Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 73199 October 26, 1988

DR. RENATO SARA and/or ROMEO ARANA petitioners,

vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

Amparo & Barcelona Law Offices for petitioners.

The Solicitor General for public respondent. Nicanor A. Magno for private respondent.

FERNAN, C.J.:

Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No. LRD-ROXII-006-82, a claim for unpaid
commissions and reimbursement of certain sums of money filed by herein private respondent Cerila Agarrado against herein petitioners Dr.
Renato Sara and Romeo Arabia.

Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara She quit her job in 1973. Four years later,
petitioners Dr. Sara and Romeo Arabia, being owners of a rice mill and having begun to engage in the buy and sell of palay and rice, entered
into a verbal agreement with private respondent Agarrado whereby it was agreed that the latter would be paid P2.00 commission per sack
of milled rice sold as well as a commission of 10% per kilo of palay purchased. It was further agreed that private respondent would spend
her own money for the undertaking, but to enable her to carry out the agreement more effectively, she was authorized to borrow money
from other persons, as in fact she did, subject to reimbursement by petitioners. 1

In 1982, private respondent filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, a
complaint against petitioners for unpaid commission of P4,598.00 on milled rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00
which she had borrowed from various persons and Pl,749.00 of her own money which petitioners allegedly had not reimbursed (LRD-ROXII-
006- 82).

By way of defense, petitioners raised the issue of lack of jurisdiction on the part of the Labor Arbiter to take cognizance of the case, there
being no employer-employee relationship between the parties. They averred that the claim for alleged unpaid commission and certain sums
of money is governed by the law on agency under the Civil Code and hence a purely civil obligation cognizable by the regular courts.

On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in favor of private respondent ordering petitioners to pay all the
claims amounting to P26,397.80. 2

Petitioner appealed the decision to the NLRC, which in a resolution dated June 25, 1986 affirmed the Labor Arbiter's decision and dismissed
the appeal. 3

Their motion for reconsideration having been denied, petitioners took the present recourse, maintaining lack of jurisdiction on the part of
the Labor Tribunal as well as grave abuse of discretion on its part in finding them liable to private respondent.

In his comment, the Solicitor General agreed with petitioners that there was no employer-employee relationship between the parties and
that by reason thereof the Labor Arbiter had no jurisdiction over the case. The Solicitor General's comment was accompanied by a
manifestation and motion stating that he was filing the comment on his own behalf and that the public respondent NLRC had been informed
about his contrary stand. 4

The primordial issue in this case is whether an employer-employee relationship exists between petitioners and private respondent as to
warrant cognizance by the Labor Arbiter of LRD-ROXII-006-82.

To determine the existence of an employer-employee relationship, this Court in a long line of decisions 5 has invariably 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 to
control the employee's conduct.
1
In the case at bar, we find that although there was a selection and engagement of private respondent in 1977, the verbal agreement between
the parties negated the existence of the other requisites.

As to the payment of wages, the verbal agreement entered into by the parties stipulated that private respondent would be paid a commission
of P2.00 per sack of milled rice sold as well as a 10% commission on palay purchase. The arrangement thus was explicitly on a commission
basis dependent on the volume of sale or purchase. Private respondent was not guaranteed any minimum compensation nor was she
allowed any drawing account or advance of any kind against unearned commissions. Her right to compensation depended upon and was
measured by the tangible results she produced the quantity of rice sold and the quantity of palay purchased.

The power to terminate the relationship was mutually vested upon the parties. Either may terminate the business arrangement at will, with
or without cause.

Finally, noticeably absent from the agreement between the parties is the element of control. Among the four (4) requisites, control is deemed
the most important that the other requisites may even be disregarded. 6 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. 7 Otherwise, no such relationship exists.

We observe that the means and methods of purchasing and selling rice or palay by private respondent were totally independent of
petitioners' control. As established by the NLRC:

... Sometime in June 1977, respondent re-engaged the services of herein complainant to sell milled rice to the customers of
the former, as well as to buy palay for and in behalf of Dr. Renato Sara, with the verbal agreement that to carry out
effectively the said task, complainant was duly authorized by respondent, Dr. Sara to spend her own money, if necessary
but subject to reimbursment and if that would not be sufficient, to borrow money from other sources with further
understanding that Dr. Sala will repay the ill thru the complainant; ... ([Emphasis supplied], p. 21, Rollo)

Note that private respondent was never given capital by his supposed employer but relied on her own resources and if insufficient, she
borrowed money from others. Petitioners did not supply private respondent with tools and appliances needed to enable her to carry her
undertaking, except to authorize her to borrow money from others, subject to reimbursement.

The absence of control is made more evident by the fact that private respondent was not even obliged to sell the palay she purchased to
petitioners. She was at liberty to sell the palay to any trader offering higher buying rates. She was thus free to sell it to anybody whom she
pleased.

Moreover, private respondent worked for petitioners at her own pleasure and was not subject to definite hours or conditions of work. She
could even delegate the task of buying and selling to others, if she so desired, or simultaneously engaged in other means of livelihood while
selling and purchasing rice or palay.

Under the conditions set forth in their agreement, private respondent was an independent contractor, who exercising independent
employment, contracted to do a piece of work according to her own method and without being subject to the control of her employer except
as to the result of her work. She was paid for the result of her labor, unlike an employee who is paid for the labor he performs. 8

The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt that private respondent was not an employee
of petitioners but was rather an independent contractor.

The Labor Tribunal's jurisdiction being primarily predicated upon the existence of an employer-employee relationship between the parties,
the absence of such element, as in the case at bar, removes the controversy from the scope of its limited jurisdiction.

WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-ROXII-006-82 of the National Labor Relations Commission is
hereby ordered DISMISSED for lack of jurisdiction.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. L-32245 May 25, 1979

2
 DY KEH BENG, Petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., Respondents.

A. M Sikat for petitioner.chanrobles virtual law library

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No.
3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy
Keh Beng guilty of the unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully reinstated
without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law. 1chanrobles virtual law
library

Now, Dy Keh Beng assigns the following errors 2as having been committed by the Court of Industrial Relations: chanrobles virtual law library

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC)
A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.

IV

RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN
THE COMPLAINT.

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR
RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows: chanrobles virtual law library

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of
Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano
and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial
Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano and Tudla In his
answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not his employee because the latter came to the
establishment only when there was work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover,
Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido
Onayan.chanroblesvirtualawlibrary chanrobles virtual law library

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto  by the Court of Industrial Relations. An
employee-employer relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was
admitted to have worked on piece basis.  4 The issue therefore centered on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .chanroblesvirtualawlibrarychanrobles virtual law library

3
According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy
Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was
continuous although their services were compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8)
workers and never less than five (5); including the complainants, and that complainants used to receive ?5.00 a day. sometimes
less. 6chanrobles virtual law library

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment; chanrobles virtual law library

(2) Solano had to leave as soon as he was through with the chanrobles virtual law library

(3) order given him by Dy; chanrobles virtual law library

(4) When there were no orders needing his services there was nothing for him to do; chanrobles virtual law library

(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him
for these orders; and chanrobles virtual law library

(6) Solano's work with Dy's establishment was not continuous. , 7chanrobles virtual law library

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875,
where an employee 8 is referred to as

shall include any employee and shag not be limited to the employee of a particular employer unless the Act explicitly states otherwise and
shall include any individual whose work has ceased as a consequence of, or in connection with any current labor dispute or because of any
unfair labor practice and who has not obtained any other substantially equivalent and regular employment.

while an employer 9

includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than
when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case
of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to
render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in the
performance of the work and to direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and
employee, because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's
work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.chanroblesvirtualawlibrary chanrobles virtual law library

While this Court upholds the control test 11 under which an employer-employee relationship exists "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, " it finds no
merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right
to control the manner of doing the work, not the actual exercise of the right. 12Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13it is natural to expect that those working under
Dy would have to observe, among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by
Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's
establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he
employed.chanroblesvirtualawlibrary chanrobles virtual law library

As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the
essence of the relation. Units of time ... and units of work are in establishments like respondent (sic) just yardsticks whereby to determine
rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.

4
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunrise
Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that judicial notice of the fact that the so-called "pakyaw"
system mentioned in this case as generally practiced in our country, is, in fact, a labor contract -between employers and employees, between
capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion
when it concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act
875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court,
if supported by substantial evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not
reverse the findings of fact of the Court of Industrial Relations when they were supported by substantial evidence. 14 chanrobles virtual law
library

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15and that
the decision being appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally
reinstated, it is fitting to apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not
terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to three years, "subject to
deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where
there are aggravating circumstances. 17 Considering there are no such circumstances in this case, there is no reason why the Court should not
apply the abovementioned formula in this instance.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three
years without qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of
dismissal. The execution of this award is entrusted to the National Labor Relations Commission. Costs against
petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.chanroblesvirtualawlibrary  chanrobles virtual law library

Fernandez, J., took no part.

G.R. No. L-12598             January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations
in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and
exclusive bargaining agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not
appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita
Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of.

In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered
legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly
organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said
companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music
and other incidental music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the
musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate
labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the
sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter
denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by
independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result already

5
adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita
Pictures, Inc., filed these petitions for review for certiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the
LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employer-employee relationship
between the parties is contested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as,
after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for
certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented
that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees
represent a majority of the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of
Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for the same is not
a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact finding character, in
which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the
matter of their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure
the fair and free choice of bargaining representatives by employees. 1 Moreover, it is alleged in the petition that the Guild it a duly registered
legitimate labor organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the film
companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it
appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really
contested. Besides, the substantial difference between the work performed by said musicians and that of other persons who participate in
the production of a film, and the peculiar circumstances under which the services of that former are engaged and rendered, suffice to show
that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in deciding upon an
appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its
judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B.
[C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film
companies. It does not intend to represent the other employees therein. Hence, it was not necessary for the Guild to allege that its members
constitute a majority of all the employees of said film companies, including those who are not musicians. The real issue in these cases, is
whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably
chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally
between the producer and musical director for the cost of furnishing such musical background. Thus, the musical director may
compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding
compensation of the musicians under him.

When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'),
which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the truck
of the film company. The film company provides the studio for the use of the musicians for that particular recording. The musicians
are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner
time.

During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the
musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera as director, he
supervises the performance of all the action, including the musicians who appear in the scenes so that in the actual performance to
be shown on the screen, the musical director's intervention has stopped.

And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of
the company assist in the operation. Hence, the work of the musicians is an integral part of the entire motion picture since they not
only furnish the music but are also called upon to appear in the finished picture.

The question to be determined next is what legal relationship exits between the musicians and the company in the light of the
foregoing facts.

We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially
the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on
the point-at-issue is called for.

6
Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking
Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner
Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other forms of
industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to
bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the
purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting
the exercise of full freedom of association and designation of representatives of their own choosing, for the purpose of negotiating
the terms and conditions of their employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional
legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship, with infinite and subtle
variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large
numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in
controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former,
when acting alone may be as helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary
and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain
types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the containers
designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into common
controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times
brought into an economic relationship with 'employers', who are not their 'employers'. In this light, the language of the Act's
definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather
than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts
involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we
eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an
agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining.

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all
employees in the conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB
776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their
right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace and the
advancement of the general welfare, and the best interests of employers and employees by the settlement of issues respecting
terms and conditions of employment through the process of collective bargaining between employers and representatives of their
employees.

The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual
worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to
establish the status of the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio
substantially under the direction and control of the company.

In other words, to determine whether a person who performs work for another is the latter's employee or an independent
contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employer-employee relationship
exist where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also
the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are employees' within the meaning of Section
2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient authority over the
persons working under their immediate supervision to warrant their exclusion from the unit.  We shall include in the unit
the employees working under the supervision of the independent contractors, but exclude the contractors.'
7
 'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act
where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John Hancock
Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of
the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to
musicians; and (4) by supervising and directing in detail, through the motion picture director, the performance of the musicians
before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts
established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test,
the members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of
collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby
declared as the sole collective bargaining representative for all the musicians employed by the film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the
spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the
contention of the employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of
the film companies in these cases. The third parties with whom the management and the workers contracted in the Maligaya cases were
agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to
steamship companies, with permits  to engage in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the
musical directors with whom the film companies claim to have dealt with had nothing comparable to the business standing of said
watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor in Caro vs.
Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the liability of an employer
under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of the Guild to represent the
musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506,
5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956),
and  Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of
the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers,
under the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, but employees of said company, because
"the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect  limits
or controls the means or details by which said workers are to accomplish their services" — as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's
Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of
the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of
the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and
margarine, it was held that the connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was
an independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the
compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of
herein petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not
contested by herein petitioners-appellants — "the work of the musicians is an integral part of the entire motion picture." Indeed, one can
hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held
bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such in
one of said buildings even though his services had been allegedly engaged by a third party who had directly contracted with said owner. In
other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as
music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the
interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor
law was sought to be construed in that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of
which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act
(Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the
Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra,
consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces
the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details — such are left to
the leader's discretion."
8
This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in
the present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the
musicians to work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of
work. The film companies, not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at
dinner time.

What is more — in the language of the order appealed from — "during the recording sessions, the motion picture director who is
an  employee of the company" — not the musical director — "supervises the recording of the musicians and tells them what to do in every
detail". The motion picture director — not the musical director — "solely directs and performance of the musicians before the camera". The
motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual
performance to be shown in the screen,  the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie
director tells the musical director what to do; tells the music to be cut or tells additional music in this part or he eliminates the entire music
he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director "directly controls the
activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like
that.".

It is well settled that "an employer-employee relationship exists . . .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 . . . ." (Alabama Highway Express Co., Express
Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber
Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship
was held to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor, who
had, and exercise, the power to hire and fire said workers. The aforementioned control over the means to be used" in reading the desired end
is possessed and exercised by the film companies over the musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur.
Gutierrez David, J., took no part.

G.R. No. 111870 June 30, 1994

AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

Jerry D. Banares for petitioner.

Perdrelito Q. Aquino for private respondent.

CRUZ, J.:

Private respondent Luis S. Salas was appointed "notarial and legal counsel" for petitioner Air Material Wings Savings and Loan Association
(AMWSLAI) in 1980. The appointment was renewed for three years in an implementing order dated January 23, 1987, reading as follows:

SUBJECT: Implementing Order on the Reappointment of the Legal Officer

TO: ATTY. LUIS S. SALAS

Per approval of the Board  en banc in a regular meeting held on January 21, 1987, you are hereby reappointed as Notarial
and Legal Counsel of this association for a term of three (3) years effective March 1, 1987, unless sooner terminated from
office for cause or as may be deemed necessary by the Board for the interest and protection of the association.

Aside from notarization of loan & other legal documents, your duties and responsibilities are hereby enumerated in the
attached sheet, per Articles IX, Section 1-d of the by-laws and those approved by the Board en banc.

Your monthly compensation/retainer's fee remains the same.

9
 This shall form part of your 201 file.

BY AUTHORITY OF THE BOARD:

LUVIN S. MANAY
President & Chief of the Board

On January 9, 1990, the petitioner issued another order reminding Salas of the approaching termination of his legal services under their
contract. This prompted Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick leave benefits, cost of living
allowances, refund of SSS premiums, moral and exemplary damages, payment of notarial services rendered from February 1, 1980 to March
2, 1990, and attorney's fees.

Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that there was no employer-employee relationship
between it and Salas and that his monetary claims properly fell within the jurisdiction of the regular courts. Salas opposed the motion and
presented documentary evidence to show that he was indeed an employee of AMWSLAI.

The motion was denied and both parties were required to submit their position papers. AMWSLAI filed a motion for reconsideration ad
cautelam, which was also denied. The parties were again ordered to submit their position papers but AMWSLAI did not comply.
Nevertheless, most of Salas' claims were dismissed by the labor arbiter in his decision dated November 21, 1991. 1

It was there held that Salas was not illegally dismissed and so not entitled to collect separation benefits. His claims for vacation leave, sick
leave, medical and dental allowances and refund of SSS premiums were rejected on the ground that he was a managerial employee. He was
also denied moral and exemplary damages for lack of evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his
notarial fees from 1980 up to 1986 because the claim therefor had already prescribed. However, the petitioner was ordered to pay Salas his
notarial fees from 1987 up to March 2, 1990, and attorney's fee equivalent to 10% of the judgment award.

On appeal, the decision was affirmed in toto by the respondent Commission, prompting the petitioner to seek relief in this Court. 2

The threshold issue in this case is whether or not Salas can be considered an employee of the petitioner company.

We have held in a long line of decisions that the elements of an employer-employee relationship are: (1) selection and engagement of the
employee; (2) payment of wages; (3) power of dismissal; and (4) employer's own power to control employee's conduct. 3

The existence of such a relationship is essentially a factual question. The findings of the NLRC on this matter are accorded great respect and
even finality when the same are supported by substantial evidence. 4

The terms and conditions set out in the letter-contract entered into by the parties on January 23, 1987, clearly show that Salas was an
employee of the petitioner. His selection as the company counsel was done by the board of directors in one of its regular meetings. The
petitioner paid him a monthly compensation/retainer's fee for his services. Though his appointment was for a fixed term of three years, the
petitioner reserved its power of dismissal for cause or as it might deem necessary for its interest and protection. No less importantly,
AMWSLAI also exercised its power of control over Salas by defining his duties and functions as its legal counsel, to wit:

1. To act on all legal matters pertinent to his Office.

2. To seek remedies to effect collection of overdue accounts of members without prejudice to initiating court action to
protect the interest of the association.

3. To defend by all means all suit against the interest of the Association. 5

In the earlier case of Hydro Resources Contractors Corp. v.

Pagalilauan, 6 this Court observed that:

A lawyer, like any other professional, may very well be an employee of a private corporation or even of the government. It
is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them regular salaries, rank them
in its table of organization, and otherwise treat them like its other officers and employees. At the same time, it may also
contract with a law firm to act as outside counsel on a retainer basis. The two classes of lawyers often work closely
together but one group is made up of employees while the other is not. A similar arrangement may exist as to doctors,
nurses, dentists, public relations practitioners and other professionals.

10
We hold, therefore, that the public respondent committed no grave abuse of discretion in ruling that an employer-employee relationship
existed between the petitioner and the private respondent.

We must disagree with the NLRC, however, on Salas' claims for notarial fees.

The petitioner contends that the public respondents are not empowered to adjudicate claims for notarial fees. On the other hand, the
Solicitor General believes that the NLRC acted correctly when it took cognizance of the claim because it arose out of Salas' employment
contract with the petitioner which assigned him the duty to notarize loan agreements and other legal documents. Moreover, Section 9 of
Rule 141 of the Rules of Court does not restrict or prevent the labor arbiter and the NLRC from determining claims for notarial fees.

Labor arbiters have the original and exclusive jurisdiction over money claims of workers when such claims have some reasonable
connection with the employer-employee relationship. The money claims of workers referred to in paragraph 3 of Article 217 of the Labor
Code are those arising out of or in connection with the employer-employee relationship or some aspect or incident of such relationship.

Salas' claim for notarial fees is based on his employment as a notarial officer of the petitioner and thus comes under the jurisdiction of the
labor arbiter.

The public respondents agreed that Salas was entitled to collect notarial fees from 1987 to 1990 by virtue of his having been assigned as
notarial officer. We feel, however, that there is no substantial evidence to support this finding.

The letter-contract of January 23, 1987, does not contain any stipulation for the separate payment of notarial fees to Salas in addition to his
basic salary. On the contrary, it would appear that his notarial services were part of his regular functions and were thus already covered by
his monthly compensation. It is true that the notarial fees were paid by members-borrowers of the petitioner for its own account and not of
Salas. However, this is not a sufficient basis for his claim to such fees in the absence of any agreement to that effect.

ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the modification that the award of notarial fees and attorney's fees is
disallowed. It is so ordered.

Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

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

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

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

11
 (1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf of
the same caddies of the Manila Golf and Country Club, the case being titled "Philippine Technical, Clerical, Commercial
Association vs. Manila Golf and Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director
Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

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

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

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

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

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

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

The appeal ascribed two errors to the SSC:

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

12
 (2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations,
which "has not only become final but (has been) executed or (become) res adjudicata." 7

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

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

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

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

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

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

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

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

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would operate in bar of a
subsequent action between the same parties for the same cause, be adversarial, or contentious, "one having opposing parties; (is) contested,
as distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to the other party and
afforded the latter an opportunity to contest it" 14 and a certification case is not such a proceeding, as this Court already ruled:
13
 A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere
investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court
enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining
representatives by the employees.15

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

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

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

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

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

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

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

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his occupation in the
premises of petitioner. He may work with any other golf club or he may seek employment a caddy or otherwise with any
entity or individual without restriction by petitioner. . . .

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

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

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

14
SO ORDERED.

Regalado and Mendoza, JJ., concur.

