Peaflor himself prepared and
signed on March 13, 2000.[9]
Outdoor Clothing disclaimed liability for any of Peaflor's monetary
claims. Since Peaflor had voluntarily resigned, Outdoor Clothing
alleged that he was not entitled to any backwages and damages. The
company likewise denied making any illegal deduction from Peaflor's
salary; while deductions were made, they were due to Peaflor's failure
to report for work during the dates the company questioned. As a
probationary employee, he was not yet entitled to any leave credit that
would offset his absences.
In his August 15, 2001 decision, the labor arbiter found that Peaflor
had been illegally dismissed.[10] Outdoor Clothing was consequently

ordered to reinstate Peaflor to his former or to an equivalent position,

and to pay him his illegally deducted salary for six days, proportionate
13th month pay, attorney's fees, moral and exemplary damages.
Outdoor Clothing appealed the labor arbiter's decision with the NLRC.
It insisted that Peaflor had not been constructively dismissed, claiming
that Peaflor tendered his resignation on March 1, 2000 because he
saw no future with the corporation due to its dire financial standing.
Syfu alleged that he was compelled to appoint Buenaobra as
concurrent HRD Manager through a memorandum dated March 1,
2000 to cover the position that Peaflor would soon vacate. [11] The
appointment was also made to address the personnel matters that had
to be taken cared of while Peaflor was on unauthorized leave.
Incidentally, Outdoor Clothing alleged that Peaflor had already been
given two notices, on March 6 and 11, 2000 (absence without official
leave memoranda or the AWOL memoranda), for his unauthorized
absences. In a memorandum dated March 3, 2000 addressed to Syfu,
Buenaobra accepted the appointment.[12]
Peaflor contested Syfu's March 1, 2000 memorandum, Buenaobra's
March 3, 2000 memorandum, and the AWOL memoranda, claiming
these pieces of evidence were fabricated and were never presented
before the labor arbiter. He pointed out that nothing in this resignation
letter indicated that it was submitted to and received by Syfu on March
1, 2000. He claimed that it was submitted on March 15, 2000, the same
date he made his resignation effective. The AWOL memoranda could
not be relied on, as he was never furnished copies of these. Moreover,
he could not be on prolonged absence without official leave, as his
residence was just a few meters away from the office.
The NLRC apparently found Outdoor Clothing's submitted memoranda
sufficient to overturn the labor arbiter's decision. [13] It characterized
Peaflor's resignation as a response, not to the allegedly degrading
and hostile treatment that he was subjected to by Syfu, but to Outdoor
Clothing's downward financial spiral. Buenaobra's appointment was
made only after Peaflor had submitted his resignation letter, and this
was made to cover the vacancy Peaflor's resignation would create.
Thus, Peaflor was not eased out from his position as HRD manager.
No malice likewise was present in the company's decision to dismiss
Peaflor's two staff members; the company simply exercised its
management prerogative to address the financial problems it faced.
Peaflor, in fact, drafted the dismissal letters of his staff members. In
the absence of any illegal dismissal, no basis existed for the monetary
awards the labor arbiter granted.
Peaflor anchored his certiorari petition with the CA on the claim that
the NLRC decision was tainted with grave abuse of discretion, although
he essentially adopted the same arguments he presented before the
labor arbiter and the NLRC.
In a decision dated December 29, 2006,[14] the CA affirmed the NLRC's
decision, stating that Peaflor failed to present sufficient evidence
supporting his claim that he had been constructively dismissed. The CA
ruled that Peaflor's resignation was knowingly and voluntarily made.
Accordingly, it dismissed Peaflor's certiorari petition. It likewise denied
the motion for reconsideration that Peaflor subsequently
filed.[15] Faced with these CA actions, Peaflor filed with us the present
petition for review on certiorari.
THE PARTIES' ARGUMENTS
Peaflor insists that, contrary to the findings of the NLRC and the CA,
he had been constructively dismissed from his employment with
Outdoor Clothing. He alleges that the dismissal of his two staff
members, the demeaning liaison work he had to perform as HRD
Manager, the salary deduction for his alleged unauthorized absences,
and the appointment of Buenaobra as the new HRD manager even
before he tendered his resignation, were clear acts of discrimination
that made his continued employment with the Outdoor Clothing
unbearable. He was thus forced to resign.
Outdoor Clothing claims that Peaflor voluntarily resigned from his
work and his contrary allegations were all unsubstantiated. The HRD
was not singled out for retrenchment, but was simply the first to lose its
staff members because the company had to downsize. Thus, all HRD
work had to be performed by Peaflor. Instead of being grateful that he
was not among those immediately dismissed due to the company's

8
retrenchment program, Peaflor unreasonably felt humiliated in
performing work that logically fell under his department; insisted on
having a full staff complement; absented himself from work without
official leave; and demanded payment for his unauthorized absences.
THE ISSUE and THE COURT'S RULING
The Court finds the petition meritorious.
A preliminary contentious issue is Outdoor Clothing's argument that we
should dismiss the petition outright because it raises questions of facts,
not the legal questions that should be raised in a Rule 45 petition. [16]
We see no merit in this argument as the rule that a Rule 45 petition
deals only with legal issues is not an absolute rule; it admits of
exceptions. In the labor law setting, we wade into factual issues when
conflict of factual findings exists among the labor arbiter, the NLRC,
and the CA. This is the exact situation that obtains in the present case
since the labor arbiter found facts supporting the conclusion that there
had been constructive dismissal, while the NLRC's and the CA's factual
findings contradicted the labor arbiter's findings. [17] Under this situation,
the conflicting factual findings below are not binding on us, and we
retain the authority to pass on the evidence presented and draw
conclusions therefrom.[18]
The petition turns on the question of whether Peaflor's undisputed
resignation was a voluntary or a forced one, in the latter case making it
a constructive dismissal equivalent to an illegal dismissal. A critical fact
necessary in resolving this issue is whether Peaflor filed his letter
of resignation before or after the appointment of Buenaobra as the
new/concurrent HRD manager. This question also gives rise to the
side issue of when Buenaobra's appointment was made. If the
resignation letter was submitted before Syfu's appointment of
Buenaobra as new HRD manager, little support exists for Peaflor's
allegation that he had been forced to resign due to the prevailing
abusive and hostile working environment. Buenaobra's appointment
would then be simply intended to cover the vacancy created by
Peaflor's resignation. On the other hand, if the resignation letter was
submitted after the appointment of Buenaobra, then factual basis
exists indicating that Peaflor had been constructively dismissed as his
resignation was a response to the unacceptable appointment of
another person to a position he still occupied.
The question of when Peaflor submitted his resignation letter arises
because this letter - undisputably made - was undated. Despite
Peaflor's claim of having impressive intellectual and academic
credentials,[19] his resignation letter, for some reason,
was undated. Thus, the parties have directly opposing claims on the
matter. Peaflor claims that he wrote and filed the letter on the same
date he made his resignation effective - March 15, 2000. Outdoor
Clothing, on the other hand, contends that the letter was submitted on
March 1, 2000, for which reason Syfu issued a memorandum of the
same date appointing Buenaobra as the concurrent HRD manager;
Syfu's memorandum cited Peaflor's intention to resign so he could
devote his time to teaching. The company further cites in support of its
case Buenaobra's March 3, 2000 memorandum accepting his
appointment. Another piece of evidence is the Syfu memorandum of
March 10, 2000, which informed the office of the appointment of
Buenaobra as the concurrent Head of HRD - the position that Peaflor
occupied. Two other memoranda are alleged to exist, namely, the
AWOL memoranda of March 6 and 11, 2000, allegedly sent to
Penaflor.
Several reasons arising directly from these pieces of evidence lead us
to conclude that Peaflor did indeed submit his resignation letter on
March, 15, 2000, i.e., on the same day that it was submitted.
First, we regard the Syfu memorandum of March 1, 2000 and the
memorandum of Buenaobra of March 3, 2000 accepting the position of
HRD Head to be highly suspect. In our view, these memoranda, while
dated, do not constitute conclusive evidence of their dates of
preparation and communication. Surprisingly, Peaflor was never
informed about these memoranda when they directly concerned him,
particularly the turnover of responsibilities to Buenaobra if indeed
Peaflor had resigned on March 1, 2000 and a smooth turnover to
Buenaobra was intended. Even the recipients of these communications
do not appear to have signed for and dated their receipt. The AWOL

memoranda, to be sure, should have been presented with proof of

service if they were to have any binding effect on Peaflor.
Second,we find it surprising that these pieces of evidence pointing to a
March 1, 2000 resignation - specifically, Syfu's March 1, 2000
memorandum to Buenaobra about Penaflor's resignation and
Buenaobra's own acknowledgment and acceptance - were only
presented to the NLRC on appeal, not before the labor arbiter. The
matter was not even mentioned in the company's position paper filed
with the labor arbiter.[20] While the presentation of evidence at the
NLRC level on appeal is not unheard of in labor cases, [21] still sufficient
explanation must be adduced to explain why this irregular practice
should be allowed. In the present case, Outdoor Clothing totally failed
to explain the reason for its omission. This failure, to us, is significant,
as these were the clinching pieces of evidence that allowed the NLRC
to justify the reversal of the labor arbiter's decision.
Third, the circumstances and other evidence surrounding Peaflor's
resignation support his claim that he was practically compelled to
resign from the company.
Foremost among these is the memorandum of March 10, 2000 signed
by Syfu informing the whole office ("To: All concerned") about the
designation of Buenaobra as concurrent Accounting and HRD
Manager. In contrast with the suspect memoranda we discussed
above, this memorandum properly bore signatures acknowledging
receipt and dates of receipt by at least five company officials, among
them the readable signature of Demogene and one Agbayani; three of
them acknowledged receipt on March 13, 2000, showing that indeed it
was only on that day that the appointment of Buenaobra to the HRD
position was disclosed. This evidence is fully consistent with Peaflor's
position that it was only in the afternoon of March 13, 2000 that he was
told, informally at that, that Buenaobra had taken over his position. It
explains as well why as late as March 13, 2000, Peaflor still prepared
and signed a security report,[22] and is fully consistent with his position
that on that day he was still working on the excuse letter of certain
sales personnel of the company. [23]
We note that the company only belatedly questioned the motivation
that Peaflor cited for his discriminatory treatment, i.e., that he was
caught in the bitter fight between Syfu and Lee, then Vice President for
Operations, that led the latter to leave the company. [24] After Lee left,
Peaflor alleged that those identified with Lee were singled out for
adverse treatment, citing in this regard the downsizing of HRD that
occurred on or about this time and which resulted in his one-man HRD
operation. We say this downsizing was only "alleged" as the company
totally failed - despite Penaflor's claim of discriminatory practice - to
adduce evidence showing that there had indeed been a legitimate
downsizing. Other than its bare claim that it was facing severe financial
problems, Outdoor Clothing never presented any evidence to prove
both the reasons for its alleged downsizing and the fact of such
downsizing. No evidence was ever offered to rebut Peaflor's claim that
his staff members were dismissed to make his life as HRD Head
difficult. To be sure, Peaflor's participation in the termination of his
staff members' employment cannot be used against him, as the
termination of employment was a management decision that Peaflor,
at his level, could not have effectively contested without putting his own
job on the line.
Peaflor's own service with the company deserves close scrutiny. He
started working for the company on September 2, 1999 so that by
March 1, 2000, his probationary period would have ended and he
would have become a regular employee. We find it highly unlikely that
Peaflor would resign on March 1, 2000 and would then simply leave
given his undisputed record of having successfully worked within his
probationary period on the company's Policy Manual, Personnel
Handbook, Job Expectations, and Organizational Set-up. It does not
appear sound and logical to us that an employee would tender his
resignation on the very same day he was entitled by law to be
considered a regular employee, especially when a downsizing was
taking place and he could have availed of its benefits if he would be
separated from the service as a regular employee. It was strange, too,
that he would submit his resignation on March 1, 2000 and keep
completely quiet about this development until its effective date on
March 15, 2000. In the usual course, the turnover alone of
responsibilities and work loads to the successor in a small company
would have prevented the matter from being completely under wraps

9
for 10 days before any announcement was ever made. That Peaflor
was caught by surprise by the turnover of his post to Buenaobra is in
fact indicated by the company's own evidence that Peaflor still
submitted a security report on March 13, 2000. On the whole,
Peaflor's record with the company is not that of a company official
who would simply and voluntarily tender a precipitate resignation on the
excuse that he would devote his time to teaching - a lame excuse at
best considering that March is the month the semester usually ends
and is two or three months away from the start of another school year.
In our view, it is more consistent with human experience that Peaflor
indeed learned of the appointment of Buenaobra only on March 13,
2000 and reacted to this development through his resignation letter
after realizing that he would only face hostility and frustration in his
working environment. Three very basic labor law principles support this
conclusion and militate against the company's case.
The first is the settled rule that in employee termination disputes, the
employer bears the burden of proving that the employee's dismissal
was for just and valid cause.[25] That Peaflor did indeed file a letter of
resignation does not help the company's case as, other than the fact of
resignation, the company must still prove that the employee voluntarily
resigned.[26] There can be no valid resignation where the act was made
under compulsion or under circumstances approximating compulsion,
such as when an employee's act of handing in his resignation was a
reaction to circumstances leaving him no alternative but to resign. [27] In
sum, the evidence does not support the existence of voluntariness in
Peaflor's resignation.
Another basic principle is that expressed in Article 4 of the Labor Code
- that all doubts in the interpretation and implementation of the Labor
Code should be interpreted in favor of the workingman. This principle
has been extended by jurisprudence to cover doubts in the evidence
presented by the employer and the employee. [28] As shown above,
Peaflor has, at very least, shown serious doubts about the merits of
the company's case, particularly in the appreciation of the clinching
evidence on which the NLRC and CA decisions were based. In such
contest of evidence, the cited Article 4 compels us to rule in Peaflor's
favor. Thus, we find that Peaflor was constructively dismissed given
the hostile and discriminatory working environment he found himself in,
particularly evidenced by the escalating acts of unfairness against him
that culminated in the appointment of another HRD manager without
any prior notice to him. Where no less than the company's chief
corporate officer was against him, Peaflor had no alternative but to
resign from his employment.[29]
Last but not the least, we have repeatedly given significance in
abandonment and constructive dismissal cases to the employee's
reaction to the termination of his employment and have asked the
question: is the complaint against the employer merely a convenient
afterthought subsequent to an abandonment or a voluntary
resignation? We find from the records that Peaflor sought almost
immediate official recourse to contest his separation from service
through a complaint for illegal dismissal. [30] This is not the act of one
who voluntarily resigned; his immediate complaints characterize him as
one who deeply felt that he had been wronged.
WHEREFORE, we GRANT the petitioner's petition for review
on certiorari, and REVERSE the decision and resolution of the Court of
Appeals in CA-G.R. SP No. 87865 promulgated on December 29, 2006
and March 14, 2007, respectively. We REINSTATE the decision of the
labor arbiter dated August 15, 2001, with the MODIFICATION that, due
to the strained relations between the parties, respondents are
additionally ordered to pay separation pay equivalent to the petitioner's
one month's salary.
Costs against the respondents.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Abad, and Perez, JJ., concur.

4.

[ G.R. No. 157098, June 30, 2005 ]

NORKIS FREE AND INDEPENDENT WORKERS UNION,
PETITIONER, VS. NORKIS TRADING COMPANY, INC. ,
RESPONDENT.
DECISION
PANGANIBAN, J.:
Wage Order No. ROVII-06, issued by the Regional Tripartite Wages
and Productivity Board (RTWPB), merely fixed a new minimum wage
rate for private sector employees in Region VII; hence, respondent
cannot be compelled to grant an across-the-board increase to its
employees who, at the time of the promulgation of the Wage Order,
were already being paid more than the existing minimum wage.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of
Court, seeking to set aside the July 30, 2002 Decision [2] and the
January 16, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR
SP No. 54611. The disposition of the assailed Decision reads as
follows:
ACCORDINGLY, We GRANT the instant petition for certiorari. The
Decision of public respondent Voluntary Arbitrator in VA Case No. 374VII-09-014-98E dated July 8, 1999, and Order dated August 13, 1999,
denying petitioners Motion for Reconsideration, are hereby SET
ASIDE. Petitioner is hereby declared to have lawfully complied with
Wage Order No. ROVII-06. No pronouncement as to costs.[4]
The Decision[5] of Voluntary Arbitrator Perfecto R. de los Reyes
III,[6] reversed by the CA, disposed as follows:
WHEREFORE, premises considered, this Office hereby decides in
favor of Complainant. Respondent is hereby ordered to grant its
employees the amount of increases granted under RTWPB Wage
Order ROVII-06 in an across-the-board manner retroactive to the dates
provided for under the said Wage Order. [7]
The January 16, 2003 Resolution denied petitioners Motion for
Reconsideration.
The Facts
The CA summarized the undisputed factual antecedents as follows:
The instant case arose as a result of the issuance of Wage Order No.
ROVII-06 by the Regional Tripartite Wages and Productivity Board
(RTWPB) increasing the minimum daily wage by P10.00, effective
October 1, 1998.
Prior to said issuance, herein parties entered into a Collective
Bargaining Agreement (CBA) effective from August 1, 1994 to July 31,
1999.
Sec. 1. Salary Increase. The Company shall grant a FIFTEEN
(P15.00) PESOS per day increase to all its regular or permanent
employees effective August 1, 1994.
Sec. 2. Minimum Wage Law Amendment. In the event that a law is
enacted increasing minimum wage, an across-the-board
increase shall be granted by the company according to the provisions
of the law.
On January 27, 1998, a re-negotiation of the CBA was terminated and
pursuant to which a Memorandum of Agreement was forged between
the parties. It was therein stated that petitioner shall grant a salary
increase to all regular and permanent employees as follows:
Ten (10) pesos per day increase effective August 1, 1997; Ten (10)
pesos per day increase effective August 1, 1998.
Pursuant to said Memorandum of Agreement, the employees received
wage increases of P10.00 per day effective August 1, 1997 and P10.00
per day effective August 1, 1998. As a result, the agreed P10.00 renegotiated salary increase effectively raised the daily wage of the
employees to P165.00 retroactive August 1, 1997; and another
increase of P10.00, effective August 1, 1998, raising the employees[]
daily wage to P175.00.

THIRD DIVISION
On March 10, 1998, the Regional Tripartite Wage Productivity Board

10
(RTWPB) of Region VII issued Wage Order ROVII-06 which
established the minimum wage of P165.00, by mandating a wage
increase of five (P5.00) pesos per day beginning April 1, 1998, thereby
raising the daily minimum wage to P160.00 and another increase of
five (P5.00) pesos per day beginning October 1, 1998, thereby raising
the daily minimum wage to P165.00 per day.
In accordance with the Wage Order and Section 2, Article XII of the
CBA, [petitioner] demanded an across-the-board
increase. [Respondent], however, refused to implement the Wage
Order, insisting that since it has been paying its workers the new
minimum wage of P165.00 even before the issuance of the Wage
Order, it cannot be made to comply with said Wage Order.

opined that since adjustments granted are only to raise the minimum
wage or the floor wage as a matter of policy, x x x wages granted over
the above amount set by this Board is deemed a compliance.
The CA added that the policy and intent of the Wage Order was to
cushion the impact of the regional economic crisis upon both the
workers and the employers, not to enrich the employees at the
expense of the employers. Further, it held that to compel respondent
to grant an across-the-board wage increase, notwithstanding that it was
already paying salaries to its employees above the minimum wage,
would be to penalize generous employers and effectively make them
wait for the passage of a new wage order before granting any
increase. This would be counter-productive [insofar] as securing the
interests of labor is concerned.[9]

Thus, [respondent] argued that long before the passage of Wage

Order ROVII-06 on March 10, 1998, and by virtue of the Memorandum
of Agreement it entered with herein [petitioner], [respondent] was
already paying its employees a daily wage of P165.00 per day
retroactive on August 1, 1997, while the minimum wage at that time
was still P155.00 per day. On August 1, 1998, [respondent] again
granted an increase from P165.00 per day to P175.00, so that at the
time of the effectivity of Wage Order No. 06 on October 1, 1998
prescribing the new minimum wage of P165.00 per day, [respondents]
employees were already receiving P175.00 per day.

The appellate court said that the Wage Order exempted from
compliance those enterprises already paying salaries equal to or more
than the prescribed minimum wage; thus, the Order effectively made
the previous voluntary increases given by respondent to its employees
creditable against the law-mandated increase. Consequently, there
was no need for the Collective Bargaining Agreement (CBA) to provide
expressly for such creditability.

For failure of the parties to settle this controversy, a preventive

mediation complaint was filed by herein [petitioner] before the National
Conciliation and Mediation Board, pursuant to which the parties
selected public respondent Voluntary Arbitrator to decide said
controversy.

Hence, this Petition.[10]

Finally, the CA sustained respondents explanation that the across-theboard increases provided in the CBA was required only when a
minimum wage law caused a distortion in the wage structure.

Issues
Submitted for arbitral resolution is the sole issue of whether or not
[respondent] has complied with Wage Order No. ROVII-06, in relation
to the CBA provision mandating an across-the-board increase in case
of the issuance of a Wage Order.
In his decision, public respondent arbitrator found herein [respondent]
not to have complied with the wage order, through the following
dispositions:
The CBA provision in question (providing for an across-the-board
increase in case of a wage order) is worded and couched in a vague
and unclear manner.
x x x In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered
(Art. 1371, New Civil Code). Thus, this Office x x x required the parties
to submit additional evidence in order to be able to know and interpret
the parties working intent and application of Wage Order No. 06 issued
by the Regional Tripartite Wages and Productivity Board, Regional
Office VII in relation to Section 2, Article XII provided for in the parties[]
existing CBA.
x x x Viewed from the foregoing facts and evidence, the working intent
and application of RTWPB Wage Order ROVII-06 in relation to Section
2, Article XII of the parties[] existing CBA is clearly established. The
evidence submitted by the parties, all point to the fact that their true
intention on how to implement existing wage orders is to grant such
wage orders in an across-the-board manner in relation to the provisions
of Section 2, Article XII of their existing CBA. Respondent in this case
[has] failed to comply with its contractual obligation of implementing the
increase under RTWPB Wage Order ROVII-06 in an across-the-board
manner as provided in Section 2, Article XII of its CBA with [petitioner].
x x x x x x x x x[8]
Respondent elevated the case to the CA via a Petition for Certiorari
and Prohibition under Rule 65 of the Rules of Court.
Ruling of the Court of Appeals
The CA noted that the grant of an across-the-board increase, provided
under Section 2 of Article XII of the CBA, was qualified by the phrase
according to the provisions of the law. It thus stressed the necessity of
determining the import of Wage Order No. ROVII-06, the law involved
in the present controversy. Taking into consideration the opinion of the
RTWPB, Region VII, the appellate court held that respondent had
sufficiently complied with Wage Order No. ROVII-06. The Board had

In its Memorandum, petitioner submits the following issues for our

consideration:
I. Whether or not the Honorable Court of Appeals gravely abused its
discretion in setting aside the decision and resolution of the honorable
voluntary arbitrator[.]
II. Whether or not the Honorable Court of Appeals gravely abused its
discretion in considering the Supplemental Memorandum of respondent
and giving merit to evidence presented for the first time on appeal and
filed after the lapse of the non[-]extendible period of time to file
memorandum and despite an extension granted to respondent[.]
III. Whether or not the Honorable Court of Appeals gravely abused its
discretion in disregarding established jurisprudence on statutory
construction.[11]
The main issue is whether respondent violated the CBA in its refusal to
grant its employees an across-the-board increase as a result of the
passage of Wage Order No. ROVII-06. Also raised is the procedural
issue relating to the propriety of the admission by the CA of RTWPBs
letter-opinion, which was attached to respondents Supplemental
Memorandum submitted to that court on August 30, 2000, beyond the
July 17, 2000 extended deadline.
The Courts Ruling
The Petition lacks merit.
Main Issue:
Effect of Wage Order No. ROVII-06
on the Parties CBA
Petitioner insists that respondent should have granted to the
employees the increase stated in Wage Order No. ROVII-06. In
addition to the increases both parties had mutually agreed upon, the
CBA supposedly imposed upon respondent the obligation to implement
the increases mandated by law without any condition or
qualification. To support its claim, petitioner repeatedly invokes
Section 2 of Article XII of the CBA, which reads:
SECTION 2. Minimum Wage Law Amendment. In the event that a
law is enacted increasing minimum wage, an across-the-board
increase shall be granted by the Company according to the provisions
of the law.

11
Interestingly, petitioner disregards altogether in its argument the
qualifying phrase according to the provisions of the law and merely
focuses its attention on the across-the-board increase clause. Given
the entire sentence, it is clear that the above-quoted CBA provision
does not support the unyielding view of petitioner that the issuance of
Wage Order No. ROVII-06 entitles its members to an across-the-board
increase, absolutely and without any condition.
Stipulations in a contract must be read together,[12] not in isolation from
one another. When the terms of its clauses are clear and leave no
room for doubt as to the intention of the contracting parties, it would not
be necessary to interpret those terms, whose literal meanings should
prevail.[13]
The CA correctly observed that the import of Wage Order No. ROVII-06
should be considered in the implementation of the government-decreed
increase. The present Petition makes no denial or refutation of this
finding, but merely an averment of the silence of the CBA on the
creditability of increases provided under the Agreement against those
in the minimum wage under a wage order. It insists that the parties
intended no such creditability; otherwise, they would have expressly
stated such intent in the CBA.
We hold that the issue here is not about creditability, but the
applicability of Wage Order No. ROVII-06 to respondents
employees. The Wage Order was intended to fix a new minimum wage
only, not to grant across-the-board wage increases to all employees in
Region VII. The intent of the Order is indicated in its title, Establishing
New Minimum Wage Rates, as well as in its preamble: the purpose,
reason or justification for its enactment was to adjust the minimum
wage of workers to cushion the impact brought about by the latest
economic crisis not only in the Philippines but also in the Asian region.
In Cagayan Sugar Milling Company v. Secretary of Labor and
Employment [14] and Manila Mandarin Employees Union v.
NLRC,[15] the Wage Orders that were the subjects of those cases were
substantially and similarly worded as Wage Order No. ROVII-06. In
those cases, this Court construed the Orders along the same line that it
follows now: as providing for an increase in the prevailing statutory
minimum wage rates of workers. No across-the-board increases were
granted.
Parenthetically, there are two methods of adjusting the minimum wage.
In Employers Confederation of the Phils. v. National Wages and
Productivity Commission,[16] these were identified as the floor wage
and the salary-ceiling methods. The floor wage method involves the
fixing of a determinate amount to be added to the prevailing statutory
minimum wage rates. On the other hand, in the salary-ceiling
method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words, workers
already being paid more than the existing minimum wage (up to a
certain amount stated in the Wage Order) are also to be given a wage
increase.
A cursory reading of the subject Wage Order convinces us that the
intention of the Regional Board of Region VII was to prescribe a
minimum or floor wage; not to determine a salary ceiling. Had the
latter been its intention, the Board would have expressly provided
accordingly. The text of Sections 2 and 3 of the Order states:
Section 2. AMOUNT AND MANNER OF INCREASE. Upon the
effectivity of this Order, the daily minimum wage rates for all the
workers and employees in the private sector shall be increased by Ten
Pesos (P10.00) per day to be given in the following manner:
i. Five Pesos (P5.00) per day effective April 1, 1998, and
ii. Additional Five Pesos (P5.00) per day effective October 1, 1998.
Section 3. UNIFORM WAGE RATE PER AREA
CLASSIFICATION. To effect a uniform wage rate pursuant to Section
1 hereof, the prescribed minimum wage after full implementation of this
Order for each area classification shall be as follows:
Area Classification
Class A
Class B

