GR L-41182-3 / April 16, 1988

Sevilla vs. CA, Tourist World Service

Facts:

Tourist World Service (TWS) entered into a contract of lease with Mrs. Segundina Noguera on her property to put
up its branch office. Mrs. Lina Sevilla, a third party to the contract, by agreement will be solidarily liable with TWS
for payment of monthly rentals. Mrs. Sevilla will also run the office where for any fare brought, four percent of
the profit goes to her and three percent goes to TWS. Later, an information reached TWS that Mrs. Sevilla was
connected to their rival firm. Since the branch was losing in profits, it considered closing down its operations. It
terminated its lease contract with Mrs. Noguera and padlocked the business premises. When Mrs. Sevilla and
employees of the branch cannot enter the office, she filed complaint for damages against TWS. She claimed that
as partner to the joint-venture, she was entitled to damages. TWS argued, on the other hand, that as a branch
manager she was an employee of TWS and was bound by its decision in closing down the business. The RTC
declared TWS as the true lessee and thus, entitled to terminate the lease and padlock the premises. Mrs. Sevilla
was also an employee and as such she was bound by acts of employer. The CA affirmed the decision. Hence, the
appeal.

Issue:

1) Whether or not there is employer-employee relationship between TWS and Mrs. Sevilla.

Held:

1) None, there is no employer-employee relationship between TWS and Mrs. Sevilla. There is no uniform test to
determine employer-employee relationship but the courts use the control test and added existing economic
conditions prevailing between parties as standard to establish such relation. By the control test, Mrs. Sevilla was
not subject to control by TWS. Though she is bound with it concerning payment of rentals, it does not make her
an employee. A true employee cannot be made to part with his own money in pursuance of his employer’s
business or assume liability therefore. Further, she pursued the business by her own gifts and capabilities and not
through the means given to her by TWS. She was not even in company’s payroll. More so, titles, such as being
branch manager, are weak indicators of employer-employee relationship. On the other hand, there is no joint
venture or partnership between them as claimed by Mrs. Sevilla. It was rather a contract of agency. However,
agency cannot be revoked at will as it is created for mutual interest of principal and agent. Her interest consisted
on the power of management delegated to her and her solidary liability in payment of rentals as per contract of
lease and so, she has acquired personal stake in the business and the equipment pertaining thereto. She cannot
be summarily ousted from possession. Though Mrs. Sevilla worked for the rival firm, it is not for TWS to punish
her disloyalty by means contrary to elementary norms of justice and fair play. For the unwarranted revocation of
the contract of agency, the Court ruled that Mrs. Sevilla was entitled to claim for damages.