Padilla, J., is on leave.

Puno, J., took no part.

G.R. No. L-16600            December 27, 1961

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,

vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.

Luis G. Hofileña for petitioner.

J. T. de Leon for respondents.

PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora Fabrigar (common-law wife) and their
children, filed a claim for compensation with the Workmen's Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar,
et al., Claimants, vs. Iloilo Chinese Commercial School, Respondent." In this claim, it was alleged that the cause of death was "  pulmonary
tuberculosis contracted  during and as a result of his employment as janitor." The Hearing Officer of the WCC denied the claim and dismissed
the case, finding that the claimant failed to prove the casual effect of employment and death; nothing was shown that the disease was
contracted in line of duty; that whatever evidence claimant presented about the cause of death was only a mere suggestion that
progressively developed from tuberculosis with heart trouble to a sudden fatal turn, ending up for the cause of "beriberi adult" at the time of
death, as per certification of Sanitary Inspector Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation Commission which, on November 12, 1959,
rendered judgment reversing the decision of its Hearing Officer, making the following findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of the respondent Iloilo Chinese
Commercial School, his work consisting of sweeping and scrubbing the floors, cleaning the classrooms and the school premises, and other
janitorial chores; on March 11, 1956, preparatory to graduation day, he carried desks and chairs from the classrooms to the auditorium, set
the curtains and worked harder and faster than usual; that although he felt shortness of breath and did not feel very well that day, he
continued working at the request of the overseer of respondent, that on the following day he reported for work, but on March 13, he spat
blood and stopped working; that from April 29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico Villareal "for far advanced
pulmonary tuberculosis and for heart disease"; and that previous to said treatment, he was attended by Dr. Jaranilla for pulmonary
tuberculosis. The Commission concluded that the short period of intervention between his last day of work (March 13, 1956) when he spat
blood and his death on June 28, 1956, due to pulmonary tuberculosis, indicated that he had been suffering from such disease even during the
time he was employed by the respondent and considering the strenuous work he performed, his employment as janitor aggravated his pre-
existing illness; that although here is a discrepancy between the cause of death "beriberi adult," as appearing in the death Certificate and the
testimony of Dr. Villareal, the latter deserves more credence, because the information (cause of death) was given by the sanitary inspector
who did not, in any way, examine the deceased before or after his death. The Commission, therefore, ordered the respondent Chinese
Commercial School, Inc., in said case —

1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito, Gloria, Rosita and Ernesto, all
surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as Death benefits;
and

2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428, as amended.

The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had been denied, petitioner
alleging that the Commission erred:

1. In disregarding completely the evidentiary value of the death certificate of the attending physician which was presented as
evidence by both claimants and respondent (Exhibits C & 4) to prove the cause of death;

15
 2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was contracted during and as a result of the
nature of his employment;

3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and

4. In not holding that the herein petitioner is exempt from the scope of the Workmen's Compensation Law.lawphil.net

Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in its favor. Considering the doctrine
that the Commission, like the Court of Industrial Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases,
but by the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188;
Secs. 43 & 46 Rep. Act No. 772, W.C. Act), petitioner's pretension is without merit. Substantial evidence supports the decision of the
Commission. While seemingly there exists an inconsistency in the cause of death, as appearing in the death certificate by Dr. Labitoria and in
Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary Inspector did not examine the deceased before and after his
death. "Undoubtedly," says the Commission, "the information that he died of beriberi adult, as appearing in the death certificate was given
because it appears that the deceased had also edema of the extremities (swollen legs)." The evidence of record sustains the following
findings of the Commission, is Fabrigar's cause of death to wit —

The short period of time intervening between his last day of work (March 13, 1956) when he spat blood and his death June 28,
1956 due to pulmonary tuberculosis indicates that he had been suffering from the disease even during the time that he was
employed by the respondent. Considering the strenuous work that he performed while in the service of the respondents and the
unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal
and legal working hours, we find that his employment aggravated his pre-existing illness and brought about his death. Moreover,
our conclusion finds support in the fact that immediately preceding his last day of work with the respondent, he had an unusually
hard day lifting desks and other furnitures and assisting in the preparations for the graduation exercises of the school. Considering
also his complaints during that day (March 11), among which was "shortness of breath", we may also say that his work affected an
already existing heart ailment.

We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the present appeal by certiorari.

It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese Chamber of Commerce which was the
one that furnished the janitor service in the premises of its buildings, including the part thereof occupied by the petitioner; that the Chamber
of Commerce paid the salaries of janitors, including the deceased; that the petitioner could not afford to pay rentals of its premises and
janitor due to limited finances depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and
Chinese nationals who helped the school. In other words, it is pretended that the deceased was not an employee of the school but of the
Chinese Chamber of Commerce which should be the one responsible for the compensation of the deceased. On one hand, according to the
Commission, there is substantial proof to the effect that Fabrigar was employed by and rendered service for the petitioner and was an
employee within the purview of the Workmen's Compensation Law. On the other hand, the most important test of employer-employee
relation is the power to control the employee's conduct. The records disclose that the person in charge (encargado) of the respondent school
supervised the deceased in his work and had control over the manner he performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry within the meaning of the Workmen's
Compensation Law. Consequently, it is argued, it is exempt from the scope of the same law. Considering that this factual question has not
been properly put in issue before the Commission, it may not now be entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et
al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision of the
Commission does not show that the matter was taken up. We are at a loss to state whether the issue was raised in the motion for
reconsideration filed with the Commission, because the said motion is not found in the record before us. And the resolution to the motion for
reconsideration does not touch this question.

IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from is affirmed, with costs against the
herein petitioner.

G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge of the Regional Trial Court, Branch
XIV, Roxas City and POTENCIANO KAPUNAN, SR., respondents.

Bedona & Bedona Law Office for petitioner.

16
Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision rendered by this Court on October 16,
1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an
employer-employee relationship between the petitioner and its co-defendant Funtecha. The Court ruled that the petitioner is not liable for
the injuries caused by Funtecha on the grounds that the latter was not an authorized driver for whose acts the petitioner shall be directly
and primarily answerable, and that Funtecha was merely a working scholar who, under Section 14, Rule X, Book III of the Rules and
Regulations Implementing the Labor Code is not considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the application of Article 2180 of the Civil Code
since Funtecha is no doubt an employee of the petitioner. The private respondents maintain that under Article 2180 an injured party shall
have recourse against the servant as well as the petitioner for whom, at the time of the incident, the servant was performing an act in
furtherance of the interest and for the benefit of the petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride
without the knowledge of the school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the Court reconsiders its decision. We
reinstate the Court of Appeals' decision penned by the late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and
Serafin E. Camilon. Applying Civil Code provisions, the appellate court affirmed the trial court decision which ordered the payment of the
P20,000.00 liability in the Zenith Insurance Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and
P3,000.00 attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner Filamer. He was, in relation to the
school, an employee even if he was assigned to clean the school premises for only two (2) hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the vehicle while the latter was
on his way home one late afternoon. It is significant to note that the place where Allan lives is also the house of his father, the school
president, Agustin Masa. Moreover, it is also the house where Funtecha was allowed free board while he was a student of Filamer Christian
Institute.

Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp dangerous curb, and viewing that the
road was clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that
they had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if something had bumped against the vehicle, but
they did not stop to check. Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the
direction against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p. 79) At the
time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school. He further said that there was no specific
time for him to be off-duty and that after driving the students home at 5:00 in the afternoon, he still had to go back to school and then drive
home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is an act in furtherance of the
interest of the petitioner-school. Allan's job demands that he drive home the school jeep so he can use it to fetch students in the morning of
the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep was routinely driven home for the said
purpose. Moreover, it is not improbable that the school president also had knowledge of Funtecha's possession of a student driver's license
and his desire to undergo driving lessons during the time that he was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely was not having a joy ride.
Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his own" but ultimately, for the service for which the jeep was
intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932]; See also Association of Baptists
for World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude that the
act of Funtecha in taking over the steering wheel was one done for and in behalf of his employer for which act the petitioner-school cannot
deny any responsibility by arguing that it was done beyond the scope of his janitorial duties. The clause "within the scope of their assigned
tasks" for purposes of raising the presumption of liability of an employer, includes any act done by an employee, in furtherance of the
interests of the employer or for the account of the employer at the time of the infliction of the injury or damage. (Manuel Casada, 190 Va 906,
59 SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle derived some benefit from the act, the existence of a presumptive
liability of the employer is determined by answering the question of whether or not the servant was at the time of the accident performing
17
any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937
[1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors its defense, was promulgated by the
Secretary of Labor and Employment only for the purpose of administering and enforcing the provisions of the Labor Code on conditions of
employment. Particularly, Rule X of Book III provides guidelines on the manner by which the powers of the Labor Secretary shall be
exercised; on what records should be kept; maintained and preserved; on payroll; and on the exclusion of working scholars from, and
inclusion of resident physicians in the employment coverage as far as compliance with the substantive labor provisions on working
conditions, rest periods, and wages, is concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The Court, thus, makes the distinction and so
holds that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for damages instituted by an injured person during a
vehicular accident against a working student of a school and against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an alleged employee and an alleged employer. It
invokes a claim brought by one for damages for injury caused by the patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to disregard the primary liability of an employer under Article 2180 of the
Civil Code is misplaced. An implementing rule on labor cannot be used by an employer as a shield to avoid liability under the substantive
provisions of the Civil Code.

There is evidence to show that there exists in the present case an extra-contractual obligation arising from the negligence or reckless
imprudence of a person "whose acts or omissions are imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or
limited control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's position in order that the petitioner
may be held responsible for his grossly negligent act, it being sufficient that the act of driving at the time of the incident was for the benefit of
the petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within the scope of his janitorial duties does not
relieve the petitioner of the burden of rebutting the presumption  juris tantum that there was negligence on its part either in the selection of
a servant or employee, or in the supervision over him. The petitioner has failed to show proof of its having exercised the required diligence
of a good father of a family over its employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the guidance of its employees and the
issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his
employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the performance of any act indispensable to the
business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would prohibit any one of its employees
from taking control over its vehicles if one is not the official driver or prohibiting the driver and son of the Filamer president from
authorizing another employee to drive the school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions or
warned its employees against the use of its vehicles by persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by which Funtecha drove the vehicle.
(Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence of evidence that the petitioner had exercised the diligence of a good
father of a family in the supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of its employees.
(Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989];
Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of
the employer is, under Article 2180, primary and solidary. However, the employer shall have recourse against the negligent employee for
whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant in the civil case for damages. This
is quite understandable considering that as far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who
was the one driving the vehicle and presumably was one authorized by the school to drive. The plaintiff and his heirs should not now be left
to suffer without simultaneous recourse against the petitioner for the consequent injury caused by a janitor doing a driving chore for the
petitioner even for a short while. For the purpose of recovering damages under the prevailing circumstances, it is enough that the plaintiff
and the private respondent heirs were able to establish the existence of employer-employee relationship between Funtecha and petitioner
Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his own but in furtherance of the business of his
employer. A position of responsibility on the part of the petitioner has thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED. The decision of the respondent
appellate court affirming the trial court decision is REINSTATED.
18
SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

G.R. No. 114733 January 2, 1997

AURORA LAND PROJECTS CORP. Doing business under the name "AURORA PLAZA" and TERESITA T. QUAZON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.

HERMOSISIMA, JR., J.:

The question as to whether an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some
businessmen try to avoid the bringing about of an employer-employee relationship in their enterprises because that judicial relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism. 1 In light of
this observation, it behooves this Court to be ever vigilant in Checking the unscrupulous efforts of some of our entrepreneurs, primarily
aimed at maximizing their return on investments at the expense of the lowly workingman.

This petition for certiorari seeks the reversal of the Resolution 2 of public respondent National Labor Relations Commission dated March 16,
1994 affirming with modification the decision of the Labor Arbiter, dated May 25, 1992, finding petitioners liable to pay private respondent
the total amount of P195,624.00 as separation pay and attorney's fees.

The relevant antecedents:

Private respondent Honorio Dagui was hired by Doñ a Aurora Suntay Tanjangco in 1953 to take charge of the maintenance and repair of the
Tanjangco apartments and residential buildings. He was to perform carpentry, plumbing, electrical and masonry work. Upon the death of
Doñ a Aurora Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco Quazon, took over the administration of all the Tanjangco
properties. On June 8, 1991, private respondent Dagui received the shock of his life when Mrs. Quazon suddenly told him: "Wala ka nang
trabaho mula ngayon,"3 on the alleged ground that his work was unsatisfactory. On August 29, 1991, private respondent, who was then
already sixty-two (62) years old, filed a complaint for illegal dismissal with the Labor Arbiter.

On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the decretal portion of which reads:

IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita Tanjangco Quazon are hereby ordered to pay the
complainant the total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDRED TWENTY FOUR PESOS (P195,624.00)
representing complainant's separation pay and the ten (10%) percent attorney's fees within ten (10) days from receipt of this
Decision.

All other issues are dismissed for lack of merit. 4

Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon appealed to the National Labor Relations Commission. The
Commission affirmed, with modification, the Labor Arbiter's decision in a Resolution promulgated on March 16, 1994, in the following
manner:

WHEREFORE, in view of the above considerations, let the appealed decision be as it is hereby AFFIRMED with (the)
MODIFICATION that complainant must be paid separation pay in the amount of P88,920.00 instead of P177,840.00. The award of
attorney's fees is hereby deleted.5

As a last recourse, petitioners filed the instant petition based on grounds not otherwise succinctly and distinctly ascribed, viz:

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
AFFIRMING THE LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITS STATEMENT THAT "WE FAIL TO FIND ANY REASON
OR JUSTIFICATION TO DISAGREE WITH THE LABOR ARBITER IN HIS FINDING THAT HONORIO DAGUI WAS DISMISSED BY THE

19
 RESPONDENT" (p. 7, RESOLUTION), DESPITE — AND WITHOUT EVEN BOTHERING TO CONSIDER — THE GROUNDS STATED IN
PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY MERITORIOUS.

II

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
FINDING THAT COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS MORE SO "FROM 1953 TO 1991" (p. 3, RESOLUTION).

III

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
AWARDING SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SO FOR THE EQUIVALENT OF 38 YEARS OF ALLEGED
SERVICE.

IV

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
HOLDING BOTH PETITIONERS LIABLE FOR SEPARATION PAY.6

It is our impression that the crux of this petition rests on two elemental issues: (1) Whether or not private respondent Honorio Dagui was an
employee of petitioners; and (2) If he were, whether or not he was illegally dismissed.

Petitioners insist that private respondent had never been their employee. Since the establishment of Aurora Plaza, Dagui served therein only
as a job contractor. Dagui had control and supervision of whoever he would take to perform a contracted job. On occasion, Dagui was hired
only as a "tubero" or plumber as the need arises in order to unclog sewerage pipes. Every time his services were needed, he was paid
accordingly. It was understood that his job was limited to the specific undertaking of unclogging the pipes. In effect, petitioners would like us
to believe that private respondent Dagui was an independent contractor, particularly a job contractor, and not an employee of Aurora Plaza.

We are not persuaded.

Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code provides in part:

There is job contracting permissible under the Code if the following conditions are met:

xxx xxx xxx

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7 Ostensibly, and by no stretch of the imagination can Dagui qualify as a
job contractor. No proof was adduced by the petitioners to show that Dagui was merely a job contractor, and it is absurd to expect that
private respondent, with such humble resources, would have substantial capital or investment in the form of tools, equipment, and
machineries, with which to conduct the business of supplying Aurora Plaza with manpower and services for the exclusive purpose of
maintaining the apartment houses owned by the petitioners herein.

The bare allegation of petitioners, without more, that private respondent Dagui is a job contractor has been disbelieved by the Labor Arbiter
and the public respondent NLRC. Dagui, by the findings of both tribunals, was an employee of the petitioners. We are not inclined to set aside
these findings. The issue whether or not an employer-employee relationship exists in a given case is essentially a question of fact. 8 As a rule,
repetitious though it has become to state, this Court does not review supposed errors in the decision of the NLRC which raise factual issues,
because factual findings of agencies exercising quasi-judicial functions [like public respondent NLRC] are accorded not only respect but even
finality, aside from the consideration that this Court is essentially not a trier of facts. 9

However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached by the labor tribunals, to which we fully
concur.

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. 10 It is the so-called "control test," and 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,11 which constitute the most important index of the existence of the employer-employee relationship. Stated otherwise, an
20
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. 12

All these elements are present in the case at bar. Private respondent was hired in 1953 by Doñ a Aurora Suntay Tanjangco (mother of
Teresita Tanjangco-Quazon), who was then the one in charge of the administration of the Tanjangco's various apartments and other
properties. He was employed as a stay-in worker performing carpentry, plumbing, electrical and necessary work (sic) needed in the repairs
of Tanjangco's properties.13 Upon the demise of Doñ a Aurora in 1982, petitioner Teresita Tanjangco-Quazon took over the administration of
these properties and continued to employ the private respondent, until his unceremonious dismissal on June 8, 1991. 14

Dagui was not compensated in terms of profits for his labor or services like an independent contractor. Rather, he was paid on a daily wage
basis at the rate of P180.00.15 Employees are those who are compensated for their labor or services by wages rather than by
profits.16 Clearly, Dagui fits under this classification.

Doñ a Aurora and later her daughter petitioner Teresita Quazon evidently had the power of dismissal for cause over the private respondent. 17

Finally, the records unmistakably show that the most important requisite of control is likewise extant in this case. It should be borne in mind
that the power of control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of duties of the employee; it is enough that the former has a right to wield the power. 18 The
establishment of petitioners is engaged in the leasing of residential and apartment buildings. Naturally, private respondent's work therein as
a maintenance man had to be performed within the premises of herein petitioners. In fact, petitioners do not dispute the fact that Dagui
reports for work from 7:00 o'clock in the morning until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui had
to observe the instructions and specifications given by then Doñ a Aurora and later by Mrs. Teresita Quazon as to how his work had to be
performed. Parenthetically, since the job of a maintenance crew is necessarily done within company premises, it can be inferred that both
Doñ a Aurora and Mrs. Quazon could easily exercise control on private respondent whenever they please.

The employment relationship established, the next question would have to be: What kind of an employee is the private respondent —
regular, casual or probationary?

We find private respondent to be a regular employee, for Article 280 of the Labor Code provides:

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 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 actually exists.

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in which they are employed. 19

Whichever standard is applied, private respondent qualifies as a regular employee. As aptly ruled by the Labor Arbiter:

. . . As owner of many residential and apartment buildings in Metro Manila, the necessity of maintaining and employing a
permanent stay-in worker to perform carpentry, plumbing, electrical and necessary work needed in the repairs of Tanjangco's
properties is readily apparent and is in fact needed. So much so that upon the demise of Doñ a Aurora Tanjangco, respondent's
daughter Teresita Tanjangco-Quazon apparently took over the administration of the properties and continued to employ
complainant until his outright dismissal on June 8, 1991. . . . 20

The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician and mason were directly related to the
business of petitioners as lessors of residential and apartment buildings. Moreover, such a continuing need for his services by herein
petitioners is sufficient evidence of the necessity and indispensability of his services to petitioners' business or trade.

Private respondent Dagui should likewise be considered a regular employee by the mere fact that he rendered service for the Tanjangcos for
more than one year, that is, beginning 1953 until 1982, under Doñ a Aurora; and then from 1982 up to June 8, 1991 under the petitioners, for
a total of twenty-nine (29) and nine (9) years respectively. Owing to private respondent's length of service, he became a regular employee,
by operation of law, one year after he was employed in 1953 and subsequently in 1982. In Baguio Country Club Corp., v. NLRC,21 we decided

21
that it is more in consonance with the intent and spirit of the law to rule that the status of regular employment attaches to the casual
employee on the day immediately after the end of his first year of service. To rule otherwise is to impose a burden on the employee which is
not sanctioned by law. Thus, the law does not provide the qualification that the employee must first be issued a regular appointment or must
first be formally declared as such before he can acquire a regular status.

Petitioners argue, however, that even assuming arguendo that private respondent can be considered an employee, he cannot be classified as
a regular employee. He was merely a project employee whose services were hired only with respect to a specific job and only while the same
exists,22 thus falling under the exception of Article 280, paragraph 1 of the Labor Code. Hence, it is claimed that he is not entitled to the
benefits prayed for and subsequently awarded by the Labor Arbiter as modified by public respondent NLRC.

The circumstances of this case in light of settled case law do not, at all, support this averment. Consonant with a string of cases beginning
with Ochoco v. NLRC,23 followed by Philippine National Construction Corporation v. NLRC,24 Magante v. NLRC,25 and Capitol Industrial
Construction Corporation v. NLRC,26 if truly, private respondent was employed as a "project employee," petitioners should have submitted a
report of termination to the nearest public employment office everytime his employment is terminated due to completion of each project, as
required by Policy Instruction No. 20, which provides:

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any
phase thereof in which they are employed, regardless of the number of project in which they have been employed by a particular
construction company. Moreover, the company is not required to obtain a clearance from the Secretary of Labor in connection with
such termination. What is required of the company is a report to the nearest Public Employment Office for statistical purposes.