Non-Agriculture Sector
165.00
155.00

Agriculture Sector
150.00
140.00

Class C
145.00
130.00
Class D
135.00
120.00
These provisions show that the prescribed minimum wage after full
implementation of the P10 increase in the Wage Order is P165 for
Class A private non-agriculture sectors. It would be reasonable and
logical, therefore, to infer that those employers already paying their
employees more than P165 at the time of the issuance of the Order are
sufficiently complying with the Order.
Further supporting this construction of Wage Order No. ROVII-06 is the
opinion of its drafter, the RTWPB Region VII. In its letteropinion[17] answering respondents queries, the Board gave a similar
interpretation of the essence of the Wage Order: to fix a new floor wage
or to upgrade the wages of the employees receiving lower than the
minimum wage set by the Order.
Notably, the RTWPB was interpreting only its own issuance, not a
statutory provision. The best authority to construe a rule or an
issuance is its very source,[18] in this case the RTWPB. Without a
doubt, the Board, like any other executive agency, has the authority to
interpret its own rules and issuances; any phrase contained in its
interpretation becomes a part of those rules or issuances
themselves.[19] Therefore, it was proper for the CA to consider the
letter dated June 13, 2000, written by the RTWPB to explain the scope
and import of the latters own Order, as such interpretation is deemed a
part of the Order itself. That the letter was belatedly submitted to that
Court is not fatal in the determination of this particular case.
We cannot sustain petitioner, even if we assume that its contention is
right and that the implementation of any government-decreed increase
under the CBA is absolute. The CBA is no ordinary contract, but one
impressed with public interest.[20] Therefore, it is subject to special
orders on wages,[21] such as those issued by the RTWPB. Capitol
Wireless v. Bate[22] is squarely in point. The union in that case claimed
that all government-mandated increases in salaries should be granted
to all employees across-the-board without any qualification whatsoever,
pursuant to the CBA provision that any government-mandated wage
increases should be over and above the benefits granted in the
CBA. The Court denied such claim and held that the provisions of the
Agreement should be read in harmony with the Wage Orders. Applying
that ruling to the present case, we hold that the implementation of a
wage increase for respondents employees should be controlled by the
stipulations of Wage Order No. ROVII-06.
At the risk of being repetitive, we stress that the employees are not
entitled to the claimed salary increase, simply because they are not
within the coverage of the Wage Order, as they were already receiving
salaries greater than the minimum wage fixed by the
Order. Concededly, there is an increase necessarily resulting from
raising the minimum wage level, but not across-the-board. Indeed, a
double burden cannot be imposed upon an employer except by clear
provision of law.[23] It would be unjust, therefore, to interpret Wage
Order No. ROVII-06 to mean that respondent should grant an acrossthe-board increase. Such interpretation of the Order is not sustained
by its text.[24]
In the resolution of labor cases, this Court has always been guided by
the State policy enshrined in the Constitution: social justice [25] and the
protection of the working class.[26] Social justice does not, however,
mandate that every dispute should be automatically decided in favor of
labor. In every case, justice is to be granted to the deserving and
dispensed in the light of the established facts and the applicable law
and doctrine.[27]
WHEREFORE, the Petition is DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

5.
THIRD DIVISION

12
[ G.R. No. 187698, August 09, 2010 ]
RODOLFO J. SERRANO, PETITIONER, VS. SEVERINO SANTOS
TRANSIT AND/OR SEVERINO SANTOS, RESPONDENTS.
DECISION
CARPIO MORALES, J.:
Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus
conductor by respondent Severino Santos Transit, a bus company
owned and operated by its co-respondent Severino Santos.
After 14 years of service or on July 14, 2006, petitioner applied for
optional retirement from the company whose representative advised
him that he must first sign the already prepared Quitclaim before his
retirement pay could be released. As petitioner's request to first go
over the computation of his retirement pay was denied, he signed the
Quitclaim on which he wrote "U.P." (under protest) after his signature,
indicating his protest to the amount of P75,277.45 which he received,
computed by the company at 15 days per year of service.
Petitioner soon after filed a complaint[1] before the Labor Arbiter,
alleging that the company erred in its computation since under
Republic Act No. 7641, otherwise known as the Retirement Pay Law,
his retirement pay should have been computed at 22.5 days per year of
service to include the cash equivalent of the 5-day service incentive
leave (SIL) and 1/12 of the 13th month pay which the company did not.
The company maintained, however, that the Quitclaim signed by
petitioner barred his claim and, in any event, its computation was
correct since petitioner was not entitled to the 5-day SIL and pro-rated
13th month pay for, as a bus conductor, he was paid on commission
basis. Respondents, noting that the retirement differential pay
amounted to only P1,431.15, explained that in the computation of
petitioner's retirement pay, five months were inadvertently not included
because some index cards containing his records had been lost.
By Decision[2] of February 15, 2007, Labor Arbiter Cresencio Ramos,
Jr. ruled in favor of petitioner, awarding him P116,135.45 as retirement
pay differential, and 10% of the total monetary award as attorney's
fees. In arriving at such computation, the Labor Arbiter ratiocinated:
In the same Labor Advisory on Retirement Pay Law, it was likewise
decisively made clear that "the law expanded the concept of "one-half
month salary" from the usual one-month salary divided by two", to wit:
B. COMPUTATION OF RETIREMENT PAY
A covered employee who retires pursuant to RA 7641 shall be entitled
to retirement pay equivalent to at least one-half (1/12) month salary for
every year of service, a fraction of at least six (6) months being
considered as one whole year.
The law is explicit that "one-half month salary shall mean fifteen (15)
days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days service incentive leaves"
unless the parties provide for broader inclusions. Evidently, the law
expanded the concept of "one-half month salary" from the usual onemonth salary divided by two.
The retirement pay is equal to half-month's pay per year of service. But
"half-month's pay" is "expanded" because it means not just the salary
for 15 days but also one-twelfth of the 13th-month pay and the cash
value of five-day service incentive leave. THIS IS THE MINIMUM. The
retirement pay package can be improved upon by voluntary company
policy, or particular agreement with the employee, or through a
collective bargaining agreement." (The Labor Code with Comments
and Cases, C.A. Azcunea, Vol. II, page 765, Fifth Edition 2004).
Thus, having established that 22.5 days pay per year of service is the
correct formula in arriving at the complete retirement pay of
complainant and inasmuch as complainant's daily earning is based on
commission earned in a day, which varies each day, the next critical
issue that needs discernment is the determination of what is a fair and
rational amount of daily earning of complainant to be used in the
computation of his retirement pay.

While complainant endeavored to substantiate his claim that he earned

average daily commission of P700.00, however, the documents he
presented are not complete, simply representative copies, therefore
unreliable. On the other haNd, while respondents question
complainant's use of P700.00 (daily income) as basis in determining
the latter's correct retirement pay, however it does not help their
defense that they did not present a single Conductor's Trip Report to
contradict the claim of complainant. Instead, respondents adduced a
handwritten summary of complainant's monthly income from 1993 until
June 2006. It must be noted also that complainant did not contest the
amounts stated on the summary of his monthly income as reported by
respondents. Given the above considerations, and most importantly
that complainant did not dispute the figures stated in that document, we
find it logical, just and equitable for both parties to rely on the summary
of monthly income provided by respondent, thus, we added
complainant's monthly income from June 2005 until June 2006 or the
last twelve months and we arrived at P189,591.30) and we divided it by
twelve (12) to arrive at complainant's average monthly earning
of P15,799.28. Thereafter, the average monthly of P15,799.28 is
divided by twenty-six (26) days, the factor commonly used in
determining the regular working days in a month, to arrive at his
average daily income of P607.66. Finally, P607.66 (average daily
income) x 22.5 days = P13,672.35 x 14 (length of service) =
P191,412.90 (COMPLETE RETIREMENT PAY). However,
inasmuch as complainant already received P75,277.45, the retirement
differential pay due him is P116,135.45 (P191,412.90 P75,277.45). (underscoring partly in the original and partly supplied)
The National Labor Relations Commission (NLRC) to which
respondents appealed reversed the Labor Arbiter's ruling and
dismissed petitioner's complaint by Decision[3] dated April 23, 2008. It,
however, ordered respondents to pay retirement differential in the
amount of P2,365.35.
Citing R & E Transport, Inc. v. Latag,[4] the NLRC held that since
petitioner was paid on purely commission basis, he was excluded from
the coverage of the laws on 13th month pay and SIL pay, hence,
the 1/12 of the 13th month pay and the 5-day SIL should not be factored
in the computation of his retirement pay.
Petitioner's motion for reconsideration having been denied by
Resolution[5] of June 27, 2008, he appealed to the Court of Appeals.
By the assailed Decision[6] of February 11, 2009, the appellate
court affirmed the NLRC's ruling, it merely holding that it was based on
substantial evidence, hence, should be respected.
Petitioner's motion for reconsideration was denied, hence, the present
petition for review on certiorari.
The petition is meritorious.
Republic Act No. 7641 which was enacted on December 9,
1992 amended Article 287 of the Labor Code by providing for
retirement pay to qualified private sector employees in the absence of
any retirement plan in the establishment. The pertinent provision of
said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines, is hereby
amended to read as follows:
xxxx
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an
employee upon reaching the age of sixty (60) years or more, but
not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5)
years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for
every year of service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the term onehalf (1/2) month salary shall mean fifteen (15) days plus onetwelfth (1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves.

13
Retail, service and agricultural establishments or operations
employing not more than (10) employees or workers are exempted
from the coverage of this provision.
x x x x (emphasis and underscoring supplied)

The affirmance by the appellate court of the reliance by the NLRC on R

& E Transport, Inc. is erroneous. In said case, the Court held that a
taxi driver paid according to the
"boundary system" is not entitled to the 13th month and the SIL pay,
hence, his retirement pay should be computed on the sole basis of his
salary.

Further, the Implementing Rules of said law provide:

RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. -- This Rule shall apply to all
employees in the private sector, regardless of their position,
designation or status and irrespective of the method by which
their wages are paid, except to those specifically exempted under
Section 2 hereof. As used herein, the term "Act" shall refer to Republic
Act No. 7641 which took effect on January 7, 1993.
SECTION 2
Exemptions. -- This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political
subdivisions, including Government-owned and/or controlled
corporations, if they are covered by the Civil Service Law and its
regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or
operations regularly employing not more than ten (10) employees.
As used in this sub-section;
xxxx
SECTION 5
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an
employee who retires pursuant to the Act shall be entitled to retirement
pay equivalent to at least one-half () month salary for every year of
service, a fraction of at least six (6) months being considered as one
whole year.
5.2 Components of One-half () Month Salary. -- For the purpose
of determining the minimum retirement pay due an employee under this
Rule, the term "one-half month salary" shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest
salary rate. As used herein, the term "salary" includes all
remunerations paid by an employer to his employees for services
rendered during normal working days and hours, whether such
payments are fixed or ascertained on a time, task, piece of
commission basis, or other method of calculating the same, and
includes the fair and reasonable value, as determined by the Secretary
of Labor and Employment, of food, lodging or other facilities
customarily furnished by the employer to his employees. The term does
not include cost of living allowances, profit-sharing payments and other
monetary benefits which are not considered as part of or integrated into
the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service
incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree
upon that should be included in the computation of the employee's
retirement pay.
x x x x (emphasis supplied)
Admittedly, petitioner worked for 14 years for the bus company which
did not adopt any retirement scheme. Even if petitioner as bus
conductor was paid on commission basis then, he falls within the
coverage of R.A. 7641 and its implementing rules. As thus correctly
ruled by the Labor Arbiter, petitioner's retirement pay should include the
cash equivalent of the 5-day SIL and 1/12 of the 13th month pay.

For purposes, however, of applying the law on SIL, as well as on

retirement, the Court notes that there is adifference between drivers
paid under the "boundary system" and conductors who are paid on
commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only
those sums in excess of the "boundary" or fee they pay to the owners
or operators of the vehicles.[7] Conductors, on the other hand, are paid
a certain percentage of the bus' earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion
from its coverage of workers who are paid on a purely commission
basis is only with respect to field personnel. The more recent case
of Auto Bus Transport Systems, Inc., v. Bautista[8] clarifies that an
employee who is paid on purely commission basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion
that the grant of service incentive leave has been delimited by the
Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule
V. According to the Implementing Rules, Service Incentive Leave
shall not apply to employees classified as "field personnel." The
phrase "other employees whose performance is unsupervised by the
employer" must not be understood as a separate classification of
employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose
actual hours of work in the field cannot be determined with reasonable
certainty."
The same is true with respect to the phrase "those who are
engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field
personnel," applying the rule on ejusdem generisthat general and
unlimited terms are restrained and limited by the particular terms that
they follow. Hence, employees engaged on task or contract basis
or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless, they
fall under the classification of field personnel.
xxxx
According to Article 82 of the Labor Code, "field personnel" shall
refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office
of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. This definition is
further elaborated in the Bureau of Working Conditions (BWC),
Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association which states that:
As a general rule, [field personnel] are those whose performance of
their job/service is not supervised by the employer or his
representative, the workplace being away from the principal office and
whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific
places at specific times, employees including drivers cannot be
said to be field personnel despite the fact that they are performing
work away from the principal office of the employee.
x x x x (emphasis, italics and underscoring supplied)
WHEREFORE, the petition is GRANTED. The Court of Appeals
Decision of February 11, 2009 and Resolution of April 28, 2009
are REVERSED and SET ASIDE and the Labor Arbiter's Decision
dated February 15, 2007 is REINSTATED.
SO ORDERED.
Brion, Bersamin, Abad,* and Villarama, Jr., JJ., concur.

14
6.

2005, the NLRC denied the appeal for its non-perfection.

THIRD DIVISION
[ G.R. No. 196426, August 15, 2011 ]

MARTICIO SEMBLANTE AND DUBRICK PILAR, PETITIONERS, VS.

COURT OF APPEALS, 19THDIVISION, 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 Decision[1]and Resolution[2] 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
Resolution[3] of the National Labor Relations Commission (NLRC),
Fourth Division (now Seventh Division), in NLRC Case No. V-0006732004.
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 masiadorand 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 cards [5] that they wear
every time they report for duty. They alleged never having incurred any
infraction and/or violation of the cockpit rules and regulations.
On November 14, 2003, however, petitioners were denied entry into
the cockpit upon the instructions of respondents, and were informed of
the termination of their services effective that date. This prompted
petitioners to file a complaint for illegal dismissal against respondents.
In answer, respondents denied that petitioners were their employees
and alleged that they were associates of respondents independent
contractor, Tomas Vega. Respondents claimed that petitioners have no
regular working time or day and they are free to decide for themselves
whether to report for work or not on any cockfighting day. In times
when there are few cockfights in Gallera de Mandaue, petitioners go to
other cockpits in the vicinity. Lastly, petitioners, so respondents assert,
were only issued identification cards to indicate that they were free
from the normal entrance fee and to differentiate them from the general
public.[6]
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque
found petitioners to be regular employees of respondents as they
performed work that was necessary and indispensable to the usual
trade or business of respondents for a number of years. The Labor
Arbiter also ruled that petitioners were illegally dismissed, and so
ordered respondents to pay petitioners their backwages and separation
pay.[7]
Respondents counsel received the Labor Arbiters Decision on
September 14, 2004. And within the 10-day appeal period, he filed the
respondents appeal with the NLRC on September 24, 2004, but
without posting a cash or surety bond equivalent to the monetary award
granted by the Labor Arbiter.[8]
It was only on October 11, 2004 that respondents filed an appeal bond
dated October 6, 2004. Hence, in a Resolution[9] dated August 25,

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 bettakers 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.

15
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:

PROFESSIONAL SERVICES, INC., PETITIONER, VS. THE COURT

OF APPEALS AND NATIVIDAD AND ENRIQUE AGANA,
RESPONDENTS.
[G.R. NO. 126467]

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
case[15] or the special circumstances in the case combined with its legal
merits or the amount and the issue involved.[16] After all, technical rules
cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the
parties.[17] This is one case where the exception to the general rule
lies.
While respondents had failed to post their bond within the 10-day
period provided above, it is evident, on the other hand, that petitioners
are NOT employees of respondents, since their relationship fails to
pass muster the four-fold test of employment We have repeatedly
mentioned in countless decisions: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employees conduct, which is the most
important element.[18]
As found by both the NLRC and the CA, respondents had no part in
petitioners selection and management;[19]petitioners compensation
was paid out of the arriba (which is a percentage deducted from the
total bets), not by petitioners;[20] and petitioners performed their
functions as masiador and sentenciador free from the direction
and control of respondents.[21] In the conduct of their work,
petitioners relied mainly on their expertise that is characteristic of the
cockfight gambling,[22] and were never given by respondents any tool
needed for the performance of their work.[23]
Respondents, not being petitioners employers, could never have
dismissed, legally or illegally, petitioners, since respondents were
without power or prerogative to do so in the first place. The rule on the
posting of an appeal bond cannot defeat the substantive rights of
respondents to be free from an unwarranted burden of answering for
an illegal dismissal for which they were never responsible.

NATIVIDAD [SUBSTITUTED BY HER CHILDREN MARCELINO

AGANA III, ENRIQUE AGANA, JR., EMMA AGANA-ANDAYA,
JESUS AGANA AND RAYMUND AGANA] AND ENRIQUE AGANA,
PETITIONERS, VS. THE COURT OF APPEALS AND JUAN
FUENTES, RESPONDENTS.
[G.R. NO. 127590]
MIGUEL AMPIL, PETITIONER, VS. NATIVIDAD AND ENRIQUE
AGANA, RESPONDENTS.

RESOLUTION
CORONA, J.:
With prior leave of court,[1] petitioner Professional Services, Inc. (PSI)
filed a second motion for reconsideration[2]urging referral thereof to the
Court en banc and seeking modification of the decision dated January
31, 2007 and resolution dated February 11, 2008 which affirmed its
vicarious and direct liability for damages to respondents Enrique Agana
and the heirs of Natividad Agana (Aganas).
Manila Medical Services, Inc. (MMSI), [3] Asian Hospital, Inc.
(AHI),[4] and Private Hospital Association of the Philippines (PHAP) [5] all
sought to intervene in these cases invoking the common ground that,
unless modified, the assailed decision and resolution will jeopardize the
financial viability of private hospitals and jack up the cost of health care.
The Special First Division of the Court granted the motions for
intervention of MMSI, AHI and PHAP (hereafter intervenors), [6] and
referred en consulta to the Court en banc the motion for prior leave of
court and the second motion for reconsideration of PSI. [7]
Due to paramount public interest, the Court en banc accepted the
referral[8] and heard the parties on oral arguments on one particular
issue: whether a hospital may be held liable for the negligence of
physicians-consultants allowed to practice in its premises. [9]
To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr.
Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique
Agana and Natividad Agana (later substituted by her heirs), in a
complaint[10] for damages filed in the Regional Trial Court (RTC) of
Quezon City, Branch 96, for the injuries suffered by Natividad when Dr.
Ampil and Dr. Fuentes neglected to remove from her body two
gauzes[11] which were used in the surgery they performed on her on
April 11, 1984 at the Medical City General Hospital. PSI was impleaded
as owner, operator and manager of the hospital.

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.

In a decision[12] dated March 17, 1993, the RTC held PSI solidarily
liable with Dr. Ampil and Dr. Fuentes for damages. [13] On appeal, the
Court of Appeals (CA), absolved Dr. Fuentes but affirmed the liability of
Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement
from Dr. Ampil.[14]

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.

On petition for review, this Court, in its January 31, 2007 decision,
affirmed the CA decision.[15] PSI filed a motion for reconsideration[16] but
the Court denied it in a resolution dated February 11, 2008. [17]

SO ORDERED.
Carpio,* Brion,** Peralta, and Sereno,*** JJ., concur.

The Court premised the direct liability of PSI to the Aganas on the
following facts and law:

7.
EN BANC
[ G.R. No. 126297, February 02, 2010 ]

First, there existed between PSI and Dr. Ampil an employer-employee

relationship as contemplated in the December 29, 1999 decision
in Ramos v. Court of Appeals[18] that "for purposes of allocating
responsibility in medical negligence cases, an employer-employee
relationship exists between hospitals and their consultants." [19] Although
the Court in Ramos later issued a Resolution dated April 11,
2002[20] reversing its earlier finding on the existence of an employment
relationship between hospital and doctor, a similar reversal was not
warranted in the present case because the defense raised by PSI
consisted of a mere general denial of control or responsibility over the
actions of Dr. Ampil.[21]

16
[32]

Second, by accrediting Dr. Ampil and advertising his qualifications, PSI

created the public impression that he was its agent. [22] Enrique testified
that it was on account of Dr. Ampil's accreditation with PSI that he
conferred with said doctor about his wife's (Natividad's)
condition.[23] After his meeting with Dr. Ampil, Enrique asked Natividad
to personally consult Dr. Ampil.[24] In effect, when Enrigue and
Natividad engaged the services of Dr. Ampil, at the back of their minds
was that the latter was a staff member of a prestigious hospital. Thus,
under the doctrine of apparent authority applied in Nogales, et al. v.
Capitol Medical Center, et al.,[25] PSI was liable for the negligence of Dr.
Ampil.
Finally, as owner and operator of Medical City General Hospital, PSI
was bound by its duty to provide comprehensive medical services to
Natividad Agana, to exercise reasonable care to protect her from
harm,[26] to oversee or supervise all persons who practiced medicine
within its walls, and to take active steps in fixing any form of negligence
committed within its premises.[27] PSI committed a serious breach of its
corporate duty when it failed to conduct an immediate investigation into
the reported missing gauzes.[28]
PSI is now asking this Court to reconsider the foregoing rulings for
these reasons:

medicine, in reality it utilizes doctors, surgeons and medical

practitioners in the conduct of its business of facilitating medical and
surgical treatment.[33] Within that reality, three legal relationships
crisscross: (1) between the hospital and the doctor practicing within its
premises; (2) between the hospital and the patient being treated or
examined within its premises and (3) between the patient and the
doctor. The exact nature of each relationship determines the basis and
extent of the liability of the hospital for the negligence of the doctor.
Where an employment relationship exists, the hospital may be held
vicariously liable under Article 2176[34] in relation to Article 2180[35] of
the Civil Code or the principle of respondeat superior. Even when no
employment relationship exists but it is shown that the hospital holds
out to the patient that the doctor is its agent, the hospital may still be
vicariously liable under Article 2176 in relation to Article 1431 [36] and
Article 1869[37] of the Civil Code or the principle of apparent
authority.[38] Moreover, regardless of its relationship with the doctor, the
hospital may be held directly liable to the patient for its own negligence
or failure to follow established standard of conduct to which it should
conform as a corporation.[39]
This Court still employs the "control test" to determine the existence of
an employer-employee relationship between hospital and doctor.
In Calamba Medical Center, Inc. v. National Labor Relations
Commission, et al.[40]it held:

I
The declaration in the 31 January 2007 Decision vis-a-vis the 11
February 2009 Resolution that the ruling in Ramos vs. Court of Appeals
(G.R. No. 134354, December 29, 1999) that "an employer-employee
relations exists between hospital and their consultants" stays should be
set aside for being inconsistent with or contrary to the import of the
resolution granting the hospital's motion for reconsideration in Ramos
vs. Court of Appeals (G.R. No. 134354, April 11, 2002), which is
applicable to PSI since the Aganas failed to prove an employeremployee relationship between PSI and Dr. Ampil and PSI proved that
it has no control over Dr. Ampil. In fact, the trial court has found that
there is no employer-employee relationship in this case and that the
doctor's are independent contractors.
II
Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did
not primarily and specifically look to the Medical City Hospital (PSI) for
medical care and support; otherwise stated, respondents Aganas did
not select Medical City Hospital (PSI) to provide medical care because
of any apparent authority of Dr. Miguel Ampil as its agent since the
latter was chosen primarily and specifically based on his qualifications
and being friend and neighbor.
III
PSI cannot be liable under doctrine of corporate negligence since the
proximate cause of Mrs. Agana's injury was the negligence of Dr.
Ampil, which is an element of the principle of corporate negligence. [29]
In their respective memoranda, intervenors raise parallel
arguments that the Court's ruling on the existence of an employeremployee relationship between private hospitals and consultants will
force a drastic and complex alteration in the long-established and
currently prevailing relationships among patient, physician and hospital,
with burdensome operational and financial consequences and adverse
effects on all three parties.[30]
The Aganas comment that the arguments of PSI need no longer be
entertained for they have all been traversed in the assailed decision
and resolution.[31]
After gathering its thoughts on the issues, this Court holds that PSI is
liable to the Aganas, not under the principle of respondeat superior for
lack of evidence of an employment relationship with Dr. Ampil but
under the principle of ostensible agency for the negligence of Dr. Ampil
and, pro hac vice, under the principle of corporate negligence for its
failure to perform its duties as a hospital.
While in theory a hospital as a juridical entity cannot practice

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.
xx xx xx
As priorly stated, private respondents maintained specific workschedules, 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. (emphasis supplied)
Even in its December 29, 1999 decision[41] and April 11, 2002
resolution[42] in Ramos, the Court found the control test decisive.
In the present case, it appears to have escaped the Court's attention
that both the RTC and the CA found no employment relationship
between PSI and Dr. Ampil, and that the Aganas did not question
such finding. In its March 17, 1993 decision, the RTC found "that
defendant doctors were not employees of PSI in its hospital, they being
merely consultants without any employer-employee relationship and in
the capacity of independent contractors."[43] The Aganas never
questioned such finding.
PSI, Dr. Ampil and Dr. Fuentes appealed[44] from the RTC decision but
only on the issues of negligence, agency and corporate liability. In its
September 6, 1996 decision, the CA mistakenly referred to PSI and Dr.
Ampil as employer-employee, but it was clear in its discussion on the
matter that it viewed their relationship as one of mere apparent
agency.[45]
The Aganas appealed from the CA decision, but only to question the
exoneration of Dr. Fuentes.[46] PSI also appealed from the CA decision,
and it was then that the issue of employment, though long settled, was
unwittingly resurrected.
In fine, as there was no dispute over the RTC finding that PSI and Dr.
Ampil had no employer-employee relationship, such finding became
final and conclusive even to this Court. [47] There was no reason for PSI
to have raised it as an issue in its petition. Thus, whatever discussion

17
on the matter that may have ensued was purely academic.
Nonetheless, to allay the anxiety of the intervenors, the Court holds
that, in this particular instance, the concurrent finding of the RTC and
the CA that PSI was not the employer of Dr. Ampil is correct. Control as
a determinative factor in testing the employer-employee relationship
between doctor and hospital under which the hospital could be held
vicariously liable to a patient in medical negligence cases is a requisite
fact to be established by preponderance of evidence. Here, there was
insufficient evidence that PSI exercised the power of control or wielded
such power over the means and the details of the specific process by
which Dr. Ampil applied his skills in the treatment of Natividad.
Consequently, PSI cannot be held vicariously liable for the negligence
of Dr. Ampil under the principle of respondeat superior.
There is, however, ample evidence that the hospital (PSI) held out to
the patient (Natividad)[48] that the doctor (Dr. Ampil) was its agent.
Present are the two factors that determine apparent authority: first, the
hospital's implied manifestation to the patient which led the latter to
conclude that the doctor was the hospital's agent; and second, the
patient's reliance upon the conduct of the hospital and the doctor,
consistent with ordinary care and prudence. [49]

The Court cannot speculate on what could have been behind the
Aganas' decision but would rather adhere strictly to the fact that, under
the circumstances at that time, Enrique decided to consult Dr. Ampil for
he believed him to be a staff member of a prominent and known
hospital. After his meeting with Dr. Ampil, Enrique advised his wife
Natividad to go to the Medical City General Hospital to be examined by
said doctor, and the hospital acted in a way that fortified Enrique's
belief.
This Court must therefore maintain the ruling that PSI is vicariously
liable for the negligence of Dr. Ampil as its ostensible agent.
Moving on to the next issue, the Court notes that PSI made the
following admission in its Motion for Reconsideration:

Atty. Agcaoili

51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic]
is not liable for Dr. Ampil's acts during the operation. Considering
further that Dr. Ampil was personally engaged as a doctor by Mrs.
Agana, it is incumbent upon Dr. Ampil, as "Captain of the Ship", and as
the Agana's doctor to advise her on what to do with her situation vis-avis the two missing gauzes. In addition to noting the missing
gauzes, regular check-ups were made and no signs of
complications were exhibited during her stay at the hospital,
which could have alerted petitioner PSI's hospital to render and
provide post-operation services to and tread on Dr. Ampil's role
as the doctor of Mrs. Agana. The absence of negligence of PSI
from the patient's admission up to her discharge is borne by the
finding of facts in this case. Likewise evident therefrom is the
absence of any complaint from Mrs. Agana after her discharge
from the hospital which had she brought to the hospital's
attention, could have alerted petitioner PSI to act accordingly and
bring the matter to Dr. Ampil's attention. But this was not the
case. Ms. Agana complained ONLY to Drs. Ampil and Fuentes, not
the hospital. How then could PSI possibly do something to fix the
negligence committed by Dr. Ampil when it was not informed
about it at all.[55](emphasis supplied)

On that particular occasion, April 2, 1984, what was your reason for
choosing Dr. Ampil to contact with in connection with your wife's
illness?

PSI reiterated its admission when it stated that had Natividad Agana
"informed the hospital of her discomfort and pain, the hospital would
have been obliged to act on it."[56]

A. First, before that, I have known him to be a specialist on that part of

the body as a surgeon, second, I have known him to be a staff
member of the Medical City which is a prominent and
known hospital. And third, because he is a neighbor, I expect more
than the usual medical service to be given to us, than his ordinary
patients.[52](emphasis supplied)

The significance of the foregoing statements is critical.

Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding

the condition of his wife; that after the meeting and as advised by Dr.
Ampil, he "asked [his] wife to go to Medical City to be examined by [Dr.
Ampil]"; and that the next day, April 3, he told his daughter to take her
mother to Dr. Ampil.[50] This timeline indicates that it was Enrique who
actually made the decision on whom Natividad should consult and
where, and that the latter merely acceded to it. It explains the testimony
of Natividad that she consulted Dr. Ampil at the instigation of her
daughter.[51]
Moreover, when asked what impelled him to choose Dr. Ampil, Enrique
testified:

Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil
was significantly influenced by the impression that Dr. Ampil was a staff
member of Medical City General Hospital, and that said hospital was
well known and prominent. Enrique looked upon Dr. Ampil not as
independent of but as integrally related to Medical City.
PSI's acts tended to confirm and reinforce, rather than negate,
Enrique's view. It is of record that PSI required a "consent for hospital
care"[53] to be signed preparatory to the surgery of Natividad. The form
reads:
Permission is hereby given to the medical, nursing and laboratory staff
of the Medical City General Hospital to perform such diagnostic
procedures and to administer such medications and treatments as may
be deemed necessary or advisable by the physicians of this
hospital for and during the confinement of xxx. (emphasis supplied)
By such statement, PSI virtually reinforced the public impression that
Dr. Ampil was a physician of its hospital, rather than one independently
practicing in it; that the medications and treatments he prescribed were
necessary and desirable; and that the hospital staff was prepared to
carry them out.
PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation
was not the exclusive basis of the Aganas' decision to have Natividad
treated in Medical City General Hospital, meaning that, had Dr. Ampil
been affiliated with another hospital, he would still have been chosen
by the Aganas as Natividad's surgeon.[54]

First, they constitute judicial admission by PSI that while it had no

power to control the means or method by which Dr. Ampil conducted
the surgery on Natividad Agana, it had the power to review or cause
the review of what may have irregularly transpired within its walls
strictly for the purpose of determining whether some form of negligence
may have attended any procedure done inside its premises, with the
ultimate end of protecting its patients.
Second, it is a judicial admission that, by virtue of the nature of its
business as well as its prominence[57] in the hospital industry, it
assumed a duty to "tread on" the "captain of the ship" role of any doctor
rendering services within its premises for the purpose of ensuring the
safety of the patients availing themselves of its services and facilities.
Third, by such admission, PSI defined the standards of its corporate
conduct under the circumstances of this case, specifically: (a) that it
had a corporate duty to Natividad even after her operation to ensure
her safety as a patient; (b) that its corporate duty was not limited to
having its nursing staff note or record the two missing gauzes and (c)
that its corporate duty extended to determining Dr. Ampil's role in it,
bringing the matter to his attention, andcorrecting his negligence.
And finally, by such admission, PSI barred itself from arguing in its
second motion for reconsideration that the concept of corporate
responsibility was not yet in existence at the time Natividad underwent
treatment;[58] and that if it had any corporate responsibility, the same
was limited to reporting the missing gauzes and did not include "taking
an active step in fixing the negligence committed." [59] An admission
made in the pleading cannot be controverted by the party making such
admission and is conclusive as to him, and all proofs submitted by him
contrary thereto or inconsistent therewith should be ignored, whether or
not objection is interposed by a party. [60]

18
Given the standard of conduct that PSI defined for itself, the next
relevant inquiry is whether the hospital measured up to it.
PSI excuses itself from fulfilling its corporate duty on the ground that
Dr. Ampil assumed the personal responsibility of informing Natividad
about the two missing gauzes.[61] Dr. Ricardo Jocson, who was part of
the group of doctors that attended to Natividad, testified that toward the
end of the surgery, their group talked about the missing gauzes but Dr.
Ampil assured them that he would personally notify the patient about
it.[62] Furthermore, PSI claimed that there was no reason for it to act on
the report on the two missing gauzes because Natividad Agana
showed no signs of complications. She did not even inform the hospital
about her discomfort.[63]
The excuses proffered by PSI are totally unacceptable.
To begin with, PSI could not simply wave off the problem and
nonchalantly delegate to Dr. Ampil the duty to review what transpired
during the operation. The purpose of such review would have been to
pinpoint when, how and by whom two surgical gauzes were mislaid so
that necessary remedial measures could be taken to avert any
jeopardy to Natividad's recovery. Certainly, PSI could not have
expected that purpose to be achieved by merely hoping that the person
likely to have mislaid the gauzes might be able to retrace his own
steps. By its own standard of corporate conduct, PSI's duty to initiate
the review was non-delegable.
While Dr. Ampil may have had the primary responsibility of notifying
Natividad about the missing gauzes, PSI imposed upon itself the
separate and independent responsibility of initiating the inquiry into the
missing gauzes. The purpose of the first would have been to apprise
Natividad of what transpired during her surgery, while the purpose of
the second would have been to pinpoint any lapse in procedure that led
to the gauze count discrepancy, so as to prevent a recurrence thereof
and to determine corrective measures that would ensure the safety of
Natividad. That Dr. Ampil negligently failed to notify Natividad did not
release PSI from its self-imposed separate responsibility.
Corollary to its non-delegable undertaking to review potential incidents
of negligence committed within its premises, PSI had the duty to take
notice of medical records prepared by its own staff and submitted to its
custody, especially when these bear earmarks of a surgery gone awry.
Thus, the record taken during the operation of Natividad which reported
a gauze count discrepancy should have given PSI sufficient reason to
initiate a review. It should not have waited for Natividad to complain.
As it happened, PSI took no heed of the record of operation and
consequently did not initiate a review of what transpired during
Natividad's operation. Rather, it shirked its responsibility and passed it
on to others - to Dr. Ampil whom it expected to inform Natividad, and to
Natividad herself to complain before it took any meaningful step. By its
inaction, therefore, PSI failed its own standard of hospital care. It
committed corporate negligence.
It should be borne in mind that the corporate negligence ascribed to
PSI is different from the medical negligence attributed to Dr. Ampil. The
duties of the hospital are distinct from those of the doctor-consultant
practicing within its premises in relation to the patient; hence, the failure
of PSI to fulfill its duties as a hospital corporation gave rise to a direct
liability to the Aganas distinct from that of Dr. Ampil.
All this notwithstanding, we make it clear that PSI's hospital liability
based on ostensible agency and corporate negligence applies only to
this case, pro hac vice. It is not intended to set a precedent and should
not serve as a basis to hold hospitals liable for every form of
negligence of their doctors-consultants under any and all
circumstances. The ruling is unique to this case, for the liability of PSI
arose from an implied agency with Dr. Ampil and an admitted corporate
duty to Natividad.[64]
Other circumstances peculiar to this case warrant this ruling, [65] not the
least of which being that the agony wrought upon the Aganas has gone
on for 26 long years, with Natividad coming to the end of her days
racked in pain and agony. Such wretchedness could have been
avoided had PSI simply done what was logical: heed the report of a
guaze count discrepancy, initiate a review of what went wrong and take
corrective measures to ensure the safety of Nativad. Rather, for 26

years, PSI hemmed and hawed at every turn, disowning any such
responsibility to its patient. Meanwhile, the options left to the Aganas
have all but dwindled, for the status of Dr. Ampil can no longer be
ascertained.[66]
Therefore, taking all the equities of this case into consideration, this
Court believes P15 million would be a fair and reasonable liability of
PSI, subject to 12% p.a. interest from the finality of this resolution to full
satisfaction.
WHEREFORE, the second motion for reconsideration is DENIED and
the motions for intervention are NOTED.
Professional Services, Inc. is ORDERED pro hac vice to pay Natividad
(substituted by her children Marcelino Agana III, Enrique Agana, Jr.,
Emma Agana-Andaya, Jesus Agana and Raymund Agana) and
Enrique Agana the total amount of P15 million, subject to 12% p.a.
interest from the finality of this resolution to full satisfaction.
No further pleadings by any party shall be entertained in this case.
Let the long-delayed entry of judgment be made in this case upon
receipt by all concerned parties of this resolution.
SO ORDERED.
Puno, C.J., Carpio, Carpio Morales, Velasco, Jr., Nachura, LeonardoDe Castro, Brion, Peralta, Del Castillo, Villarama, Jr., and Perez, JJ.,
concur.
Bersamin, J., no part.
Abad, J., on official leave.
Mendoza, J., on leave.

8.
SECOND DIVISION
[ 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.
DECISION
VELASCO JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal
of the March 29, 2005 Decision[1] of the Court of Appeals (CA) in CAG.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
Agreement[2] (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

19
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
- P 865,096.07
December 10, 2002
2001

- 6,214,737.11

2000

- 8,003,180.38

1999

- 6,797,814.05

1998

- 4,805,166.34

1997

- 2,822,620.00[3]

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,
2001[4] 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

20
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. 04022004) 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:
A
The Court of Appeals committed grave abuse of discretion in granting
respondents' petition for certiorari.

21
B
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.
C
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 employeremployee 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 employeremployee 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

22
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 gainsaid 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.
2.
3.

Refer and recommend prospective agents to Manulife

Coach agents to become productive
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.
b.
c.

Refer and recommend prospective agents to Manulife;

Train and coordinate activities of other commission agents;
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, 2003[24] 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
Corporation[25] reveals a striking similarity that would more than support
a similar finding as in that case. Thus, there was an employeremployee 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

23
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 withinthe 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
evidentialburden 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 quasijudicial 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 Commission[32] 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

24
[2]

from 1977 up to 2001 amounting to PhP 12,435,474.24;

notice in writing.

(3) Nominal damages of PhP 30,000 as indemnity for violation of the

due process requirements; and

Tongko additionally agreed (1) to comply with all regulations and

requirements of Manulife, and (2) to maintain a standard of knowledge
and competency in the sale of Manulife's products, satisfactory to
Manulife and sufficient to meet the volume of the new business,
required by his Production Club membership. [3]

(4) Attorney's fees equivalent to ten percent (10%) of the

aforementioned backwages and separation pay.
Costs against respondent Manulife.
SO ORDERED.
Carpio-Morales, and Brion, JJ., concur.
Quisumbing, (Chairperson), pls. see dissenting opinion.
Tinga, J., join J. Quisumbing's dissent.

9.
EN BANC
[ G.R. No. 167622, June 29, 2010 ]
GREGORIO V. TONGKO, PETITIONER, VS. THE
MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. AND
RENATO A. VERGEL DE DIOS, RESPONDENTS.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration[1] dated December 3,
2008 filed by respondent The Manufacturers Life Insurance Co.
(Phils.), Inc. (Manulife) to set aside our Decision of November 7,
2008. In the assailed decision, we found that an employer-employee
relationship existed between Manulife and petitioner Gregorio Tongko
and ordered Manulife to pay Tongko backwages and separation pay for
illegal dismissal.
The following facts have been stated in our Decision of November 7,
2008, now under reconsideration, but are repeated, simply for
purposes of clarity.
The contractual relationship between Tongko and Manulife had
two basic phases. The first or initial phase began on July 1, 1977,
under a Career Agent's Agreement (Agreement) that provided:
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.
x x x x
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 to or 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.
x x x x
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

The second phase started in 1983 when Tongko was named Unit
Manager in Manulife's Sales Agency Organization. In 1990, he
became a Branch Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.[4]
Tongko's gross earnings consisted of commissions, persistency
income, and management overrides. Since the beginning, Tongko
consistently declared himself self-employed in his income tax
returns. Thus, under oath, he declared his gross business income
and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax on
Tongko's earnings.[5]
In 2001, Manulife instituted manpower development programs at the
regional sales management level. Respondent Renato Vergel de Dios
wrote Tongko a letter dated November 6, 2001 on concerns that were
brought up during the October 18, 2001 Metro North Sales Managers
Meeting. De Dios wrote:
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.
x x x x
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.
x x x x
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

25
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.

your Sales Managers, all these efforts have failed in helping you align
your directions with Management's avowed agency growth policy.

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!

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.[7]

Issue # 3: "Sales Managers are doing what the company asks them to
do but, in the process, they earn less."

Tongko responded by filing an illegal dismissal complaint with the

National Labor Relations Commission (NLRC) Arbitration Branch. He
essentially alleged - despite the clear terms of the letter terminating his
Agency Agreement - that he was Manulife's employee before he was
illegally dismissed.[8]

x x x x
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
x x x x
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.
x x x x
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.
x x x x
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.
x x x x
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. [6]
Subsequently, de Dios wrote Tongko another letter, dated December
18, 2001, terminating Tongko's services:
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

x x x x

Thus, the threshold issue is the existence of an employment

relationship. A finding that none exists renders the question of illegal
dismissal moot; a finding that an employment relationship exists, on the
other hand, necessarily leads to the need to determine the validity of
the termination of the relationship.
A. Tongko's Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual overrider not exceeding P50,000.00, regardless of production levels
attained and exclusive of commissions and bonuses. He also claimed
that as Regional Sales Manager, he was given a travel and
entertainment allowance of P36,000.00 per year in addition to his
overriding commissions; he was tasked with numerous administrative
functions and supervisory authority over Manulife's employees, aside
from merely selling policies and recruiting agents for Manulife; and he
recommended and recruited insurance agents subject to vetting and
approval by Manulife. He further alleges that he was assigned a
definite place in the Manulife offices when he was not in the field - at
the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts.,
Salcedo Village, Makati City - for which he never paid any
rental. Manulife provided the office equipment he used, including
tables, chairs, computers and printers (and even office stationery), and
paid for the electricity, water and telephone bills. As Regional Sales
Manager, Tongko additionally asserts that he was required to follow at
least three codes of conduct.[9]
B. Manulife's Case - Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the
Agreement, Tongko was paid commissions of varying amounts,
computed based on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As sales manager,
Tongko was paid overriding sales commission derived from sales made
by agents under his unit/structure/branch/region. Manulife also points
out that it deducted and withheld a 10% tax from all commissions
Tongko received; Tongko even declared himself to be self-employed
and consistently paid taxes as such--i.e., he availed of tax deductions
such as ordinary and necessary trade, business and professional
expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over
Tongko's claim as he was not its employee as characterized in the fourfold test and our ruling in Carungcong v. National Labor Relations
Commission.[10]
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship
existed between the parties. However, the NLRC reversed the labor
arbiter's decision on appeal; it found the existence of an employeremployee relationship and concluded that Tongko had been illegally
dismissed. In the petition for certiorari with the Court of Appeals (CA),
the appellate court found that the NLRC gravely abused its discretion in
its ruling and reverted to the labor arbiter's decision that no employeremployee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and
found that an employment relationship existed between Tongko and

26
Manulife. We concluded that Tongko is Manulife's employee for the
following reasons:
1. Our ruling in the first Insular[11] case did not foreclose the
possibility of an insurance agent becoming an employee of an
insurance company; if evidence exists showing 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 be present. The determination of the existence
of an employer-employee relationship is thus on a case-to-case
basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to
characterize him as an employee, as shown by the following
indicators:
2.1 Tongko undertook to comply with Manulife's rules, regulations
and other requirements, i.e., the different codes of conduct such
as the Agent Code of Conduct, the Manulife Financial Code of
Conduct, and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife's insurance agents and
managers, who occupied similar positions as Tongko, showed
that they performed administrative duties that established
employment with Manulife;[12] and
2.3 Tongko was tasked to recruit some agents in addition to his
other administrative functions. De Dios' letter harped on the
direction Manulife intended to take, viz., greater agency
recruitment as the primary means to sell more policies; Tongko's
alleged failure to follow this directive led to the termination of his
employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for
reconsideration on the following GROUNDS:

THE COURT'S RULING

A. The Insurance and the Civil Codes;

the Parties' Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law
perspective, oblivious that the factual antecedents were set in the
insurance industry so that the Insurance Code primarily governs.
Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents
and Brokers" and specifically defines the agents and brokers
relationship with the insurance company and how they are governed by
the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency"
that it speaks of, as agency is a civil law matter governed by the Civil
Code. Thus, at the very least, three sets of laws - namely, the
Insurance Code, the Labor Code and the Civil Code - have to be
considered in looking at the present case. Not to be forgotten, too, is
the Agreement (partly reproduced on page 2 of this Dissent and which
no one disputes) that the parties adopted to govern their relationship
for purposes of selling the insurance the company offers. To forget
these other laws is to take a myopic view of the present case and to
add to the uncertainties that now exist in considering the legal
relationship between the insurance company and its "agents."
The main issue of whether an agency or an employment relationship
exists depends on the incidents of the relationship. The Labor Code
concept of "control" has to be compared and distinguished with the
"control" that must necessarily exist in a principal-agent
relationship. The principal cannot but also have his or her say in
directing the course of the principal-agent relationship, especially in
cases where the company-representative relationship in the insurance
industry is an agency.
a. The laws on insurance and agency

1. The November 7[, 2008] Decision violates Manulife's right to due

process by: (a) confining the review only to the issue of "control" and
utterly disregarding all the other issues that had been joined in this
case; (b) mischaracterizing the divergence of conclusions between the
CA and the NLRC decisions as confined only to that on "control"; (c)
grossly failing to consider the findings and conclusions of the CA on the
majority of the material evidence, especially [Tongko's] declaration in
his income tax returns that he was a "business person" or "selfemployed"; and (d) allowing [Tongko] to repudiate his sworn statement
in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in
contract law and agency, distorts not only the legal relationships of
agencies to sell but also distributorship and franchising, and ignores
the constitutional and policy context of contract law vis--vis labor
law.
3. The November 7[, 2008] Decision ignores the findings of the CA on
the three elements of the four-fold test other than the "control" test,
reverses well-settled doctrines of law on employer-employee
relationships, and grossly misapplies the "control test," by selecting,
without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the
scope authorized by Articles 8 and 9 of the Civil Code, beyond the
powers granted to this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial legislation, the
constitutional prohibition against impairment of contracts under Article
III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made
unsustainable and reversible errors, which should be corrected, in
concluding that Respondent Manulife and Petitioner had an employeremployee relationship, that Respondent Manulife illegally dismissed
Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney's
fees.[13]

The business of insurance is a highly regulated commercial activity in

the country, in terms particularly of who can be in the insurance
business, who can act for and in behalf of an insurer, and how these
parties shall conduct themselves in the insurance business. Section
186 of the Insurance Code provides that "No person, partnership, or
association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do
the business of insurance in the Philippines." Sections 299 and 300 of
the Insurance Code on Insurance Agents and Brokers, among other
provisions, provide:
Section 299. No insurance company doing business in the Philippines,
nor any agent thereof, shall pay any commission or other
compensation to any person for services in obtaining insurance,
unless such person shall have first procured from the Commissioner a
license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in
the solicitation or procurement of applications for insurance, or receive
for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to
act from the Commissioner x x x The Commissioner shall satisfy
himself as to the competence and trustworthiness of the applicant and
shall have the right to refuse to issue or renew and to suspend or
revoke any such license in his discretion.
Section 300. Any person who for compensation solicits or obtains
insurance on behalf of any insurance company or transmits for a
person other than himself an application for a policy or contract of
insurance to or from such company or offers or assumes to act in the
negotiating of such insurance shall be an insurance agent within the
intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is
subject.
The application for an insurance agent's license requires a written
examination, and the applicant must be of good moral character and

27
[26]

must not have been convicted of a crime involving moral

turpitude.[14] The insurance agent who collects premiums from an
insured person for remittance to the insurance company does so in a
fiduciary capacity, and an insurance company which delivers an
insurance policy or contract to an authorized agent is deemed to have
authorized the agent to receive payment on the company's
behalf.[15] Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and this
covers any rebate from the premium or any special favor or advantage
in the dividends or benefit accruing from the policy.

National Labor Relations Commission (AFPMBAI case)

allegation that Tongko was not its employee.

Thus, under the Insurance Code, the agent must, as a matter of

qualification, be licensed and must also act within the parameters of the
authority granted under the license and under the contract with the
principal. Other than the need for a license, the agent is limited in the
way he offers and negotiates for the sale of the company's insurance
products, in his collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent, rules to
check on the parameters on the authority given to the agent, and rules
to ensure that industry, legal and ethical rules are followed) are built-in
elements of control specific to an insurance agency and should not and
cannot be read as elements of control that attend an employment
relationship governed by the Labor Code.

The present case at first glance appears aligned with the facts in
the Carungcong, the Grepalife, and the second Insular Life cases. A
critical difference, however, exists as these cited cases dealt with the
proper legal characterization of a subsequent management
contract that superseded the original agency contract between the
insurance company and its agent. Carungcong dealt with a
subsequent Agreement making Carungcong a New Business Manager
that clearly superseded the Agreement designating Carungcong as an
agent empowered to solicit applications for insurance. The Grepalife
case, on the other hand, dealt with the proper legal characterization of
the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties
and functions of the Ruiz brothers, as these were enumerated in their
contracts, we concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out their jobs. Finally,
the second Insular Life case dealt with the implications of de los Reyes'
appointment as acting unit manager which, like the subsequent
contracts in the Carungcong and theGrepalife cases, was clearly
defined under a subsequent contract. In all these cited cases, a
determination of the presence of the Labor Code element of
control was made on the basis of the stipulations of the
subsequent contracts.

On the other hand, the Civil Code defines an agent as a "person [who]
binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of
the latter."[16] While this is a very broad definition that on its face may
even encompass an employment relationship, the distinctions between
agency and employment are sufficiently established by law and
jurisprudence.
Generally, the determinative element is the control exercised over the
one rendering service. The employer controls the employee both in the
results and in the means and manner of achieving this result. The
principal in an agency relationship, on the other hand, also has the
prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency
must be express in light of the need for a license and for the
designation by the insurance company. In the present case, the
Agreement fully serves as grant of authority to Tongko as Manulife's
insurance agent.[17] This agreement is supplemented by the company's
agency practices and usages, duly accepted by the agent in carrying
out the agency.[18] By authority of the Insurance Code, an insurance
agency is for compensation,[19] a matter the Civil Code Rules on
Agency presumes in the absence of proof to the contrary. [20] Other than
the compensation, the principal is bound to advance to, or to
reimburse, the agent the agreed sums necessary for the execution of
the agency.[21] By implication at least under Article 1994 of the Civil
Code, the principal can appoint two or more agents to carry out the
same assigned tasks,[22] based necessarily on the specific instructions
and directives given to them.
With particular relevance to the present case is the provision that "In
the execution of the agency, the agent shall act in accordance with the
instructions of the principal."[23] This provision is pertinent for purposes
of the necessary control that the principal exercises over the agent in
undertaking the assigned task, and is an area where the instructions
can intrude into the labor law concept of control so that minute
consideration of the facts is necessary. A related article is Article 1891
of the Civil Code which binds the agent to render an account of his
transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the
first Insular and Grepalife cases to establish that the company rules
and regulations that an agent has to comply with are indicative of an
employer-employee relationship.[24] The Dissenting Opinions of Justice
Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also
cite Insular Life Assurance Co. v. National Labor Relations
Commission (second Insular case)[25] to support the view that Tongko is
Manulife's employee. On the other hand, Manulife cites
the Carungcong case and AFP Mutual Benefit Association, Inc. v.

to support its

A caveat has been given above with respect to the use of the rulings in
the cited cases because none of them is on all fours with the present
case; the uniqueness of the factual situation of the present case
prevents it from being directly and readily cast in the mold of the cited
cases. These cited cases are themselves different from one another;
this difference underscores the need to read and quote them in the
context of their own factual situations.

In stark contrast with the Carungcong, the Grepalife, and the second
Insular Life cases, the only contract or document extant and
submitted as evidence in the present case is the Agreement - a pure
agency agreement in the Civil Code context similar to the original
contract in the first Insular Life case and the contract in the AFPMBAI
case. And while Tongko was later on designated unit manager in
1983, Branch Manager in 1990, and Regional Sales Manager in 1996,
no formal contract regarding these undertakings appears in the records
of the case. Any such contract or agreement, had there been any,
could have at the very least provided the bases for properly
ascertaining the juridical relationship established between the parties.
These critical differences, particularly between the present case
and the Grepalife and the second Insular Life cases, should therefore
immediately drive us to be more prudent and cautious in applying the
rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977
Agreement that governed and defined the parties' relations until the
Agreement's termination in 2001. This Agreement stood for more than
two decades and, based on the records of the case, was never
modified or novated. It assumes primacy because it directly dealt with
the nature of the parties' relationship up to the very end; moreover,
both parties never disputed its authenticity or the accuracy of its terms.
By the Agreement's express terms, Tongko served as an "insurance
agent" for Manulife, not as an employee. To be sure, the Agreement's
legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; as the dissent clearly stated, the
characterization of the juridical relationship the Agreement embodied is
a matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least,
the provision on the absence of employer-employee relationship
between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.

28
The parties' legal characterization of their intent, although not
conclusive, is critical in this case because this intent is not illegal or
outside the contemplation of law, particularly of the Insurance and the
Civil Codes. From this perspective, the provisions of the Insurance
Code cannot be disregarded as this Code (as heretofore already noted)
expressly envisions a principal-agent relationship between the
insurance company and the insurance agent in the sale of insurance to
the public. For this reason, we can take judicial notice that as a
matter of Insurance Code-based business practice, an agency
relationship prevails in the insurance industry for the purpose of
selling insurance. The Agreement, by its express terms, is in
accordance with the Insurance Code model when it provided for a
principal-agent relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not reflect the parties'
true intent. This intent, incidentally, is reinforced by the system of
compensation the Agreement provides, which likewise is in accordance
with the production-based sales commissions the Insurance Code
provides.
Significantly, evidence shows that Tongko's role as an insurance agent
never changed during his relationship with Manulife. If changes
occurred at all, the changes did not appear to be in the nature of their
core relationship. Tongko essentially remained an agent, but moved
up in this role through Manulife's recognition that he could use other
agents approved by Manulife, but operating under his guidance and in
whose commissions he had a share. For want of a better term, Tongko
perhaps could be labeled as a "lead agent" who guided under his wing
other Manulife agents similarly tasked with the selling of Manulife
insurance.
Like Tongko, the evidence suggests that these other agents operated
under their own agency agreements. Thus, if Tongko's compensation
scheme changed at all during his relationship with Manulife, the change
was solely for purposes of crediting him with his share in the
commissions the agents under his wing generated. As an agent who
was recruiting and guiding other insurance agents, Tongko likewise
moved up in terms of the reimbursement of expenses he incurred in the
course of his lead agency, a prerogative he enjoyed pursuant to Article
1912 of the Civil Code. Thus, Tongko received greater
reimbursements for his expenses and was even allowed to use
Manulife facilities in his interactions with the agents, all of whom were,
in the strict sense, Manulife agents approved and certified as such by
Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from the
reading of the Agreement (the only agreement on record in this case)
and his continuing role thereunder as sales agent, from the perspective
of the Insurance and the Civil Codes and in light of what Tongko
himself attested to as his role as Regional Sales Manager. To be sure,
this interpretation could have been contradicted if other agreements
had been submitted as evidence of the relationship between Manulife
and Tongko on the latter's expanded undertakings. In the absence of
any such evidence, however, this reading - based on the available
evidence and the applicable insurance and civil law provisions - must
stand, subject only to objective and evidentiary Labor Code tests on the
existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the
Agreement during the course of the parties' relationship should be
noted. From 1977 until the termination of the Agreement, Tongko's
occupation was to sell Manulife's insurance policies and
products. Both parties acquiesced with the terms and conditions of the
Agreement. Tongko, for his part, accepted all the benefits flowing from
the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he
was an independent agent selling Manulife insurance products since he
invariably declared himself a business or self-employed person in his
income tax returns. This consistency with, and action made
pursuant to the Agreement were pieces of evidence that were
never mentioned nor considered in our Decision of November 7,
2008. Had they been considered, they could, at the very least, serve
as Tongko's admissions against his interest. Strictly speaking,
Tongko's tax returns cannot but be legally significant because he
certified under oath the amount he earned as gross business income,
claimed business deductions, leading to his net taxable income. This

should be evidence of the first order that cannot be brushed aside by a

mere denial. Even on a layman's view that is devoid of legal
considerations, the extent of his annual income alone renders his
claimed employment status doubtful.[27]
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel - a legal and
equitable concept[28] - necessarily must come into play. 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. Interestingly, Justice Velasco's dissenting opinion states that
Tongko was forced to declare himself a business or self-employed
person by Manulife's persistent refusal to recognize him as its
employee.[29] Regrettably, the dissent has shown no basis for this
conclusion, an understandable omission since no evidence in fact
exists on this point in the records of the case. In fact, what the
evidence shows is Tongko's full conformity with, and action as, an
independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that the
commissions he earned as a sales agent should not be considered in
the determination of the backwages and separation pay that should be
given to him. This part of the dissent is correct although it went on to
twist this conclusion by asserting that Tongko had dual roles in his
relationship with Manulife; he was an agent, not an employee, in so far
as he sold insurance for Manulife, but was an employee in his capacity
as a manager. Thus, the dissent concluded that Tongko's backwages
should only be with respect to his role as Manulife's manager.
The conclusion with respect to Tongko's employment as a manager is,
of course, unacceptable for the legal, factual and practical reasons
discussed in this Resolution. In brief, the factual reason is grounded
on the lack of evidentiary support of the conclusion that Manulife
exercised control over Tongko in the sense understood in the Labor
Code. The legal reason, partly based on the lack of factual basis, is
the erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other hand, is the
havoc that the dissent's unwarranted conclusion would cause the
insurance industry that, by the law's own design, operated along the
lines of principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence
on record showing that Manulife ever exercised means-and-manner
control, even to a limited extent, over Tongko during his ascent in
Manulife's sales ladder. In 1983, Tongko was appointed unit
manager. Inexplicably, Tongko never bothered to present any
evidence at all on what this designation meant. This also holds true for
Tongko's appointment as branch manager in 1990, and as Regional
Sales Manager in 1996. The best evidence of control - the agreement
or directive relating to Tongko's duties and responsibilities - was never
introduced as part of the records of the case.The reality is, prior to de
Dios' letter, Manulife had practically left Tongko alone not only in doing
the business of selling insurance, but also in guiding the agents under
his wing. As discussed below, the alleged directives covered by de
Dios' letter, heretofore quoted in full, were policy directions and
targeted results that the company wanted Tongko and the other sales
groups to realign with in their own selling activities. This is the reality
that the parties' presented evidence consistently tells us.
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.