Throughout the duration of private respondent's employment as maintenance man, there should have been filed as many reports of
termination as there were projects actually finished, if it were true that private respondent was only a project worker. Failure of the
petitioners to comply with this simple, but nonetheless compulsory, requirement is proof that Dagui is not a project employee. 27

Coming now to the second issue as to whether or not private respondent Dagui was illegally dismissed, we rule in the affirmative.

Jurisprudence abound as to the rule that the twin requirements of due process, substantive and procedural, must be complied with, before a
valid dismissal exists.28 Without which the dismissal becomes void.29

The twin requirements of notice and hearing constitute the essential elements of due process. This simply means that the employer shall
afford the worker ample opportunity to be beard and to defend himself with the assistance of his representative, if he so desires. 30 As held in
the case of Pepsi Cola Bottling Co. v. NLRC:31

The law requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of
employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal
is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him (Section 13, BP
130; Sections, 2-6, Rule XIV, Book V Rules and Regulations Implementing the Labor Code as amended), Failure to comply with the
requirements taints the dismissal with illegality. This procedure is mandatory; in the absence of which, any judgment reached by
management is void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National Service Corporation v. NLRC, 168 SCRA
122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].

These mandatory requirements were undeniably absent in the case at bar. Petitioner Quazon dismissed private respondent on June 8, 1991,
without giving him any written notice informing the worker herein of the cause for his termination. Neither was there any hearing
conducted in order to give Dagui the opportunity to be heard and defend himself. He was simply told: "Wala ka nang trabaho mula ngayon,"
allegedly because of poor workmanship on a previous job. 32 The undignified manner by which private respondent's services were
terminated smacks of absolute denial of the employee's right to due process and betrays petitioner Quazon's utter lack of respect for labor.
Such an attitude indeed deserves condemnation.

The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both the Labor Arbiter and
the NLRC. No backwages were awarded. It must be remembered that backwages and reinstatement are two reliefs that should be given to an
illegally dismissed employee. They are separate and distinct from each other. In the event that reinstatement is no longer possible, as in this
case,33 separation pay is awarded to the employee. The award of separation pay is in lieu of reinstatement and not of backwages. In other
words, an illegally dismissed employee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and (2) backwages.34 Payment of backwages is specifically designed to restore an employee's income that was lost because of his
unjust dismissal.35 On the other hand, payment of separation pay is intended to provide the employee money during the period in which he
will be looking for another employment. 36

Considering, however, that the termination of private respondent Dagui was made on June 8, 1991 or after the effectivity of the amendatory
provision of Republic Act No. 6715 on March 21, 1989, private respondent's backwages should be computed on the basis of said law.

22
It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sans backwages. While as a general
rule, a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the court below, 37 law
and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court's
jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors. 38 In this case, the failure of the Labor Arbiter and
the public respondent NLRC to award backwages to the private respondent, who is legally entitled thereto having been illegally dismissed,
amounts to a "plain error" which we may rectify in this petition, although private respondent Dagui did not bring any appeal regarding the
matter, in the interest of substantial justice. The Supreme Court is clothed with ample authority to review matters, even if they are not
assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. 39 Rules of procedure are
mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be avoided. 40 Thus, substantive rights like the award of backwages resulting
from illegal dismissal must not be prejudiced by a rigid and technical application of the rules. 41

Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the claims of private respondent, she cannot be
made jointly and severally liable with the corporation, notwithstanding the fact that she is the highest ranking officer of the company, since
Aurora Plaza has a separate juridical personality.

We disagree.

In the cases of Maglutac v. National Labor Relations Commission,42 Chua v. National Labor Relations Commission,43 and A.C. Ransom Labor
Union-CCLU v. National Labor Relations Commission  44 we were consistent in holding that the highest and most ranking officer of the
corporation, which in this case is petitioner Teresita Quazon as manager of Aurora Land Projects Corporation, can be held jointly and
severally liable with the corporation for the payment of the unpaid money claims of its employees who were illegally dismissed. In this case,
not only was Teresita Quazon the most ranking officer of Aurora Plaza at the time of the termination of the private respondent, but worse,
she had a direct hand in the private respondent's illegal dismissal. A corporate officer is not personally liable for the money claims of
discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. 45 Here, the failure of
petitioner Quazon to observe the mandatory requirements of due process in terminating the services of Dagui evinced malice and bad faith
on her part, thus making her liable.

Finally, we must address one last point. Petitioners aver that, assuming that private respondent can be considered an employee of Aurora
Plaza, petitioners cannot be held liable for separation pay for the duration of his employment with Doñ a Aurora Tanjangco from 1953 up to
1982. If petitioners should be held liable as employers, their liability for separation pay should only be counted from the time Dagui was
rehired by the petitioners in 1982 as a maintenance man.

We agree.

Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita Quazon, as manager of Aurora Plaza,
continued to employ private respondent. From 1953 up to the death of Doñ a Aurora sometime in 1982, private respondent's claim for
separation pay should have been filed in the testate or intestate proceedings of Doñ a Aurora. This is because the demand for separation pay
covered by the years 1953-1982 is actually a money claim against the estate of Doñ a Aurora, which claim did not survive the death of the old
woman. Thus, it must be filed against her estate in accordance with Section 5, Rule 86 of the Revised Rules of Court, to wit:

Sec. 5. Claims which must be filed under tire 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 for the
last sickness of the decedent, and judgment for money against the 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. . . .

WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent National Labor Relations Commission
dated March 16, 1994 is hereby MODIFIED in that the award of separation pay against the petitioners shall be reckoned from the date
private respondent was re-employed by the petitioners in 1982, until June 8, 1991. In addition to separation pay, full backwages are likewise
awarded to private respondent, inclusive of allowances, and other benefits or their monetary equivalent pursuant to Article 279 46 of the
Labor Code, as amended by Section 34 of Republic Act No. 6715, computed from the time he was dismissed on June 8, 1991 up to the finality
of this decision, without deducting therefrom the earnings derived by private respondent elsewhere during the period of his illegal
dismissal, pursuant to our ruling in Osmalik Bustamante, et al. v. National Labor Relations Commission.47

No costs.

SO ORDERED.

Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

23
 [G.R. No. 73887. December 21, 1989.]

GREAT PACIFIC LIFE ASSURANCE CORPORATION, Petitioner, v. HONORATO JUDICO and NATIONAL LABOR RELATIONS
COMMISSION, Respondents.

G.A. Fortun and Associates for the petitioner.

Corsino B. Soco for Private Respondent.

SYLLABUS

1. LABOR LAW; EMPLOYER-EMPLOYEE RELATIONSHIP; TEST TO DETERMINE EXISTENCE THEREOF. — The test therefore 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.

2. ID.; ID.; PRESENT IN CASE AT BAR; TERMINATION OF EMPLOYEE WITHOUT VALID REASON NOT PROPER. — We can readily see that the
element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite minimum
amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner’s
employment with a fixed weekly wage of P200.00 for thirteen weeks regardless of production. He was assigned a definite place in the office
to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both cases he
was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a promotion to Zone Supervisor with additional supervisor’s allowance, a definite
amount of P110.00 aside from the regular P200.00 weekly "allowance." Furthermore, his contract of services with petitioner is not for a
piece of work nor for a definite period. On the other hand, an ordinary commission insurance agent works at his own volition or at his own
leisure without fear of dismissal from the company and short of committing acts detrimental to the business interest of the company or
against the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic performance or even dead
result does not become a ground for dismissal. Whereas, in private-respondent’s case, the undisputed facts show that he was controlled by
petitioner insurance company not only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal.
Undoubtedly, private respondent, by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to
the protection of the law and could not just be terminated without valid and justifiable cause.

DECISION

PARAS, J.:

Before Us is a Petition for Certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity) dated September
9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering petitioner insurance company, Great
Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private respondent Honorato Judico, an its regular employee as
defined under Art. 281 of the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico’s money
claims.chanrobles.com:cralaw:red

The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm,
before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said complaint prayed for award of money claims
consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages and attorney’s fees.

Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the ground that the
employer-employee relations did not exist between the parties but ordered Grepalife to pay complainant the sum of P1,000.00 by reason of
Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art. 281 of the Labor
Code and declaring the appeal of Grepalife questioning the legality of the payment of P1,000.00 to complainant moot and academic.
Nevertheless, for the purpose of revoking the supersedes bond of said company it ruled that the Labor Arbiter erred in awarding P1,000.00
to complainant in the absence of any legal or factual basis to support its payment.chanrobles.com.ph : virtual law library

Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to wit:chanrob1es virtual
1aw library

I. Whether the relationship between insurance agents and their principal, the insurance company, is that of agent and principal to be
governed by the Insurance Code and the Civil Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.
24
II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code.

III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between insurance agent and the insurance
company, arising from their agency relations.

IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J. Minoria and in ordering the case
remanded to said Labor Arbiter for further proceedings. (p. 159, Rollo).

The crux of these issues boil down to the question of whether or not employer-employee relationship existed between petitioner and
private Respondent.

Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a
debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as "an insurance agent selling/servicing
industrial life plans and policy holders. Industrial life plans are those whose premiums are payable either daily, weekly or monthly and
which are collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line
with the findings of public respondent that as such debit agent, private respondent Judico had definite work assignments including but not
limited to collection of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out
that complainant was initially paid P200.00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage
denominated as sales reserve of his total collections but not lesser than P200.00. Sometime in September 1981, complainant was promoted
to the position of Zone Supervisor and was given additional (supervisor’s) allowance fixed at P110.00 per week. During the third week of
November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of
at least P200.00. Finally on June 28, 1982, complainant was dismissed by way of termination of his agency contract.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph

Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that Judico’s
compensation was not based on any fixed number of hours he was required to devote to the service of petitioner company but rather it was
the production or result of his efforts or his work that was being compensated and that the so-called allowance for the first thirteen weeks
that Judico worked as debit agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal
expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner
contends that Judico’s compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and
premium collections).

Said contentions of petitioner are strongly rejected by private Respondent. He maintains that he received a definite amount as his wage
known as "sales reserve" the failure to maintain the same would bring him back to a beginner’s employment with a fixed weekly wage of
P200.00 regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to
canvassing and making regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which an
anemic performance would mean dismissal. He earned out of his faithful and productive service, a promotion to Zone Supervisor with
additional supervisor’s allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic performance
and not because of the termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not
an insurance agent in the ordinary meaning of the term.chanrobles virtual lawlibrary

That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment Planning Corp. v. SSS, 21
SCRA 294, an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who keep definite
hours and work under the control and supervision of the company; and (2) registered representatives who work on commission basis. The
agents who belong to the second category are not required to report for work at anytime, they do not have to devote their time exclusively to
or work solely for the company since the time and the effort they spend in their work depend entirely upon their own will and initiative;
they are not required to account for their time nor submit a report of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain percentage of their sales. One salient point in the determination of
employer-employee relationship which cannot be easily ignored is the fact that the compensation that these agents on commission received
is not paid by the insurance company but by the investor (or the person insured). After determining the commission earned by an agent on
his sales the agent directly deducts it from the amount he received from the investor or the person insured and turns over to the insurance
company the amount invested after such deduction is made. The test therefore 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.chanrobles virtual lawlibrary

Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on Judico was very much
present. The record shows that petitioner Judico received a definite minimum amount per week as his wage known as "sales reserve"
wherein the failure to maintain the same would bring him back to a beginner’s employment with a fixed weekly wage of P200.00 for thirteen
weeks regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to his
canvassing work he was burdened with the job of collection. In both cases he was required to make regular report to the company regarding
these duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor’s allowance, a definite amount of P110.00 aside from the regular P200.00 weekly
"allowance." Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite period.

On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear of dismissal from
25
the company and short of committing acts detrimental to the business interest of the company or against the latter, whether he produces or
not is of no moment as his salary is based on his production, his anemic performance or even dead result does not become a ground for
dismissal. Whereas, in private-respondent’s case, the undisputed facts show that he was controlled by petitioner insurance company not
only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal. Undoubtedly, private respondent,
by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law and could
not just be terminated without valid and justifiable cause.chanrobles.com:cralaw:red

Premises considered, the appealed the decision is hereby AFFIRMED in toto.

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by
which:

1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance
with the existing rules and regulations" of the Company;

2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the
contract to "constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may
from time to time be promulgated by it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to
him, and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of
soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and
employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations
which the Company may from time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or
from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the
Agent's Manual and in circulars of the Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on
account of ... (explicitly specified causes). ...

Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the
Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any
commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever,
except when the termination is due to disability or death in line of service. As to commission corresponding to any
balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to
it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation
of this contract, involving criminal liability or breach of trust.
26
 ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid
without the prior consent in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to implement his end
of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments
under the first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a
civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment
of his commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the
termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent
contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract.  5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-
employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said
official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at
the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's
fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition
for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract
invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under
the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was
that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an
ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn
from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own
time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular
station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed
most effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents
contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the
critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party
who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which
the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for
insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made
Basiao, in legal contemplation, an employee of the Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan10

... In determining the existence of employer-employee relationship, the following elements are generally considered,
namely: (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 — although the latter is the most important element (35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship
between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an
employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.

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
27
party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect,
not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations
governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. 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.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees
of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,  13 the Court ruled that a person engaged to sell soft drinks for
another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling
expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an
employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System  14 a case almost on all fours with the present one, this Court
held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was
an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on
percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or
registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their
duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any
time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered
their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without
compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or
control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an
independent contractor and not an employee.

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 vs means of
soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever
this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the
length of his relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred
in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the
Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent
Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

G.R. No. 86693 July 2, 1990

28
COSMOPOLITAN FUNERAL HOMES, INC., petitioner,
vs.
NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Castro, Enriquez, Carpio, Guillen & Associates for petitioner.

Castro B. Dorado for private respondent.

GUTIERREZ, JR., J.:

The nature of the work of a "funeraria" supervisor, whether employee or commission agent, is the issue raised in this petition.

Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the services of private respondent Noli Maalat as a "supervisor" to
handle the solicitation of mortuary arrangements, sales and collections. The funeral services which he sold refer to the taking of the corpse,
embalming, casketing, viewing and delivery. The private respondent was paid on a commission basis of 3.5% of the amounts actually
collected and remitted.

On January 15, 1987, respondent Maalat was dismissed by the petitioner for commission of the following violations despite previous
warnings:

(a) Understatement of the reported contract price against the actual contract price charged to and paid by the customers;

(b) Misappropriation of funds or collections by non-remittance of collections and non-issuance of Official Receipt;

(c) Charging customers additional amount and pocketing the same for the cost of medicines, linen, and security services
without issuing Official Receipt;

(d) Non-reporting of some embalming and re-embalming charges and pocketing the same and non-issuance of Official
Receipt;

(e) Engaging in tomb making and inclusion of the price of the tomb in the package price without prior knowledge of the
customers and the company. (At p. 16, Records)

Maalat filed a complaint for illegal dismissal and non-payment of commissions.

On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho rendered a decision declaring Maalat's dismissal illegal and
ordering the petitioner to pay separation pay, commission, interests and attorney's fee in the total amount of P205,571.52.

In an appeal from the decision, the National Labor Relations Commission (NLRC), on May 31, 1988, reversed the Arbiter's action and
rendered a new decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the decision dated November 27, 1987, is hereby SET ASIDE  and VACATED and a New
One ENTERED, ordering as follows:

1. Judgment is hereby rendered declaring the dismissal of complainant Noli Maalat by respondent-appellant as justified
and with lawful cause. By way of equitable relief and in the interest of social and compassionate justice, We hereby order
and direct respondent Cosmopolitan Funeral Homes, Inc. to pay complainant Maalat his separation pay equivalent to one-
half (1/2%) month average income for every year of service to appellant, computed on his last year of service
immediately preceding his separation from respondent, subject to allowable set-offs and deductions of the counter-claims
of respondent company, after due notice and hearing.

2. The claims for accrued commissions by complainant may be admitted, subject to proofs thereof, and allowable set-offs
and deductions credited to the account of respondent-appellant by way of counterclaims, after due notice and hearing.

3. All the evidence adduced by the parties are hereby admitted, subject to rebuttal and/or controvertion by either party
during the hearing and the hearings hereafter.

29
 4. The Attorney's fee in favor of complainant's counsel is hereby fixed at two (2%) percent, assessable over whatever final
money award complainant may be entitled on the aggregate sums thereof, after proper hearing on the same.

All other claims and counter-claims are hereby dismissed for lack of merit, except those specified above.

Finally, this case is remanded to the Regional Arbitration Branch of origin for further proceedings in accordance with the
above judgment. No findings as to costs. (At pp. 66-67, Rollo)

The petitioner's motion for reconsideration was denied, hence, this petition for review before this Court.

The issues raised in this petition are:

I. Whether or not the NLRC erred in ruling that an employment relationship existed between the parties; and

II. Whether or not there was equitable basis for the award of 1/2 month separation pay for every year of service.

In determining whether a person who performs work for another is the latter's employee or an independent contractor, the prevailing test is
the "right of control" test. Under this test, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

The petitioner argues that Maalat was never its employee for he was only a commission agent whose work was not subject to its control.
Citing Investment Planning Corporation of the Philippines v. Social Security System (21 SCRA 924 [1967]), the petitioner states that the work
of its agents approximates that of an independent contractor since the agent is not under control by the latter with respect to the means and
methods employed in the performance of the work, but only as to the results.

The NLRC, after its perusal of the facts and evidence on record, stated that there exists an employment relationship between the parties. The
petitioner has failed to overcome this factual finding.

The fact that the petitioner imposed and applied its rule prohibiting superiors from engaging in other funeral business which it considered
inimical to company interests proves that it had the right of control and actually exercised its control over the private respondent. In other
words, Maalat worked exclusively for the petitioner.

Moreover, the private respondent was prohibited from engaging in part-time embalming business outside of the company and a violation
thereof was cause for dismissal. Incurring absences without leave was likewise subject to disciplinary action: a reprimand for the first
offense, one week suspension for the second offense, and dismissal for the third offense.

The petitioner admits that these prohibitive rules bound the private respondent but states that these rules have no bearing on the means
and methods ordinarily required of a supervisor. The overall picture is one of employment. The petitioner failed to prove that the contract
with private respondent was but a mere agency, which indicates that a "supervisor" is free to accomplish his work on his own terms and may
engage in other means of livelihood.

In Investment Planning Corporation, supra, cited by the petitioner, the majority of the "commission agents" are regularly employed
elsewhere. Such a circumstance is absent in Maalat's case. Moreover, the private respondent's job description states that ". . . he attends to
the needs of the clientele and arranges the kind of casket and funeral services the customers would like to avail themselves of" and indicates
that he must always be on the job or at least most of time.

Likewise, the private respondent was not allowed to issue his own receipts, nor was he allowed to directly deduct his commission as truly
independent salesmen practice.

Worthy of note too are two other company rules which provide that "negotiation and making of contract with customers shall be done inside
the office" and "signing of contract should be made immediately before the cadaver or deceased is place in the casket." (Annex 10-B,
Petitioner's Position Paper, Records) Said rules belie the petitioner's stand that it does not have control over the means and methods by
which the work is accomplished. The control test has been satisfied. (Social Security System v. Court of Appeals, 156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported private respondent to the Social Security System as a covered
employee adds strength to the conclusion that Maalat is an employee.

30
There is no reversible error in the findings of facts by the NLRC which are supported by substantial evidence and which we, therefore, do not
disturb on appeal.

The payment of compensation by way of commission does not militate against the conclusion that private respondent was an employee.
Under Article 97 of the Labor Code, "wage" shall mean "the renumeration of earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, pace or commission basis . . .".

The non-observance of regular office hours does not sufficiently show that Maalat is a "supervisor on commission basis" nor does the same
indicate that he is an independent salesman. As a supervisor, although compensated on commission basis, he is exempt from the observance
of normal hours of work for his compensation is measured by the number of sales he makes. He may not have had the usual fixed time for
starting and ending his work as in other types of employment but he had to spend most of his working hours at his job. People die at all
times of the day or night.

All considered, we rule that private respondent is an employee of petitioner corporation.

II

The petitioner impugns the award of separation pay equivalent to one-half (1/2) month average income for every year of service to private
respondent. The NLRC ruled that:

However, mindful of the fact the complainant Noli Maalat has served respondent company for the last twenty four (24)
years, more or less, it is but proper to afford him some equitable relief, consistent with the recent rulings of the Supreme
Court, due to his past services with no known previous record, and the ends of social and compassionate justice will thus
be served if he is paid a portion of his separation pay, equivalent to one-half (1/2) month every year of his service to said
company. (See Soco v. Mercantile Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone, et al, v. Lariosa et al.,
G.R. No. 70479, February 27, 1987). We are not inclined to grant complainant his full month termination pay for every
year of his service because, unlike in the former Soco case, the misconduct of the employee merely involves infraction of
company rules while in the latter Firestone case it involves misconduct of a rank-and-file employee, although similarly
involving acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private respondent Maalat was dishonest in the discharge of his functions. The
finding is sufficiently supported by the evidence on record.

Additionally, the private respondent did not appeal from the NLRC decision, thereby impliedly accepting the validity of his dismissal.

We take exception, therefore, to the grant of separation pay to private respondent.

In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671 [1988]), this Court re-examined, the doctrine in the
aforecited Firestone and Soco cases and other previous cases that employees dismissed for cause are nevertheless entitled to separation pay
on the ground of social and compassionate justice. In abandoning this doctrine, the Court held, and we quote:

. . . We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where
the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.
Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring
employee for his offense. . . .

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. . . .

Subsequent decisions have abided by this pronouncement. (See Philippine National Construction Corporation v. National Labor Relations
Commission, 170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor Relations Commission, 170 SCRA 597 [1989]; Osias Academy
v. National Labor Relations Commission, G.R. No. 83234, April 18, 1989; and Nasipit Lumber Co., Inc. v. National Labor Relations
Commission, G.R. No. 54424, August 31, 1989.)

Conformably with the above cited  PLDT ruling, this Court pronounces that the grant of separation pay to private respondent Maalat, who
was validly terminated for dishonesty, is not justified.
31
Parenthetically, it may be mentioned that the Labor Arbiter, apparently unaware of the petition for review pending before this Court,
conducted further proceedings to compute private respondent's separation pay, unclaimed commission and 2% attorney's fees, in
compliance with the NLRC decision of May 31, 1988. After hearing, the Labor Arbiter rendered a decision on May 10, 1989, the pertinent
portion of which reads:

In sum, the sustainable claims of complainant are as follows:

(1) Separation Pay : P 76,064.40

(2) Unpaid Commissions : 39,344.80
——————
Sub-total : P 115,409.20
(3) 2% Attorney's Fees : 2,308.18
——————
P 117, 717.38

WHEREFORE, judgment is hereby rendered ordering respondent Cosmopolitan Funeral Homes, Inc., to pay complainant
Noli Maalat his claims above set forth in the total amount of P117,717.38 only.

Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is not entitled to separation pay, this Court sets aside the Labor Arbiter's
computation of separation pay. However, we uphold his computation of unclaimed commissions amounting to P39,344.80. The amount of
attorney's fee should consequently be recomputed at 2% of P39,344.80 or P786.89.

WHEREFORE, the judgment of the National Labor Relations Commission is AFFIRMED except for the grant of separation pay which is hereby
disallowed. Private respondent Maalat is entitled to unclaimed commissions of P39,344.80 and 2% attorney's fees of P786.89, said amounts
being considered final.

SO ORDERED.

Feliciano, Bidin and Cortes, JJ., concur.

Fernan, C.J., is on leave.

G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and Employment, National
Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO GARCIANO, ALFREDO C.
BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO,
CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET
SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails the decision of
respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-
TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly heard and decided
aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the existence
of employer-employee relationship and granting respondent workers by reason thereof their various monetary claims.
32
The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as tailors, seamstress,
sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid
on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesos provided they report for work
before 9:30 a.m. everyday.

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods
even on Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint docketed as
NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of overtime
work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under
Wage Orders Nos. 1, 2, 3, 4 and 5.1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador Rivera, a salesman of
petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied that
the same was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the design of petitioner
Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and Zapata denied ownership of the same.
Consequently a memorandum was issued to each of them to explain on or before February 4, 1985 why no action should be taken against
them for accepting a job order which is prejudicial and in direct competition with the business of the company. 2 Both respondents allegedly
did not submit their explanation and did not report for work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They
countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal dismissal
and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions without
loss of seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The charge of unfair labor
practice is dismissed for lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage law is
hereby ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave pay and
the 13th Month Pay. In view thereof, the economic analyst of the Commission is directed to compute the monetary awards
due each complainant based on the available records of the respondents retroactive as of three years prior to the filing of
the instant case.

SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said decision but limited the
backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.

II

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE
THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.

III

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7

33
The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly held in countless
decisions that the test of employer-employee relationship is four-fold: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. It is the so called "control test" that is the most
important element. 8 This simply means the determination of whether the employer controls or has reserved the right to control the
employee not only as to the result of the work but also as to the means and method by which the same is to be accomplished. 9

The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the operations of petitioner, when
a customer enters into a contract with the haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern maker,
sewer or "plantsadora" to take the customer's measurements, and to sew the pants, coat or shirt as specified by the customer. Supervision is
actively manifested in all these aspects — the manner and quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated
May 30, 1981 addressed to Topper's Makati Tailors which reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and Ofel Bautista. Other
than this person (sic) must ask permission to the above mentioned before giving orders or instructions to the tailors.

B. Before accepting the job orders tailors must check the materials, job orders, due dates and other things to maximize the
efficiency of our production. The materials should be checked (sic) if it is matched (sic) with the sample, together with the
number of the job order.

C. Effective immediately all job orders must be finished one day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your supervisors. If you have many due dates for certain day, advise
Ruben or Ofel at once so that they can make necessary adjustment on due dates.

D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must advise the tailors
regarding the due dates so that we can eliminate what we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle the problem.
Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be subject to disciplinary action.

For strict compliance. 10

From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only as to the result but also
the means and methods by which the same are to be accomplished. That private respondents are regular employees is further proven by the
fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00 daily if they
report for work before 9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument that they are independent contractors must fail. As established
in the preceding paragraphs, private respondents did not exercise independence in their own methods, but on the contrary were subject to
the control of petitioners from the beginning of their tasks to their completion. Unlike independent contractors who generally rely on their
own resources, the equipment, tools, accessories, and paraphernalia used by private respondents are supplied and owned by petitioners.
Private respondents are totally dependent on petitioners in all these aspects.

Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage as mandated by Section 2(g)
of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing
Presidential Decree 1713 which explicitly states that, "All employees paid by the result shall receive not less than the applicable new
minimum wage rates for eight (8) hours work a day, except where a payment by result rate has been established by the Secretary of
Labor. ..." 12 No such rate has been established in this case.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum wages to private respondents
has already been resolved in the decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient evidence to support the claims
of the complainants for alleged violation of the minimum wage, their claims for underpayment re violation of the Minimum Wage Law under
Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13

The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither did they file any
petition raising that issue in the Supreme Court. Accordingly, insofar as this case is concerned, that issue has been laid to rest. As to private
respondents, the judgment may be said to have attained finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not

34
himself appealed cannot obtain from the appellate court-, any affirmative relief other than the ones granted in the decision of the court
below. " 14

As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance. This is apparent from the
provision defining the employees entitled to said allowance, thus: "... All workers in the private sector, regardless of their position,
designation or status, and irrespective of the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations Implementing P.D. No.
851 which provides:

Section 3. Employers covered. — The Decree shall apply to all employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the
workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are
concerned.  (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service
incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the
performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code.
For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor
Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show that a violation of the
employer's rules has been committed and the evidence of such transgression, the copied barong tagalog, was in the possession of Pelobello
who pointed to Zapata as the owner. When required by their employer to explain in a memorandum issued to each of them, they not only
failed to do so but instead went on AWOL (absence without official leave), waited for the period to explain to expire and for petitioner to
dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of union
activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private respondents, their blatant disregard of
their employer's memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for termination of
employment by the employer expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the
commission of acts inimical to the interests of the employer, another justifiable ground for dismissal under the same Article of the Labor
Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in the
service is inimical to the employer's interest. 16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to their version and found
their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant Manager who was investigating them,
unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:

No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to
his employer, regard for his employer's rules, and appreciation of the dignity and responsibility of his office, has so plainly
and completely been bared.

That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and
proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writings should be resolved in the former's favor, is not an unreasonable or unfair rule.
But that disregard of the employer's own rights and interests can be justified by that concern and solicitude is unjust and
unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. 17 More importantly, while
the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every
labor dispute will automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an employee for just and valid
cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in accordance with the
norms of due process. 19

35
There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously insist on the existence of
employer-employee relationship, because of the supervision and control of their employer over them, were the very ones who exhibited
their lack of respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor Arbiter dated June 10,
1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is
dismissed for lack of factual and legal bases. Award of service incentive leave pay to private respondents is deleted.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. 154463             September 5, 2006

CEBU METAL CORPORATION, petitioner,

vs.
GREGORIO ROBERT SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO, respondents.

DECISION

CHICO-NAZARIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision 1 dated 18 February 2002,
and the Resolution2 dated 27 June 2002, rendered by the Court of Appeals in CA-G.R. SP No. 66480, which annulled and set aside the
decision3 dated 9 October 2000, and resolution4 dated 2 July 2001, of the National Labor Relations Commission (NLRC) in NLRC Case No.V-
000840-99. In its decision, the NLRC reversed and set aside the decision 5 dated 27 May 1999 of Labor Arbiter Jesus N. Rodriguez, Jr. in favor
of complainant employees, herein respondents Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado, RAB Case No. 06-01-
10019-97.

The Facts

Parties herein are somewhat at variance with respect to the basic facts of the case at bar.

The facts of the case as recounted 6 by petitioner Cebu Metal Corporation are as follows:

Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buying and selling of scrap iron x x x. In the Bacolod Branch,
it has three regular (3) employees holding such positions as Officer-in-Charge, a scaler and a yardman, x x x whose salaries are paid
directly by its main office in Cebu while others are undertaking pakiao work in the unloading of scrap iron for stockpiling.

Among those workers who presented for work in the unloading of scrap iron in the area are the unemployed persons or trisicad
drivers standing by in the vicinity some of whom are the herein complainants x x x Gregorio Robert Saliling, Elias Bolido, Manuel
Alquiza, Benjie Amparado and non-complainants Arnel Allera, Eliseo Torralba or any other persons who wanted to augment their
income aside from their regular jobs. Robert Gregorio Saliling started working in 1996, Elias Bolido on (sic) October 1995 while
Manuel Alquiza and Benjie Amparado, on (sic) February 1996.

As compensation for their services, these workers including the herein complainants are paid at the rate of P15.00 per ton for
which each person can unload at least two (2) to three (3) tons per hour or can earn at least P240.00 to P360.00 in eight (8) hours
if work is only available which payment necessarily includes cost of living allowance (COLA) and 13th-month pay.

xxxx

Petitioner company further elaborated 7 on the nature of its business and the circumstances surrounding the employment of respondent
complainants, to wit:

36
 The Bacolod buying station is mainly a stockyard where scrap metal delivered by its suppliers are stockpiled.

The supply of scrap metal is not steady as it depends upon many factors, such as availability of supplies, price, competition and
demand among others. There are therefore (sic) instances when in a single week , one or two trucks of scrap metal are delivered
while there are weeks when not a single truck of scrap metal are delivered although there may also be weeks when quite a number
of trucks are delivered to the stockyard x x x. The arrivals of these trucks and the deliveries of scrap metal are not regular and the
schedules of deliveries x x x to the stockyard x x x are not known before hand by the respondent (petitioner company).

x x x [t]he trucks used in the delivery of scrap metal are owned and/or rented by the different suppliers of scrap metal. These
trucks have their own driver and truck boys employed by these different suppliers. Sometimes, these trucks do not have any truck
boys, and in these instances, the respondent hires the services of people for the purpose of unloading the scrap metal from these
trucks.

It is for this reason that the unloaders hired by the respondent to unload the scrap metal from these trucks are basically seasonal
workers. They are hired only whenever there are trucks of suppliers of scrap metal that deliver scrap metal to the yard of the
respondent and these trucks happen not to have any accompanying truck boys. Whoever are available and whoever are willing to
help unload x x x on a particular occasion are hired to unload x x x.

Usually, there is a leader for a particular group who is tasked to unload the scrap metal from a particular truck. It is this leader who
distributes the individual take of each member of the particular group unloading the scrap metal from a particular truck.

In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado, in their position
paper8 submitted to the Labor Arbiter, narrate:

1. That complainants Gregorio Saliling was employed by defendant Corporation x x x in 1988, complainant Elias Bolido was hired in
1992 and complainant Benjie Amparado was hired by respondent in 1994; x x x.

2. The aforesaid complainants, from the time they were employed by respondent, they received their salary on (sic) the following
rate:

GREGORIO ROBERT SALILING ------- P5.00/hour in 1988

5.00/hour in 1989
6.00/hour in 1990
7.00/hour in 1991
7.00/hour in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
ELIAS BOLIDO ------- P100.00/day in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
BENJIE AMPARADO ------- P7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996

3. That the aforesaid complainants never received any other benefits from the respondent, except the amount indicated above; (sic)
They received the sum of P10.93 per hour in case of overtime work, but they never received additional benefits in case, (sic) they
worked on Saturdays, Sundays, and Holidays;

Complainants likewise never received 13th month pay, holiday pay, incentive leave pay, bonuses and other labor benefits;

4. Complainants were required to work from 8:00 A.M. to 12:00 noon and from 1:00 P.M. to 5:00 P.M. or for eight hours a day;
seven days a week and thirty days a month;

5. When these complainants demanded from respondent for the increase of their salary, respondent through Marlon got irritated
and instructed complainants to stop working, thus, complainants, effective December 1996 were precluded from entering
respondent loading and unloading compound x x x.

37
On 10 January 1997, respondent complainants filed a Complaint9 before the Regional Arbitration Branch No VI, Bacolod City for
underpayment of wages and non-payment of the following benefits: 1) 13th month pay; 2) holiday pay; and 3) service incentive leave pay.

On 6 March 1998, respondent complainants manifested 10 that they were including in their complaint against petitioner company, the claim
for illegal dismissal. Such belated filing was alleged to have been due to the fact that they were only dismissed after the filing of their
complaint.

On 27 May 1999, the Labor Arbiter rendered a decision 11 the dispositive of which reads:

CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation, through its manager, MARLON RADEN, is hereby
ordered to REINSTATE complainants to their former positions with backwages limited to one (1) year and 13th month pay, ERA
and COLA as follows:

NAME OF COMPLAINANTS:

1. Gregorio Robert Saliling

A) Backwages ----- P42,238.30
th
B) 13  Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
2. Elias Bolido
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38

A) Backwages ----- P42,238.30

B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
3. Manuel Alquiza
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
4. Benjie Amparado
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
GRAND TOTAL ----- P257,009.52

In case reinstatement is no longer feasible, complainants are to be given separation pay equivalent to fifteen (15) days to be given
for every year of service.

Attorney's fees of five percent (5%) of the total judgment award of the amount of Twelve Thousand Eight Hundred fifty Pesos and
Forty-Eight Centavos (P12,850.48) is also awarded.

In ordering the reinstatement of respondent complainants, the Labor Arbiter found them to have been illegally dismissed from their
employment with petitioner company. The decision explained that:
38
 Regarding the second issue which is illegal dismissal, we find the same meritorious. Under Article 280 of the Labor Code,
complainants are regular employees since they are "engaged to perform activities which are necessary and desirable in the usual
business or trade of the employer", (sic) x x x. Complainants job of loading, unloading and stockpiling scrap iron is necessary and
part of the business of respondent. Since complainants were dismissed without cause and due process of law, they are entitled to
reinstatement with backwages limited to one (1) year.

Aggrieved, petitioner company appealed the foregoing decision to the NLRC.

In a Decision12 promulgated on 9 October 2000, the Fourth Division of the NLRC reversed and set aside the ruling of the Labor Arbiter.
Instead, the Commission held that respondent complainants were not regular employees of petitioner company, thus, they could not have
been illegally dismissed. The order of reversal was based on the Commission's finding that the petty cash vouchers 13 submitted by petitioner
company confirmed the fact that unloaders were paid on "pakiao" or task basis at P15.00 per metric ton. The Commission further
rationalized that with the irregular nature of the work involved, the stoppage and resumption of which depended solely on the availability or
supply of scrap metal, it necessarily follows that after the job of unloading was completed and "unloaders" were paid the contract price, the
latter's working relationship with petitioner company legally ended. They were then free to offer their services to others.

As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on the question of whether or not respondent
complainants were illegally dismissed since the complaint filed on 10 January 1997 failed to include such matter. To be sure, the complaint
merely imputed the following causes of action: 1) underpayment of wages; and 2) non-payment of a) 13th month pay; b) holiday pay; and c)
service incentive leave pay. Nowhere was the matter of illegal dismissal written on the same. The issue was formally brought up only on 6
March 1998, via a Manifestation, long after the filing of the parties' respective position papers.

In view of the above, the Commission declared that respondent complainants invalidly raised the issue of illegal dismissal in the position
paper they filed before the Labor Arbiter.

Dissatisfied by the above, it was the turn of respondent complainants to challenge the same but this time before the Court of Appeals.

In a Decision dated 18 February 2002, the Court of Appeals annulled and set aside the assailed decision of the NLRC. Said Decision was
grounded exclusively on the argument that the Commission committed grave abuse of discretion in reversing and setting aside the Decision
of the Labor Arbiter since petitioner company did not make an issue out of the Labor Arbiter's action in ruling on a cause of action, i.e., illegal
dismissal, not specifically stated in the complaint. Stated differently, the NLRC gravely abused its discretion in ruling on an issue that was
allegedly not raised on appeal before it.

The Court of Appeals decision ended in this wise:

WHEREFORE, foregoing premises considered, the PETITION HAVING MERIT is hereby GIVEN DUE COURSE. RESULTANTLY, the
challenged decision of Public Respondent National Labor Relations Commission is hereby ANNULLED AND SET ASIDE AND THE
JUDGMENT OF THE LABOR ARBITER IN RAB-CASE No. 06-01-10019-97 REINSTATED. No costs.

SO ORDERED.

The Issues

Its Motion for Reconsideration having been denied14, petitioner company now comes to this Court imputing the following errors on the Court
of Appeals:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS COMMISSION FOURTH DIVISION, CEBU
CITY HAD NO AUTHORITY TO DISMISS PRIVATE RESPONDENT'S CLAIMS FOR ILLEGAL DISMISSAL AND OTHER MONEY CLAIMS;

II.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS COMMISSION FOURTH DIVISION, CEBU
CITY HAD NO AUTHORITY TO REVERSE THE LABOR ARBITER'S DECISION; and

III.

THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR CERTIORARI IN CA G.R. SP. NO. 66480 AND IN ANNULING (sic)
THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION.
39
In essence, the issue for resolution in the case at bar is whether or not the Court of Appeals committed reversible error in ruling that the
NLRC had no authority to adjudicate on an issue not properly raised in petitioner company's Memorandum on Appeal.

Petitioner company posits that contrary to the argument of the appellate court, the main or primary reason for the reversal of the Labor
Arbiter's decision was the finding that respondent complainants could not be regarded, based on the facts of the case and the evidence
presented, as regular employees of petitioner company.

Conversely, respondent complainants allege that an appellate court has no power to resolve an unassigned error that does not affect the
court's jurisdiction or is an error that is neither plain nor clerical. Likewise, they contend that "there is nothing to show that petitioner
company made an issue of the Labor Arbiter's action in ruling on a cause of action not specifically stated in the complaint."

The Court's Ruling

We find merit in the petition.

It was plain error for the Court of Appeals to annul and set aside the decision of the NLRC on the lone reason that the latter "dismissed
Petitioner's appeal on the basis of an issue not raised by Private Respondent in its appeal x x x." 15 A painstaking review of the decision of the
NLRC will readily reveal that the Commission's finding that respondent complainants were not regular employees was the raison d'être for
the subsequent turnaround of the state of affairs.

What the NLRC made use of to reverse the Labor Arbiter's decision was precisely the conclusion of the latter that respondent complainants
were regular employees of petitioner company. According to the Commission, such conclusion was predicated merely on the consideration
that respondent complainants were performing activities necessary and desirable to the business or trade of their employer. Based on the
facts of the case and the evidence presented by the parties to the case at bar, however, the NLRC arrived at a divergent conclusion, which we
fully agree in. We quote with approval its disquisition:

It is interesting to note that the Labor Arbiter had given credence and probative value to the Petty Cash Vouchers submitted by the
respondents. Thus he said:

"The petty cash vouchers (Annexes "1" to"1-A-62", respondents position paper) show that complainants are not paid on
hourly or daily basis as they would like this office to believe but on "pakiao" or task basis at P15.00 per metric ton. There
is no basis then for complainants to claim that they are underpaid since there is no minimum wage in this type of work.
Complainants' earnings depend upon their own diligence and speed in unloading and stockpiling scrap iron. More
importantly, it depends upon the availability of scrap iron to be unloaded and stockpiled."