29
on the contractual relationship between them.
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.
From jurisprudence, an important lesson that the first Insular Life case
teaches us is 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," as the first Insular Life case tells us, 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. Our ruling in these respects in the first Insular
Life case was practically reiterated in Carungcong. Thus, as will be
shown more fully below, Manulife's codes of conduct, [30] 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.
The dissent considers the imposition of administrative and managerial
functions on Tongko as indicative of labor law control; thus, Tongko as
manager, but not as insurance agent, became Manulife's employee. It
drew this conclusion from what the other Manulife managers disclosed
in their affidavits (i.e., their enumerated administrative and managerial
functions) and after comparing these statements with the
managers in Grepalife. The dissent compared the control exercised
by Manulife over its managers in the present case with the control the
managers in the Grepalife case exercised over their employees by
presenting the following matrix:[31]
Duties of Manulife's Manager

Duties of Grepalife's
Managers/Supervisors

- to render or recommend
prospective agents to be licensed,
trained and contracted to sell
Manulife products and who will be
part of my Unit
- to coordinate activities of the
agents under [the managers'] Unit
in [the agents'] daily, weekly and
monthly selling activities, making
sure that their respective sales
targets are met; - to conduct
periodic training sessions for [the]
agents to further enhance their
sales skill; and - to assist [the]
agents with their sales activities by
way of joint fieldwork, consultations
and one-on-one evaluation and
analysis of particular accounts

- train understudies for the position

of district manager

- properly account, record and

document the company's funds,
spot-check and audit the work of
the zone supervisors, x x x follow
up the submission of weekly
remittance reports of the debit
agents and zone supervisors direct and supervise the sales
activities of the debit agents under
him, x x x undertake and discharge
the functions of absentee debit
agents, spot-check the record of
debit agents, and insure proper
documentation of sales and
collections of debit agents.

Aside from these affidavits however, no other evidence exists regarding

the effects of Tongko's additional roles in Manulife's sales operations

To the dissent, Tongko's administrative functions as recruiter, trainer,

or supervisor of other sales agents constituted a substantive alteration
of Manulife's authority over Tongko and the performance of his end of
the relationship with Manulife. We could not deny though that Tongko
remained, first and foremost, an insurance agent, and that his
additional role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued to dominate the
relations between Tongko and Manulife even after Tongko assumed
his leadership role among agents. This conclusion cannot be denied
because it proceeds from the undisputed fact that Tongko and Manulife
never altered their July 1, 1977 Agreement, a distinction the present
case has with the contractual changes made in the second Insular Life
case. Tongko's results-based commissions, too, attest to the primacy
he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate
the great qualitative difference that exists between:
the Manulife managers' role is to coordinate activities of the agents
under the managers' Unit in the agents' daily, weekly, and monthly
selling activities, making sure that their respective sales targets are
met.
the District Manager's duty in Grepalife is to 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 managers, and maintain his quota of sales (the failure of
which is a ground for termination).
the Zone Supervisor's (also in Grepalife) has the duty to 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.
These job contents are worlds apart in terms of "control." In Grepalife,
the details of how to do the job are specified and pre-determined; in the
present case, the operative words are the "sales target," the
methodology being left undefined except to the extent of being
"coordinative." To be sure, a "coordinative" standard for a manager
cannot be indicative of control; the standard only essentially describes
what a Branch Manager is - the person in the lead who orchestrates
activities within the group. To "coordinate," and thereby to lead and to
orchestrate, is not so much a matter of control by Manulife; it is simply
a statement of a branch manager's role in relation with his agents from
the point of view of Manulife whose business Tongko's sales group
carries.
A disturbing note, with respect to the presented affidavits and Tongko's
alleged administrative functions, is the selective citation of the portions
supportive of an employment relationship and the consequent omission
of portions leading to the contrary conclusion. For example, the
following portions of the affidavit of Regional Sales Manager John
Chua, with counterparts in the other affidavits, were not brought out in
the Decision of November 7, 2008, while the other portions suggesting
labor law control were highlighted. Specifically, the following portions of
the affidavits were not brought out:[32]
1.a. I have no fixed wages or salary since my services are
compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in
soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work
load;
1.d. I use my own facilities, tools, materials and supplies in carrying out
my business of selling insurance;

30
x x x x
6. I have my own staff that handles the day to day operations of my
office;
7. My staff are my own employees and received salaries from me;
x x x x
9. My commission and incentives are all reported to the Bureau of
Internal Revenue (BIR) as income by a self-employed individual or
professional with a ten (10) percent creditable withholding tax. I also
remit monthly for professionals.
These statements, read with the above comparative analysis of the
Manulife and the Grepalife cases, would have readily yielded the
conclusion that no employer-employee relationship existed between
Manulife and Tongko.
Even de Dios' letter is not determinative of control as it indicates the
least amount of intrusion into Tongko's exercise of his role as manager
in guiding the sales agents. Strictly viewed, de Dios' directives are
merely operational guidelines on how Tongko could align his
operations with Manulife's re-directed goal of being a "big league
player." The method is to expand coverage through the use of more
agents. This requirement for the recruitment of more agents is not a
means-and-method control as it relates, more than anything else, and
is directly relevant, to Manulife's objective of expanded business
operations through the use of a bigger sales force whose members are
all on a principal-agent relationship. An important point to note here
is that Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business;
Tongko was effectively guiding his corps of sales agents, who are
bound to Manulife through the same Agreement that he had with
Manulife, all the while sharing in these agents' commissions
through his overrides. This is the lead agent concept mentioned
above for want of a more appropriate term, since the title of Branch
Manager used by the parties is really a misnomer given that what is
involved is not a specific regular branch of the company but a corps of
non-employed agents, defined in terms of covered territory, through
which the company sells insurance. Still another point to consider is
that Tongko was not even setting policies in the way a regular company
manager does; company aims and objectives were simply relayed to
him with suggestions on how these objectives can be reached through
the expansion of a non-employee sales force.
Interestingly, a large part of de Dios' letter focused on income, which
Manulife demonstrated, in Tongko's case, to be unaffected by the new
goal and direction the company had set. Income in insurance agency,
of course, is dependent on results, not on the means and manner of
selling - a matter for Tongko and his agents to determine and an area
into which Manulife had not waded. Undeniably, de Dios' letter
contained a directive to secure a competent assistant at Tongko's own
expense. While couched in terms of a directive, it cannot strictly be
understood as an intrusion into Tongko's method of operating and
supervising the group of agents within his delineated territory. More
than anything else, the "directive" was a signal to Tongko that his
results were unsatisfactory, and was a suggestion on how Tongko's
perceived weakness in delivering results could be remedied. It was a
solution, with an eye on results, for a consistently underperforming
group; its obvious intent was to save Tongko from the result that he
then failed to grasp - that he could lose even his own status as an
agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life
case that showed the hallmarks of an employer-employee relationship
in the management system established. These were: exclusivity of
service, control of assignments and removal of agents under the
private respondent's unit, and furnishing of company facilities and
materials as well as capital described as Unit Development Fund. All
these are obviously absent in the present case. If there is a
commonality in these cases, it is in the collection of premiums which is
a basic authority that can be delegated to agents under the Insurance
Code.
As previously discussed, what simply happened in Tongko's case was
the grant of an expanded sales agency role that recognized him as
leader amongst agents in an area that Manulife defined. Whether this

consequently resulted in the establishment of an employment

relationship can be answered by concrete evidence that
corresponds to the following questions:
as lead agent, what were Tongko's specific functions and the terms of
his additional engagement;
was he paid additional compensation as a so-called Area Sales
Manager, apart from the commissions he received from the insurance
sales he generated;
what can be Manulife's basis to terminate his status as lead agent;
can Manulife terminate his role as lead agent separately from his
agency contract; and
to what extent does Manulife control the means and methods of
Tongko's role as lead agent?
The answers to these questions may, to some extent, be deduced from
the evidence at hand, as partly discussed above. But strictly speaking,
the questions cannot definitively and concretely be answered through
the evidence on record. The concrete evidence required to settle
these questions is simply not there, since only the Agreement and
the anecdotal affidavits have been marked and submitted as
evidence.
Given this anemic state of the evidence, particularly on the requisite
confluence of the factors determinative of the existence of employeremployee relationship, the Court cannot conclusively find that the
relationship exists in the present case, even if such relationship only
refers to Tongko's additional functions. While a rough deduction can
be made, the answer will not be fully supported by the substantial
evidence needed.
Under this legal situation, the only conclusion that can be made is that
the absence of evidence showing Manulife's control over Tongko's
contractual duties points to the absence of any employer-employee
relationship between Tongko and Manulife. In the context of the
established evidence, Tongko remained an agent all along; although
his subsequent duties made him a lead agent with leadership role, he
was nevertheless only an agent whose basic contract yields no
evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the
question of whether an agent may simultaneously assume conflicting
dual personalities. But to set the record straight, the concept of a
single person having the dual role of agent and employee while doing
the same task is a novel one in our jurisprudence, which must be
viewed with caution especially when it is devoid of any
jurisprudential support or precedent. The quoted portions in Justice
Carpio-Morales' dissent,[33] borrowed from both the Grepalife and
the second Insular Life cases, to support the duality approach of the
Decision of November 7, 2008, are regrettably far removed from their
context - i.e., the cases' factual situations, the issues they decided and
the totality of the rulings in these cases - and cannot yield the
conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz
brothers' appointment as zone supervisor and district manager made
them employees of Grepalife. Indeed, because of the presence of the
element of control in their contract of engagements, they were
considered Grepalife's employees. This did not mean, however, that
they were simultaneously considered agents as well as employees
of Grepalife; the Court's ruling never implied that this situation existed
insofar as the Ruiz brothers were concerned. The Court's statement the Insurance Code may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar the application
of the Labor Code with regard to labor standards and labor relations simply means that when an insurance company has exercised control
over its agents so as to make them their employees, the relationship
between the parties, which was otherwise one for agency governed by
the Civil Code and the Insurance Code, will now be governed by the
Labor Code. The reason for this is simple - the contract of agency has
been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of

31
whether the labor bodies have jurisdiction over an illegal termination
dispute involving parties who had two contracts - first, an original
contract (agency contract), which was undoubtedly one for agency, and
another subsequent contract that in turn designated the agent acting
unit manager (a management contract). Both the Insular Life and the
labor arbiter were one in the position that both were agency
contracts. The Court disagreed with this conclusion and held that
insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor
arbiter for further proceedings. We never said in this case though that
the insurance agent had effectively assumed dual personalities for the
simple reason that the agency contract has been effectively
superseded by the management contract. The management contract
provided that if the appointment was terminated for any reason other
than for cause, the acting unit manager would be reverted to agent
status and assigned to any unit.

illegally dismissed and ordering petitioner to pay respondents

separation pay, backwages, 13th month pay, Cost of Living Allowance
(COLA), emergency relief allowance (ERA), salary differentials and
attorneys fees. The NLRC reversed the Labor Arbiters finding that
respondents failed to lay down the facts and circumstances
surrounding their dismissal and to prove their entitlement to monetary
awards.[4]

1. Jaime Pancho

November 15, 1964

The dissent pointed out, as an argument to support its employment

relationship conclusion, that any doubt in the existence of an employeremployee relationship should be resolved in favor of the existence of
the relationship.[34] This observation, apparently drawn from Article 4 of
the Labor Code, is misplaced, as Article 4 applies only when a doubt
exists in the "implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as in a
situation where the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence the Labor Code
requires.

2. Rodolfo Pancho, Jr.

February 1, 1975

3. Joselito Medalla

November 15, 1964

4. Paquito Magallanes

March 10, 1973

5. Felomino Magallanes

November 15, 1964

6. Alicia Magallanes

January 15, 1964

7. Evelyn Magallanes

January 1, 1974

8. Violeta Villacampa

December 1, 1979

9. Maritess Pancho

December 15, 1985

10. Rogelio Pancho

December 1, 1979

11. Arnolfo Pancho

February 1, 1975

On the dissent's last point regarding the lack of jurisprudential value of

our November 7, 2008 Decision, suffice it to state that, as discussed
above, the Decision was not supported by the evidence adduced and
was not in accordance with controlling jurisprudence. It should,
therefore, be reconsidered and abandoned, but not in the manner the
dissent suggests as the dissenting opinions are as factually and as
legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko's failure to
comply with the guidelines of de Dios' letter, as a ground for termination
of Tongko's agency, is a matter that the labor tribunals cannot rule
upon in the absence of an employer-employee relationship. Jurisdiction
over the matter belongs to the courts applying the laws of insurance,
agency and contracts.
WHEREFORE, considering the foregoing discussion,
we REVERSE our Decision of November 7, 2008, GRANTManulife's
motion for reconsideration and, accordingly, DISMISS Tongko's
petition. No costs.
SO ORDERED.
Corona, C.J., Carpio, Brion, Peralta, Del Castillo, Abad,
Perez, and Mendoza, JJ., concur.
Carpio Morales, J., please see separate dissenting opinion.
Velasco, Jr., J., please see dissenting opinion.
Nachura, Leonardo-De Castro, and Bersamin, JJ., joins the dissent of
J. Velasco.
Villarama, Jr., J., no part.

10.
SECOND DIVISION
[ G.R. No. 151827, April 29, 2005 ]
JOSEFINA BENARES, PETITIONER, VS. JAIME PANCHO,
RODOLFO PANCHO, JR., JOSELITO MEDALLA, PAQUITO
MAGALLANES, ALICIA MAGALLANES, EVELYN MAGALLANES,
VIOLETA VILLACAMPA, MARITESS PANCHO, ROGELIO PANCHO
AND ARNOLFO PANCHO, RESPONDENTS.
DECISION
TINGA, J.:
Assailed in this Petition for Review on Certiorari[1] is the Decision[2] of
the Court of Appeals which affirmed the National Labor Relations
Commissions (NLRC) decision[3] holding that respondents were

The antecedents, as narrated by the NLRC, follow.

Complainants alleged to have started working as sugar farm workers
on various dates, to
wit:

Respondent Hda. Maasin II is a sugar cane plantation located in

Murcia, Negros Occidental with an area of 12-24 has. planted, owned
and managed by Josefina Benares, individual co-respondent.
On July 24, 1991, complainants thru counsel wrote the Regional
Director of the Department of Labor and Employment, Bacolod City for
intercession particularly in the matter of wages and other benefits
mandated by law.
On September 24, 1991, a routine inspection was conducted by
personnel of the Bacolod District Office of the Department of Labor and
Employment. Accordingly, a report and recommendation was made,
hence, the endorsement by the Regional Director of the instant case to
the Regional Arbitration Branch, NLRC, Bacolod City for proper hearing
and disposition.
On October 15, 1991, complainants alleged to have been
terminated without being paid termination benefits by respondent in
retaliation to what they have done in reporting to the Department of
Labor and Employment their working conditions viz-a-viz (sic) wages
and other mandatory benefits.
On July 14, 1992, notification and summons were served to the parties
wherein complainants were directed to file a formal complaint.
On July 28, 1992, a formal complaint was filed for illegal dismissal with
money claims.

32
[10]

From the records, summons and notices of hearing were served to the
parties and apparently no amicable settlement was arrived, hence, the
parties were directed to file their respective position papers.
On January 22, 1993, complainant submitted their position paper, while
respondent filed its position paper on June 21, 1993.
On March 17, 1994, complainants filed their reply position paper and
affidavit. Correspondingly, a rejoinder was filed by respondent on May
16, 1994.
On August 17, 1994, from the Minutes of the scheduled hearing,
respondent failed to appear, and that the Office will evaluate the
records of the case whether to conduct a formal trial on the merits or
not, and that the corresponding order will be issued.
On January 16, 1996, the Labor Arbiter issued an order to the effect
that the case is now deemed submitted for resolution.
On April 30, 1998, the Labor Arbiter a quo issued the assailed decision
dismissing the complaint for lack of merit.
On June 26, 1998, complainants not satisfied with the aforecited ruling
interposed the instant appeal anchored on the ground that:
THE HONORABLE LABOR ARBITER GRAVELY ABUSED ITS
DISCRETION AND SERIOUSLY ERRED IN HOLDING THAT THE
COMPLAINANTS FAILED TO DISCUSS THE FACTS AND
CIRCUMSTANCES SURROUNDING THEIR DISMISSAL, HENCE,
THERE IS NO DISMISSAL TO SPEAK OF AND THAT
COMPLAINANTS FAILED TO ALLEGE AND PROVE THAT THEIR
CLAIMS ARE VALID, HENCE THE DISMISSAL OF THEIR
COMPLAINT WOULD CAUSE GRAVE AND IRREPARABLE DAMAGE
TO HEREIN COMPLAINANTS.[5]
The NLRC held that respondents attained the status of regular
seasonal workers of Hda. Maasin II having worked therein from 19641985. It found that petitioner failed to discharge the burden of proving
that the termination of respondents was for a just or authorized cause.
Hence, respondents were illegally dismissed and should be awarded
their money claims.
Petitioners motion for reconsideration[6] dated May 12, 1999 was
denied in the resolution[7] dated October 29, 1999.
The Court of Appeals affirmed the NLRCs ruling, with the modification
that the backwages and other monetary benefits shall be computed
from the time compensation was withheld in accordance with Article
279 of the Labor Code, as amended by Republic Act No. 6715.
In its Resolution[8] dated November 28, 2001, the appellate court
denied petitioners motion for reconsideration for lack of merit.
Petitioner is now before this Court averring that the Court of Appeals
erred in affirming the decision of the NLRC. While petitioner concedes
that the factual findings of the NLRC are generally binding on the
appellate court, petitioner insists that the findings of the NLRC are
vague and contradictory, thereby necessitating review.
According to petitioner, the fact that she was able to present sufficient
proof to rebut the claim of illegal dismissal should be considered in light
of the NLRCs admission that there are gray areas in the case which
require clarification. Petitioner avers that the NLRC should have at
least remanded the case to the labor arbiter to thresh out these gray
areas. She further claims that the NLRC was overly zealous in
awarding COLA and ERA despite the fact that respondents did not
even pray for these awards in their complaint. She also questions the
NLRCs general statement to the effect that the payroll she submitted is
not convincing asserting that she submitted 235 sets of payroll, not just
one, and that the NLRC did not even bother to explain why it found the
payroll unconvincing.
Respondents filed a Comment[9] dated May 10, 2002 alleging that
petitioner failed to submit certified true copies of the assailed decisions
and resolutions, and that the petition lacks proof of service and raises
questions of fact.

In her Reply to Comment dated September 17, 2002, petitioner

points out that the Rules of Court do not require that all copies of the
petition contain certified true copies of the questioned decisions and
resolutions. Further, all copies of the petition filed with the Court
contain an affidavit of service. Respondents copy does not have an
affidavit of service because the sworn declaration can not be executed
before service of the petition is actually made. Petitioner also
maintains that the rule on review of findings of fact by the Supreme
Court admits of certain exceptions such as when the conclusions
arrived at are grounded entirely on speculation, surmises and
conjectures as in this case.
The petition was given due course and the parties were required to
submit their respective memoranda in theResolution[11] dated March 3,
2003. Petitioner filed a Manifestation and Compliance[12] dated April
22, 2003 adopting the allegations in her Petition for Review on
Certiorari and Reply to Comment as her memorandum. For their part,
respondents filed a Memoranda For Private Respondents[13] dated May
7, 2003 alleging that the Court of Appeals correctly relied upon the
factual findings of the NLRC after having found the same to be
supported by substantial evidence. They insist that they are regular
seasonal employees of the sugar plantation. As such, petitioner has the
burden of proving that their dismissal was for a just or authorized
cause.
As regards the contention that the NLRC erroneously awarded COLA
and ERA, respondents cite Osias Academy v. DOLE,[14] which provides
that the NLRC can extend monetary awards even if these are not
prayed for if the monetary benefits are statutory grants intended to
alleviate the laborers plight like the COLA and ERA.
The main question raised by the present petition is whether
respondents are regular employees of Hacienda Maasin and thus
entitled to their monetary claims. Related to this is the issue of whether
respondents were illegally terminated.
This case presents a good opportunity to reiterate the Courts rulings
on the subject of seasonal employment. The Labor Code defines
regular and casual employment, viz:
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 service 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 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.
The law provides for three kinds of employees: (1) regular employees
or those who have been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer; (2) project employees or those whose 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 service to be performed is seasonal in
nature and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project
employees.[15]
In Mercado v. NLRC,[16] the Court ruled that seasonal workers do not
become regular employees by the mere fact that they have rendered at
least one year of service, whether continuous or broken, because the
proviso in the second paragraph of Article 280 demarcates as casual
employees, all other employees who do not fall under the definition of
the preceding paragraph. It deems as regular employees those
casual employees who have rendered at least one year of service
regardless of the fact that such service may be continuous or broken.
The factual circumstances obtaining in the Mercado case, however, are

33
peculiar. In that case, the workers were engaged to do a particular
phase of agricultural work necessary for rice and/or sugarcane
production, after which they would be free to render services to other
farm workers who need their services.
In contrast, in the case of Hacienda Fatima v. National Federation of
Sugarcane Workers-Food and General Trade,[17] respondents
performed the same tasks for petitioners every season for several
years. Thus, they were considered the latters regular employees for
their respective tasks. The fact that they do not work continuously for
one whole year but only for the duration of the season does not detract
from considering them in regular employment since in a litany of cases
this Court has already settled that seasonal workers who are called to
work from time to time and are temporarily laid off during off-season are
not separated from service in that period, but merely considered on
leave until re-employed.[18]
Citing jurisprudence, the Court, in Hacienda Fatima, condensed the
rule that the primary standard for determining regular employment is
the reasonable connection between the particular activity performed by
the employee vis--vis the usual trade or business of the employer.
This connection can be determined by considering the nature of the
work performed and its relation to the scheme of the particular
business or trade in its entirety. 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.[19]

NLRC and the Court of Appeals have similarly held that respondents
were regular employees of petitioner. Since it is a settled rule that the
factual findings of quasi-judicial agencies which have acquired
expertise in the matters entrusted to their jurisdiction are accorded by
this Court not only respect but even finality, [24] we shall no longer
disturb this finding.
Petitioner next underscores the NLRC decisions mention of the
payroll she presented despite the fact that she allegedly presented
235 sets of payroll, not just one payroll. This circumstance does not in
itself evince any grave abuse of discretion on the part of the NLRC as it
could well have been just an innocuous typographical error.
Verily, the NLRCs decision, affirmed as it was by the Court of Appeals,
appears to have been arrived at after due consideration of the evidence
presented by both parties.
We also find no reason to disturb the finding that respondents were
illegally terminated. When there is no showing of 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 just or authorized cause. [25] In this case,
as found both by the NLRC and the Court of Appeals, petitioner failed
to prove any such cause for the dismissal of respondents.
WHEREFORE, the instant petition is DENIED. The assailed Decision
and Resolution of the Court of Appeals respectively dated June 29,
2001 and November 28, 2001 are hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.

In this case, petitioner argues that respondents were not her regular
employees as they were merely pakiao workers who did not work
continuously in the sugar plantation. They performed such tasks as
weeding, cutting and loading canes, planting cane points, fertilizing,
cleaning the drainage, etc. These functions allegedly do not require
respondents daily presence in the sugarcane field as it is not everyday
that one weeds, cuts canes or applies fertilizer. In support of her
allegations, petitioner submitted cultivo and milling payrolls.
The probative value of petitioners evidence, however, has been
passed upon by the labor arbiter, the NLRC and the Court of
Appeals. Although the labor arbiter dismissed respondents complaint
because their position paper is completely devoid of any discussion
about their alleged dismissal, much less of the probative facts
thereof,[20]the ground for the dismissal of the complaint implies a
finding that respondents are regular employees.
The NLRC was more unequivocal when it pronounced that
respondents have acquired the status of regular seasonal employees
having worked for more than one year, whether continuous or broken in
petitioners hacienda.
According to petitioner, however, the NLRCs conclusion is highly
suspect considering its own admission that there are gray areas which
requires (sic) clarification. She alleges that despite these gray areas,
the NLRC chose not to remand the case to the Labor Arbiter.as this
would unduly prolong the agony of the complainants in particular. [21]
Petitioner perhaps wittingly omitted mention that the NLRC opted to
appreciate the merits of the instant case based on available
documents/pleadings.[22] That the NLRC chose not to remand the case
to the labor arbiter for clarificatory proceedings and instead decided the
case on the basis of the evidence then available to it is a judgment call
this Court shall not interfere with in the absence of any showing that the
NLRC abused its discretion in so doing.
The Court of Appeals, in fact, found no such grave abuse of discretion
on the part of the NLRC. Accordingly, it dismissed the petition
for certiorari and affirmed with modification the findings of the NLRC. It
is well to note at this point that in quasi-judicial proceedings, the
quantum of evidence required to support the findings of the NLRC is
only substantial evidence or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.[23]
The issue, therefore, of whether respondents were regular employees
of petitioner has been adequately dealt with. The labor arbiter, the

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario,

JJ., concur.

11.
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

34
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 midyear 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 22,500.00

09/2001)

c.

Housing Allowance (01/2001 57,000.00

07/2002)

d.

Midyear Bonus 2001

27,500.00

e.

13th Month Pay

27,500.00

f.

10% share in the profits of

361,175.00
Kasei
Corp. from 1996-2001
Moral and exemplary damages 100,000.00

g.

h.

10% Attorney's fees

P957,742.50

7,076.50

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]

35
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 employeremployee 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 Viaa v. AlLagadan 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, 13 th 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.

36
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. FlorendoFlores,[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,
isREINSTATED. 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.
Panganiban, C.J., (Chairperson), Austria-Martinez, Callejo,
Sr. and Chico-Nazario, JJ., concur.

15% commission on direct advertisements less withholding tax and a

10% commission on agency advertisements based on gross revenues
less agency commission and the corresponding withholding tax. The
commissions, released every fifteen days of each month, were to be
given to petitioner only after the clients would have paid for the
advertisements. Apart from commissions, petitioner was also entitled
to a monthly allowance of P2,000.00 as long as he met the
P30,000.00-monthly quota. Basically, the contentious points raised by
the parties had something to do with the following stipulations of the
agreement; viz:
"12. You are not an employee of the Metromedia Times Corporation
nor does the company have any obligations towards anyone you may
employ, nor any responsibility for your operating expenses or for any
liability you may incur. The only rights and obligations between us are
those set forth in this agreement. This agreement cannot be amended
or modified in any way except with the duly authorized consent in
writing of both parties.
"13. Either party may terminate this agreement at any time by giving
written notice to the other, thirty (30) days prior to effectivity of
termination."[2]
On 15 August 1992, barely two months after the renewal of his
contract, petitioner received the following notice from respondent firm

"Dear Mr. Paguio,

"Please be advised of our decision to terminate your services as
Account Executive of Manila Times effective September 30, 1992.
"This is in accordance with our contract signed last July 1, 1992."[3]
Apart from vague allegations of misconduct on which he was not given
the opportunity to defend himself, i.e.,pirating clients from his coexecutives and failing to produce results, no definite cause for
petitioner's termination was given. Aggrieved, petitioner filed a case
before the labor arbiter, asking that his dismissal be declared unlawful
and that his reinstatement, with entitlement to backwages without loss
of seniority rights, be ordered. Petitioner also prayed that respondent
company officials be held accountable for acts of unfair labor practice,
for P500,000.00 moral damages and for P200,000.00 exemplary
damages.
In their defense, respondent Metromedia Times Corporation asserted
that it did not enter into any agreement with petitioner outside of the
contract of services under Articles 1642 and 1644 of the Civil Code of
the Philippines.[4] Asserting their right to terminate the contract with
petitioner, respondents pointed to the last provision thereof stating that
both parties could opt to end the contract provided that either party
would serve, thirty days prior to the intended date of termination, the
corresponding notice to the other.
The labor arbiter found for petitioner and declared his dismissal
illegal. The arbiter ordered respondent Metromedia Times Corporation
and its officers to reinstate petitioner to his former position, without loss
of seniority rights, and to pay him his commissions and other
remuneration accruing from the date of dismissal on 15 August 1992
up until his reinstatement. He likewise adjudged that Liberato I. Gomez,
general manager of respondent corporation, be held liable to petitioner
for moral damages in the amount of P20,000.00.