The above findings validate respondent's position as to the nature of complainants' work. Their services are needed only when
scrap metals are delivered which occurs only one or twice a week or sometimes no delivery at all in a given week. The irregular
nature of work, stoppage of work and then work again depending on the supply of scrap metal has not been denied by
complainants. On the contrary they even admitted the same in their Reply to respondent's Appeal. x x x. Indeed, it would be unjust
to require respondent to maintain complainants in the payroll even if there is no more work to be done. To do so would make
complainants privileged retainers who collect payment from their employer for work not done. This is extremely unfair and
amount to cuddling of labor at the expense of management. 16

It should be remembered that The Philippine Constitution, while inexorably committed towards the protection of the working class from
exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to strike a balance between an avowed
predilection for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the
other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be dispensed with in the light of
established facts, the applicable law, and existing jurisprudence. 17

Under the circumstances abovestated:

x x x there can be no illegal dismissal to speak of. Besides, complainants cannot claim regularity in the hiring every time a truck
comes loaded with scrap metal. This is confirmed in the Petty cash Vouchers which are in the names of different leaders who
apportion the amount earned among his members. 18

And, quite telling is the fact that not every truck delivery of scrap metal requires the services of respondent complainants when a particular
truck is accompanied by its own "unloader." And whenever required, respondent complainants were not always the ones contracted to
undertake the unloading of the trucks since the work was offered to whomever were available at a given time.

Finally, the judgment of the Commission that the Labor Arbiter acted incorrectly in ruling on a cause of action, i.e., illegal dismissal, not
specifically stated in the complaint, did not constitute grave abuse of discretion on its part.
40
It is well settled that an act of a court or tribunal may only be considered to have been done in grave abuse of discretion when the same was
performed in a capricious or whimsical exercise of judgment which is equivalent to lack of jurisdiction. 19 The abuse of discretion must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined or to a ct at all in
contemplation of law, as where the power is exercised in an arbitrary power and despotic manner by reason of passion or personal
hostility.20

In the case at bar, from the preceding definition, it is quite apparent that no grave abuse of discretion can be attributed to the NLRC. Its
decision simply expressed an observation, to wit:

Moreover, We note that in the complaint filed last January 10, 1997, the issue of illegal dismissal was not raised as a cause of action
although it was later discussed in their position paper filed on January 12, 1998. x x x. [Emphasis supplied.]

The use of the word "moreover" clearly expresses NLRC's position in treating the matter of the non-inclusion of the issue of illegal dismissal
in the complaint merely as an add-on, adjunct or a supplement to its finding that respondent complainants' were not regular employees of
petitioner company.

At any rate, the Court is clothed with authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case. 21

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 18 February 2002, and the Resolution dated 27
June 2002, both rendered by the Court of Appeals in CA-G.R. SP No. 66480, are hereby REVERSED and SET ASIDE. Accordingly, the Decision
of the NLRC dated 9 October 2000 is REINSTATED. Costs against respondent complainants.

SO ORDERED.

Panganiban, C.J. Chairman, Ynares-Santiago, Austria-Martinez, Callejo, Sr., J.J., concur.

G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and
between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao
as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises
belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly
rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to
Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina
Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the
Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors
of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to
receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3,
41
 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because
of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to
the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises
on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of
her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with
a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo,
in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the
reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard
following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the
instant appeal on the following assignment of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE
TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD
THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM
DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS
AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O.
SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT
LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the
appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and
appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist
as well as a imediately columnist had been in the travel business prior to the establishment of the joint
business venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre,
she being the godmother of one of his children, with her own clientele, coming mostly from her own
social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering
the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with
appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

42
 3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had
its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof,
having no participation in nor connection with said business at the Trade & Commerce Building (pp.
16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own
business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the
airline companies. She shared the 7% commissions given by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn.  Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying
for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the
office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist
World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the
co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch
manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title
for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-
testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service,
Inc. and as such was designated manager. 1

xxx xxx xxx

The trial court2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee,
it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of
Appeal 5 rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING
OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ...
WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE
CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF
LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH
APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING
AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT
SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST
ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD
SERVICE INC.6
43
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc.
The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises
by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc.
unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist
World Service, Inc.7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager"
of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera.
The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that "whatever might
have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from
taking the law into their own hands, 8 in reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation
between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor
disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in
force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we 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." 10 Subsequently, however, we have considered, 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, in
determining the existence of an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc.,
either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease
covering the Tourist Worlds Ermita office, she had bound herself in solidum  as and for rental payments, an arrangement that would be like
claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease as one of mere
guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own
money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some
other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these
circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing
the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings,
the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is
determined by the right-of-control test and certain economic parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the
parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed 15 and where each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign
"Tourist World Service, Inc. 17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services
"in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself
based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship,
rather than a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the
principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted
to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of
44
rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not
to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent
the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take
pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it,
and as owner of the telephone lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc.
was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant,
and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been
explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad
light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify
the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that
Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla
was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and
authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962,
the private respondents ended the lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao,
on the pretext that it was necessary to Protect the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World Service,
Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it
sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near
the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the
process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part.
It is offensive, in any event, to elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should
be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ...
in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct
subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article
2219 (10) thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage. 24

ART. 2219. Moral damages25 may be recovered in the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with
Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as
nominal 26 and/or temperate27 damages, to be just, fair, and reasonable under the circumstances.

45
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of
Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly
and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for
exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

G.R. No. L-72654-61               January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES
and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.

FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are
employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they were illegally dismissed from their
employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated
by private respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing business with port and office at Camaligan,
Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma
patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second
fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on percentage
commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they received thirteen percent (13%)
of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise,
they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a
minimum income of P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman received a minimum
income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private respondent, to
proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of their fish-catch at midsea to
the prejudice of private respondent. Petitioners denied the charge claiming that the same was a countermove to their having formed a labor
union and becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on
September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were formally filed
against them. Notwithstanding, private respondent refused to allow petitioners to return to the fishing vessel to resume their work on the
same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay, emergency
cost of living allowance and service incentive pay, with the then Ministry (now Department) of Labor and Employment, Regional Arbitration
Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they were arbitrarily
dismissed without being given ample time to look for a new job.

46
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position paper denying the
employer-employee relationship between private respondent and petitioners on the theory that private respondent and petitioners were
engaged in a joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing furnishing the parties with
notice and summons. On December 27, 1983, after two (2) previously scheduled joint hearings were postponed due to the absence of private
respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the
fishing operations were conducted, mode of payment of compensation for services rendered by the fishermen-crew members, and the
circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint decision 5 dismissing all the
complaints of petitioners on a finding that a "joint fishing venture" and not one of employer-employee relationship existed between private
respondent and petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of the labor arbiter that a
"joint fishing venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners is a joint venture
arrangement and not an employer-employee relationship. To stress that there is an employer-employee relationship between them and
private respondent, petitioners invite attention to the following: that they were directly hired by private respondent through its general
manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by
private respondent from 8 to 15 years in various capacities; that private respondent, through its operations manager, supervised and
controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the
volume or number of tubes of the fish-catch the time to return to the fishing port, which were communicated to the patron/pilot by radio
(single side band); that they were not allowed to join other outfits even the other vessels owned by private respondent without the
permission of the operations manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch
which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies,
rules and regulations imposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and petitioners, petitioners claim
that public respondent exceeded its jurisdiction and/or abused its discretion when it added facts not contained in the records when it stated
that the pilot-crew members do not receive compensation from the boat-owners except their share in the catch produced by their own
efforts; that public respondent ignored the evidence of petitioners that private respondent controlled the fishing operations; that public
respondent did not take into account established jurisprudence that the relationship between the fishing boat operators and their crew is
one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and executory for failure of
petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said decision pursuant to the doctrine laid down in Vir-
Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a
"joint fishing venture" exists between private respondent and petitioners rests on the resolution of the Social Security System (SSS) in a
1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein,
from compulsory coverage of the SSS on the ground that there is no employer-employee relations between the boat-owner and the
fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the
doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee relationship between the boat-owner and the pilot and crew
members when the boat-owner supplies the boat and equipment while the pilot and crew members contribute the corresponding labor and
the parties get specific shares in the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-
owners in the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the pilot and crew members
shared in the catch.

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to dismiss it on a mere
technicality. In so doing, we exercise the prerogative accorded to this Court enunciated in Firestone Filipinas Employees Association, et
al.  vs.  Firestone Tire and Rubber Co.  of the Philippines,  Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before
this Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that its power be exercised
according to justice and equity and substantial merits of the controversy."

47
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing, as in the case of
petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their job to earn a living to support their families,
convince Us to adopt a more liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from
the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by their non-lawyer
representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8) days earlier, or on June 25, 1984. As
adverted to earlier, the circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the pendency of the case
understandably have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of events, the
information as to the adverse decision against them would not reach them within such time frame as would allow them to faithfully abide by
the 10-calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer provide equitable
justification to conclude that there is substantial compliance with the ten-calendar day rule of filing of appeals with the NLRC when
petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail.

We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that are generally
considered are the following (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 with respect to the means and methods by which the work is to be accomplished. 8 The
employment relation arises from contract of hire, express or implied. 9 In the absence of hiring, no actual employer-employee relation could
exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 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. The
test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing venture" existed between
private respondent and petitioners is not applicable in the instant case. There is neither light of control nor actual exercise of such right on
the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as
regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long
and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former have no relationship
whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they
only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the fishing operations was
undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the control and supervision of private
respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port
were shown to be the prerogative of private respondent. 12 While performing the fishing operations, petitioners received instructions via a
single-side band radio from private respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was
monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew
members.

The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De Guzman Fishing
Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it from compulsory coverage of the SSS
law is not supported by evidence on record. It was erroneous for public respondent to apply the factual situation of the parties in the 1968
case to the instant case in the light of the changes in the conditions of employment agreed upon by the private respondent and petitioners as
discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under no obligation to remain in
the outfit for any definite period as one can be the crew member of an outfit for one day and be the member of the crew of another vessel the
next day, the herein petitioners, on the other hand, were directly hired by private respondent, through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years
in various capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on
September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted
as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot
of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as
winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of petitioners to perform work
which is necessary or desirable in the usual business or trade of private respondent for a period of 8-15 years since 1968 qualify them as
regular employees within the meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities usually necessary
or desirable in the usual fishing business or occupation of private respondent. 14

48
Aside from performing activities usually necessary and desirable in the business of private respondent, it must be noted that petitioners
received compensation on a percentage commission based on the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if the total
proceeds exceeded the cost of the crude oil consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such
compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, 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 included 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. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form of share in the fish-
catch which the patron/pilot as head of the team distributes to his crew members in accordance with their own understanding 15 is not
supported by recorded evidence. Except that such claim appears as an allegation in private respondent's position paper, there is nothing in
the records showing such a sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at midsea without the
knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board the fishing vessel on September 11, 1983
to resume their activities without giving them the opportunity to air their side on the accusation against them unmistakably reveals the
disciplinary power exercised by private respondent over them and the corresponding sanction imposed in case of violation of any of its rules
and regulations. The virtual dismissal of petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the dismissal of petitioners was tainted with
illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually resulting in their
dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the parties herein. A joint venture, including
partnership, presupposes generally a  parity of standing between the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It
would be inconsistent with the principle of parity of standing between the joint co-venturers as regards the conduct of business, if private
respondent would outrightly exclude petitioners from the conduct of the business without first resorting to other measures consistent with
the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have discussed with an open mind
the advantages and disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture" between the
parties. But this was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal complaints were
filed against them. The lame excuse of private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In Negre vs. WCC 135 SCRA 653
(1985), we held that fishermen crew members who were recruited by one master fisherman locally known as "maestro" in charge of
recruiting others to complete the crew members are considered employees, not industrial partners, of the boat-owners. In an earlier case
of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the
employer of the fishermen crew members because of an alleged partnership agreement between him, as financier, and Simplicio
Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there existed
an employer-employee relationship between the boat-owner and the fishermen crew members not only because they worked for and in the
interest of the business of the boat-owner but also because they were subject to the control, supervision and dismissal of the boat-owner,
thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by
"pakiao basis" still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held that the employer-
employee relationship between the crew members and the owners of the fishing vessels engaged in deep sea fishing is merely suspended
during the time the vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The
said ruling is premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular
operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor Relations Commission
dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or
any equivalent positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin and Cortés, JJ., concur.

Feliciano, J., concurs in the result.

49
 [G.R. No. 163700 : April 18, 2012]

CHARLIE JAO, PETITIONER, VS. BCC PRODUCTS SALES INC., AND TERRANCE TY, RESPONDENTS.

DECISION

BERSAMIN, J.:

The issue is whether petitioner was respondents’ employee or not. Respondents denied an employer-employee relationship with petitioner,
who insisted the contrary.cralaw

Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court of Appeals (CA) on February 27,
2004,[1] finding no employee-employer relationship between him and respondents, thereby reversing the ruling by the National Labor
Relations Commission (NLRC) to the effect that he was the employee of respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent Terrance Ty (Ty), employed him as
comptroller starting from September 1995 with a monthly salary of P20,000.00 to handle the financial aspect of BCC’s business; [2] that on
October 19,1995, the security guards of BCC, acting upon the instruction of Ty, barred him from entering the premises of BCC where he then
worked; that his attempts to report to work in November and December 12, 1995 were frustrated because he continued to be barred from
entering the premises of BCC;[3] and that he filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement with full
backwages, non-payment of wages, damages and attorney’s fees. [4]

Respondents countered that petitioner was not their employee but the employee of Sobien Food Corporation (SFC), the major creditor and
supplier of BCC; and that SFC had posted him as its comptroller in BCC to oversee BCC’s finances and business operations and to look after
SFC’s interests or investments in BCC.[5]

Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996, [6] the NLRC vacated the ruling and remanded the case for
further proceedings.[7] Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a new decision on September 20, 2001, dismissing petitioner’s
complaint for want of an employer-employee relationship between the parties. [8] Petitioner appealed the September 20, 2001 decision of
Labor Arbiter Mayor.

On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayor’s decision, and declaring that petitioner had been illegally
dismissed. It ordered the payment of unpaid salaries, backwages and 13 th month pay, separation pay and attorney’s fees.[9] Respondents
moved for the reconsideration of the NLRC decision, but their motion for reconsideration was denied on September 30, 2002. [10] Thence,
respondents assailed the NLRC decision on certiorari  in the CA.

Ruling of the CA

On February 27, 2004, the CA promulgated its assailed decision, [11] holding:

After a judicious review of the records vis-à-vis the respective posturing of the contending parties, we agree with the finding that no
employer-employee relationship existed between petitioner BCC and the private respondent.  On this note, the conclusion of the public
respondent must be reversed for being issued with grave abuse of discretion.

“Etched in an unending stream of cases are the four (4) standards in determining the existence of an employer-employee relationship,
namely, (a)  the manner of selection and engagement of the putative employee; (b)  the mode of payment of wages; (c)  the presence or
absence of power of dismissal; and, (d)  the presence or absence of control of the putative employee’s conduct.” Of these powers the power
of control over the employee’s conduct is generally regarded as determinative of the existence of the relationship.

Apparently, in the case before us, all these four elements are absent.  First, there is no proof that the services of the private respondent were
engaged to perform the duties of a comptroller in the petitioner company.  There is no proof that the private respondent has undergone a
selection procedure as a standard requisite for employment, especially with such a delicate position in the company.  Neither is there any
proof of his appointment nor is there any showing that the parties entered into an employment contract, stipulating thereof that he will
receive P20,000.00/month salary as comptroller, before the private respondent commenced with his work as such.  Second, as clearly
established on record, the private respondent was not included in the petitioner company’s payroll during the time of his alleged
employment with the former.  True, the name of the private respondent Charlie Jao appears in the payroll however it does not prove that he
has received his remuneration for his services.  Notably, his name was not among the employees who will receive their salaries as
represented by the payrolls.  Instead, it appears therein as a comptroller who is authorized to approve the same.  Suffice it to state that it is
rather obscure for a certified public accountant doing the functions of a comptroller from September 1995 up to December 1995 not to
50
receive his salary during the said period.  Verily, such scenario does not conform with the usual and ordinary experience of man.  Coming
now to the most controlling factor, the records indubitably reveal the undisputed fact that the petitioner company did not have nor did not
exercise the power of control over the private respondent.  It did not prescribe the manner by which the work is to be carried out, or the
time by which the private respondent has to report for and leave from work.  As already stated, the power of control is such an important
factor that other requisites may even be disregarded.  In  Sevilla v. Court of Appeals, the Supreme Court emphatically held, thus:
“The “control test,” under which the person for whom the services are rendered reserves the right to direct not only the end to be
achieved but also the means for reaching such end, is generally relied on by the courts.”

We have carefully examined the evidence submitted by the private respondent in the formal offer of evidence and unfortunately, other than
the bare assertions of the private respondent which he miserably failed to substantiate, we find nothing therein that would decisively
indicate that the petitioner BCC exercised the fundamental power of control over the private respondent in relation to his employment—not
even the ID issued to the private respondent and the affidavits executed by Bertito Jemilla and Rogelio Santias.  At best, these pieces of
documents merely suggest the existence of employer-employee relationship as intimated by the NLRC.  On the contrary, it would appear that
the said sworn statement provided a substantial basis to support the contention that the private respondent worked at the petitioner BCC as
SFC’s representative, being its major creditor and supplier of goods and merchandise.  Moreover, as clearly pointed out by the petitioner in
his Reply to the private respondent’s Comment, it is unnatural for SFC to still employ the private respondent “to oversee and supervise
collections of account receivables due SFC from its customers or clients” like the herein petitioner BCC on a date later than December, 1995
considering that a criminal complaint has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal certainty that employee-employer relationship
existed between the parties.  On the other hand, it was clearly shown by the petitioner that it neither exercised control nor supervision over
the conduct of the private respondent’s employment.  Hence, the allegation that there is employer-employee relationship must necessarily
fail.

Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public respondent NLRC dated July 31, 2002 and
the Resolution dated September 30, 2002 are REVERSED and SET ASIDE. Accordingly, the decision of the Labor Arbiter dated September 20,
2001 is hereby REINSTATED.

SO ORDERED.

After the CA denied petitioner’s motion for reconsideration on May 14, 2004, [12] he filed a motion for extension to file petition for review,
which the Court denied through the resolution dated July 7, 2004 for failure to render an explanation on why the service of copies of the
motion for extension on respondents was not personally made. [13] The denial notwithstanding, he filed his petition for review on certiorari.
The Court denied the petition on August 18, 2004 in view of the denial of the motion for extension of time and the continuing failure of
petitioner to render the explanation as to the non-personal service of the petition on respondents. [14] However, upon a motion for
reconsideration, the Court reinstated the petition for review on certiorari and required respondents to comment.[15]

Issue

The sole issue is whether or not an employer-employee relationship existed between petitioner and BCC. A finding on the existence of an
employer-employee relationship will automatically warrant a finding of illegal dismissal, considering that respondents did not state any
valid grounds to dismiss petitioner.

Ruling

The petition lacks merit.

The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of factual findings cannot be done by
the Court acting on a petition for review on certiorari because the Court is not a trier of facts but reviews only questions of law. Nor may the
Court be bound to analyze and weigh again the evidence adduced and considered in the proceedings below. [16] This rule is not absolute,
however, and admits of exceptions. For one, the Court may look into factual issues in labor cases when the factual findings of the Labor
Arbiter, the NLRC, and the CA are conflicting. [17]

Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among such adjudicating offices compels the
Court’s exercise of its authority to review and pass upon the evidence presented and to draw its own conclusions therefrom.

To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID) issued to him stating his name and his
position as “comptroller,” and bearing his picture, his signature, and the signature of Ty; (b) a payroll of BCC for the period of October 1-15,
1996 that petitioner approved as comptroller; (c) various bills and receipts related to expenditures of BCC bearing the signature of
petitioner; (d) various checks carrying the signatures of petitioner and Ty, and, in some checks, the signature of petitioner alone; (e) a court
order showing that the issuing court considered petitioner’s ID as proof of his employment with BCC; (f) a letter of petitioner dated March 1,
1997 to the Department of Justice on his filing of a criminal case for estafa against Ty for non-payment of wages; (g) affidavits of some
employees of BCC attesting that petitioner was their co-employee in BCC; and (h) a notice of raffle dated December 5, 1995 showing that

51
petitioner, being an employee of BCC, received the notice of raffle in behalf of BCC. [18]

Respondents denied that petitioner was BCC’s employee. They affirmed that SFC had installed petitioner as its comptroller in BCC to oversee
and supervise SFC’s collections and the account of BCC to protect SFC’s interest; that their issuance of the ID to petitioner was only for the
purpose of facilitating his entry into the BCC premises in relation to his work of overseeing the financial operations of BCC for SFC; that the
ID should not be considered as evidence of petitioner’s employment in  BCC;[19] that petitioner executed an affidavit in March 1996,[20] stating,
among others, as follows:

1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed by, Sobien Food Corporation
with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I have been entrusted by
my employer to oversee and supervise collections on account of receivables due SFC from its customers or clients; for
instance, certain checks due and turned over by one of SFC’s customers is BCC Product Sales, Inc., operated or run by one
Terrance L. Ty,  (President and General manager), pursuant to, or in accordance with, arrangements or agreement
thereon; such arrangement or agreement is duly confirmed by said Terrance Ty, as shown or admitted by him in a public
instrument executed therefor, particularly par. 2 of that certain Counter-Affidavit executed and subscribed on December 11, 1995,
xerox copy of which is hereto attached, duly marked as Annex “A” and made integral part hereof.

3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were delivered to, or turned over in favor of
SFC, Mr. Terrance Ty, in a desire to blemish my reputation or to cause me dishonor as well as to impute unto myself the
commission of a crime, state in another public instrument executed therefor in that:

“3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely without any authority from BCC
and the same were reportedly turned over by said Mr. Jao to a person who is not an agent or is not authorized representative of
BCC.”

xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex “B” and made integral part hereof. (emphasis
supplied)

and that the affidavit constituted petitioner’s admission of the arrangement or agreement between BCC and SFC for the latter to appoint a
comptroller to oversee the former’s operations.

Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee relationship between him and
respondents because it had been executed in March 1996, or after his employment with respondents had been terminated on December 12,
1995; and that the affidavit referred to his subsequent employment by SFC following the termination of his employment by BCC. [21]
br>We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the Labor Arbiter to the effect that the
affidavit actually supported the contention that petitioner had really worked in BCC as SFC’s representative. It does seem more natural and
more believable that petitioner’s affidavit was referring to his employment by SFC even while he was reporting to BCC as a comptroller in
behalf of SFC. As respondents pointed out, it was implausible for SFC to still post him to oversee and supervise the collections of accounts
receivables due from BCC beyond December 1995 if, as he insisted, BCC had already illegally dismissed him and had even prevented him
from entering the premises of BCC. Given the patent animosity and strained relations between him and respondents in such circumstances,
indeed, how could he still efficiently perform in behalf of SFC the essential responsibility to “oversee and supervise collections” at BCC?
Surely, respondents would have vigorously objected to any arrangement with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in his own affidavit dated December 11,
1995 to the effect that petitioner had illegally appropriated some checks without authority from BCC. [22] Petitioner thereby sought to show
that he had the authority to receive the checks pursuant to the arrangements between SFC and BCC. This showing would aid in fending off
the criminal charge respondents filed against him arising from his mishandling of the checks. Naturally, the circumstances petitioner
adverted to in his March 1996 affidavit concerned those occurring before December 11, 1995, the same period when he actually worked as
comptroller in BCC.

Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner offered as a rebuttal witness, lent
credence to respondents’ denial of petitioner’s employment. So declared in that affidavit, among others, that he had known petitioner for
being “earlier his retained accountant having his own office but did not hold office” in SFC’s premises; that Ty had approached him (So)
“looking for an accountant or comptroller to be employed by him (Ty) in [BCC’s] distribution business” of SFC’s general merchandise, and
had later asked him on his opinion about petitioner; and that he (So) had subsequently learned  that “Ty had already employed [petitioner]
as his comptroller as of September 1995.” [23]

The statements of So really supported respondents’ position in that petitioner’s association with SFC prior to his supposed employment by
52
BCC went beyond mere acquaintance with So. That So, who had earlier merely “retained” petitioner as his accountant, thereafter employed
petitioner as a “retained” accountant after his supposed illegal dismissal by BCC raised a doubt as to his employment by BCC, and rather
confirmed respondents’ assertion of petitioner being an employee of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the Court has consistently looked for the following
incidents, to wit:  (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee on the means and methods by which the work is accomplished. The last element, the so-called
control test, is the most important element. [24]

Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly employed by BCC that debunked his
claim against respondents.

It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver some 158 checks to SFC.
Considering that he contested respondents’ challenge by pointing to the existing arrangements between BCC and SFC, it should be clear that
respondents did not exercise the power of control over him, because he thereby acted for the benefit and in the interest of SFC more than of
BCC.

In addition, petitioner presented no document setting forth the terms of his employment by BCC. The failure to present such agreement on
terms of employment may be understandable and expected if he was a common or ordinary laborer who would not jeopardize his
employment by demanding such document from the employer, but may not square well with his actual status as a highly educated
professional.

Petitioner’s admission that he did not receive his salary for the three months of his employment by BCC, as his complaint for illegal dismissal
and non-payment of wages[25] and the criminal case for estafa he later filed against the respondents for non-payment of wages [26] indicated,
further raised grave doubts about his assertion of employment by BCC. If the assertion was true, we are puzzled how he could have
remained in BCC’s employ in  that period of time despite not being paid the first salary of P20,000.00/month. Moreover, his name did not
appear in the payroll of BCC despite him having approved the payroll as comptroller.

Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the insincerity of petitioner’s assertion of
employment by BCC. In the petition for review on certiorari, he averred that he had been barred from entering the premises of BCC on
October 19, 1995,[27] and thus was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had been illegally dismissed on
December 12, 1995 when respondents’ security guards barred him from entering the premises of BCC, [28] causing him to bring his complaint
only on December 29, 1995, and after BCC had already filed the criminal complaint against him. The wide gap between October 19, 1995 and
December 12, 1995 cannot be dismissed as a trivial inconsistency considering that the several incidents affecting the veracity of his
assertion of employment by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioner’s claim, we need not dwell at length on the other proofs he presented, like the
affidavits of some of the employees of BCC, the ID, and the signed checks, bills and receipts. Suffice it to be stated that such other proofs were
easily explainable by respondents and by the aforestated circumstances showing him to be the employee of SFC, not of BCC.cralaw

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the costs of suit.

SO  ORDERED.

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 Reconsideration1 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.

53
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.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the Company, and
collect, in exchange for provisional receipts issued by the Agent, money due 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.

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.2

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

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.

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.
54
This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting held at the 7/F
Conference room last 18 October.

xxxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before the rest of your
Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on their own to confirm your
statement and it took you to name Malou Samson as a source of the same, an allegation that Malou herself denied at our meeting and in your
very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that these
allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency development objectives!

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

xxxx

All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year 2000 versus
1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more money in the Year 2001
compared to Year 2000. Obviously, your above statement about making "less money" did not refer to you but the way you argued this point
had us almost believing that you were spouting the gospel of truth when you were not. x x x

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been
discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the Philippines. While as you
claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not
been proactive all these years when it comes to agency growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following changes in the
interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This
assistant should be so chosen as to complement your skills and help you in the areas where you feel "may not be your cup of tea."

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above could solve this
problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in autonomous fashion. x x
x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining
groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for
meeting the objectives of these remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But you have to
understand that meeting corporate objectives by everyone is primary and will not be compromised. We are meeting tough challenges next
year, and I would want everybody on board. Any resistance or holding back by anyone will be dealt with accordingly. 6

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services:

55
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. 7

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

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 over-rider not exceeding ₱50,000.00, 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 ₱36,000.00 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 four-
fold 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 employer-employee 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 employer-employee 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
Manulife. We concluded that Tongko is Manulife’s employee for the following reasons:

1. Our ruling in the first Insular11 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:
56
 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:

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 "self-employed"; 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-à -
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 employer-employee 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 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.
57
a. The laws on insurance and agency

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.1avvphi1.net

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 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.

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.

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.

58
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. National Labor Relations Commission (AFPMBAI case) 26 to support its allegation that Tongko was not its employee.

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.

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 the Grepalife 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.

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.

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.1awph!1 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.

59
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
concept28 – 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
60
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.

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 - train understudies for the position of district manager
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
- 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 on the contractual relationship between them.

61
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;

xxxx

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;

xxxx

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
62
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 employer-
employee 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 –
63
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 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.

The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of an employer-
employee 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.

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, GRANT Manulife’s motion for
reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO DIOSDADO M. PERALTA

Associate Justice Associate Justice

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

64
 JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA
Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution had been reached in
consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169510               August 8, 2011

ATOK BIG WEDGE COMPANY, INC., Petitioner,

vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision 1 dated May 31, 2005 of the Court of Appeals (CA) in
CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005 denying petitioner’s motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by petitioner Atok Big Wedge
Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis,
respondent assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal surface occupants
within the area covered by the company's mineral claims. Respondent was likewise tasked to perform liaison work with several government
agencies, which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the management to
discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee of ₱3,000.00 a
month,3 which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer agreement, but such
agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social Security System
(SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent considering that he was
only a retainer/consultant. On February 4, 2003, respondent filed a Complaint 4 with the SSS against petitioner for the latter's refusal to
cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum 5 advising respondent that within
30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint 6 for illegal dismissal, unfair labor practice, underpayment of wages, non-payment of
13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB),

65
Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case No.
RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc., or Atok for brevity,
approached him and asked him if he can help the company’s problem involving the 700 million pesos crop damage claims of the residents
living at the minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres offered to pay him ₱3,000.00
per month plus representation expenses. It was also agreed upon by him and Torres that his participation in resolving the problem was
temporary and there will be no employer-employee relationship between him and Atok. It was also agreed upon that his compensation,
allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only passage to and from the
minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the crop damage claimants. Unfortunately, Atok’s
representatives, including him, were virtually held hostage by the irate claimants who demanded on the spot payment of their claims. He
was able to convince the claimants to release the company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok was prosecuting its
case with the claimants, another case erupted involving its partner, Benguet Corporation. After Atok parted ways with Benguet Corporation,
some properties acquired by the partnership and some receivables by Benguet Corporation was the problem. He was again entangled with
documentation, conferences, meetings, planning, execution and clerical works. After two years, the controversy was resolved and Atok
received its share of the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s
accountabilities with Benguet Corporation in the amount of ₱900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of the burden of paying
700 million pesos. In between attending the problems of the crop damage issue, he was also assigned to do liaison works with the SEC,
Bureau of Mines, municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take charge of some liaison
matters and public relations in Baguio and Benguet Province, and to report regularly to Atok’s office in Manila to attend meetings and so he
had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already entitled to the benefits due an
employee under the law, but management ignored his requests. However, he continued to avail of his representation expenses and
reimbursement of company-related expenses. He also enjoyed the privilege of securing interest free salary loans payable in one year through
salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal assistant, and to assist in the
ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his registration with the SSS. His
request was again ignored and so he filed a complaint with the SSS. After filing his complaint with the SSS, respondents terminated his
services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito rendered a
Decision8 ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent, the Labor Arbiter
dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution 9 affirming the decision of the Labor Arbiter. Respondent filed a Motion for
Reconsideration, but it was denied in the Resolution 10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and resolution
of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable Public
Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of Petitioner
and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it affirmed the said Decision. 11
66
On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal portion of which
reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution  of the National Labor Relations Commission dismissing petitioner's
complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company Incorporated is ORDERED to
reinstate petitioner Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full backwages,
inclusive of allowances and other benefits or their monetary equivalent computed from the time these were withheld from him up to the
time of his actual and effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation of
backwages, allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge Company Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have overlooked
Article 280 of the Labor Code,13 or the provision which distinguishes between two kinds of employees, i.e., regular and casual employees.
Applying the provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse of one year from his
employment. Considering also that respondent had been performing services for the petitioner for eleven years, respondent is entitled to the
rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's employment would only be temporary, it clearly
appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover, although respondent may
have waived his right to attain a regular status of employment when he agreed to perform these tasks on a temporary employment status,
still, it was the law that recognized and considered him a regular employee after his first year of rendering service to petitioner. As such, the
waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF
THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO
SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS
OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A
PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-
EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF
THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF
THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE
OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL. 14

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the Rules of
Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in rendering the
resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an employer-employee
relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-employee relationship
is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a casual employee from a regular
employee for purposes of determining the rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing that there is
no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special
civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper vehicle for judicial review of
decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict observance of the doctrine on hierarchy of
67
courts as the appropriate forum for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous factual
findings should be left to the CA as it is procedurally equipped for that purpose. From the decision of the Court of Appeals, an ordinary
appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted to by the parties. Hence, respondent's resort
to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings
thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial
evidence.17 Being a question of fact, the determination whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should have been
accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct, or the so-called "control test." 18 Of these four, the last one is the most important. 19 The so-called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right
to control not only the end achieved, but also the manner and means to be used in reaching that end. 20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other things,
respondent was not required to report everyday during regular office hours of petitioner. Respondent's monthly retainer fees were paid to
him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent would
accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the freedom to
accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not control the
manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of the petitioner
engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner hired him in a
limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent's Position Paper: 21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the amount of Php3,000.00
per month plus representation expenses. It was also agreed by Mr. Torres and the complainant that his participation on this particular
problem of Atok will be temporary since the problem was then contemplated to be limited in nature, hence, there will be no employer-employee
relationship between him and Atok. Complainant agreed on this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related expenses will be processed and paid through disbursement
vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he agreed to perform
tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he became a regular employee
of the petitioner based on his contention that the "temporary" aspect of his job and its "limited" nature could not have lasted for eleven years
unless some time during that period, he became a regular employee of the petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The appellate court's
premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not
determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of another, no matter
how necessary for the latter's business, even without being hired as an employee. 23 Hence, respondent's length of service and petitioner's
repeated act of assigning respondent some tasks to be performed did not result to respondent's entitlement to the rights and privileges of a
regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be considered as a
regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its findings that respondent became
a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not the yardstick
for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to
security of tenure; it does not apply where the existence of an employment relationship is in dispute. 24 It is, therefore, erroneous on the part
of the Court of Appeals to rely on Article 280 in determining whether an employer-employee relationship exists between respondent and the
petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's services by the petitioner
after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages, allowances and other
benefits.

68
WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No.
87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the National Labor Relations
Commission are REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO*
Associate Justice

PRESBITERO J. VELASCO, JR. ARTURO D. BRION**

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO***

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

G.R. No. 169757               November 23, 2011

CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX, Petitioner,
vs.
WILMER D. GENOVIA, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its
Resolution dated September 21, 2005, denying petitioner’s motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor Arbiter with modification,
finding that respondent is an employee of petitioner, and that respondent was illegally dismissed and entitled to the payment of backwages
and separation pay in lieu of reinstatement.

The facts are as follows:

69
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio
for illegal dismissal, non-payment of commission and award of moral and exemplary damages.

In his Position Paper,1 respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio manager by petitioner
Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage and operate Celkor and to promote and sell the
recording studio's services to music enthusiasts and other prospective clients. He received a monthly salary of ₱7,000.00. They also agreed
that he was entitled to an additional commission of ₱100.00 per hour as recording technician whenever a client uses the studio for
recording, editing or any related work. He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was
required to work half-day only, but most of the time, he still rendered eight hours of work or more. All the employees of petitioner, including
respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record to avoid paying the employees overtime
pay.

Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him about his project to
produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked respondent to
compose and arrange songs for Celine and promised that he (Lirio) would draft a contract to assure respondent of his compensation for such
services. As agreed upon, the additional services that respondent would render included composing and arranging musical scores only,
while the technical aspect in producing the album, such as digital editing, mixing and sound engineering would be performed by respondent
in his capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his work on the album as
composer and arranger would only be done during his spare time, since his other work as studio manager was the priority. Respondent then
started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer and arranger of the
album. Petitioner verbally assured him that he would be duly compensated. By mid-November 2001, respondent finally finished the
compositions and musical arrangements of the songs to be included in the album. Before the month ended, the lead and back-up vocals in
the ten (10) songs were finally recorded and completed. From December 2001 to January 2002, respondent, in his capacity as studio
manager, worked on digital editing, mixing and sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with various radio
stations, malls, publishers, record companies and manufacturers, record bars and other outlets in preparation for the promotion of the said
album. By early February 2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs and cassette tapes, was
tapped to do the job. The carrier single of the album, which respondent composed and arranged, was finally aired over the radio on February
22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and arranger of the
album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in the music industry, respondent did
not deserve a high compensation, and he should be thankful that he was given a job to feed his family. Petitioner informed respondent that
he was entitled only to 20% of the net profit, and not of the gross sales of the album, and that the salaries he received and would continue to
receive as studio manager of Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that he be
properly compensated. On March 14, 2002, petitioner verbally terminated respondent’s services, and he was instructed not to report for
work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was conducted before he
was terminated, in violation of his constitutional right to due process. Having worked for more than six months, he was already a regular
employee. Although he was a so called "studio manager," he had no managerial powers, but was merely an ordinary employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation pay, backwages
and overtime pay; and that he be awarded unpaid commission in the amount of ₱2,000.00 for services rendered as a studio technician as
well as moral and exemplary damages.

Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by petitioner, 2 and Petty
Cash Vouchers3 evidencing receipt of payroll payments by respondent from Celkor.

In defense, petitioner stated in his Position Paper 4 that respondent was not hired as studio manager, composer, technician or as an employee
in any other capacity of Celkor. Respondent could not have been hired as a studio manager, since the recording studio has no personnel
except petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to
come up with an album as the latter aborted its project to produce one. Thus, he decided to produce an album for his daughter and
established a recording studio, which he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would
compose the songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be an
amateur composer, an arranger with limited experience and musician without any formal musical training. According to petitioner,
respondent had no track record as a composer, and he was not known in the field of music. Nevertheless, after some discussion, respondent
verbally agreed with petitioner to co-produce the album based on the following terms and conditions: (1) petitioner shall provide all the
financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs; (3) respondent shall act as composer and arranger of
all the lyrics and the music of the five songs he already composed and the revival songs; (4) petitioner shall have exclusive right to market
70
the album; (5) petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net
profit; and (6) respondent shall be entitled to draw advances of ₱7,000.00 a month, which shall be deductible from his share of the net
profits and only until such time that the album has been produced.

According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that respondent was just an
amateur composer with no track record whatsoever in the music industry, had no definite source of income, had limited experience as an
arranger, had no knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach him how to use the
studio equipment; that petitioner would shoulder all the expenses of production and provide the studio and equipment as well as his
knowledge in the use thereof; and Celine Mei Lirio would sing the songs. They embarked on the production of the album on or about the
third week of August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal partnership under
Article 17675 of the New Civil Code, since they agreed to contribute money, property or industry to a common fund with the intention of
dividing the profits among themselves. Petitioner had no control over the time and manner by which respondent composed or arranged the
songs, except on the result thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner
contended that no employer-employee relationship existed between him and the respondent, and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision, 6 finding that an employer-employee relationship existed
between petitioner and respondent, and that respondent was illegally dismissed. The dispositive portion of the decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner),
have illegally dismissed complainant in his status as regular employee and, consequently, ORDERING said respondents:

1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision and, in lieu of
reinstatement, to [pay] his separation pay of one (1) month pay per year of service reckoned from [the] date of hire on August 15,
2001 until finality of this decision, which as of date amounts to full backwages total of 145,778.6 (basic ₱7,000.00 x 19.6
mos.=₱133,000.00 + 1/12 thereof as 13th month pay of ₱11,083.33 + SILP ₱7,000/32.62 days=₱214.59/day x 5=₱1,072.96 x 1.58
yrs.=₱1,695.27); separation pay of ₱22,750.00 (₱7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of ₱2,000.00;

3) To pay him moral and exemplary damages in the combined amount of ₱75,000.00.

Other monetary claims of complainant are dismissed for lack of merit. 7

The Labor Arbiter stated that petitioner’s denial of the employment relationship cannot overcome respondent’s positive assertion and
documentary evidence proving that petitioner hired respondent as his employee. 8

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The dispositive portion of the
Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is REVERSED and, hence, SET ASIDE
and a new one ENTERED dismissing the instant case for lack of merit. 9

The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC agreed that respondent
was able to prove that he received gross pay less deduction and net pay, with the corresponding Certification of Correctness by petitioner,
covering the period from July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved with substantial evidence that he
was selected and engaged by petitioner, that petitioner had the power to dismiss him, and that they had the power to control him not only as
to the result of his work, but also as to the means and methods of accomplishing his work.

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution 9 dated December 14, 2004.

Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision 10 reversing and setting aside the resolution of the NLRC, and reinstating the
decision of the Labor Arbiter, with modification in regard to the award of commission and damages. The Court of Appeals deleted the award
of commission, and moral and exemplary damages as the same were not substantiated. The dispositive portion of the Court of Appeals’
decision reads:

71
WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14, 2004 are hereby REVERSED
and SET ASIDE. Accordingly, the decision dated October 31, 2003 of  the Labor Arbiter is REINSTATED,  with the modification  that the
awards of commission and damages are deleted.11 (Emphasis supplied.)

Petitioner’s motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution 12 dated September 21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will prosper only if there
is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part of the NLRC. 13 However, petitioner
contends that the Court of Appeals decided the case not in accordance with law and applicable rulings of this Court as petitioner could not
find any portion in the Decision of the Court of Appeals ruling that the NLRC acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by
the NLRC raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner contends that
it was error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether there exists an employer-employee
relationship between the parties.