12.
FIRST DIVISION
[ G.R. No. 147816, May 09, 2003 ]
EFREN P. PAGUIO, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, METROMEDIA TIMES CORPORATION,
ROBINA Y. GOKONGWEI, LIBERATO GOMEZ, JR., YOLANDA E.
ARAGON, FREDERICK D. GO AND ALDA IGLESIA,
RESPONDENTS.
DECISION
VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered,
for the fifth time, into an agreement with petitioner Efren P. Paguio,
appointing the latter to be an account executive of the firm. [1] Again,
petitioner was to solicit advertisements for "The Manila Times," a
newspaper of general circulation, published by respondent company.
Petitioner, for his efforts, was to receive compensation consisting of a

On appeal, the National Labor Relations Commission (NLRC) reversed

the ruling of the labor arbiter and declared the contractual relationship
between the parties as being for a fixed-term employment. The NLRC
declared a fixed-term employment to be lawful as long as "it was
agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the
worker and absent any other circumstances vitiating his consent. [5] The
finding of the NLRC was primarily hinged on the assumption that
petitioner, on account of his educated stature, having indeed personally
prepared his pleadings without the aid of counsel, was an unlikely
victim of a lopsided contract. Rejecting the assertion of petitioner that
he was a regular employee, the NLRC held: The decisive determinant
would not be the activities that the employee (was) called upon to
perform but rather, the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a
day certain being understood to be that which (would) necessarily
come, although it (might) not be known when. [6]

37
Petitioner appealed the ruling of the NLRC before the Court of Appeals
which upheld in toto the findings of the commission. In his petition for
review on certiorari, petitioner raised the following issues for resolution:
"WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE
RESPONDENT'S COMPANY IS FOR A FIXED PERIOD.
"WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.
"WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES
AND MORAL DAMAGES."[7]
The crux of the matter would entail the determination of the nature of
contractual relationship between petitioner and respondent company
was it or was it not one of regular employment?
A "regular employment," whether it is one or not, is aptly gauged from
the concurrence, or the non-concurrence, of the following factors a)
the manner of selection and engagement of the putative employee, b)
the mode of payment of wages, c) the presence or absence of the
power of dismissal; and d) the presence or absence of the power to
control the conduct of the putative employee or the power to control the
employee with respect to the means or methods by which his work is to
be accomplished.[8] The "control test" assumes primacy in the overall
consideration. Under this test, an employment relation obtains where
work is performed or services are rendered under the control and
supervision of the party contracting for the service, not only as to the
result of the work but also as to the manner and details of the
performance desired.[9]
An indicum of regular employment, rightly taken into account by the
labor arbiter, was the reservation by respondent Metromedia Times
Corporation not only of the right to control the results to be achieved
but likewise the manner and the means used in reaching that
end.[10] Metromedia Times Corporation exercised such control by
requiring petitioner, among other things, to submit a daily sales activity
report and also a monthly sales report as well. Various solicitation
letters would indeed show that Robina Gokongwei, company president,
Alda Iglesia, the advertising manager, and Frederick Go, the
advertising director, directed and monitored the sales activities of
petitioner.
The Labor Code, in Article 280 thereof, 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.
"An employment shall be deemed to be casual if it is not covered by the
proceeding paragraph: Provided, 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."
Thus defined, a regular employee is one who is engaged to perform
activities which are necessary and desirable in the usual business or
trade of the employer as against those which are undertaken for a
specific project or are seasonal. Even in these latter cases, where such
person has rendered at least one year of service, regardless of the
nature of the activity performed or of whether it is continuous or
intermittent, the employment is considered regular as long as the
activity exists, it not being indispensable that he be first issued a
regular appointment or be formally declared as such before acquiring a
regular status.[11]
That petitioner performed activities which were necessary and
desirable to the business of the employer, and that the same went on
for more than a year, could hardly be denied. Petitioner was an account
executive in soliciting advertisements, clearly necessary and desirable,
for the survival and continued operation of the business of respondent
corporation. Robina Gokongwei, its President, herself admitted that the
income generated from paid advertisements was the lifeblood of the
newspaper's existence. Implicitly, respondent corporation recognized

petitioner's invaluable contribution to the business when it renewed, not

just once but five times, its contract with petitioner.
Respondent company cannot seek refuge under the terms of the
agreement it has entered into with petitioner. The law, in defining their
contractual relationship, does so, not necessarily or exclusively upon
the terms of their written or oral contract, but also on the basis of the
nature of the work petitioner has been called upon to perform. [12] The
law affords protection to an employee, and it will not countenance any
attempt to subvert its spirit and intent. A stipulation in an agreement
can be ignored as and when it is utilized to deprive the employee of his
security of tenure.[13] The sheer inequality that characterizes employeremployee relations, where the scales generally tip against the
employee, often scarcely provides him real and better options.
The real question that should thus be posed is whether or not petitioner
has been justly dismissed from service. A lawful dismissal must meet
both substantive and procedural requirements; in fine, the dismissal
must be for a just or authorized cause and must comply with the
rudimentary due process of notice and hearing. It is not shown that
respondent company has fully bothered itself with either of these
requirements in terminating the services of petitioner. The notice of
termination recites no valid or just cause for the dismissal of petitioner
nor does it appear that he has been given an opportunity to be heard in
his defense.
The evidence, however, found by the appellate court is wanting that
would indicate bad faith or malice on the part of respondents,
particularly by respondent Liberato I. Gomez, and the award of moral
damages must thus be deleted.
WHEREFORE, the instant petition is GRANTED. The decision of the
Court of Appeals in C.A. G.R. SP No. 527773 and that of the National
Labor Relations Commission are hereby SET ASIDE and that of the
Labor Arbiter isREINSTATED except with respect to the P20,000.00
moral damages adjudged against respondent Liberato I. Gomez which
award is deleted.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna,
JJ., concur.

13.
SECOND DIVISION
[ G.R. No. 129315, October 02, 2000 ]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL
CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA
NAS, AND TERESITA FLORES, PETITIONERS, VS. NATIONAL
LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC.
AND/OR TRINIDAD LAO ONG, RESPONDENTS.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution
dated October 17, 1996 of public respondent National Labor Relations
Commission (First Division),[1] in NLRC NCR Case No. 00-04-0316395, and the Resolution dated March 5, 1997 denying the motion for
reconsideration. The aforecited October 17th Resolution affirmed the
Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Caizares dismissing the petitioners' complaint for illegal dismissal and
declaring that petitioners are not regular employees of private
respondent Lao Enteng Company, Inc..

38
The records of the case show that the five male petitioners, namely,
Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio
Lacap, and Simplicio Pedelos worked as barbers, while the two female
petitioners, Teresita Flores and Patricia Nas worked as manicurists in
New Look Barber Shop located at 651 P. Paterno Street, Quiapo,
Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner
Nas alleged that she also worked as watcher and marketer of private
respondent.
Petitioners claim that at the start of their employment with the New
Look Barber Shop, it was a single proprietorship owned and managed
by Mr. Vicente Lao. In or about January 1982, the children of Vicente
Lao organized a corporation which was registered with the Securities
and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong
as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties
of the New Look Barber Shop and continued the business. All the
petitioners were allowed to continue working with the new company
until April 15, 1995 when respondent Trinidad Ong informed them that
the building wherein the New Look Barber Shop was located had been
sold and that their services were no longer needed. [2]
On April 28, 1995, petitioners filed with the Arbitration Branch of the
NLRC, a complaint for illegal dismissal, illegal deduction, separation
pay, non-payment of 13th month pay, and salary differentials. Only
petitioner Nas asked for payment of salary differentials as she alleged
that she was paid a daily wage of P25.00 throughout her period of
employment. The petitioners also sought the refund of the P1.00 that
the respondent company collected from each of them daily as salary of
the sweeper of the barber shop.
Private respondent in its position paper averred that the petitioners
were joint venture partners and were receiving fifty percent commission
of the amount charged to customers. Thus, there was no employeremployee relationship between them and petitioners. And
assuming arguendo, that there was an employer-employee
relationship, still petitioners are not entitled to separation pay because
the cessation of operations of the barber shop was due to serious
business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng
Co. Inc., specifically stated in her affidavit dated September 06, 1995
that Lao Enteng Company, Inc. did not take over the management of
the New Look Barber Shop, that after the death Lao Enteng petitioner
were verbally informed time and again that the partnership may fold up
anytime because nobody in the family had the time to be at the barber
shop to look after their interest; that New Look Barber Shop had always
been a joint venture partnership and the operation and management of
the barber shop was left entirely to petitioners; that her father's
contribution to the joint venture included the place of business,
payment for utilities including electricity, water, etc. while petitioners as
industrial partners, supplied the labor; and that the barber shop was
allowed to remain open up to April 1995 by the children because they
wanted to give the partners a chance at making it work. Eventually,
they were forced to close the barber shop because they continued to
lose money while petitioners earned from it. Trinidad also added that
private respondents had no control over petitioners who were free to
come and go as they wished. Admittedly too by petitioners they
received fifty percent to sixty percent of the gross paid by customers.
Trinidad explained that some of the petitioners were allowed to register
with the Social Security System as employees of Lao Enteng
Company, Inc. only as an act of accommodation. All the SSS
contributions were made by petitioners. Moreover, Osias Corporal,
Elpidio Lacap and Teresita Flores were not among those registered
with the Social Security System. Lastly, Trinidad avers that without any
employee-employer relationship petitioners claim for 13th month pay
and separation pay have no basis in fact and in law.[3]
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S.
Caizares, Jr. ordered the dismissal of the complaint on the basis of his
findings that the complainants and the respondents were engaged in a
joint venture and that there existed no employer-employee relation
between them. The Labor Arbiter also found that the barber shop was
closed due to serious business losses or financial reverses and
consequently declared that the law does not compel the establishment
to pay separation pay to whoever were its employees.[4]

On appeal, NLRC affirmed the said findings of the Labor Arbiter and
dismissed the complaint for want of merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employeremployee relationship under the fourway test established by the
Supreme Court. It is a common practice in the Barber Shop industry
that barbers supply their own scissors and razors and they split their
earnings with the owner of the barber shop. The only capital of the
owner is the place of work whereas the barbers provide the skill and
expertise in servicing customers. The only control exercised by the
owner of the barber shop is to ascertain the number of customers
serviced by the barber in order to determine the sharing of profits. The
barbers maybe characterized as independent contractors because they
are under the control of the barber shop owner only with respect to the
result of the work, but not with respect to the details or manner of
performance. The barbers are engaged in an independent calling
requiring special skills available to the public at large. [5]
Its motion for reconsideration denied in the Resolution [6] dated March 5,
1997, petitioners filed the instant petition assigning that the NLRC
committed grave abuse of discretion in:
I.
ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE
PROVING THAT PETITIONERS WERE EMPLOYEES OF
RESPONDENT COMPANY IN RULING THAT PETITIONERS
WERE INDEPENDENT CONTRACTORS.
II.

NOT HOLDING THAT PETITIONERS WERE ILLEGALLY

DISMISSED AND IN NOT AWARDING THEIR MONEY
CLAIMS.[7]
Petitioners principally argue that public respondent NLRC gravely erred
in declaring that the petitioners were independent contractors. They
contend that they were employees of the respondent company and
cannot be considered as independent contractors because they did not
carry on an independent business. They did not cut hair, manicure, and
do their work in their own manner and method. They insist they were
not free from the control and direction of private respondents in all
matters, and their services were engaged by the respondent company
to attend to its customers in its barber shop. Petitioners also stated
that, individually or collectively, they do not have substantial capital nor
investments in tools, equipments, work premises and other materials
necessary in the conduct of the barber shop. What the barbers owned
were merely combs, scissors, and razors, while the manicurists owned
only nail cutters, nail polishes, nippers and cuticle removers. By no
standard can these be considered "substantial capital" necessary to
operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial
evidence on record showing that petitioners Pedro Tolentino, Manuel
Caparas, Simplicio Pedelos, and Patricia Nas were registered with the
Social Security System as regular employees of the respondent
company. The SSS employment records in common show that the
employer's ID No. of Vicente Lao/Barber and Pawn Shop was 030606200-1 and that of the respondent company was 03-8740074-7. All
the foregoing entries in the SSS employment records were
painstakingly detailed by the petitioners in their position paper and in
their memorandum appeal but were arbitrarily ignored first by the Labor
Arbiter and then by the respondent NLRC which did not even mention
said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of
facts of the NLRC are to be accorded respect and finality on appeal.
We have long settled that this Court will not uphold erroneous
conclusions unsupported by substantial evidence. [8] We must also
stress that where the findings of the NLRC contradict those of the labor
arbiter, the Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned findings. [9]
The issues raised by petitioners boil down to whether or not an
employer-employee relationship existed between petitioners and
private respondent Lao Enteng Company, Inc. The Labor Arbiter has
concluded that the petitioners and respondent company were engaged
in a joint venture. The NLRC concluded that the petitioners were
independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint
venture is unsupported by any documentary evidence. It should be

39
noted that aside from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor written partnership
agreements presented. We have ruled that even the sharing of
proceeds for every job of petitioners in the barber shop does not mean
they were not employees of the respondent company. [10]
Petitioner aver that NLRC was wrong when it concluded that petitioners
were independent contractors simply because they supplied their own
working implements, shared in the earnings of the barber shop with the
owner and chose the manner of performing their work. They stressed
that as far as the result of their work was concerned the barber shop
owner controlled them.
An independent contractor is one who undertakes "job contracting", i.e.,
a person who (a) 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 (b) has
substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary
in the conduct of the business.[11]
Juxtaposing this provision vis--vis the facts of this case, we are
convinced that petitioners are not "independent contractors". They did
not carry on an independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their responsibility,
and in their own manner and method. The services of the petitioners
were engaged by the respondent company to attend to the needs of its
customers in its barber shop. More importantly, the petitioners,
individually or collectively, did not have a substantial capital or
investment in the form of tools, equipment, work premises and other
materials which are necessary in the conduct of the business of the
respondent company. What the petitioners owned were only combs,
scissors, razors, nail cutters, nail polishes, the nippers - nothing else.
By no standard can these be considered substantial capital necessary
to operate a barber shop. From the records, it can be gleaned that
petitioners were not given work assignments in any place other than at
the work premises of the New Look Barber Shop owned by the
respondent company. Also, petitioners were required to observe rules
and regulations of the respondent company pertaining, among other
things, observance of daily attendance, job performance, and regularity
of job output. The nature of work performed by were clearly directly
related to private respondent's business of operating barber shops.
Respondent company did not dispute that it owned and operated three
(3) barber shops. Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and
private respondent? The following elements must be present for an
employer-employee relationship to exist: (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.
Records of the case show that the late Vicente Lao engaged the
services of the petitioners to work as barbers and manicurists in the
New Look Barber Shop, then a single proprietorship owned by him; that
in January 1982, his children organized a corporation which they
registered with the Securities and Exchange Commission as Lao
Enteng Company, Inc.; that upon its incorporation, it took over the
assets, equipment, and properties of the New Look Barber Shop and
continued the business; that the respondent company retained the
services of all the petitioners and continuously paid their wages.
Clearly, all three elements exist in petitioners' and private respondent's
working arrangements.
Private respondent claims it had no control over petitioners. The power
to control refers to the existence of the power and not necessarily to
the actual exercise thereof, nor is it essential for the employer to
actually supervise the performance of duties of the employee. It is
enough that the employer has the right to wield that power.[12] As to the
"control test", the following facts indubitably reveal that respondent
company wielded control over the work performance of petitioners, in
that: (1) they worked in the barber shop owned and operated by the
respondents; (2) they were required to report daily and observe definite
hours of work; (3) they were not free to accept other employment
elsewhere but devoted their full time working in the New Look Barber
Shop for all the fifteen (15) years they have worked until April 15, 1995;

(4) that some have worked with respondents as early as in the 1960's;
(5) that petitioner Patricia Nas was instructed by the respondents to
watch the other six (6) petitioners in their daily task. Certainly,
respondent company was clothed with the power to dismiss any or all
of them for just and valid cause. Petitioners were unarguably
performing work necessary and desirable in the business of the
respondent company.
While it is no longer true that membership to SSS is predicated on the
existence of an employee-employer relationship since the policy is now
to encourage even the self-employed dressmakers, manicurists and
jeepney drivers to become SSS members, we could not agree with
private respondents that petitioners were registered with the Social
Security System as their employees only as an accommodation. As we
have earlier mentioned private respondent showed no proof to their
claim that petitioners were the ones who solely paid all SSS
contributions. It is unlikely that respondents would report certain
persons as their workers, pay their SSS premium as well as their
wages if it were not true that they were indeed their employees. [13]
Finally, we agree with the labor arbiter that there was sufficient
evidence that the barber shop was closed due to serious business
losses and respondent company closed its barber shop because the
building where the barber shop was located was sold. An employer
may adopt policies or changes or adjustments in its operations to
insure profit to itself or protect investment of its stockholders. In the
exercise of such management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose all or
substantially all of its assets and properties which may bring about the
dismissal or termination of its employees in the process.[14]
Prescinding from the above, we hold that the seven petitioners are
employees of the private respondent company; as such, they are to be
accorded the benefits provided under the Labor Code, specifically
Article 283 which mandates the grant of separation pay in case of
closure or cessation of employer's business which is equivalent to one
(1) month pay for every year of service. [15] Likewise, they are entitled to
the protection of minimum wage statutes. Hence, the separation pay
due them may be computed on the basis of the minimum wage
prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The
Revised Guidelines on the Implementation of the 13th Month Pay Law
states that "all rank and file employees are now entitled to a 13th month
pay regardless of the amount of basic salary that they receive in a
month. Such employees are entitled to the benefit regardless of their
designation or employment status, and irrespective of the method by
which their wages are paid, provided that they have worked for at least
one (1) month during a calendar year" and so all the seven (7)
petitioners who were not paid their 13th month pay must be paid
accordingly.[16]
Anent the other claims of the petitioners, such as the P10,000.00 as
penalty for non-compliance with procedural process; P10,000.00 as
moral damages; refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney's fees), we find them without
basis.
IN VIEW WHEREOF, the petition is GRANTED. The public
respondent's Decision dated October 17, 1996 and Resolution dated
March 05, 1997 are SET ASIDE. Private respondents are hereby
ordered to pay, severally and jointly, the seven (7) petitioners their (1)
13th month pay and (2) separation pay equivalent to one month pay for
every year of service, to be computed at the then prevailing minimum
wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

14.
FIRST DIVISION
[ G.R. No. 165881, April 19, 2006 ]

40
OSCAR VILLAMARIA, JR. PETITIONER,VS.COURT OF APPEALS
AND JERRY V. BUSTAMANTE, RESPONDENTS.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the
Revised Rules of Court assailing the Decision[1] and Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the
Resolution[3] of the National Labor Relations Commission (NLRC) in
NCR-30-08-03247-00, which in turn affirmed the Decision[4] of the
Labor Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with a
public utility franchise to operate along the Baclaran-Sucat route. By
1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a "boundary basis."
One of those drivers was respondent Bustamante who drove the
jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day
to Villamaria as boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997, Villamaria
verbally agreed to sell the jeepney to Bustamante under the "boundaryhulog scheme," where Bustamante would remit to Villarama P550.00 a
day for a period of four years; Bustamante would then become the
owner of the vehicle and continue to drive the same under Villamaria's
franchise. It was also agreed that Bustamante would make a
downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan
ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog"[5] over
the passenger jeepney with Plate No. PVU-660, Chassis No. EVER9538168-C and Motor No. SL-26647. The parties agreed that if
Bustamante failed to pay the boundary-hulog for three days, Villamaria
Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day; in case Bustamante failed to remit
the daily boundary-hulog for a period of one week,
the Kasunduan would cease to have legal effect and Bustamante
would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the
vehicle without prior authority from Villamaria Motors. Thus,
Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle; in
case of failure to do so, any fine that may be imposed by government
authorities would be charged against his account. Bustamante further
obliged himself to pay for the cost of replacing any parts of the vehicle
that would be lost or damaged due to his negligence. In case the
vehicle sustained serious damage, Bustamante was obliged to notify
Villamaria Motors before commencing repairs. Bustamante was not
allowed to wear slippers, short pants or undershirts while driving. He
was required to be polite and respectful towards the passengers. He
was also obliged to notify Villamaria Motors in case the vehicle was
leased for two or more days and was required to attend any meetings
which may be called from time to time. Aside from the boundaryhulog, Bustamante was also obliged to pay for the annual registration
fees of the vehicle and the premium for the vehicle's comprehensive
insurance. Bustamante promised to strictly comply with the rules and
regulations imposed by Villamaria for the upkeep and maintenance of
the jeepney.
Bustamante continued driving the jeepney under the supervision and
control of Villamaria. As agreed upon, he made daily remittances of
P550.00 in payment of the purchase price of the vehicle. Bustamante
failed to pay for the annual registration fees of the vehicle, but
Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective
boundary-hulog. This prompted Villamaria to serve a
"Paalala,"[6] reminding them that under theKasunduan, failure to pay the
daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned
the drivers that the Kasunduan would henceforth be strictly enforced
and urged them to comply with their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by

Bustamante and barred the latter from driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint [7] for Illegal
Dismissal against Villamaria and his wife Teresita. In his Position
Paper,[8] Bustamante alleged that he was employed by Villamaria in
July 1996 under the boundary system, where he was required to remit
P450.00 a day. After one year of continuously working for them, the
spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March 2001
after paying P550.00 in daily installments and that he would thereafter
continue driving the vehicle along the same route under the same
franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be
replaced, and was assured that it would be done. However, he was
later arrested and his driver's license was confiscated because
apparently, the replacement engine that was installed was taken from a
stolen vehicle. Due to negotiations with the apprehending authorities,
the jeepney was not impounded. The Villamaria spouses took the
jeepney from him on July 24, 2000, and he was no longer allowed to
drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully
prayed that judgment be rendered ordering the respondents, jointly and
severally, the following:
1. Reinstate complainant to his former position without loss of
seniority rights and execute a Deed of Sale in favor of the
complainant relative to the PUJ with Plate No. PVU-660;
2.

Ordering the respondents to pay backwages in the amount of

P400.00 a day and other benefits computed from July 24, 2000
up to the time of his actual reinstatement;

3.

Ordering respondents to return the amount of P10,000.00 and

P180,000.00 for the expenses incurred by the complainant in the
repair and maintenance of the subject jeep;

4.

Ordering the respondents to refund the amount of One Hundred

(P100.00) Pesos per day counted from August 7, 1997 up to June
2000 or a total of P91,200.00;

5.

To pay moral and exemplary damages of not less than

P200,000.00;

6. Attorney's fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being
prayed for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the
existence of the Kasunduan, but alleged that Bustamante failed to pay
the P10,000.00 downpayment and the vehicle's annual registration
fees. They further alleged that Bustamante eventually failed to remit the
requisite boundary-hulog of P550.00 a day, which prompted them to
issue the Paalaala. Instead of complying with his obligations,
Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse,
the jeepney figured in an accident and its license plate was
confiscated; Bustamante even abandoned the vehicle in a gasoline
station in Sucat, Paraaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved
and Teresita Villamaria asked Bustamante for the keys, Bustamante
told her: "Di kunin ninyo." When the vehicle was finally retrieved, the
tires were worn, the alternator was gone, and the battery was no longer
working.
Citing the cases of Cathedral School of Technology v.
NLRC[11] and Canlubang Security Agency Corporation v. NLRC,[12] the
spouses Villamaria argued that Bustamante was not illegally dismissed
since the Kasunduanexecuted on August 7, 1997 transformed the
employer-employee relationship into that of vendor-vendee. Hence, the
spouses concluded, there was no legal basis to hold them liable for
illegal dismissal. They prayed that the case be dismissed for lack of
jurisdiction and patent lack of merit.
In his Reply,[13] Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained
that the rulings of the Court in National Labor Union v.

41
[14]

[15]

Dinglasan, Magboo v. Bernardo, and Citizen's League of Free

Workers v. Abbas[16] are germane to the issue as they define the nature
of the owner/operator-driver relationship under the boundary system.
He further reiterated that it was the Villamaria spouses who presented
the Kasunduan to him and that he conformed thereto only upon their
representation that he would own the vehicle after four years.
Moreover, it appeared that the Paalala was duly received by him, as
he, together with other drivers, was made to affix his signature on a
blank piece of paper purporting to be an "attendance sheet."
On March 15, 2002, the Labor Arbiter rendered judgment [17] in favor of
the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as
the PAALALA, to prove their claim that complainant violated the terms
of their contract and afterwards abandoned the vehicle assigned to
him. As against the foregoing, [the] complaint's (sic) mere allegations to
the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees.[18]
Bustamante appealed the decision to the NLRC, [19] insisting that
the Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages, he
kept only the excess of the boundary-hulog which he was required to
remit daily to Villamaria under the agreement. Bustamante maintained
that he remained an employee because he was engaged to perform
activities which were necessary or desirable to Villamaria's trade or
business.
The NLRC rendered judgment[20] dismissing the appeal for lack of
merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby
DISMISSED for reasons not stated in the Labor Arbiter's decision but
mainly on a jurisdictional issue, there being none over the subject
matter of the controversy.[21]
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the complaint.
Bustamante filed a Motion for Reconsideration, which the NLRC
resolved to deny on May 30, 2003.[22]
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
I
IN DISMISSING PETITIONER'S APPEAL "FOR REASON NOT
STATED IN THE LABOR ARBITER'S DECISION, BUT MAINLY ON
JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE
WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS
ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE
RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND
THE PROTECTIVE MANTLE OF OUR LABOR LAWS.[23]
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of employer-employee
and as such, the Labor Arbiter had jurisdiction over his complaint. He
further alleged that it is common knowledge that operators of
passenger jeepneys (including taxis) pay their drivers not on a regular
monthly basis but on commission or boundary basis, or even the
boundary-hulog system. Bustamante asserted that he was dismissed
from employment without any lawful or just cause and without due
notice.
For his part, Villamaria averred that Bustamante failed to adduce proof
of their employer-employee relationship. He further pointed out that
the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He
argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale
of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle

and were not the same fees as understood in the boundary system. He
added that the boundary-hulog plan was basically a scheme to help the
driver-buyer earn money and eventually pay for the unit in full, and for
the owner to profit not from the daily earnings of the driver-buyer but
from the purchase price of the unit sold. Villamaria further asserted that
the apparently restrictive conditions in the Kasunduan did not mean
that the means and method of driver-buyer's conduct was controlled,
but were mere ways to preserve the vehicle for the benefit of both
parties: Villamaria would be able to collect the agreed purchase price,
while Bustamante would be assured that the vehicle would still be in
good running condition even after four years. Moreover, the right of
vendor to impose certain conditions on the buyer should be respected
until full ownership of the property is vested on the latter. Villamaria
insisted that the parallel circumstances obtaining in Singer Sewing
Machine Company v. Drilon[24] has analogous application to the instant
issue.
In its Decision[25] dated August 30, 2004, the CA reversed and set aside
the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned
resolutions of the NLRC must be, as they are hereby are, REVERSED
AND SET ASIDE, and judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante separation pay computed from the
time of his employment up to the time of termination based on the
prevailing minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante back wages computed from the time
of his dismissal up to March 2001 based on the prevailing
minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED.[26]
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamante's complaint. Under theKasunduan, the relationship
between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamaria's exercise of
control over Bustamante's conduct in operating the jeepney is
inconsistent with the former's claim that he was not engaged in the
transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned
in the Kasunduan, it did not mean that Villamaria could not exercise it.
It explained that the existence of an employment relationship did not
depend on how the worker was paid but on the presence or absence of
control over the means and method of the employee's work. In this
case, Villamaria's directives (to drive carefully, wear an identification
card, don decent attire, park the vehicle in his garage, and to inform
him about provincial trips, etc.) was a means to control the way in
which Bustamante was to go about his work. In view of Villamaria's
supervision and control as employer, the fact that the "boundary"
represented installment payments of the purchase price on the jeepney
did not remove the parties' employer-employee relationship.
While the appellate court recognized that a week's default in paying the
boundary-hulog constituted an additional cause for terminating
Bustamante's employment, it held that the latter was illegally
dismissed. According to the CA, assuming that Bustamante failed to
make the required payments as claimed by Villamaria, the latter
nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither
submitted any police report to support his claim that the vehicle figured
in a mishap nor presented the affidavit of the gas station guard to
substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and
filed, on September 17, 2004, a motion for reconsideration thereof. The
CA denied the motion in a Resolution[27] dated November 2, 2004, and
Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for
review on certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess or
lack of jurisdiction in reversing the decision of the Labor Arbiter and the
NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a