Petitioner’s argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari under Rule 65 of the Rules
of Court filed before the Court of Appeals in accordance with the decision of the Court in St. Martin Funeral Home v. NLRC, 14 which held:

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are interpreted
and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all such petitions should henceforth be
initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for the relief
desired.15

The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the public respondent [NLRC] committed
grave abuse of discretion when it declared that no employer-employee relationship exists between the petitioner and the private
respondents, since the petitioner failed to prove such fact by substantial evidence." 16

Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari, which is
merely confined to issues of jurisdiction or grave abuse of discretion. 17 By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was exercised arbitrarily or
despotically.18

The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution,
committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is material to or decisive of the
controversy; and it cannot make this determination without looking into the evidence of the parties. 19 Necessarily, the appellate court can
only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other evidence on record. 20 Thus, contrary to the contention of petitioner, the Court of Appeals can
review the finding of facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its discretion in
finding that no employer-employee relationship existed between petitioner and respondent. 21

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF
PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN
VIOLATION OF ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE
PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND
THE PRIVATE RESPONDENTS.22

Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by way of any
document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter that petitioner failed to
substantiate his claim that he had a partnership with respondent, citing the Labor Arbiter’s finding, thus:

72
In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14, 2001, he was hired as
'Studio manager' by respondent Lirio to manage and operate the recording studio and to promote and sell its services to music enthusiasts
and clients, proven by his receipt for this purpose from said respondent a fixed monthly compensation of ₱7,000.00, with commission of
₱100.00 per hour when serving as recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points
to complainant's hiring as employee so that the case comes within the purview of our jurisdiction on labor disputes between an employer
and an employee. x x x.

Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion thereto, in the face of
complainant's evidence, constitute but a self-serving assertion, without probative value, a mere invention  to justify the illegal
dismissal.

xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to respondent's Lirio's
insistences on merely giving him 20% based on net profit on sale of the album which he composed and arranged during his free time and,
moreover, that salaries which he received would be deducted therefrom, which obviously, soured the relations from the point of view of
respondent Lirio.23

Hence, based on the finding above and the doctrine that "if doubt exists between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter," 24 the Court of Appeals reversed the resolution of the NLRC and reinstated the
decision of the Labor Arbiter with modification. Even if the Court of Appeals was remiss in not stating it in definite terms, it is implied that
the Court of Appeals found that the NLRC gravely abused its discretion in finding that no employer-employee relationship existed between
petitioner and respondent based on the evidence on record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in accordance with law, or
whether or not the Court of Appeals erred in reversing and setting aside the decision of the NLRC, and reinstating the decision of the Labor
Arbiter with modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not ironclad. 25 Where the issue is
shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, in this case, the NLRC, this Court is
constrained to review the factual findings of the Court of Appeals. 26

Before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship existed between
petitioner and respondent.27

The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. The most important element
is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.28

It is settled that no particular form of evidence is required to prove the existence of an employer-employee relationship. 29 Any competent
and relevant evidence to prove the relationship may be admitted. 30

In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as follows: (a) a
document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by petitioner, 31 which showed that respondent
received a monthly salary of ₱7,000.00 (₱3,500.00 every 15th of the month and another ₱3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers, 32 showing the amounts he
received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages of ₱7,000.00. Petitioner
wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner, and respondent, thereafter, filed an action
for illegal dismissal against petitioner. The power of control refers merely to the existence of the power. 33 It is not essential for the employer
to actually supervise the performance of duties of the employee, as it is sufficient that the former has a right to wield the
power.34 Nevertheless, petitioner stated in his Position Paper that it was agreed that he would help and teach respondent how to use the
studio equipment. In such case, petitioner certainly had the power to check on the progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership.1âwphi1 Such claim was not
supported by any written agreement. The Court notes that in the payroll dated July 31, 2001 to March 15, 2002, 35 there were deductions
from the wages of respondent for his absence from work, which negates petitioner’s claim that the wages paid were advances for
respondent’s work in the partnership. In Nicario v. National Labor Relations Commission, 36 the Court held:

73
It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must
be tilted in favor of the latter. It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising
from the evidence, or in the interpretation of agreements and writing should be resolved in the former’s favor. The policy is to extend the
doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the
State to give maximum aid and protection of labor. This rule should be applied in the case at bar, especially since the evidence presented by
the private respondent company is not convincing. x x x 37

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed that an employer-
employee relationship existed between petitioner and respondent.

In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly
made.38 Article 277 (b) of the Labor Code39 puts the burden of proving that the dismissal of an employee was for a valid or authorized cause
on the employer, without distinction whether the employer admits or does not admit the dismissal. 40 For an employee’s dismissal to be valid,
(a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process. 41 Procedural due process requires the
employer to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the
particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee
of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his
defense.42 Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly affirmed the Labor Arbiter’s
finding that respondent was illegally dismissed, and entitled to the payment of backwages, and separation pay in lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution
dated September 21, 2005, are AFFIRMED.

No costs.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE PORTUGAL PEREZ*

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

74
 THIRD DIVISION

[G.R. No. 172927 : February 11, 2010]

RONILO SORREDA, PETITIONER, VS. CAMBRIDGE ELECTRONICS CORPORATION, [1] RESPONDENT.

DECISION

CORONA, J.:

This petition[2] seeks to reverse and set aside the May 26, 2005 decision [3] of the Court of Appeals (CA) in CA-G.R. SP No. 77303 and its
resolution denying reconsideration.[4] The CA affirmed the resolution[5] of the National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 028156-01 declaring that petitioner Ronilo Sorreda was not a regular employee of respondent Cambridge Electronics Corporation.

On May 8, 1999, petitioner was hired by respondent as a technician for a period of 5 months at minimum wage. [6] Five weeks into the job (on
June 15, 1999), petitioner met an accident in which his left arm was crushed by a machine and had to be amputated. [7]

Petitioner claimed that, shortly after his release from the hospital, officers of respondent company called him to a meeting with his common-
law wife, father and cousin. There he was assured a place in the company as a regular employee for as long as the company existed and as
soon as he fully recovered from his injury.

In September 1999, after he recovered from his injury, petitioner reported for work. Instead of giving him employment, they made him sign
a memorandum of resignation to formalize his separation from the company in the light of the expiration of his five-month contract.

On November 16, 1999, petitioner filed in the Regional Arbitration Branch of the NLRC of Dasmarià ±as, Cavite a complaint[8] for illegal
dismissal (later changed to breach of contract). In his position paper, he raised the following issues:

1. whether there was a valid agreement or contract of perpetual employment perfected between the parties concerned;
2. whether respondent corporation was bound thereby and
3. whether [petitioner] has a cause of action for damages against respondent based on the contract. [9]

He claimed that respondent failed to comply with the terms of the contract of perpetual employment which was perfected in June 1999
when he was called to a meeting by management. [10] He prayed that respondent be made to pay compensatory, [11] moral[12] and exemplary
damages and attorney's fees for default or breach of contract.

Respondent denied that it extended regular employment to petitioner. Only words of encouragement were offered but not perpetual
employment. Moreover, it assailed the labor arbiter's jurisdiction over the case, claiming a lack of causal connection between the alleged
breach of contract and their employer-employee relationship.

The labor arbiter held that he had jurisdiction to hear and decide the case as it involved the employer-employee relationship of the
contending parties. He ruled that petitioner who had been employed on a per-project basis became a regular employee by virtue of the
contract of perpetual employment. He stated that the positive declaration of the witnesses (common-law wife, father and cousin) present at
the meeting and the parole evidence rule was enough to support the petitioner's claim. Thus, in a decision dated March 9, 2001, the labor
arbiter ruled that petitioner was employed by respondent for an indefinite period of employment (that is, on regular status.) He ordered
petitioner's reinstatement and the payment of backwages, moral damages and exemplary damages as well as attorney's fees. [13]

Both petitioner and respondent appealed to the NLRC. Petitioner claimed that the labor arbiter erred in finding that he was a regular
employee, that the case was based on illegal dismissal and that reinstatement and payment of backwages were the proper reliefs.
Respondent, on the other hand, asked for the reversal of the labor arbiter's decision based on grave abuse of discretion for assuming
jurisdiction over the case.

The NLRC agreed with respondent.[14] It found that petitioner was not a regular employee; thus, he was neither illegally dismissed nor
entitled to reinstatement and backwages. Petitioner sued for compensatory damages because of the accident that befell him. As the contract
for per-project employment had already expired, the issue no longer fell under the jurisdiction of the labor arbiter and NLRC. Moreover, the
testimonies of petitioner's witnesses were declared self-serving and thus insufficient to prove the contract of perpetual employment. The
motion for reconsideration of petitioner was denied. [15]

Aggrieved, petitioner filed a petition for certiorari [16] in the CA questioning the NLRC's finding of non-existence of the contract of perpetual
employment.

The CA dismissed the petition for lack of merit, stating that the labor arbiter decided the case on an issue that was never raised ( i.e., the
employment status of petitioner). Moreover, petitioner's principal cause of action, breach of contract, was not cognizable by the labor courts
but by the regular courts.[17] The CA concluded that the NLRC did not commit any reversible error in finding that the labor arbiter had no
jurisdiction over the case. Furthermore, petitioner failed to prove grave abuse of discretion in the NLRC's exercise of its quasi-judicial
75
function.

Petitioner moved for reconsideration but the motion was denied. [18] Thus, this petition.

We affirm the Court of Appeals.

This case rests on the issue of whether the labor arbiter had the jurisdiction to take cognizance thereof.

Jurisdiction over the subject matter of a complaint is determined by the allegations of the complaint. [19] In Pioneer Concrete Philippines, Inc. v.
Todaro,[20] the Court reiterated that where no employer-employee relationship exists between the parties, and the Labor Code or any labor
statute or collective bargaining agreement is not needed to resolve any issue raised by them, it is the Regional Trial Court which has
jurisdiction. Thus it has been consistently held that the determination of the existence of a contract as well as the payment of damages is
inherently civil in nature.[21] A labor arbiter may only take cognizance of a case and award damages where the claim for such damages arises
out of an employer-employee relationship.[22]

In this instance, petitioner, from the period May 8, 1999 to October 8, 1999, was clearly a per-project employee of private respondent,
resulting in an employer-employee relationship. Consequently, questions or disputes arising out of this relationship fell under the
jurisdiction of the labor arbiter.

However, based on petitioner's allegations in his position paper, his cause of action was based on an alleged second contract of employment
separate and distinct from the per-project employment contract. Thus, petitioner insisted that there was a perfected contract of perpetual
employment and that respondent was liable to pay him damages.

We note, however, that petitioner filed the case only when respondent refused to rehire him.[23]

While there was an employer-employee relationship between the parties under their five-month per-project contract of employment, the
present dispute is neither rooted in the aforestated contract nor is it one inherently linked to it. Petitioner insists on a right to be employed
again in respondent company and seeks a determination of the existence of a new and separate contract that established that right. As such,
his case is within the jurisdiction not of the labor arbiter but of the regular courts. The NLRC and the CA were therefore correct in ruling that
the labor arbiter erroneously took cognizance of the case.

Even assuming arguendo that the labor arbiter had the jurisdiction to decide the case, the Court cannot countenance petitioner's claim that a
contract of perpetual employment was ever constituted. While the Constitution recognizes the primacy of labor, it also recognizes the critical
role of private enterprise in nation-building and the prerogatives of management. A contract of perpetual employment deprives
management of its prerogative to decide whom to hire, fire and promote, and renders inutile the basic precepts of labor relations. While
management may validly waive it prerogatives, such waiver should not be contrary to law, public order, public policy, morals or good
customs.[24] An absolute and unqualified employment for life in the mold of petitioner's concept of perpetual employment is contrary to
public policy and good customs, as it unjustly forbids the employer from terminating the services of an employee despite the existence of a
just or valid cause. It likewise compels the employer to retain an employee despite the attainment of the statutory retirement age, even if the
employee has became a "non-performing asset" or, worse, a liability to the employer.

Moreover, aside from the self-serving claim of petitioner, there was no concrete proof to establish the existence of such agreement.
Petitioner cannot validly force respondent to enter into a permanent employment contract with him. Such stance is contrary to the
consensuality principle of contracts as well as to the management prerogative of respondent company to choose its employees.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.

G.R. No. 192084               September 14, 2011

JOSE MEL BERNARTE, Petitioner,

vs.
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and PERRY MARTINEZ, Respondents.

DECISION

CARPIO, J.:
76
 The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No.
105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of the
Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents Philippine
Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala, however,
changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract for the
period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed
citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He
felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he
signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez
issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town
games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first
contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of the
latter period, PBA decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply
not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed. 4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages and
attorney’s fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a)
reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay complainants:

JOSE MEL RENATO

BERNARTE GUEVARRA

1. backwages from January 1, 2004 up to the finality of ₱536,250.00 ₱211,250.00

this Decision, which to date is

2. moral damages 100,000.00 50,000.00

3. exemplary damages 100,000.00 50,000.00

4. 10% attorney's fees 68,625.00 36,125.00

TOTAL ₱754,875.00 ₱397,375.00

or a total of ₱1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

77
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s judgment. The dispositive portion of the NLRC’s decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The
dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008 of the
National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents’ complaint before the Labor Arbiter
is DISMISSED.

SO ORDERED.10

The Court of Appeals’ Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and
methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees’ acts of blowing the whistle and making calls during basketball games,
it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball games for the
illogical reason that said acts refer only to the referees’ skills. How could a skilled referee perform his job without blowing a whistle and
making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and
making calls?

Moreover, this Court disagrees with the Labor Arbiter’s finding (as affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.

xxxx

Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s conclusion that private respondents’ repeated hiring made them
regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally
dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiter’s decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005 became final and executory for failure of respondents to appeal with
the NLRC within the prescribed period. Petitioner claims that the Labor Arbiter’s decision was constructively served on respondents as early
as August 2005 while respondents appealed the Arbiter’s decision only on 31 March 2006, way beyond the reglementary period to appeal.
Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post
master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmaster’s Certification to prove constructive service of the Labor Arbiter’s
decision on respondents. The Postmaster certified:

xxx

78
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim
on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention
period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on
September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. – Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the
expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by
the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt
by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days
from the date the addressee received the first notice of the postmaster. 13

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the
addressee.15 Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon
a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee. 16

The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was
issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was
actually delivered.17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued
by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by respondents,
negating petitioner’s claim of constructive service of the Labor Arbiter’s decision on respondents. The Postmaster’s Certification does not
sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the three
notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the
registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiter’s decision on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiter’s decision moot as respondents’ appeal was considered in the
interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the merits
rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and remain unsettled
due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province
of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of
Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case. 18

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control
the employee on the means and methods by which the work is accomplished. The so-called "control test" is the most important indicator of
the presence or absence of an employer-employee relationship. 19

In this case, PBA admits repeatedly engaging petitioner’s services, as shown in the retainer contracts. PBA pays petitioner a retainer fee,
exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioner’s violation
of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor
and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the
performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents classify
or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least one hour
before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or
substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on
or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of the contract; (b) to
give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball game outside of the PBA,

79
without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest standards of
honesty or morality; and (6) imposition of various sanctions for violation of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the
whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of Appeals, "how could a skilled referee perform his job without blowing a
whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the
whistle and making calls?"20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of its
talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.
The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. We have ruled that:

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

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve it. 22

We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the
game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot
overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court.
Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when
he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioner’s job of officiating a
professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work
only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate
games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to
report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees’ salaries. These
undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such,
plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:

Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to
details by which the result is achieved, an employer/employee relationship is likely to exist." The Court must be careful to distinguish
between "control[ling] the conduct of another party contracting party by setting out in detail his obligations" consistent with the freedom of
contract, on the one hand, and "the discretionary control an employer daily exercises over its employee’s conduct" on the other.

Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving him an assessor,
discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not,
for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches.
That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining
independent contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x

80
It is undisputed that the Federation did not control the way Yonan refereed his games.1âwphi1 He had full discretion and authority, under
the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like
the Federation’s registration and training requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on
the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and
international level, requires "a great deal of skill and natural ability." Yonan asserts that it was the Federation’s training that made him a top
referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled
significantly or negated when the putative employer’s activity is the result of a statutory requirement, not the employer’s choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the player’s vicarious liability claim against the association should be dismissed. In finding that the umpire is an
independent contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA
does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules.
The TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired
party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform
his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA
and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides
to discontinue petitioner’s services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms
and conditions of the contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as in the present
case. The non-renewal of the contract between the parties does not constitute illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

MARIANO C. DEL CASTILLO* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice
81
G.R. No. 192558               February 15, 2012

BITOY JAVIER (DANILO P. JAVIER), Petitioner,

vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision 1 of the Court of Appeals (CA) and its
June 7, 2010 Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009 Decision 3 of the National Labor Relations
Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. He alleged that he
was an employee of Fly Ace since September 2007, performing various tasks at the respondent’s warehouse such as cleaning and arranging
the canned items before their delivery to certain locations, except in instances when he would be ordered to accompany the company’s
delivery vehicles, as pahinante; that he reported for work from Monday to Saturday from 7:00 o’clock in the morning to 5:00 o’clock in the
afternoon; that during his employment, he was not issued an identification card and payslips by the company; that on May 6, 2008, he
reported for work but he was no longer allowed to enter the company premises by the security guard upon the instruction of Ruben
Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to allow him to enter, he saw Ong whom he approached and
asked why he was being barred from entering the premises; that Ong replied by saying, "Tanungin mo anak mo;" 6 that he then went home
and discussed the matter with his family; that he discovered that Ong had been courting his daughter Annalyn after the two met at a fiesta
celebration in Malabon City; that Annalyn tried to talk to Ong and convince him to spare her father from trouble but he refused to accede;
that thereafter, Javier was terminated from his employment without notice; and that he was neither given the opportunity to refute the
cause/s of his dismissal from work.

To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a stevedore or pahinante of Fly
Ace from September 2007 to January 2008. The said affidavit was subscribed before the Labor Arbiter (LA).7

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in December 2007, Javier
was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate of ₱ 300.00 per trip, which was later increased
to ₱ 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of its contracted hauler,
Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he was their
employee, Fly Ace insisted that there was no illegal dismissal. 8 Fly Ace submitted a copy of its agreement with Milmar Hauling Services and
copies of acknowledgment receipts evidencing payment to Javier for his contracted services bearing the words, "daily
manpower (pakyaw/piece rate pay)" and the latter’s signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof that he was a
regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any document showing that he received the benefits
accorded to regular employees of the Respondents. His contention that Respondent failed to give him said ID and payslips implies that
indeed he was not a regular employee of Fly Ace considering that complainant was a helper and that Respondent company has contracted a
regular trucking for the delivery of its products.

Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is a regular hauler to
deliver its products, we give credence to Respondents’ claim that complainant was contracted on "pakiao" basis.

As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of workers on "pakiao" basis has
evidentiary weight because although the signature of the complainant appearing thereon are not uniform, they appeared to be his true
signature.

xxxx
82
Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not liable for salary
differentials. 9

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately concluded that he was not a
regular employee simply because he failed to present proof. It was of the view that a pakyaw-basis arrangement did not preclude the
existence of employer-employee relationship. "Payment by result x x x is a method of compensation and does not define the essence of the
relation. It is a mere method of computing compensation, not a basis for determining the existence or absence of an employer-employee
relationship.10 " The NLRC further averred that it did not follow that a worker was a job contractor and not an employee, just because the
work he was doing was not directly related to the employer’s trade or business or the work may be considered as "extra" helper as in this
case; and that the relationship of an employer and an employee was determined by law and the same would prevail whatever the parties
may call it. In this case, the NLRC held that substantial evidence was sufficient basis for judgment on the existence of the employer-employee
relationship. Javier was a regular employee of Fly Ace because there was reasonable connection between the particular activity performed
by the employee (as a "pahinante") in relation to the usual business or trade of the employer (importation, sales and delivery of groceries).
He may not be considered as an independent contractor because he could not exercise any judgment in the delivery of company products. He
was only engaged as a "helper."