42
combination of employer-employee and vendor-vendee relationships.
The terms and conditions of the Kasunduan clearly state that he and
respondent Bustamante had entered into a conditional deed of sale
over the jeepney; as such, their employer-employee relationship had
been transformed into that of vendor-vendee. Petitioner insists that he
had the right to reserve his title on the jeepney until after the purchase
price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate
remedy of petitioner was an appeal via a petition for review on certiorari
under Rule 45 of the Rules of Court and not a special civil action
of certiorari under Rule 65. He argues that petitioner failed to establish
that the CA committed grave abuse of its discretion amounting to
excess or lack of jurisdiction in its decision, as the said ruling is in
accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent insists
that his juridical relationship with petitioner is that of employeremployee because he was engaged to perform activities which were
necessary or desirable in the usual business of petitioner, his
employer.
In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to resolve
the merits of his petition.
We agree with respondent's contention that the remedy of petitioner
from the CA decision was to file a petition for review on certiorari under
Rule 45 of the Rules of Court and not the independent action of
certiorari under Rule 65. Petitioner had 15 days from receipt of the CA
resolution denying his motion for the reconsideration within which to file
the petition under Rule 45.[28] But instead of doing so, he filed
a petition for certiorari under Rule 65 on November 22, 2004, which
did not, however, suspend the running of the 15-day reglementary
period; consequently, the CA decision became final and executory
upon the lapse of the reglementary period for appeal. Thus, on this
procedural lapse, the instant petition stands to be dismissed. [29]
It must be stressed that the recourse to a special civil action under Rule
65 of the Rules of Court is proscribed by the remedy of appeal under
Rule 45. As the Court elaborated in Tomas Claudio Memorial College,
Inc. v. Court of Appeals:[30]
We agree that the remedy of the aggrieved party from a decision or
final resolution of the CA is to file a petition for review on certiorari
under Rule 45 of the Rules of Court, as amended, on questions of facts
or issues of law within fifteen days from notice of the said resolution.
Otherwise, the decision of the CA shall become final and executory.
The remedy under Rule 45 of the Rules of Court is a mode of appeal to
this Court from the decision of the CA. It is a continuation of the
appellate process over the original case. A review is not a matter of
right but is a matter of judicial discretion. The aggrieved party may,
however, assail the decision of the CA via a petition for certiorariunder
Rule 65 of the Rules of Court within sixty days from notice of the
decision of the CA or its resolution denying the motion for
reconsideration of the same. This is based on the premise that in
issuing the assailed decision and resolution, the CA acted with grave
abuse of discretion, amounting to excess or lack of jurisdiction and
there is no plain, speedy and adequate remedy in the ordinary course
of law. A remedy is considered plain, speedy and adequate if it will
promptly relieve the petitioner from the injurious effect of the judgment
and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if
appeal is available, for the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive. The aggrieved
party is, likewise, barred from filing a petition for certiorari if the remedy
of appeal is lost through his negligence. A petition for certiorari is an
original action and does not interrupt the course of the principal case
unless a temporary restraining order or a writ of preliminary injunction
has been issued against the public respondent from further proceeding.
A petition for certiorari must be based on jurisdictional grounds
because, as long as the respondent court acted within its jurisdiction,
any error committed by it will amount to nothing more than an error of
judgment which may be corrected or reviewed only by appeal. [31]

However, we have also ruled that a petition for certiorari under Rule 65
may be considered as filed under Rule 45, conformably with the
principle that rules of procedure are to be construed liberally, provided
that the petition is filed within the reglementary period under Section 2,
Rule 45 of the Rules of Court, and where valid and compelling
circumstances warrant that the petition be resolved on its merits.[32] In
this case, the petition was filed within the reglementary period and
petitioner has raised an issue of substance: whether the existence of a
boundary-hulogagreement negates the employer-employee
relationship between the vendor and vendee, and, as a corollary,
whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction
over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the reliefs
prayed for, whether or not the complainant/plaintiff is entitled to any or
all of such reliefs.[33] A prayer or demand for relief is not part of the
petition of the cause of action; nor does it enlarge the cause of action
stated or change the legal effect of what is alleged. [34] In determining
which body has jurisdiction over a case, the better policy is to consider
not only the status or relationship of the parties but also the nature of
the action that is the subject of their controversy. [35]
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the case
by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work, and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relationship, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements, and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite.[36] The jurisdiction of Labor
Arbiters and the NLRC under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes
or their collective bargaining agreement.[37] Not every dispute between
an employer and employee involves matters that only the Labor Arbiter
and the NLRC can resolve in the exercise of their adjudicatory or quasijudicial powers. Actions between employers and employees where the
employer-employee relationship is merely incidental is within the
exclusive original jurisdiction of the regular courts. [38] When the
principal relief is to be granted under labor legislation or a collective
bargaining agreement, the case falls within the exclusive jurisdiction of
the Labor Arbiter and the NLRC even though a claim for damages
might be asserted as an incident to such claim.[39]
We agree with the ruling of the CA that, under the boundaryhulog scheme incorporated in the Kasunduan, a dual juridical
relationship was created between petitioner and respondent: that of

43
employer-employee and vendor-vendee. The Kasunduan did not
extinguish the employer-employee relationship of the parties extant
before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan[40] that the jeepney owner/operator-driver relationship under
the boundary system is that of employer-employee and not lessorlessee. This doctrine was affirmed, under similar factual settings,
in Magboo v. Bernardo[41] and Lantaco, Sr. v. Llamas,[42] and was
analogously applied to govern the relationships between auto-calesa
owner/operator and driver,[43] bus owner/operator and conductor,[44] and
taxi owner/operator and driver.[45]
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latter's daily earnings are
remitted to the owner/operator less the excess of the boundary which
represents the driver's compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over
the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the
hands of the owner/operator, who, being the holder of the certificate of
public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the
"boundary" given to the owner/operator is not sufficient to change the
relationship between them. Indubitably, the driver performs activities
which are usually necessary or desirable in the usual business or trade
of the owner/operator.[46]
Under the Kasunduan, respondent was required to remit P550.00 daily
to petitioner, an amount which represented the boundary of petitioner
as well as respondent's partial payment (hulog) of the purchase price of
the jeepney. Respondent was entitled to keep the excess of his daily
earnings as his daily wage. Thus, the daily remittances also had a dual
purpose: that of petitioner's boundary and respondent's partial payment
(hulog) for the vehicle. This dual purpose was expressly stated in
the Kasunduan. The well-settled rule is that an obligation is not novated
by an instrument that expressly recognizes the old one, changes only
the terms of payment, and adds other obligations not incompatible with
the old provisions or where the new contract merely supplements the
previous one. [47]The two obligations of the respondent to remit to
petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the
agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall
prevail.[48] The intention of the contracting parties should be ascertained
by looking at the words used to project their intention, that is, all the
words, not just a particular word or two or more words standing alone.
The various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all of
them taken jointly.[49] The parts and clauses must be interpreted in
relation to one another to give effect to the whole. The legal effect of a
contract is to be determined from the whole read together. [50]
Under the Kasunduan, petitioner retained supervision and control over
the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG
PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG
UNANG PANIG.
2.

Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN

NG IKALAWANG PANIG sa paghahanapbuhay bilang
pampasada o pangangalakal sa malinis at maayos na
pamamaraan.

3.

Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG

IKALAWANG PANIG sa mga bagay na makapagdudulot ng
kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG
PANIG.

4.

Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng

UNANG PANIG.

5.

Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang

maglagay ng ID Card sa harap ng windshield upang sa
pamamagitan nito ay madaliang malaman kung ang
nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.

6.

Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga

ng] multa kung sakaling mahuli ang sasakyang ito na hindi
nakakabit ang ID card sa wastong lugar o anuman kasalanan o
kapabayaan.

7.

Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang

materyales o piyesa na papalitan ng nasira o nawala ito dahil sa
kanyang kapabayaan.

8.

Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang

hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan.

9.

Na kung magkaroon ng mabigat na kasiraan ang sasakyang

ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG
IKALAWANG PANIG ay obligadong itawag ito muna sa
VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop
na awtorisado ng VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa

panahon ng pamamasada na ang nagmamaneho ay nakatsinelas, naka short pants at nakasando lamang. Dapat ang
nagmamaneho ay laging nasa maayos ang kasuotan upang
igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado
niyang driver ay magpapakita ng magandang asal sa mga
pasaheros at hindi dapat magsasalita ng masama kung sakali
man may pasaherong pilosopo upang maiwasan ang anumang
kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG
ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3)
araw ay ang opisina ng VILLAMARIA MOTORS ang may
karapatang mangasiwa ng nasabing sasakyan hanggang
matugunan ang lahat ng responsibilidad. Ang halagang dapat
bayaran sa opisina ay may karagdagang multa ng P50.00 sa
araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA
MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo
ay nangangahulugan na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa
rehistro, comprehensive insurance taon-taon at kahit anong uri ng
aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG
PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo
sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa
tuwing tatawag ang mga tagapangasiwa nito upang maipaabot
ang anumang mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat
ng mga patakaran na magkakaroon ng pagbabago o karagdagan
sa mga darating na panahon at hindi magiging hadlang sa lahat
ng mga balakin ng VILLAMARIA MOTORS sa lalo pang
ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging
buwaya sa pasahero upang hindi kainisan ng kapwa driver at
maiwasan ang pagkakasangkot sa anumang gulo.

44
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang
kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi
naman ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin
ng dalawa o higit pang araw sa lalawigan ay dapat lamang na
ipagbigay alam muna ito sa VILLAMARIA MOTORS upang
maiwasan ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang
pakikipag-unahan sa kaninumang sasakyan upang maiwasan
ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon
sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay
iparating agad ito sa kinauukulan at iwasan na iparating ito kung
[kani-kanino] lamang upang maiwasan ang anumang usapin.
Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso
kong sinasang-ayunan at buong sikap na pangangalagaan ng
TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at
gagamitin lamang ito sa paghahanapbuhay at wala nang iba
pa.[51]
The parties expressly agreed that petitioner, as vendor, and
respondent, as vendee, entered into a contract to sell the jeepney on a
daily installment basis of P550.00 payable in four years and that
petitioner would thereafter become its owner. A contract is one of
conditional sale, oftentimes referred to as contract to sell, if the
ownership or title over the property sold is retained by the vendor, and
is not passed to the vendee unless and until there is full payment of the
purchase price and/or upon faithful compliance with the other terms
and conditions that may lawfully be stipulated. [52] Such payment or
satisfaction of other preconditions, as the case may be, is a positive
suspensive condition, the failure of which is not a breach of contract,
casual or serious, but simply an event that would prevent the obligation
of the vendor to convey title from acquiring binding force. [53] Stated
differently, the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and uncertain
event so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed.[54] The vendor may extrajudicially terminate the operation of the
contract, refuse conveyance, and retain the sums or installments
already received, where such rights are expressly provided for. [55]
Under the boundary-hulog scheme, petitioner retained ownership of the
jeepney although its material possession was vested in respondent as
its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force
and effect and respondent would have to return the jeepney to
petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue driving
the jeepney on a boundary basis of P550.00 daily despite the
termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner and
respondent was not negated by the foregoing stipulation in
the Kasunduan, considering that petitioner retained control of
respondent's conduct as driver of the vehicle. As correctly ruled by the
CA:
The exercise of control by private respondent over petitioner's conduct
in operating the jeepney he was driving is inconsistent with private
respondent's claim that he is, or was, not engaged in the transportation
business; that, even if petitioner was allowed to let some other person
drive the unit, it was not shown that he did so; that the existence of an
employment relation is not dependent on how the worker is paid but on
the presence or absence of control over the means and method of the
work; that the amount earned in excess of the "boundary hulog" is
equivalent to wages; and that the fact that the power of dismissal was
not mentioned in the Kasunduan did not mean that private respondent
never exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to
wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for two

days of more, or to drive the unit carefully, etc. necessarily related to

control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing
Machine but National Labor Union since the latter case involved
jeepney owners/operators and jeepney drivers, and that the fact that
the "boundary" here represented installment payment of the purchase
price on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and
control by the employer.[56]
Neither is such juridical relationship negated by petitioner's claim that
the terms and conditions in the Kasunduanrelative to respondent's
behavior and deportment as driver was for his and respondent's
benefit: to insure that respondent would be able to pay the requisite
daily installment of P550.00, and that the vehicle would still be in good
condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as driver
of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise, and
the rules and regulations of the Land Transportation Regulatory Board
are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure but
to mainly identify the holder thereof as a bona fide employee of the firm
who issues it.[57]
As respondent's employer, it was the burden of petitioner to prove that
respondent's termination from employment was for a lawful or just
cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do
so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected in
accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the
Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here,
the default in the remittance of the boundary hulog for one week or
longer may be considered an additional cause for termination of
employment. The reason is because the Kasunduan would be of no
force and effect in the event that the purchaser failed to remit the
boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa.
Moreover, well-settled is the rule that, the employer has the burden of
proving that the dismissal of an employee is for a just cause. The
failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper before
the Labor Arbiter, alleged that petitioner failed to pay the miscellaneous
fee of P10,000.00 and the yearly registration of the unit; that petitioner
also stopped remitting the "boundary hulog," prompting him (private
respondent) to issue a "Paalala," which petitioner however ignored; that
petitioner even brought the unit to his (petitioner's) province without
informing him (private respondent) about it; and that petitioner
eventually abandoned the vehicle at a gasoline station after figuring in
an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondent's
allegation viz, that he retrieved the vehicle from the gas station, where
petitioner abandoned it, contradicted his statement in the Paalala that
he would enforce the provision (in the Kasunduan) to the effect that
default in the remittance of the boundary hulog for one week would
result in the forfeiture of the unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng "BOUNDARY HULOG"
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan
particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa

45
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng
wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na
pong ipatutupad ang nasabing Kasunduan kaya't aking pinaaalala sa
inyong lahat na tuparin natin ang nakalagay sa kasunduan upang
maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang
hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli
ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo
pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan
ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioner's)
(Sg
d.)
SCAR VILLAMARIA, JR."
On another point, private respondent did not submit any police report to
support his claim that petitioner really figured in a vehicular mishap.
Neither did he present the affidavit of the guard from the gas station to
substantiate his claim that petitioner abandoned the unit there. [58]
Petitioner's claim that he opted not to terminate the employment of
respondent because of magnanimity is negated by his (petitioner's)
own evidence that he took the jeepney from the respondent only on
July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
decision of the Court of Appeals in CA-G.R. SP No. 78720 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., (Chairperson), Ynares-Santiago, AustriaMartinez, and Chico-Nazario, JJ., concur.

15.
FIRST DIVISION
[ G.R. No. 117495, May 29, 1997 ]
NELLY ACTA MARTINEZ, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, DOMINADOR CORRO, PASTOR
CORRO, CELESTINO CORRO, LUIS CORRO, EREBERTO CORRO,
JAIME CRUZ, WENCESLAO DELVO, GREGORIO DELVO,
HERMEJIAS COLIBAO, JOSE OGANA AND ALONSO ALBAO,
RESPONDENTS.
DECISION
BELLOSILLO, J.:
RAUL MARTINEZ was operator of two (2) taxicab units under the
business name PAMA TX and two (2) additional units under the name
P. J. TIGER TX. Private respondents Dominador Corro, Pastor Corro,
Celestino Corro, Luis Corro, Ereberto Corro, Jaime Cruz, Wenceslao
Delvo, Gregorio Delvo, Hermejias Colibao, Jose Ogana and Alonso
Albao worked for him as drivers. On 18 March 1992 Raul Martinez died
leaving behind his mother, petitioner Nelly Acta Martinez, as his sole
heir.
On 14 July 1992 private respondents lodged a complaint against Raul
Martinez and petitioner Nelly Acta Martinez before the Labor Arbiter for
violation of P. D. 851[1] and illegal dismissal. They alleged that they
have been regular drivers of Raul Martinez since 20 October 1989
earning no less than P400.00 per day driving twenty-four (24) hours
every other day. For the duration of employment, not once did they
receive a 13th month pay. After the death of Raul Martinez, petitioner
took over the management and operation of the business. On or about

22 June 1992 she informed them that because of difficulty in

maintaining the business, she was selling the units together with the
corresponding franchises. However, petitioner did not proceed with her
plan; instead, she assigned the units to other drivers.
Petitioner traversed the claim for 13th month pay by contending that it
was personal and therefore did not survive the death of her son.
Besides, private respondents were not entitled thereto as Sec. 3, par.
(e), of the Rules and Regulations Implementing P. D. 851 is explicit that
employers of those who are paid on purely boundary basis are not
covered therein. The relationship between her son and private
respondents was not that of employer-employee but of lessor-lessee.
The operation of the business ceased upon the death of her son and
that she did not continue the business because she did not know how
to run it.
On 30 August 1993 the Labor Arbiter dismissed the complaint on the
following grounds: (a) private respondents' claims being personal were
extinguished upon the death of Raul Martinez; (b) petitioner was a
mere housewife who did not possess the required competence to
manage the business; and, (c) private respondents were not entitled to
13th month pay because the existence of employer-employee
relationship was doubtful on account of the boundary system adopted
by the parties.[2]
However, respondent National Labor Relations Commission viewed the
case differently. According to NLRC, (a) private respondents were
regular drivers because payment of wages, which is one of the
essential requisites for the existence of employment relation, may
either be fixed, on commission, boundary, piece-rate or task basis; (b)
the management of the business passed on to petitioner who even
replaced private respondents with a new set of drivers; and, (c) the
claims of private respondents survived the death of Raul Martinez
considering that the business did not cease operation outright but
continued presumably, in the absence of proof of sale, up to the
moment. As regards the claim for 13th month pay, NLRC upheld the
stand of petitioner based on the express provision of P. D. 851 as
reiterated in the revised guidelines on the implementation thereof. On
28 January 1994 respondent NLRC thus set aside the appealed
decision, and as alternative to reinstatement, ordered petitioner to grant
respondents separation pay equivalent to one (1) month salary for
every year of service a fraction of six (6) months being considered as
one (1) whole year.[3] On 30 September 1994 the motion for
reconsideration was denied.[4] Hence, this recourse of petitioner.
On 11 October 1995 the Court issued a temporary restraining order
enjoining the execution of the assailed decision of respondent NLRC.
Petitioner imputes grave abuse of discretion on respondent NLRC in
reversing the decision of the Labor Arbiter.
Petitioner argues that respondent NLRC acted as a probate court when
it assumed jurisdiction over the estate of a deceased person,
pronounced her legally entitled to succeed the deceased and ordered
her to pay the money claim of private respondents. Moreover, petitioner
argues that the claims of private respondents were personal to her son
and thus were abated by his death.
Petitioner's arguments are well-taken. The claim for 13th month pay
pertains to the personal obligation of Raul Martinez which did not
survive his death. The rule is settled that unless expressly assumed,
labor contracts are not enforceable against the transferee of an
enterprise. In the present case, petitioner does not only disavow that
she continued the operation of the business of her son but also
disputes the existence of labor contracts between her son and private
respondents. The reason for the rule is that labor contracts are in
personam,[5] and that claims for backwages earned from the former
employer cannot be filed against the new owners of an
enterprise.[6] Nor is the new operator of a business liable for claims for
retirement pay of employees.[7] Thus the claim of private respondents
should have been filed instead in the intestate proceedings involving
the estate of Raul Martinez in accordance with Sec. 5, Rule 86, of the
Rules of Court which provides in part Sec. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions. - All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses for the last
sickness of the decedent, and judgment for money against the

46
decedent, must be filed within the time limited in the notice; otherwise
they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring
against the claimants x x x x
Under this rule, upon the death of the defendant, a testate or intestate
proceeding shall be instituted in the proper court wherein all his
creditors must appear and file their claims which shall be paid
proportionately out of the property left by the deceased. The objective
is to avoid duplicity of procedures. Hence, the ordinary actions must be
taken out from the ordinary courts. Conformably with Art. 110 of the
Labor Code, money claims of laborers enjoy preference over claims of
other creditors in case of bankruptcy or liquidation of the employer's
business.[8]

of discretion. With this conclusion, consideration of the issue on illegal

dismissal becomes futile and irrelevant.

Petitioner also insists on the absence of employer-employee

relationship between her son and private respondents because there is
no evidence that her son paid a single centavo by way of wages to
private respondents; rather, they were governed by the boundary
system. Neither is there such relationship between her and private
respondents because she did not continue the operation of the
business which ceased upon the death of her son.

Vitug, Kapunan, and Hermosisima, Jr., concur.

Padilla, (Chairman), on leave

As early as 3 March 1956, in National Labor Union v. Dinglasan, [9] this

Court ruled that the relationship between jeepney owners/operators on
one hand and jeepney drivers on the other under the boundary system
is that of employer-employee and not of lessor-lessee. Therein we
explained that in the lease of chattels the lessor loses complete control
over the chattel leased although the lessee cannot be reckless in the
use thereof, otherwise he would be responsible for the damages to the
lessor. In the case of jeepney owners/operators and jeepney drivers,
the former exercise supervision and control over the latter. The fact that
the drivers do not receive fixed wages but get only that in excess of the
so-called "boundary" they pay to the owner/operator is not sufficient to
withdraw the relationship between them from that of employer and
employee. The doctrine is applicable by analogy to the present case.
Thus, private respondents were employees of Raul Martinez because
they had been engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the
employer.[10] The records show that private respondents had been
employed since 20 October 1989 except for Ogana, the Delvos, Albao
and Colibao who were employed on later dates. [11]
Hence, these questions arise: Do private respondents, being then
employees of Raul Martinez, necessarily continue to be employees of
the petitioner as the new operator of the business? In the affirmative,
were they illegally dismissed?
The factual findings of quasi-judicial agencies such as respondent
NLRC, which have acquired expertise in the matters entrusted to their
jurisdiction, are accorded by this Court not only respect but also finality
if they are supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion.[12] As respondent NLRC found The facts of the case will readily show that before respondent taxi
owner Raul Martinez died, he became bedridden and the management
of his taxi business passed on to his mother who was his only surviving
heir. It will also be noted that despite the information given by the
mother that she will sell the business and extend separation benefits to
complainants, no such thing occurred. Instead, she replaced
complainants with a new set of drivers (See Complainants' Position
paper, p. 25, Record). [13]
The above findings, however, were culled from mere allegations in
private respondents' position paper. But mere allegation is not
evidence.[14] It is a basic rule in evidence that each party must prove his
affirmative allegation.[15]In Opulencia Ice Plant and Storage v.
NLRC[16] we ruled that no particular form of evidence is required to
prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be
admitted. In that case, the relationship was sufficiently proved by
testimonial evidence. In the present case, however, private
respondents simply assumed the continuance of an employeremployee relationship between them and petitioner, when she took
over the operation of the business after the death of her son Raul
Martinez, without any supporting evidence. Consequently, we cannot
sustain for lack of basis the factual finding of respondent NLRC on the
existence of employer-employee relationship between petitioner and
private respondents. Clearly, such finding emanates from grave abuse

WHEREFORE, the petition is GRANTED. The Decision of respondent

National Labor Relations Commission dated 28 January 1994 ordering
petitioner Nelly Acta Martinez to grant respondents separation pay as
well as its Order of 30 September 1994 denying reconsideration is SET
ASIDE. The Decision of the Labor Arbiter dated 30 August 1993
dismissing the complaint is REINSTATED.
The temporary restraining order issued on 11 October 1995 is
made PERMANENT.
SO ORDERED.

16.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 119268

February 23, 2000

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS,

ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA
and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and
GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of
public respondent promulgated on October 28, 1994, in NLRC NCR CA
No. 003883-92, and its resolution2 dated December 13, 1994 which
denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International
Inc., a domestic corporation engaged in the operation of "Goodman
Taxi." Petitioners used to drive private respondent's taxicabs every
other day on a 24-hour work schedule under the boundary system.
Under this arrangement, the petitioners earned an average of P400.00
daily. Nevertheless, private respondent admittedly regularly deducts
from petitioners, daily earnings the amount of P30.00 supposedly for
the washing of the taxi units. Believing that the deduction is illegal,
petitioners decided to form a labor union to protect their rights and
interests.
Upon learning about the plan of petitioners, private respondent refused
to let petitioners drive their taxicabs when they reported for work on
August 6, 1991, and on succeeding days. Petitioners suspected that
they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the
labor arbiter a complaint against private respondent for unfair labor
practice, illegal dismissal and illegal deduction of washing fees. In a
decision3 dated August 31, 1992, the labor arbiter dismissed said
complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated
April 28, 1994, reversed and set aside the judgment of the labor arbiter.
The labor tribunal declared that petitioners are employees of private
respondent, and, as such, their dismissal must be for just cause and
after due process. It disposed of the case as follows:

47
WHEREFORE, in view of all the foregoing considerations, the
decision of the Labor Arbiter appealed from is hereby SET
ASIDE and another one entered:

IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER

SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS ARE
EMPLOYEES OF RESPONDENT TAXI COMPANY.7

1. Declaring the respondent company guilty of illegal

dismissal and accordingly it is directed to reinstate the
complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado,
Romeo Q. Clariza, Luis de los Angeles, Amado Centino,
Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel
Ordeniza, to their former positions without loss of seniority
and other privileges appertaining thereto; to pay the
complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount
paid as washing charges; and

The petition is impressed with merit.

2. Dismissing the charge of unfair [labor] practice for

insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied.
Remaining hopeful, private respondent filed another motion for
reconsideration. This time, public respondent, in its decision5 dated
October 28, 1994, granted aforesaid second motion for
reconsideration. It ruled that it lacks jurisdiction over the case as
petitioners and private respondent have no employer-employee
relationship. It held that the relationship of the parties is leasehold
which is covered by the Civil Code rather than the Labor Code, and
disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the
Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the
Decision of April 28, 1994 are hereby SET ASIDE. The
Decision of the Labor Arbiter subject of the appeal is likewise
SET ASIDE and a NEW ONE ENTERED dismissing the
complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's
latest decision which was denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without
or in excess of jurisdiction, or with grave abuse of discretion in
rendering the assailed decision, arguing that:
I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN
RESPONDENT'S SECOND MOTION FOR RECONSIDERATION
WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE
NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT
EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE
CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE
JURISDICTION TO REVERSE, ALTER OR MODIFY.
III

The phrase "grave abuse of discretion amounting to lack or excess of

jurisdiction" has settled meaning in the jurisprudence of procedure. It
means such capricious and whimsical exercise of judgment by the
tribunal exercising judicial or quasi-judicial power as to amount to lack
of power.8 In labor cases, this Court has declared in several instances
that disregarding rules it is bound to observe constitutes grave abuse of
discretion on the part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy
of the labor arbiter's decision, wrote the labor arbiter who rendered the
decision and expressed dismay over the judgment. Neither notice of
appeal was filed nor cash or surety bond was posted by private
respondent. Nevertheless, the labor tribunal took cognizance of the
letter from private respondent and treated said letter as private
respondent's appeal. In a certiorari action before this Court, we ruled
that the labor tribunal acted with grave abuse of discretion in treating a
mere letter from private respondent as private respondent's appeal in
clear violation of the rules on appeal prescribed under Section 3(a),
Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter
committed grave abuse of discretion when he failed to resolve
immediately by written order a motion to dismiss on the ground of lack
of jurisdiction and the supplemental motion to dismiss as mandated by
Section 15 of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC
gravely abused its discretion by allowing and deciding an appeal
without an appeal bond having been filed as required under Article 223
of the Labor Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely
abused its discretion in disregarding the rule governing position papers.
In this case, the parties have already filed their position papers and
even agreed to consider the case submitted for decision, yet the labor
arbiter still admitted a supplemental position paper and memorandum,
and by taking into consideration, as basis for his decision, the alleged
facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely
abused its discretion in treating the motion to set aside judgment and
writ of execution as a petition for relief of judgment. In doing so, public
respondent had, without sufficient basis, extended the reglementary
period for filing petition for relief from judgment contrary to prevailing
rule and case law.
In this case before us, private respondent exhausted administrative
remedy available to it by seeking reconsideration of public respondent's
decision dated April 28, 1994, which public respondent denied. With
this motion for reconsideration, the labor tribunal had ample opportunity
to rectify errors or mistakes it may have committed before resort to
courts of justice can be had.14 Thus, when private respondent filed a
second motion for reconsideration, public respondent should have
forthwith denied it in accordance with Rule 7, Section 14 of its New
Rules of Procedure which allows only one motion for reconsideration
from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for
reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under
oath and filed within ten (10) calendar days from receipt of the
order, resolution or decision with proof of service that a copy
of the same has been furnished within the reglementary
period the adverse party and provided further, that only one
such motion from the same party shall be entertained.
[Emphasis supplied]

48
The rationale for allowing only one motion for reconsideration from the
same party is to assist the parties in obtaining an expeditious and
inexpensive settlement of labor cases. For obvious reasons, delays
cannot be countenanced in the resolution of labor disputes. The
dispute may involve no less than the livelihood of an employee and that
of his loved ones who are dependent upon him for food, shelter,
clothing, medicine, and education. It may as well involve the survival of
a business or an industry.15
As correctly pointed out by petitioner, the second motion for
reconsideration filed by private respondent is indubitably a prohibited
pleading16 which should have not been entertained at all. Public
respondent cannot just disregard its own rules on the pretext of
"satisfying the ends of justice",17 especially when its disposition of a
legal controversy ran afoul with a clear and long standing jurisprudence
in this jurisdiction as elucidated in the subsequent discussion. Clearly,
disregarding a settled legal doctrine enunciated by this Court is not a
way of rectifying an error or mistake. In our view, public respondent
gravely abused its discretion in taking cognizance and granting private
respondent's second motion for reconsideration as it wrecks the orderly
procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave
untouched the flip-flopping decisions of the public respondent. As
mentioned earlier, its October 28, 1994 judgment is not in accord with
the applicable decisions of this Court. The labor tribunal reasoned out
as follows:
On the issue of whether or not employer-employee
relationship exists, admitted is the fact that complainants are
taxi drivers purely on the "boundary system". Under this
system the driver takes out his unit and pays the
owner/operator a fee commonly called "boundary" for the use
of the unit. Now, in the determination the existence of
employer-employee relationship, the Supreme Court in the
case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26
October 1988) has applied the following 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 of
control the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses
that "control is deemed the most important that the other
requisites may even be disregarded". Under the control test,
an employer-employee relationship exists if 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.
Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein
obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the
drivers pay a certain fee for the use of the vehicle. On the
matter of control, the drivers, once they are out plying their
trade, are free to choose whatever manner they conduct their
trade and are beyond the physical control of the
owner/operator; they themselves determine the amount of
revenue they would want to earn in a day's driving; and, more
significantly aside from the fact that they pay for the gasoline
they consume, they likewise shoulder the cost of repairs on
damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship
of the parties is more of a leasehold or one that is covered by
a charter agreement under the Civil Code rather than the
Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the
relationship between jeepney owners/operators on one hand and
jeepney drivers on the other under the boundary system is that of
employer-employee and not of lessor-lessee. We explained that in the

lease of chattels, the lessor loses complete control over the chattel
leased although the lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages to the lessor. In the
case of jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The management of
the business is in the owner's hands. The owner as holder of the
certificate of public convenience must see to it that the driver follows
the route prescribed by the franchising authority and the rules
promulgated as regards its operation. Now, the fact that the drivers do
not receive fixed wages but get only that in excess of the so-called
"boundary" they pay to the owner/operator is not sufficient to withdraw
the relationship between them from that of employer and employee.
We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus conductor, 20 autocalesa owner/operator and driver,21 and recently between taxi
owners/operators and taxi drivers.22 Hence, petitioners are undoubtedly
employees of private respondent because as taxi drivers they perform
activities which are usually necessary or desirable in the usual
business or trade of their employer.
As consistently held by this Court, termination of employment must be
effected in accordance with law. The just and authorized causes for
termination of employment are enumerated under Articles 282, 283 and
284 of the Labor Code. The requirement of notice and hearing is setout in Article 277 (b) of the said Code. Hence, petitioners, being
employees of private respondent, can be dismissed only for just and
authorized cause, and after affording them notice and hearing prior to
termination. In the instant case, private respondent had no valid cause
to terminate the employment of petitioners. Neither were there two (2)
written notices sent by private respondent informing each of the
petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of private respondent to comply with the
twin-notice requirement underscored the illegality surrounding
petitioners' dismissal.
Under the law, 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.23 It must be emphasized, though, that recent judicial
pronouncements24 distinguish between employees illegally dismissed
prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and
those whose illegal dismissals were effected after such date. Thus,
employees illegally dismissed prior to March 21, 1989, are entitled to
backwages up to three (3) years without deduction or qualification,
while those illegally dismissed after that date are granted full
backwages inclusive of allowances and other benefits or their monetary
equivalent from the time their actual compensation was withheld from
them up to the time of their actual reinstatement. The legislative policy
behind Republic Act No. 6715 points to "full backwages" as meaning
exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of his
illegal dismissal. Considering that petitioners were terminated from
work on August 1, 1991, they are entitled to full backwages on the
basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from
petitioners for washing of the taxi units, we view the same as not illegal
in the context of the law. We note that after a tour of duty, it is
incumbent upon the driver to restore the unit he has driven to the same
clean condition when he took it out. Car washing after a tour of duty is
indeed a practice in the taxi industry and is in fact dictated by fair
play.25 Hence, the drivers are not entitled to reimbursement of washing
charges.1wphi1.nt
WHEREFORE, the instant petition is GRANTED. The assailed
DECISION of public respondent dated October 28, 1994, is hereby
SET ASIDE. The DECISION of public respondent dated April 28, 1994,
and its RESOLUTION dated December 13, 1994, are hereby
REINSTATED subject to MODIFICATION. Private respondent is
directed to reinstate petitioners to their positions held at the time of the
complained dismissal. Private respondent is likewise ordered to pay
petitioners their full backwages, to be computed from the date of
dismissal until their actual reinstatement. However, the order of public

49
respondent that petitioners be reimbursed the amount paid as washing
charges is deleted. Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza and De Leon, Jr., JJ., concur.
Buena, on official leave.

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
suspension[13] before the National Labor Relations Commission
(NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha
subsequently filed a complaint for illegal dismissal.[14]

17.
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]

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 memorandum[16] 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 Decision[19] 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 Decision[20] 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 oncertiorari.

50
[22]

The appellate court, by June 30, 2004 Decision, 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 Decision[23] 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 issuesinstructions 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 relationship[27] between 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.

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 workschedules, 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 Law[34] 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.

This Court is unimpressed.

Turning now to the issue of dismissal, the Court upholds the appellate
court's conclusion that private respondents were illegally dismissed.

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]

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

Where a person who works for another does so more or less at his own

In the motion to dismiss it filed before the Med-Arbiter, the employer

51
(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
schedule[42] 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 282 [47] 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

52
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.

absorbing the respondents for the purpose and assigning them to the
same positions they held with SIP. It maintained that the respondents
were not dismissed, but were merely prevented by GMPC from
performing their functions. For this reason, SIP posited that the legal
obligations that would arise under the circumstances have to be
shouldered by GMPC.

Quisumbing, (Chairperson), Tinga, Velasco, Jr., and Brion, JJ., concur.

The Labor Arbiter's Decision

18.
THIRD DIVISION
[ G.R. No. 192473, October 11, 2010 ]
S.I.P. FOOD HOUSE AND MR. AND MRS. ALEJANDRO PABLO,
PETITIONERS, VS. RESTITUTO BATOLINA, ALMER CALUMPISAN,
ARIES MALGAPO, ARMANDO MALGAPO, FLORDELIZA MATIAS,
PERCIVAL MATIAS, ARWIN MIRANDA, LOPE MATIAS, RAMIL
MATIAS, ALLAN STA. INES, RESPONDENTS.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari[1] which seeks to
nullify the decision[2] and resolution[3] of the Court of Appeals (CA),
promulgated on November 27, 2009 and May 31, 2010, respectively, in
CA-G.R. SP No. 101651.[4]
The Antecedents
The facts are laid out in the assailed CA Decision and are summarized
below.
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by
the employees of the Government Service Insurance System
(GSIS). Incidental to its purpose, GMPC wanted to operate a canteen
in the new GSIS Building, but had no capability and expertise in this
area. Thus, it engaged the services of the petitioner S.I.P. Food House
(SIP), owned by the spouses Alejandro and Esther Pablo, as
concessionaire. The respondents Restituto Batolina and nine (9)
others (the respondents) worked as waiters and waitresses in the
canteen.
In February 2004, GMPC terminated SIP's "contract as GMPC
concessionaire," because of GMPC's decision "to take direct
investment in and management of the GMPC canteen;" SIP's continued
refusal to heed GMPC's directives for service improvement; and the
alleged interference of the Pablos' two sons with the operation of the
canteen.[5] The termination of the concession contract caused the
termination of the respondents' employment, prompting them to file a
complaint for illegal dismissal, with money claims, against SIP and the
spouses Pablo.

The Compulsory Arbitration Proceedings

The Parties' Positions
The respondents alleged before the labor arbiter that they were SIP
employees, who were illegally dismissed sometime in February and
March 2004. SIP did not implement Wage Order Nos. 5 to 11 for the
years 1997 to 2004. They did not receive overtime pay although they
worked from 6:30 in the morning until 5:30 in the afternoon, or other
employee benefits such as service incentive leave, and maternity
benefit (for their co-employee Flordeliza Matias). Their employee
contributions were also not remitted to the Social Security System.
To avoid liability, SIP argued that it operated the canteen in behalf of
GMPC since it had no authority by itself to do so. The respondents
were not its employees, but GMPC's, as shown by their identification
cards. It claimed that GMPC terminated its concession and prevented
it from having access to the canteen premises as GSIS personnel
locked the place; GMPC then operated the canteen on its own,

Labor Arbiter Francisco A. Robles rendered a Decision on June 30,

2005 dismissing the complaint for lack of merit. [6] He found that the
respondents were GMPC's employees, and not SIP's, as there existed
a labor-only contracting relationship between the two entities. The labor
arbiter, however, opined that even if respondents were considered as
SIP's employees, their dismissal would still not be illegal because the
termination of its contract to operate the canteen came as a surprise
and was against its will, rendering the canteen's closure involuntary.
Arbiter Robles likewise denied the employees' money claims. He ruled
that SIP is not liable for unpaid salaries because it had complied with
the minimum statutory requirement and had extended better benefits
than GMPC; although they were paid only P160.00 to PP220.00 daily,
the employees were provided with free board and lodging seven (7)
days a week. Neither were the respondents entitled to overtime pay as
it was highly improbable that they regularly worked beyond eight (8)
hours every day for a canteen that closes after 5:30 p.m.
The respondents brought their case, on appeal, to the National Labor
Relations Commission (NLRC).
The NLRC Ruling
In its Decision of August 30, 2007,[7] the NLRC found that SIP was the
respondents' employer, but it sustained the labor arbiter's ruling that the
employees were not illegally dismissed as the termination of SIP's
concession to operate the canteen constituted an authorized cause for
the severance of employer-employee relations. Furthermore, the
respondents' admission that they applied with GMPC when it
terminated SIP's concession is an indication that they were employees
of SIP and that they were terminating their employment relationship
with it. As the labor arbiter did, the NLRC regarded the closure of SIP's
canteen operations involuntary, thus, negating the employees'
entitlement to separation pay.[8]
For failure of SIP to present proof of compliance with the law on the
minimum wage, 13th month pay, and service incentive leave, the NLRC
awarded the respondents a total of P952,865.53 in salary and
13th month pay differentials and service incentive leave pay.[9] The
NLRC, however, denied the employees' claim for overtime pay, holding
that the respondents failed to present evidence that they rendered two
hours overtime work every day of their employment with SIP.
SIP moved for, but failed to secure, a reconsideration of the NLRC
decision. It then elevated the case to the CA through a petition
for certiorari charging the NLRC with grave abuse of discretion in
rendering the assailed decision. Essentially, SIP argued that the NLRC
erred in declaring that it was the respondents' employer who is liable
for their money claims despite its being a labor-only contractor of
GMPC.
The CA Decision
In its Decision promulgated on November 27, 2009, [10] the CA granted
the petition in part. While it affirmed the award, it found merit in SIP's
objection to the NLRC computation and assumption that a month had
twenty-six (26) working days, instead of twenty (20) working days. The
CA recognized that in a government agency such as the GSIS, there
are only 20 official business days in a month. It noted that the
respondents presented no evidence that the employees worked even
outside official business days and hours. It accordingly remanded the
case for a recomputation of the award.
Finding substantial evidence in the records supporting the NLRC
conclusions, the CA brushed aside SIP's argument that it could not
have been the employer of the respondents because it was a mere
labor-only contractor of GMPC. It sustained the NLRC's findings that
SIP was the respondents' employer.

53
SIP moved for reconsideration, but the CA denied the motion on May
31, 2010.[11] Hence, the present petition.
The Petition
SIP seeks a reversal of the appellate court's ruling that it was the
employer of the respondents, claiming that it was merely a labor-only
contractor of GMPC.
It insists that it could not be the respondents' employer as it was not
allowed to operate a canteen in the GSIS building. It was the GMPC
who had the authority to undertake the operation. GMPC only engaged
SIP's services because GMPC had no capability or competence in the
area. SIP points out that GMPC assumed responsibility for its acts in
operating the canteen; all businesses it transacted were under GMPC's
name, as well as the business registration and other permits of the
canteen, sales receipts and vouchers for food purchased from the
canteen; the employees were issued individual ID cards by GMPC. In
sum, SIP contends that its arrangement with GMPC was one of
contractor/subcontractor governed by Article 106 of the Labor
Code. Lastly, it submits that it was not registered with the Department
of Labor and Employment as an independent contractor and, therefore,
it is presumed to be a labor-only contractor.
The Respondents' Comment
Without being required by the Court, the respondents filed their
comment to SIP's petition on August 3, 2010.[12] They question the
propriety of the petition for review on certiorari raising only questions of
fact and not of law as required by Rule 45 of the Rules of Court. This
notwithstanding, they submit that the CA committed no error in
upholding the NLRC's findings of facts which established that SIP was
the real employer of Batolina and the other complainants. Thus, SIP
was liable to them for their statutory benefits, although it was not made
to answer for their lost employment due to the involuntary nature of the
canteen's closure.
The respondents pray that the petition be dismissed for lack of merit.
The Court's Ruling
We first resolve the alleged impropriety of the petition. [13] While it is the
general rule that the Court may not review factual findings of the CA,
we deem it proper to depart from the rule and examine the facts of the
case in view of the conflicting factual findings of the labor arbiter, on
one hand, and the NLRC and the CA, on the other.[14] We, therefore,
hold the respondents' position on this point unmeritorious.
We now consider the merits of the case.
The employer-employee relationship issue
We affirm the CA ruling that SIP was the respondents' employer. The
NLRC decision, which the CA affirmed, states:
Respondents have been the concessionaire of GMPC canteen for nine
(9) years (Annex "A" of Complainants' Sur-Rejoinder...., Records,
302). During this period, complainants were employed at the said
canteen (Sinumpaang Salaysay of complainants, Records, p. 156). On
February 29, 2004, respondents' concession with GMPC was
terminated (Annex "C" of Respondents' Answer and Position Paper,
Records, p. 77). When respondents were prevented from entering the
premises as a result of the termination of their concession, they sent a
protest letter dated April 14, 2004 to GMPC thru their
counsel. Pertinent portion of the letter:

performing their usual duties of serving the food requirements of GSIS

personnel and others.
Clearly, no less than respondents, thru their counsel, admitted that
complainants herein were their employees.
That complainants were employees of respondents is further bolstered
by the fact that respondents do not deny that they were the ones who
paid complainants salary. When complainants charged them of
underpayment, respondents even interposed the defense of file (sic)
board and lodging given to complainants.
Furthermore, these IDs issued to complainants bear the signature of
respondent Alejandro C. Pablo (Annexes "J", "K", "M" to "M-2" of
complainant's Reply. . ., Records, pp. 285 to 290). Likewise, the
memoranda issued to complainants regarding their absences without
leave were signed by respondent Alejandro C. Pablo (Annexes A, C, E,
& G, Ibid., Records, pp. 274, 276, 279, 282). All these pieces of
evidence clearly show that respondents are the employer of
complainants. (Rollo, pp. 87-88.)
x

The CA ruled out SIP's claim that it was a labor-only contractor or a

mere agent of GMPC. We agree with the CA; SIP and its proprietors
could not be considered as mere agents of GMPC because they
exercised the essential elements of an employment relationship with
the respondents such as hiring, payment of wages and the power of
control, not to mention that SIP operated the canteen on its own
account as it paid a fee for the use of the building and for the privilege
of running the canteen. The fact that the respondents applied with
GMPC in February 2004 when it terminated its contract with SIP, is
another clear indication that the two entities were separate and distinct
from each other. We thus see no reason to disturb the CA's
findings.
The respondents's money claims
We likewise affirm the CA ruling on the monetary award to Batolina and
the other complainants. The free board and lodging SIP furnished the
employees cannot operate as a set-off for the underpayment of their
wages. We held in Mabeza v. National Labor Relations
Commission[15] that the employer cannot simply deduct from the
employee's wages the value of the board and lodging without satisfying
the following requirements: (1) proof that such facilities are customarily
furnished by the trade; (2) voluntary acceptance in writing by the
employees of the deductible facilities; and
(3) proof of the fair and
reasonable value of the facilities charged. As the CA aptly noted, it is
clear from the records that SIP failed to comply with these
requirements.
On the collateral issue of the proper computation of the monetary
award, we also find the CA ruling to be in order. Indeed, in the
absence of evidence that the employees worked for 26 days a month,
no need exists to recompute the award for the respondents who were
"explicitly claiming for their salaries and benefits for the services
rendered from Monday to Friday or 5 days a week or a total of 20 days
a month."[16]
In light of the foregoing, we find no merit in the petition.
WHEREFORE, premises considered, we hereby DISMISS the petition
for lack of merit. The assailed decision and resolution of the Court of
Appeals in CA-G.R. SP No. 101651, are AFFIRMED.
SO ORDERED.
Carpio Morales, Bersamin, Villarama, Jr., and Sereno, JJ., concur.

We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo,
the concessionaires who used to occupy and/or rent the area for a
cafeteria/canteen at the 2nd Floor of the GSIS Building for the past
several years.
Last March 12, 2004, without any court writ or order, and with the aid of
your armed agents, you physically barredour clients & their
employees/helpers from entering the said premises and from

19.
THIRD DIVISION

54
[ 567 Phil. 26, January 29, 2008 ]
LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION,
Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
COLEGIO DE SAN JUAN DE LETRAN CALAMBA, INC.,
Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in the present Petition for Review on Certiorari under Rule 45
of the Rules of Court is the Decision[1] of the Court of Appeals (CA)
promulgated on May 14, 2002 in CA-G.R. SP No. 61552 dismissing the
special civil action for certiorari filed before it; and the
Resolution[2] dated November 28, 2002, denying petitioner's Motion for
Reconsideration.
The facts of the case are as follows:
On October 8, 1992, the Letran Calamba Faculty and Employees
Association (petitioner) filed with Regional Arbitration Branch No. IV of
the National Labor Relations Commission (NLRC) a
Complaint[3] against Colegio de San Juan de Letran, Calamba, Inc.
(respondent) for collection of various monetary claims due its members.
Petitioner alleged in its Position Paper that:
xxxx
2) [It] has filed this complaint in behalf of its members whose names
and positions appear in the list hereto attached as Annex A.
3) In the computation of the thirteenth month pay of its academic
personnel, respondent does not include as basis therefor their
compensation for overloads. It only takes into account the pay the
faculty members receive for their teaching loads not exceeding
eighteen (18) units. The teaching overloads are rendered within eight
(8) hours a day.
4) Respondent has not paid the wage increases required by Wage
Order No. 5 to its employees who qualify thereunder.
5) Respondent has not followed the formula prescribed by DECS
Memorandum Circular No. 2 dated March 10, 1989 in the computation
of the compensation per unit of excess load or overload of faculty
members. This has resulted in the diminution of the compensation of
faculty members.
6) The salary increases due the non-academic personnel as a result of
job grading has not been given. Job grading has been an annual
practice of the school since 1980; the same is done for the purpose of
increasing the salaries of non-academic personnel and as the
counterpart of the ranking systems of faculty members.
7) Respondent has not paid to its employees the balances of seventy
(70%) percent of the tuition fee increases for the years 1990, 1991 and
1992.
8) Respondent has not also paid its employees the holiday pay for the
ten (10) regular holidays as provided for in Article 94 of the Labor
Code.
9) Respondent has refused without justifiable reasons and despite
repeated demands to pay its obligations mentioned in paragraphs 3 to
7 hereof.
x x x x[4]
The complaint was docketed as NLRC Case No. RAB-IV-10-4560-92-L.
On January 29, 1993, respondent filed its Position Paper denying all
the allegations of petitioner.
On March 10, 1993, petitioner filed its Reply.
Prior to the filing of the above-mentioned complaint, petitioner filed a
separate complaint against the respondent for money claims with
Regional Office No. IV of the Department of Labor and Employment
(DOLE).
On the other hand, pending resolution of NLRC Case No. RAB-IV-10-

4560-92-L, respondent filed with Regional Arbitration Branch No. IV of

the NLRC a petition to declare as illegal a strike staged by petitioner in
January 1994.
Subsequently, these three cases were consolidated. The case for
money claims originally filed by petitioner with the DOLE was later
docketed as NLRC Case No. RAB-IV-11-4624-92-L, while the petition
to declare the subject strike illegal filed by respondent was docketed as
NLRC Case No. RAB-IV-3-6555-94-L.
On September 28, 1998, the Labor Arbiter (LA) handling the
consolidated cases rendered a Decision with the following dispositive
portion:
WHEREFORE, premises considered, judgment is hereby rendered, as
follows:
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-114624-92-L) are hereby dismissed for lack of merit;
2.

The petition to declare strike illegal (NLRC Case No. RAB-IV-36555-94-L) is hereby dismissed, but the officers of the Union,
particularly its President, Mr. Edmundo F. Marifosque, Sr., are
hereby reprimanded and sternly warned that future conduct
similar to what was displayed in this case will warrant a more
severe sanction from this Office.
SO ORDERED.[5]
Both parties appealed to the NLRC.
On July 28, 1999, the NLRC promulgated its Decision[6] dismissing both
appeals. Petitioner filed a Motion for Reconsideration [7] but the same
was denied by the NLRC in its Resolution[8] dated June 21, 2000.
Petitioner then filed a special civil action for certiorari with the CA
assailing the above-mentioned NLRC Decision and Resolution.
On May 14, 2002, the CA rendered the presently assailed judgment
dismissing the petition.
Petitioner filed a Motion for Reconsideration but the CA denied it in its
Resolution promulgated on November 28, 2002.
Hence, herein petition for review based on the following assignment of
errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE FACTUAL FINDINGS OF THE NATIONAL LABOR RELATIONS
COMMISSION CANNOT BE REVIEWED IN CERTIORARI
PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO
RULE SQUARELY ON THE ISSUE OF WHETHER OR NOT THE PAY
OF FACULTY MEMBERS FOR TEACHING OVERLOADS SHOULD
BE INCLUDED AS BASIS IN THE COMPUTATION OF THEIR
THIRTEENTH MONTH PAY.
III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND
IN NOT GRANTING PETITIONER'S MONETARY CLAIMS.[9]
Citing Agustilo v. Court of Appeals,[10] petitioner contends that in a
special civil action for certiorari brought before the CA, the appellate
court can review the factual findings and the legal conclusions of the
NLRC.
As to the inclusion of the overloads of respondent's faculty members in
the computation of their 13th-month pay, petitioner argues that under
the Revised Guidelines on the Implementation of the 13th-Month Pay
Law, promulgated by the Secretary of Labor on November 16, 1987,
the basic pay of an employee includes remunerations or earnings paid
by his employer for services rendered, and that excluded therefrom are
the cash equivalents of unused vacation and sick leave credits,
overtime, premium, night differential, holiday pay and cost-of-living
allowances. Petitioner claims that since the pay for excess loads or

55
overloads does not fall under any of the enumerated exclusions and
considering that the said overloads are being performed within the
normal working period of eight hours a day, it only follows that the
overloads should be included in the computation of the faculty
members' 13th-month pay.
To support its argument, petitioner cites the opinion of the Bureau of
Working Conditions of the DOLE that payment of teaching overload
performed within eight hours of work a day shall be considered in the
computation of the 13th-month pay.[11]
Petitioner further contends that DOLE-DECS-CHED-TESDA Order No.
02, Series of 1996 (DOLE Order) which was relied upon by the LA and
the NLRC in their respective Decisions cannot be applied to the instant
case because the DOLE Order was issued long after the
commencement of petitioner's complaints for monetary claims; that the
prevailing rule at the time of the commencement of petitioner's
complaints was to include compensations for overloads in determining
a faculty member's 13th-month pay; that to give retroactive application
to the DOLE Order issued in 1996 is to deprive workers of benefits
which have become vested and is a clear violation of the constitutional
mandate on protection of labor; and that, in any case, all doubts in the
implementation and interpretation of labor laws, including implementing
rules and regulations, should be resolved in favor of labor.
Lastly, petitioner avers that the CA, in concluding that the NLRC
Decision was supported by substantial evidence, failed to specify what
constituted said evidence. Thus, petitioner asserts that the CA acted
arbitrarily in affirming the Decision of the NLRC.
In its Comment, respondent contends that the ruling in Agustilo is an
exception rather than the general rule; that the general rule is that in a
petition for certiorari, judicial review by this Court or by the CA in labor
cases does not go so far as to evaluate the sufficiency of the evidence
upon which the proper labor officer or office based his or its
determination but is limited only to issues of jurisdiction or grave abuse
of discretion amounting to lack of jurisdiction; that before a party may
ask that the CA or this Court review the factual findings of the NLRC,
there must first be a convincing argument that the NLRC acted in a
capricious, whimsical, arbitrary or despotic manner; and that in its
petition for certiorari filed with the CA, herein petitioner failed to prove
that the NLRC acted without or in excess of jurisdiction or with grave
abuse of discretion.
Respondent argues that Agustilo is not applicable to the present case
because in the former case, the findings of fact of the LA and the NLRC
are at variance with each other; while in the present case, the findings
of fact and conclusions of law of the LA and the NLRC are the same.
Respondent also avers that in a special civil action for certiorari, the
discretionary power to review factual findings of the NLRC rests upon
the CA; and that absent any findings by the CA of the need to resolve
any unclear or ambiguous factual findings of the NLRC, the grant of the
writ of certiorari is not warranted.
Further, respondent contends that even granting that the factual
findings of the CA, NLRC and the LA may be reviewed in the present
case, petitioner failed to present valid arguments to warrant the
reversal of the assailed decision.

is to exclude excess teaching load, which is akin to overtime, in the

computation of a teacher's basic salary and, ultimately, in the
computation of his 13th-month pay.
As to respondent's alleged non-payment of petitioner's consolidated
money claims, respondent contends that the findings of the LA
regarding these matters, which were affirmed by the NLRC and the CA,
have clear and convincing factual and legal bases to stand on.
The Courts Ruling
The Court finds the petition bereft of merit.
As to the first and third assigned errors, petitioner would have this
Court review the factual findings of the LA as affirmed by the NLRC
and the CA, to wit.
With respect to the alleged non-payment of benefits under Wage Order
No. 5, this Office is convinced that after the lapse of the one-year
period of exemption from compliance with Wage Order No. 5 (Exhibit
1-B), which exemption was granted by then Labor Minister Blas Ople,
the School settled its obligations to its employees, conformably with the
agreement reached during the management-employees meeting of
June 26, 1985 (Exhibits 4-B up to 4-D, also Exhibit 6-x-1). The
Union has presented no evidence that the settlement reached during
the June 26, 1985 meeting was the result of coercion. Indeed, what is
significant is that the agreement of June 26, 1985 was signed by Mr.
Porferio Ferrer, then Faculty President and an officer of the
complaining Union. Moreover, the samples from the payroll journal of
the School, identified and offered in evidence in these cases (Exhibits
1-C and 1-D), shows that the School paid its employees the benefits
under Wage Order No. 5 (and even Wage Order No. 6) beginning June
16, 1985.
Under the circumstances, therefore, the claim of the Union on this point
must likewise fail.
The claim of the Union for salary differentials due to the improper
computation of compensation per unit of excess load cannot hold water
for the simple reason that during the Schoolyears in point there were
no classes from June 1-14 and October 17-31. This fact was not
refuted by the Union. Since extra load should be paid only when
actually performed by the employees, no salary differentials are due
the Union members.
The non-academic members of the Union cannot legally insist on wage
increases due to Job Grading. From the records it appears that Job
Grading is a system adopted by the School by which positions are
classified and evaluated according to the prescribed qualifications
therefor. It is akin to a merit system whereby salary increases are made
dependent upon the classification, evaluation and grading of the
position held by an employee.
The system of Job Grading was initiated by the School in Schoolyear
1989-1990. In 1992, just before the first of the two money claims was
filed, a new Job Grading process was initiated by the School.

Respondent avers that the DOLE Order is an administrative regulation

which interprets the 13th-Month Pay Law (P.D. No. 851) and, as such, it
is mandatory for the LA to apply the same to the present case.

Under the circumstances obtaining, it cannot be argued that there were

repeated grants of salary increases due to Job Grading to warrant the
conclusion that some benefit was granted in favor of the non-academic
personnel that could no longer be eliminated or banished under Article
100 of the Labor Code. Since the Job Grading exercises of the School
were neither consistent nor for a considerable period of time, the
monetary claims attendant to an increase in job grade are non-existent.

Moreover, respondent contends that the Legal Services Office of the

DOLE issued an opinion dated March 4, 1992, [12] that remunerations for
teaching in excess of the regular load, which includes overload pay for
work performed within an eight-hour work day, may not be included as
part of the basic salary in the computation of the 13th-month pay unless
this has been included by company practice or policy; that petitioner
intentionally omitted any reference to the above-mentioned opinion of
the Legal Services Office of the DOLE because it is fatal to its cause;
and that the DOLE Order is an affirmation of the opinion rendered by
the said Office of the DOLE.

The claim of the Union that its members were not given their full share
in the tuition fee increases for the Schoolyears 1989-1990, 1990-1991
and 1991-1992 is belied by the evidence presented by the School
which consists of the unrefuted testimony of its Accounting
Coordinator, Ms. Rosario Manlapaz, and the reports extrapolated from
the journals and general ledgers of the School (Exhibits 2, 2-A up to
2-G). The evidence indubitably shows that in Schoolyear 1989-1990,
the School incurred a deficit of P445,942.25, while in Schoolyears
1990-1991 and 1991-1992, the School paid out, 91% and 77%,
respectively, of the increments in the tuition fees collected.

Furthermore, respondent claims that, contrary to the asseveration of

petitioner, prior to the issuance of the DOLE Order, the prevailing rule

As regards the issue of non-payment of holiday pay, the individual pay

records of the School's employees, a sample of which was identified

56
and explained by Ms. Rosario Manlapaz (Exhibit 3), shows that said
School employees are paid for all days worked in the year. Stated
differently, the factor used in computing the salaries of the employees
is 365, which indicates that their regular monthly salary includes
payment of wages during all legal holidays. [13]
This Court held in Odango v. National Labor Relations
Commission[14] that:
The appellate courts jurisdiction to review a decision of the NLRC in a
petition for certiorari is confined to issues of jurisdiction or grave abuse
of discretion. An extraordinary remedy, a petition for certiorari is
available only and restrictively in truly exceptional cases. The sole
office of the writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to
lack or excess of jurisdiction. It does not include correction of the
NLRCs evaluation of the evidence or of its factual findings. Such
findings are generally accorded not only respect but also finality. A
party assailing such findings bears the burden of showing that the
tribunal acted capriciously and whimsically or in total disregard of
evidence material to the controversy, in order that the extraordinary writ
of certiorari will lie.[15]
In the instant case, the Court finds no error in the ruling of the CA that
since nowhere in the petition is there any acceptable demonstration
that the LA or the NLRC acted either with grave abuse of discretion or
without or in excess of its jurisdiction, the appellate court has no reason
to look into the correctness of the evaluation of evidence which
supports the labor tribunals' findings of fact.

benefits which are not considered or integrated as part of the

regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night
differential and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be included as part
of thebasic salary in the computation of the 13th month pay if by
individual or collective agreement, company practice or policy, the
same are treated as part of the basic salary of the employees.
Basic wage is defined by the Implementing Rules of RA 6727 as
follows:
Basic Wage means all remuneration or earnings paid by an
employer to a worker for services rendered onnormal working
days and hours but does not include cost of living allowances,
13th-month pay or other monetary benefits which are not
considered as part of or integrated into the regular salary of the
workers xxx.

2.
Settled is the rule that the findings of the LA, when affirmed by the
NLRC and the CA, are binding on the Supreme Court, unless patently
erroneous.[16] It is not the function of the Supreme Court to analyze or
weigh all over again the evidence already considered in the
proceedings below.[17] In a petition for review on certiorari, this Courts
jurisdiction is limited to reviewing errors of law in the absence of any
showing that the factual findings complained of are devoid of support in
the records or are glaringly erroneous. [18] Firm is the doctrine that this
Court is not a trier of facts, and this applies with greater force in labor
cases.[19] Findings of fact of administrative agencies and quasi-judicial
bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only great
respect but even finality.[20] They are binding upon this Court unless
there is a showing of grave abuse of discretion or where it is clearly
shown that they were arrived at arbitrarily or in utter disregard of the
evidence on record.[21] We find none of these exceptions in the present
case.
In petitions for review on certiorari like the instant case, the Court
invariably sustains the unanimous factual findings of the LA, the NLRC
and the CA, specially when such findings are supported by substantial
evidence and there is no cogent basis to reverse the same, as in this
case.[22]
The second assigned error properly raises a question of law as it
involves the determination of whether or not a teacher's overload pay
should be considered in the computation of his or her 13 th-month pay.
In resolving this issue, the Court is confronted with conflicting
interpretations by different government agencies.
On one hand is the opinion of the Bureau of Working Conditions of the
DOLE dated December 9, 1991, February 28, 1992 and November 19,
1992 to the effect that if overload is performed within a teacher's
normal eight-hour work per day, the remuneration that the teacher will
get from the additional teaching load will form part of the basic wage. [23]
This opinion is affirmed by the Explanatory Bulletin on the Inclusion of
Teachers' Overload Pay in the 13th-Month Pay Determination issued by
the DOLE on December 3, 1993 under then Acting DOLE Secretary
Cresenciano B. Trajano. Pertinent portions of the said Bulletin read as
follows:
1. Basis of the 13th-month pay computation
The Revised Implementing Guidelines of the 13th-Month Pay Law
(P.D. 851, as amended) provides that an employee shall be
entitled to not less than 1/12 of the total basic salary earned
within a calendar year for the purpose of computing such
entitlement. The basic wage of an employee shall include:
x x x all remunerations or earnings paid by his employer for
services rendered but do not include allowances or monetary

The foregoing definition was based on Article 83 of the Labor

Code which provides that the normal hours of work of any
employee shall not exceed eight (8) hours a day. This means
that the basic salary of an employee for the purpose of computing
the 13th-month pay shall include all remunerations or earnings
paid by an employer for services rendered during normal working
hours.
Overload work/pay
Overload on the other hand means the load in excess of the
normal load of private school teachers as prescribed by the
Department of Education, Culture and Sports (DECS) or the
policies, rules and standards of particular private schools. In
recognition of the peculiarities of the teaching profession, existing
DECS and School Policies and Regulations for different levels of
instructions prescribe a regular teaching load, the total actual
teaching or classroom hours of which a teacher can generally
perform in less than eight (8) hours per working day. This is
because teaching may also require the teacher to do additional
work such as handling an advisory class, preparation of lesson
plans and teaching aids, evaluation of students and other related
activities. Where, however a teacher is engaged to undertake
actual additional teaching work after completing his/her regular
teaching load, such additional work is generally referred to
as overload. In short, additional work in excess of the regular
teaching load is overload work. Regular teaching load and
overload work, if any, may constitute a teacher's working
day.

Where a teacher is required to perform such overload within

the eight (8) hours normal working day, such overload
compensation shall be considered part of the basic pay for
the purpose of computing the teacher's 13th-month
pay. Overload work is sometimes misunderstood as
synonymous to overtime work as this term is used and
understood in the Labor Code. These two terms are not the same
because overtime work is work rendered in excess of normal
working hours of eight in a day (Art. 87, Labor Code). Considering
that overload work may be performed either within or outside
eight hours in a day, overload work may or may not be overtime
work.
3. Concluding Statement
In the light of the foregoing discussions, it is the position of this
Department that all basic salary/wage representing payments earned
for actual work performed during or within the eight hours in a day,
including payments for overload work within eight hours, form part of
basic wage and therefore are to be included in the computation of 13thmonth pay mandated by PD 851, as amended.[24] (Underscoring
supplied)
On the other hand, the Legal Services Department of the DOLE holds
in its opinion of March 4, 1992 that remunerations for teaching in
excess of the regular load shall be excluded in the computation of the
13th-month pay unless, by school policy, the same are considered as
part of the basic salary of the qualified teachers. [25]
This opinion is later affirmed by the DOLE Order, pertinent portions of
which are quoted below:
xxxx

57
2.

In accordance with Article 83 of the Labor Code of the Philippines,

as amended, the normal hours of work of school academic
personnel shall not exceed eight (8) hours a day. Any work done
in addition to the eight (8) hours daily work shall constitute
overtime work.

3.

The normal hours of work of teaching or academic personnel shall

be based on their normal or regular teaching loads. Such normal or
regular teaching loads shall be in accordance with the policies,
rules and standards prescribed by the Department of Education,
Culture and Sports, the Commission on Higher Education and the
Technical Education and Skills Development Authority. Any
teaching load in excess of the normal or regular teaching load
shall be considered as overload. Overload partakes of the nature
of temporary extra assignment and compensation therefore shall be
considered as an overload honorarium if performed within the 8hour work period and does not form part of the regular or basic
pay. Overload performed beyond the eight-hour daily work is
overtime work.[26] (Emphasis supplied)
It was the above-quoted DOLE Order which was used by the LA as
basis for ruling against herein petitioner.
The petitioners claim that the DOLE Order should not be made to
apply to the present case because said Order was issued only in 1996,
approximately four years after the present case was initiated before the
Regional Arbitration Branch of the NLRC, is not without basis. The
general rule is that administrative rulings and circulars shall not be
given retroactive effect.[27]
Nevertheless, it is a settled rule that when an administrative or
executive agency renders an opinion or issues a statement of
policy, it merely interprets a pre-existing law and the
administrative interpretation is at best advisory for it is the courts
that finally determine what the law means.[28]
In the present case, while the DOLE Order may not be applicable, the
Court finds that overload pay should be excluded from the computation
of the 13th-month pay of petitioner's members.
In resolving the issue of the inclusion or exclusion of overload pay in
the computation of a teacher's 13th-month pay, it is decisive to
determine what basic salary includes and excludes.
In this respect, the Court's disquisition in San Miguel Corporation v.
Inciong[29] is instructive, to wit:
Under Presidential Decree 851 and its implementing rules, the basic
salary of an employee is used as the basis in the determination of his
13th month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree
851, the following compensations are deemed not part of the basic
salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree
525 and Letter of Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of the employee at the
time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations
Implementing Presidential Decree 851 issued by the then Labor
Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the
computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree
525 and Letter of Instruction No. 174 and profit sharing payments
indicate the intention to strip basic salary of other payments which are
properly considered as fringe benefits. Likewise, the catch-all
exclusionary phrase all allowances and monetary benefits which are
not considered or integrated as part of the basic salary shows also the
intention to strip basic salary of any and all additions which may be in

the form of allowances or fringe benefits.

Moreover, the Supplementary Rules and Regulations Implementing
Presidential Decree 851 is even more emphatic in declaring that
earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to
include all remunerations or earnings paid by an employer to an
employee, this cloud is dissipated in the later and more controlling
Supplementary Rules and Regulations which categorically, exclude
from the definition of basic salary earnings and other remunerations
paid by employer to an employee. A cursory perusal of the two sets of
Rules indicates that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The Supplementary
Rules and Regulations cure the seeming tendency of the former rules
to include all remunerations and earnings within the definition of basic
salary.
The all-embracing phrase earnings and other remunerations which
are deemed not part of the basic salary includes within its meaning
payments for sick, vacation, or maternity leaves, premium for works
performed on rest days and special holidays, pay for regular holidays
and night differentials. As such they are deemed not part of the basic
salary and shall not be considered in the computation of the 13th-month
pay. If they were not so excluded, it is hard to find any earnings and
other remunerations expressly excluded in the computation of the 13 thmonth pay. Then the exclusionary provision would prove to be idle and
with no purpose.
This conclusion finds strong support under the Labor Code of the
Philippines. To cite a few provisions:
Art. 87 Overtime work. Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the overtime work,
additional compensation equivalent to his regular wage plus at least
twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than
and added to the regular wage or basic salary, for reason of which
such is categorically excluded from the definition of basic salary under
the Supplementary Rules and Regulations Implementing Presidential
Decree 851.
In Article 93 of the same Code, paragraph
c.) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee.
It is likewise clear that premium for special holiday which is at least
30% of the regular wage is an additional compensation other than and
added to the regular wage or basic salary. For similar reason it shall not
be considered in the computation of the 13th -month pay.[30]
In the same manner that payment for overtime work and work
performed during special holidays is considered as additional
compensation apart and distinct from an employee's regular wage or
basic salary, an overload pay, owing to its very nature and definition,
may not be considered as part of a teacher's regular or basic salary,
because it is being paid for additional work performed in excess of the
regular teaching load.
The peculiarity of an overload lies in the fact that it may be performed
within the normal eight-hour working day. This is the only reason why
the DOLE, in its explanatory bulletin, finds it proper to include a
teacher's overload pay in the determination of his or her 13th-month
pay. However, the DOLE loses sight of the fact that even if it is
performed within the normal eight-hour working day, an overload is still
an additional or extra teaching work which is performed after the
regular teaching load has been completed. Hence, any pay given as
compensation for such additional work should be considered as extra
and not deemed as part of the regular or basic salary.
Moreover, petitioner failed to refute private respondent's contention that
excess teaching load is paid by the hour, while the regular teaching
load is being paid on a monthly basis; and that the assignment of

58
overload is subject to the availability of teaching loads. This only goes
to show that overload pay is not integrated with a teacher's basic salary
for his or her regular teaching load. In addition, overload varies from
one semester to another, as it is dependent upon the availability of
extra teaching loads. As such, it is not legally feasible to consider
payments for such overload as part of a teacher's regular or basic
salary. Verily, overload pay may not be included as basis for
determining a teacher's 13th-month pay.
WHEREFORE, the instant petition is DENIED. The assailed Decision
and Resolution of the Court of Appeals areAFFIRMED.
SO ORDERED.
Ynares-Santiago, (Chairperson), Corona, Nachura, and Reyes, JJ.,
concur.

Further investigation of this matter is required, therefore, you are

summoned to a hearing at 4:00 p.m. today. The hearing wills determine
your employment status with this company.
(SGD) ANNALENE
REYES-ESCOBIA
Manager[1]
On February 24, 1999, respondent was terminated from employment.
The employer, through petitioner Escobia, gave him his two-day salary
and a termination letter, which reads:
February 24, 1999
Dear Mr. Nicasio Galit,
I am sorry to inform you that your employment with this company has
been terminated effective today, February 24, 1999. This decision was
not made without a thorough and complete investigation.
You were given an office memo dated February 23, 1999 warning you
of a possible dismissal. You were given a chance to defend yourself on
a hearing that was held in the afternoon of the said date.

20.
SECOND DIVISION
[ 568 Phil. 585, February 13, 2008 ]
R.B. MICHAEL PRESS and ANNALENE REYES ESCOBIA,
Petitioners, vs. NICASIO C. GALIT, Respondent.
DECISION
VELASCO JR., J.:
The Case
Year in, year out, a copious number of illegal dismissal cases reach the
Court of Appeals (CA) and eventually end up with this Court. This
petition for review under Rule 45 registered by petitioners R.B. Michael
Press and Annalene Reyes Escobia against their former machine
operator, respondent Nicasio C. Galit, is among them. It assails the
November 14, 2001 Decision of the CA in CA-G.R. SP No. 62959,
finding the dismissal of respondent illegal. Likewise challenged is the
May 7, 2002 Resolution denying reconsideration.
The Facts
On May 1, 1997, respondent was employed by petitioner R.B. Michael
Press as an offset machine operator, whose work schedule was from
8:00 a.m. to 5:00 p.m., Mondays to Saturdays, and he was paid PhP
230 a day. During his employment, Galit was tardy for a total of 190
times, totaling to 6,117 minutes, and was absent without leave for a
total of nine and a half days.
On February 22, 1999, respondent was ordered to render overtime
service in order to comply with a job order deadline, but he refused to
do so. The following day, February 23, 1999, respondent reported for
work but petitioner Escobia told him not to work, and to return later in
the afternoon for a hearing. When he returned, a copy of an Office
Memorandum was served on him, as follows:
To
: Mr. Nicasio Galit
From :

ANNALENE REYES-ESCOBIA

Re

WARNING FOR DISMISSAL; NOTICE OF

HEARING

This warning for dismissal is being issued for the following offenses:
(1) habitual and excessive tardiness
(2) committing acts of discourtesy, disrespect in addressing superiors
(3) failure to work overtime after having been instructed to do so
(4) Insubordination - willfully disobeying, defying or disregarding
company authority
The offenses youve committed are just causes for termination of
employment as provided by the Labor Code. You were given verbal
warnings before, but there had been no improvement on your conduct.

During the hearing, Mrs. Rebecca Velasquez and Mr. Dennis Reyes,
were present in their capacity as Production Manager and Supervisor,
respectively.
Your admission to your offenses against the company and the
testimonies from Mrs. Velasquez and Mr. Reyes justified your dismissal
from this company,
Please contact Ms. Marly Buita to discuss 13th-Month Pay
disbursements.
Cordially,
(SGD) Mrs. Annalene Reyes-Escobia[2]
Respondent subsequently filed a complaint for illegal dismissal and
money claims before the National Labor Relations Commission (NLRC)
Regional Arbitration Branch No. IV, which was docketed as NLRC
Case No. RAB IV-2-10806-99-C. On October 29, 1999, the labor
arbiter rendered a Decision,
WHEREFORE, premises considered, there being a finding that
complainant was illegally dismissed, respondent RB MICHAEL
PRESS/Annalene Reyes-Escobia is hereby ordered to reinstate
complainant to his former position without loss of seniority rights and
other benefits, and be paid his full backwages computed from the time
he was illegally dismissed up to the time of his actual reimbursement.
All other claims are DISMISSED for lack of evidence.
SO ORDERED.[3]
On January 3, 2000, petitioners elevated the case to the NLRC and
their appeal was docketed as NLRC NCR CA No. 022433-00. In the
April 28, 2000 Decision, the NLRC dismissed the appeal for lack of
merit.
Not satisfied with the ruling of the NLRC, petitioners filed a Petition for
Certiorari with the CA. On November 14, 2001, the CA rendered its
judgment affirming with modification the NLRCs Decision, thus:
WHEREFORE, the petition is DISMISSED for lack of merit. The
Decision of public respondent is accordingly modified in that the basis
of the computation of the backwages, 13th month pay and incentive pay
should be respondents daily wage of P230.00; however, backwages
should be computed from February 22, 1999 up to the finality of this
decision, plus the 13th month and service incentive leave pay.[4]
The CA found that it was not the tardiness and absences committed by
respondent, but his refusal to render overtime work on February 22,
1999 which caused the termination of his employment. It ruled that the
time frame in which respondent was afforded procedural due process is
dubitable; he could not have been afforded ample opportunity to
explain his side and to adduce evidence on his behalf. It further ruled
that the basis for computing his backwages should be his daily salary
at the time of his dismissal which was PhP 230, and that his
backwages should be computed from the time of his dismissal up to the
finality of the CAs decision.

59
On December 3, 2001, petitioners asked for reconsideration
denied in the CAs May 7, 2002 Resolution.

[5]

but was

Persistent, petitioners instituted the instant petition raising numerous

issues which can be summarized, as follows: first, whether there was
just cause to terminate the employment of respondent, and whether
due process was observed in the dismissal process; and second,
whether respondent is entitled to backwages and other benefits despite
his refusal to be reinstated.
The Courts Ruling
It is well settled that findings of fact of quasi-judicial agencies, like the
NLRC, are accorded not only respect but even finality if the findings are
supported by substantial evidence. This is especially so when such
findings of the labor arbiter were affirmed by the CA.[6] However, this is
not an iron-clad rule. Though the findings of fact by the labor arbiter
may have been affirmed and adopted by the NLRC and the CA as in
this case, it cannot divest the Court of its authority to review the
findings of fact of the lower courts or quasi-judicial agencies when it
sees that justice has not been served, more so when the lower courts
or quasi-judicial agencies findings are contrary to the evidence on
record or fail to appreciate relevant and substantial evidence presented
before it.[7]
Petitioners aver that Galit was dismissed due to the following offenses:
(1) habitual and excessive tardiness; (2) commission of discourteous
acts and disrespectful conduct when addressing superiors; (3) failure to
render overtime work despite instruction to do so; and (4)
insubordination, that is, willful disobedience of, defiance to, or disregard
of company authority.[8] The foregoing charges may be condensed into:
(1) tardiness constituting neglect of duty; (2) serious misconduct; and
(3) insubordination or willful disobedience.
Respondents tardiness cannot be considered condoned by
petitioners
Habitual tardiness is a form of neglect of duty. Lack of initiative,
diligence, and discipline to come to work on time everyday exhibit the
employees deportment towards work. Habitual and excessive
tardiness is inimical to the general productivity and business of the
employer. This is especially true when the tardiness and/or
absenteeism occurred frequently and repeatedly within an extensive
period of time.
In resolving the issue on tardiness, the labor arbiter ruled that
petitioners cannot use respondents habitual tardiness and
unauthorized absences to justify his dismissal since they had already
deducted the corresponding amounts from his salary. Furthermore, the
labor arbiter explained that since respondent was not subjected to any
admonition or penalty for tardiness, petitioners then had condoned the
offense or that the infraction is not serious enough to merit any penalty.
The CA then supported the labor arbiters ruling by ratiocinating that
petitioners cannot draw on respondents habitual tardiness in order to
dismiss him since there is no evidence which shows that he had been
warned or reprimanded for his excessive and habitual tardiness.
We find the ruling incorrect.
The mere fact that the numerous infractions of respondent have not
been immediately subjected to sanctions cannot be interpreted as
condonation of the offenses or waiver of the company to enforce
company rules. A waiver is a voluntary and intentional relinquishment
or abandonment of a known legal right or privilege. [9] It has been ruled
that a waiver to be valid and effective must be couched in clear and
unequivocal terms which leave no doubt as to the intention of a party to
give up a right or benefit which legally pertains to him. [10] Hence, the
management prerogative to discipline employees and impose
punishment is a legal right which cannot, as a general rule, be impliedly
waived.
In Cando v. NLRC,[11] the employee did not report for work for almost
five months when he was charged for absenteeism. The employee
claimed that such absences due to his handling of union matters were
condoned. The Court held that the employee did not adduce proof to
show condonation coupled with the fact that the company eventually
instituted the administrative complaint relating to his company

violations.
Thus it is incumbent upon the employee to adduce substantial
evidence to demonstrate condonation or waiver on the part of
management to forego the exercise of its right to impose sanctions for
breach of company rules.
In the case at bar, respondent did not adduce any evidence to show
waiver or condonation on the part of petitioners. Thus the finding of the
CA that petitioners cannot use the previous absences and tardiness
because respondent was not subjected to any penalty is bereft of legal
basis. In the case of Filipio v. The Honorable Minister Blas F.
Ople,[12] the Court, quoting then Labor Minister Ople, ruled that past
infractions for which the employee has suffered the corresponding
penalty for each violation cannot be used as a justification for the
employees dismissal for that would penalize him twice for the same
offense. At most, it was explained, these collective infractions could be
used as supporting justification to a subsequent similar offense. In
contrast, the petitioners in the case at bar did not impose any
punishment for the numerous absences and tardiness of respondent.
Thus, said infractions can be used collectively by petitioners as a
ground for dismissal.
The CA however reasoned out that for respondents absences,
deductions from his salary were made and hence to allow petitioners to
use said absences as ground for dismissal would amount to double
jeopardy.
This postulation is incorrect.
Respondent is admittedly a daily wage earner and hence is paid based
on such arrangement. For said daily paid workers, the principle of a
days pay for a days work is squarely applicable. Hence it cannot be
construed in any wise that such nonpayment of the daily wage on the
days he was absent constitutes a penalty.
Insubordination or willful disobedience
While the CA is correct that the charge of serious misconduct was not
substantiated, the charge of insubordination however is meritorious.
For willful disobedience to be a valid cause for dismissal, these two
elements must concur: (1) the employees assailed conduct must have
been willful, that is, characterized by a wrongful and perverse attitude;
and (2) the order violated must have been reasonable, lawful, made
known to the employee, and must pertain to the duties which he had
been engaged to discharge.[13]
In the present case, there is no question that petitioners order for
respondent to render overtime service to meet a production deadline
complies with the second requisite. Art. 89 of the Labor Code
empowers the employer to legally compel his employees to perform
overtime work against their will to prevent serious loss or damage:
Art. 89. EMERGENCY OVERTIME WORK
Any employee may be required by the employer to perform overtime
work in any of the following cases:
xxxx
(c) When there is urgent work to be performed on machines,
installations, or equipment, in order to avoid serious loss or damage to
the employer or some other cause of similar nature;
xxxx
In the present case, petitioners business is a printing press whose
production schedule is sometimes flexible and varying. It is only
reasonable that workers are sometimes asked to render overtime work
in order to meet production deadlines.
Dennis Reyes, in his Affidavit dated May 3, 1999, stated that in the
morning of February 22, 1999, he approached and asked respondent
to render overtime work so as to meet a production deadline on a
printing job order, but respondent refused to do so for no apparent
reason. Respondent, on the other hand, claims that the reason why he
refused to render overtime work was because he was not feeling well
that day.

60
The issue now is, whether respondents refusal or failure to render
overtime work was willful; that is, whether such refusal or failure was
characterized by a wrongful and perverse attitude. In Lakpue Drug Inc.
v. Belga, willfulness was described as characterized by a wrongful and
perverse mental attitude rendering the employees act inconsistent with
proper subordination.[14] The fact that respondent refused to provide
overtime work despite his knowledge that there is a production
deadline that needs to be met, and that without him, the offset machine
operator, no further printing can be had, shows his wrongful and
perverse mental attitude; thus, there is willfulness.

(2) After serving the first notice, the employers should schedule and
conduct a hearing or conference wherein the employees will be given
the opportunity to: (1) explain and clarify their defenses to the charge
against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management. During
the hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a representative
or counsel of their choice. Moreover, this conference or hearing could
be used by the parties as an opportunity to come to an amicable
settlement.

Respondents excuse that he was not feeling well that day is

unbelievable and obviously an afterthought. He failed to present any
evidence other than his own assertion that he was sick. Also, if it was
true that he was then not feeling well, he would have taken the day off,
or had gone home earlier, on the contrary, he stayed and continued to
work all day, and even tried to go to work the next day, thus belying his
excuse, which is, at most, a self-serving statement.

(3) After determining that termination of employment is justified, the

employers shall serve the employees awritten notice of
termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment.
In addition, if the continued employment poses a serious and imminent
threat to the life or property of the employers or of other employees like
theft or physical injuries, and there is a need for preventive
suspension,[17]the employers can immediately suspend the erring
employees for a period of not more than 30 days. Notwithstanding the
suspension, the employers are tasked to comply with the twin notice
requirement under the law. The preventive suspension cannot replace
the required notices.[18] Thus, there is still a need to comply with the
twin notice requirement and the requisite hearing or conference to
ensure that the employees are afforded due process even though they
may have been caught in flagrante or when the evidence of the
commission of the offense is strong.

After a re-examination of the facts, we rule that respondent unjustifiably

refused to render overtime work despite a valid order to do so. The
totality of his offenses against petitioner R.B. Michael Press shows that
he was a difficult employee. His refusal to render overtime work was
the final straw that broke the camels back, and, with his gross and
habitual tardiness and absences, would merit dismissal from service.
Due process: twin notice and hearing requirement
On the issue of due process, petitioners claim that they had afforded
respondent due process. Petitioners maintain that they had observed
due process when they gave respondent two notices and that they had
even scheduled a hearing where he could have had explained his side
and defended himself.
We are not persuaded.
We held in Agabon v. NLRC:
Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a
hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss;
and (2) if the dismissal is based on authorized causes under Articles
283 and 284, the employer must give the employee and the
Department of Labor and Employment written notices 30 days prior to
the effectivity of his separation.[15]
Under the twin notice requirement, the employees must be given two
(2) notices before his employment could be terminated: (1) a first notice
to apprise the employees of their fault, and (2) a second notice to
communicate to the employees that their employment is being
terminated. Not to be taken lightly of course is the hearing or
opportunity for the employee to defend himself personally or by counsel
of his choice.
In King of Kings Transport v. Mamac,[16] we had the occasion to further
elucidate on the procedure relating to the twin notice and hearing
requirement, thus:
(1) The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them,
and a directive that the employees are given the opportunity to submit
their written explanation within a reasonable period. Reasonable
opportunity under the Omnibus Rules means every kind of assistance
that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a
period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint. Moreover,
in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.

On the surface, it would seem that petitioners observed due process

(twin notice and hearing requirement): On February 23, 1999 petitioner
notified respondent of the hearing to be conducted later that day. On
the same day before the hearing, respondent was furnished a copy of
an office memorandum which contained a list of his offenses, and a
notice of a scheduled hearing in the afternoon of the same day. The
next day, February 24, 1999, he was notified that his employment with
petitioner R.B. Michael Press had been terminated.
A scrutiny of the disciplinary process undertaken by petitioners leads
us to conclude that they only paid lip service to the due process
requirements.
The undue haste in effecting respondents termination shows that the
termination process was a mere simulationthe required notices were
given, a hearing was even scheduled and held, but respondent was not
really given a real opportunity to defend himself; and it seems that
petitioners had already decided to dismiss respondent from service,
even before the first notice had been given.
Anent the written notice of charges and hearing, it is plain to see that
there was merely a general description of the claimed offenses of
respondent. The hearing was immediately set in the afternoon of
February 23, 1999the day respondent received the first notice.
Therefore, he was not given any opportunity at all to consult a union
official or lawyer, and, worse, to prepare for his defense.
Regarding the February 23, 1999 afternoon hearing, it can be inferred
that respondent, without any lawyer or friend to counsel him, was not
given any chance at all to adduce evidence in his defense. At most, he
was asked if he did not agree to render overtime work on February 22,
1999 and if he was late for work for 197 days. He was never given any
real opportunity to justify his inability to perform work on those days.
This is the only explanation why petitioners assert that
respondent admitted all the charges.
In the February 24, 1999 notice of dismissal, petitioners simply justified
respondents dismissal by citing his admission of the offenses charged.
It did not specify the details surrounding the offenses and the specific
company rule or Labor Code provision upon which the dismissal was
grounded.
In view of the infirmities in the proceedings, we conclude that
termination of respondent was railroaded in serious breach of his right
to due process. And as a consequence of the violation of his statutory
right to due process and following Agabon, petitioners are liable jointly
and solidarily to pay nominal damages to the respondent in the amount

61
of PhP 30,000.

[19]

WHEREFORE, premises considered, the November 14, 2001 CA

Decision in CA-G.R. SP No. 62959, the April 28, 2000 Decision of the
NLRC in NLRC NCR CA No. 022433-00, and the October 29, 1999
Decision of the Labor Arbiter in NLRC Case No. RAB IV-2-10806-99-C
are hereby REVERSED and SET ASIDE. The Court declares
respondents dismissal from employment VALID and LEGAL.
Petitioners are, however, ordered jointly and solidarily to pay
respondent nominal damages in the amount of PhP 30,000 for violation
of respondents right to due process.
No costs.
SO ORDERED.
Quisumbing, (Chairperson), Carpio, Carpio-Morales, and Tinga,
JJ., concur.