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to present proof of a valid
cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier who was likewise entitled to backwages and separation
pay in lieu of reinstatement. The NLRC thus ordered:

WHEREFORE, premises considered, complainant’s appeal is partially GRANTED. The assailed Decision of the labor arbiter is VACATED and a
new one is hereby entered holding respondent FLY ACE CORPORATION guilty of illegal dismissal and non-payment of 13th month pay.
Consequently, it is hereby ordered to pay complainant DANILO "Bitoy" JAVIER the following:

1. Backwages -₱ 45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

TOTAL -₱ 59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.11

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and reinstated the dismissal of
Javier’s complaint as ordered by the LA. The CA exercised its authority to make its own factual determination anent the issue of the existence
of an employer-employee relationship between the parties. According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause. However, before a case
for illegal dismissal can prosper, an employer-employee relationship must first be established. x x x it is incumbent upon private respondent
to prove the employee-employer relationship by substantial evidence.

xxx

It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners, but he failed to discharge
his burden. The non-issuance of a company-issued identification card to private respondent supports petitioners’ contention that private
respondent was not its employee.12

The CA likewise added that Javier’s failure to present salary vouchers, payslips, or other pieces of evidence to bolster his contention, pointed
to the inescapable conclusion that he was not an employee of Fly Ace. Further, it found that Javier’s work was not necessary and desirable to
the business or trade of the company, as it was only when there were scheduled deliveries, which a regular hauling service could not deliver,

83
that Fly Ace would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier did not pass the
"control test."

He contracted work outside the company premises; he was not required to observe definite hours of work; he was not required to report
daily; and he was free to accept other work elsewhere as there was no exclusivity of his contracted service to the company, the same being
co-terminous with the trip only.13 Since no substantial evidence was presented to establish an employer-employee relationship, the case for
illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS NOT A REGULAR
EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.14

The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly Ace has nothing to
substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not
preclude his regular employment with the company. Even the acknowledgment receipts bearing his signature and the confirming receipt of
his salaries will not show the true nature of his employment as they do not reflect the necessary details of the commissioned task. Besides,
Javier’s tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in the importation and
sale of grocery items. "On days when there were no scheduled deliveries, he worked in petitioners’ warehouse, arranging and cleaning the
stored cans for delivery to clients." 15 More importantly, Javier was subject to the control and supervision of the company, as he was made to
report to the office from Monday to Saturday, from 7:00 o’clock in the morning until 5:00 o’clock in the afternoon. The list of deliverable
goods, together with the corresponding clients and their respective purchases and addresses, would necessarily have been prepared by Fly
Ace. Clearly, he was subjected to compliance with company rules and regulations as regards working hours, delivery schedule and output,
and his other duties in the warehouse.16

The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a worker on a per trip basis is not significant
because "this is merely a method of computing compensation and not a basis for determining the existence of employer-employee
relationship." Javier likewise invokes the rule that, "in controversies between a laborer and his master, x x x doubts reasonably arising from
the evidence should be resolved in the former’s favour. The policy is reflected is no less than the Constitution, Labor Code and Civil Code." 18

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latter’s failure to observe substantive and
procedural due process. Since his dismissal was not based on any of the causes recognized by law, and was implemented without notice,
Javier is entitled to separation pay and backwages.

In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having a service contract
with Milmar Hauling Services for the purpose of transporting and delivering company products to customers, Fly Ace contracted Javier as an
extra helper or pahinante on a mere "per trip basis." Javier, who was actually a loiterer in the area, only accompanied and assisted the
company driver when Milmar could not deliver or when the exigency of extra deliveries arises for roughly five to six times a month. Before
making a delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded company products. With the vehicle
and products in their custody, the driver and Javier "would leave the company premises using their own means, method, best judgment and
discretion on how to deliver, time to deliver, where and [when] to start, and manner of delivering the products." 20

Fly Ace dismisses Javier’s claims of employment as baseless assertions. Aside from his bare allegations, he presented nothing to substantiate
his status as an employee. "It is a basic rule of evidence that each party must prove his affirmative allegation. If he claims a right granted by
law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of his
opponent."21 Invoking the case of Lopez v. Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by substantial evidence. Thus,
it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.

84
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are unfortunately not supported by
proof, documentary or otherwise."23 Javier simply assumed that he was an employee of Fly Ace, absent any competent or relevant evidence
to support it. "He performed his contracted work outside the premises of the respondent; he was not even required to report to work at
regular hours; he was not made to register his time in and time out every time he was contracted to work; he was not subjected to any
disciplinary sanction imposed to other employees for company violations; he was not issued a company I.D.; he was not accorded the same
benefits given to other employees; he was not registered with the Social Security System (SSS) as petitioner’s employee; and, he was free to
leave, accept and engage in other means of livelihood as there is no exclusivity of his contracted services with the petitioner, his services
being co-terminus with the trip only. All these lead to the conclusion that petitioner is not an employee of the respondents." 24

Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier would perform his work or
by which the same is to be accomplished." 25 In other words, Javier and the company driver were given a free hand as to how they would
perform their contracted services and neither were they subjected to definite hours or condition of work.

Fly Ace likewise claims that Javier’s function as a pahinante was not directly related or necessary to its principal business of importation and
sales of groceries. Even without Javier, the business could operate its usual course as it did not involve the business of inland transportation.
Lastly, the acknowledgment receipts bearing Javier’s signature and words "pakiao rate," referring to his earned salaries on a per trip basis,
have evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier was not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javier’s alleged illegal dismissal is anchored on the existence of an employer-employee relationship
between him and Fly Ace. This is essentially a question of fact. Generally, the Court does not review errors that raise factual questions.
However, when there is conflict among the factual findings of the antecedent deciding bodies like the LA, the NLRC and the CA, "it is proper,
in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine
the questioned findings."26 In dealing with factual issues in labor cases, "substantial evidence – that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion – is sufficient." 27

As the records bear out, the LA and the CA found Javier’s claim of employment with Fly Ace as wanting and deficient. The Court is
constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the NLRC 28 allows a relaxation of the rules of procedure
and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. Labor officials are enjoined to use
reasonable means to ascertain the facts speedily and objectively with little regard to technicalities or formalities but nowhere in the rules
are they provided a license to completely discount evidence, or the lack of it. The quantum of proof required, however, must still be satisfied.
Hence, "when confronted with conflicting versions on factual matters, it is for them in the exercise of discretion to determine which party
deserves credence on the basis of evidence received, subject only to the requirement that their decision must be supported by substantial
evidence."29 Accordingly, the petitioner needs to show by substantial evidence that he was indeed an employee of the company against which
he claims illegal dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is, therefore, incumbent
upon the Court to determine whether the party on whom the burden to prove lies was able to hurdle the same. "No particular form of
evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html - fnt31 Hence, while no
particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as well as its qualitative aspects."30 Although substantial evidence is not a function
of quantity but rather of quality, the x x x circumstances of the instant case demand that something more should have been proffered. Had
there been other proofs of employment, such as x x x inclusion in petitioner’s payroll, or a clear exercise of control, the Court would have
affirmed the finding of employer-employee relationship." 31

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the requisite quantum of
evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his or her right thereto x x x." 33 Sadly, Javier failed
to adduce substantial evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of evidence on this point,
all that Javier presented were his self-serving statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed
to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to depart from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the company premises during
weekdays arranging and cleaning grocery items for delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit
executed by one Bengie Valenzuela was unsuccessful in strengthening Javier’s cause. In said document, all Valenzuela attested to was that he
would frequently see Javier at the workplace where the latter was also hired as stevedore. 34 Certainly, in gauging the evidence presented by
Javier, the Court cannot ignore the inescapable conclusion that his mere presence at the workplace falls short in proving employment
therein. The supporting affidavit could have, to an extent, bolstered Javier’s claim of being tasked to clean grocery items when there were no
scheduled delivery trips, but no information was offered in this subject simply because the witness had no personal knowledge of Javier’s
employment status in the company. Verily, the Court cannot accept Javier’s statements, hook, line and sinker.
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The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of an employer-
employee relationship, viz: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee’s conduct. Of these elements, the most important criterion is whether the employer controls or has
reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is
to be accomplished.35

In this case, Javier was not able to persuade the Court that the above elements exist in his case.1avvphi1 He could not submit competent
proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate what
his conduct should be while at work. In other words, Javier’s allegations did not establish that his relationship with Fly Ace had the attributes
of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Ace’s
assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was also baffling to realize that Javier did
not dispute Fly Ace’s denial of his services’ exclusivity to the company. In short, all that Javier laid down were bare allegations without
corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on a pakyaw basis. The Court cannot
fail to note that Fly Ace presented documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment receipts
admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the signatures affixed therein cannot automatically
sway us to ignore the documents because "forgery cannot be presumed and must be proved by clear, positive and convincing evidence and
the burden of proof lies on the party alleging forgery." 36

Considering the above findings, the Court does not see the necessity to resolve the second issue presented.

One final note. The Court’s decision does not contradict the settled rule that "payment by the piece is just a method of compensation and
does not define the essence of the relation." 37 Payment on a piece-rate basis does not negate regular employment. "The term ‘wage’ is
broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the
essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employer-employee relationship. However,
in determining whether the relationship is that of employer and employee or one of an independent contractor, each case must be
determined on its own facts and all the features of the relationship are to be considered." 38 Unfortunately for Javier, the attendant facts and
circumstances of the instant case do not provide the Court with sufficient reason to uphold his claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that
every labor dispute will be automatically decided in favor of labor. Management also has its rights which are entitled to respect and
enforcement in the interest of simple fair play. Out of its concern for the less privileged in life, the Court has inclined, more often than not,
toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule
that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 39

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010 Resolution, in CA-G.R. SP No.
109975, are hereby AFFIRMED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO*
Associate Justice

DIOSDADO M. PERALTA**
ROBERTO A. ABAD
Associate Justice
Associate Justice
Acting Chairperson

JOSE PORTUGAL PEREZ***

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.
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DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson’s Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

G.R. No. 195190               July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.

DECISION

DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and
regulations that merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and methods
of accomplishing it do not establish employer-employee relationship. 1

This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i)
reversed and set aside the February 23, 2009 Decision 4 of the National Labor Relations Commission (NLRC), (ii) ordered petitioner Royale
Homes Marketing Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii)
remanded the case to the Labor Arbiter for the proper determination and computation of said monetary awards.

Also assailed in this Petition isthe January 18, 2011 Resolution 5 of the CA denying Royale Homes’ Motion for Reconsideration, 6 as well as its
Supplemental7 thereto.

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing Director for a fixed period of
one year. His work consisted mainly of marketing Royale Homes’ realestate inventories on an exclusive basis. Royale Homes reappointed
him for several consecutive years, the last of which covered the period January 1 to December 31, 2003 where he held the position of
Division 5 Vice-President-Sales.8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal 9 against Royale Homes and its President Matilde Robles, Executive
Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President for Sales Carmina Sotto. Alcantara
alleged that he is a regular employee of Royale Homes since he is performing tasks that are necessary and desirable to its business; that in
2003 the company gave him ₱1.2 million for the services he rendered to it; that in the first week of November 2003, however, the executive
officers of Royale Homes told him that they were wondering why he still had the gall to come to office and sit at his table; 10 and that the
actsof the executive officers of Royale Homes amounted to his dismissal from work without any valid or just cause and in gross disregard of
the proper procedure for dismissing employees. Thus, he alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad
faith and in an oppressive manner.

Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as to be paid backwages,
moral and exemplary damages, and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-
945 be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper of Alcantara
isclear that it engaged his services as an independent sales contractorfor a fixed term of one year only. He never received any salary, 13th
87
month pay, overtime pay or holiday pay from Royale Homes as hewas paid purely on commission basis. In addition, Royale Homes had no
control on how Alcantara would accomplish his tasks and responsibilities as he was free to solicit sales at any time and by any manner which
he may deem appropriateand necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it as a sales agent, had
formed a brokerage company that directly competed with its business, and even recruited some of its sales agents. Although this was against
the exclusivity clause of the contract, Royale Homes still offered to accept Alcantara’s wife back so she could continue to engage in real estate
brokerage, albeit exclusively for Royale Homes. In a special management committee meeting on October 8,2003, however, Alcantara
announced publicly and openly that he would leave the company by the end of October 2003 and that he would no longer finish the
unexpired term of his contract. He has decided to join his wifeand pursue their own brokerage business. Royale Homes accepted Alcantara’s
decision. It then threw a despedidaparty in his honor and, subsequently, appointed a new independent contractor. Two months after
herelinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming that he was illegally dismissed.

Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision 11 holding that Alcantara is an employee of Royale Homes with a fixed-term
employment period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law.Hence, Alcantara
is entitled to an amount which he may have earned on the average for the unexpired portion of the contract. With regard to the impleaded
corporate officers, the Labor Arbiter absolved them from any liability.

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing Corp. to pay the
complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (₱277,000.00) representing his
compensation/commission for the unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED.12

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred inruling that
there exists an employer-employee relationship between the parties. It insisted that the contract between them expressly statesthat
Alcantara is an independent contractor and not an ordinary employee. Ithad no control over the means and methods by which he performed
his work. RoyaleHomes likewise assailed the award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara
who chose not to finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled to
backwages, reinstatement, unpaid commissions, and damages.

Ruling of the National LaborRelations Commission

On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara is not an employee but a mere independent contractor of
Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He was also
free to adopt the selling methods he deemed most effective and can even recruit sales agents to assist him in marketing the inventories of
Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being paid on commission basis
as stipulated in the contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the regular
courts.

The falloof the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005 is REVERSED and SET
ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED.14

Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his motion.

Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the NLRC in ruling that he is not
an employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue of whether the pre-termination of the
contract is valid.

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 Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision 18 granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the four-fold
and economic reality tests, it held thatAlcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over
Alcantara since his job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He was also bound by the
company code of ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes,
supporting the theory that he is anemployee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in violation of
his right to procedural due process. Thus, the CA ruled that he isentitled to backwages and separation pay, in lieu of reinstatement.
Considering,however, that the CA was not satisfied with the proofadduced to establish the amount of Alcantara’s annual salary, it remanded
the caseto the Labor Arbiter to determine the same and the monetary award he is entitled to. With regard to the corporate officers, the CA
absolved them from any liability for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith
orgross negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National Labor Relations Commission
in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution dated May 29, 2009 are
hereby SET ASIDE and a new one is entered ordering the respondent company to pay petitioner backwages which shall be computed from
the time of his illegal termination in October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for
every year of service. This case is REMANDED to the Labor Arbiter for the proper determination and computation of back wages, separation
pay and other monetary benefits that petitioner is entitled to.

SO ORDERED.19

Royale Homes filed a Motion for Reconsideration 20 and a Supplemental Motion for Reconsideration. 21 In a Resolution22 dated January 18,
2011, however, the CA denied said motions.

Issues

Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS
OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR
LACK OF JURISDICTION AND CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF THIS
HONORABLE COURT IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS.
ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR RECONSIDERATION
OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.] 23

Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an independent contractor.
This can be readily seen from the contract stating that no employer-employee relationship exists between the parties; that Alcantara was
free to solicit sales at any time and by any manner he may deem appropriate; that he may recruit sales personnel to assist him in marketing
Royale Homes’ inventories; and, thathis remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on a shallow ground that
his performance is subject to company rules and regulations, code of ethics, periodic evaluation, and exclusivity clause of contract.
RoyaleHomes maintains that it is expected to exercise some degree of control over its independent contractors,but that does not
automatically result in the existence ofemployer-employee relationship. For control to be consideredas a proof tending to establish
employer-employee relationship, the same mustpertain to the means and method of performing the work; not on the relationship of the
independent contractors among themselves or their persons or their source of living.

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Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who openly and publicly
declared that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor involves an evaluation
of factual matters which, ordinarily, is not within the province of this Court. In view of the conflicting findings of the tribunals below,
however, this Court is constrained to go over the factual matters involved in this case. 24

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and executed in
pursuanceof their mutual agreement. While the existence of employer-employee relationship is a matter of law, the characterization made
by the parties in their contract as to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the
parties’ written contractunequivocally states their intention at the time they entered into it. In Tongko v. The Manufacturers LifeInsurance
Co. (Phils.), Inc.,25 it was held that:

To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; x x x 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
embodiestheir 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. 26

In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no employer-employee relationship
exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to be bound by employer-employee
relationship atthe time ofthe signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I

Marikina City

Dear Mr. Alcantara,

This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING CORPORATION effective January
1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms and condition to be
provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market our real estate
inventories subject to rules, regulations and code of ethics promulgated by the company. Further, you are free to recruit sales
personnel/agents to assist you in marketing of our inventories provided that your personnel/agents shall first attend the required seminars
and briefing to be conducted by us from time to time for the purpose of familiarizing them of terms and conditionsof sale, the natureof
property sold, etc., attendance of which shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.

2. Budget allocation depending on your division’s sale performance as per our budget guidelines.

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 3. Sales incentive and other forms of company support which may be granted from time to time. It is understood,
however, that no employer-employee relationship exists between us, that of your sales personnel/agents, and that you
shall hold our company x x x, its officers and directors, free and harmless from any and all claims of liability and damages
arising from and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations, policies and code of
ethics upon notice for justifiable reason.

Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our agreement on the matter.(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of
itsstipulations should control." 28 No construction is even needed asthey already expressly state their intention. Also, this Court adopts the
observation of the NLRC that it is rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed to be
receiving ₱1.2 million as his annual salary, not to have contested the portion of the contract expressly indicating that he is not an employee
of Royale Homes if their true intention were otherwise.

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test, to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control
the employee with respect to the means and methods by which the work is to be accomplished. 29 Among the four, the most determinative
factor in ascertaining the existence of employeremployee relationship is the "right of control test". 30 "It is deemed to be such an important
factor that the other requisites may even be disregarded." 31 This holds true where the issues to be resolved iswhether a person who
performs work for another is the latter’s employee or is an independent contractor, 32 as in this case. For where the person for whom the
services are performed reserves the right to control not only the end to beachieved, but also the means by which such end is reached,
employer-employee relationship is deemed to exist. 33

In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his tasks is subject to
company rules, regulations, code of ethics, and periodic evaluation, the element of control is present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship.1âwphi1 A person who performs work for another and is
subjected to its rules, regulations, and code of ethics does not necessarily become an employee. 34 As long as the level of control does not
interfere with the means and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission35 it was pronounced 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 employeremployee relationship unlike the
second, which address both the result and the means used to achieve it. x x x 36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation alluded to byAlcantara do
not involve control over the means and methods by which he was to performhis job. Understandably, Royale Homes has to fix the price,
impose requirements on prospective buyers, and lay down the terms and conditionsof the sale, including the mode of payment, which the
independent contractors must follow. It is also necessary for Royale Homes to allocateits inventories among its independent contractors,
determine who has priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor the
result of their marketing and sales efforts. But tothe mind of this Court, these do not pertain to the means and methods of how Alcantara was
to perform and accomplish his task of soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner as
to how he would transact business with prospective clients. In Tongko, this Court held that guidelines or rules and regulations that do
notpertain to the means or methodsto be employed in attaining the result are not indicative of control as understood inlabor law. Thus:

From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by the rules and regulations
of an insurance company does not ipso factomake 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 Lifecase 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 beemployed 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
91
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 Lifecase was practically reiterated in
Carungcong. Thus, as will be shown more fully below, Manulife’s codes of conduct, all of which do not intrude into the insurance agents’
means and manner of conducting their sales and only control them as to the desired results and Insurance Code norms, cannot be used as
basis for a finding that the labor law concept of control existed between Manulife and Tongko. 37 (Emphases in the original)

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the elements thereof,
particularly Royale Homes’ power of control over the means and methods of accomplishing the work. 38 He, however, failed to cite
specificrules, regulations or codes of ethics that supposedly imposed control on his means and methods of soliciting sales and dealing with
prospective clients. On the other hand, this case is replete with instances that negate the element of control and the existence of employer-
employee relationship. Notably, Alcantara was not required to observe definite working hours. 39 Except for soliciting sales, RoyaleHomes did
not assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as he can "solicit sales at any time
and by any manner which [he may] deem appropriate and necessary." He performed his tasks on his own account free from the control and
direction of Royale Homes in all matters connected therewith, except as to the results thereof. 40

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship. 41 As discussed above, the absence of
control over the means and methodsdisproves employer-employee relationship. The continuous rehiring of Alcantara simply signifies the
renewal of his contract with Royale Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does the
exclusivity clause of contract establish the existence of the labor law concept of control. In Consulta v. Court of Appeals, 42 it was held that
exclusivity of contract does not necessarily result in employer-employee relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean that Pamana
exercised control over the means and methods of Consulta’s work as the term control is understood in labor jurisprudence. Neither did it
make Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being connected
with any other company, for aslong as the business [of the] company did not compete with Pamana’s business. 43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as he does not sell projects
of Royale Homes’ competitors. He can engage in selling various other products or engage in unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations consist only of
commission override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no proof that he received
fixed monthly salary. No payslip or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed salary
withholding tax or that it registered him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact,
his Complaint merely states a ballpark figure of his alleged salary of ₱100,000.00, more or less. All of these indicate an independent
contractual relationship.44 Besides, if Alcantara indeed consideredhimself an employee of Royale Homes, then he, an experienced and
professional broker, would have complained that he was being denied statutorily mandated benefits. But for nine consecutive years, he kept
mum about it, signifying that he has agreed, consented, and accepted the fact that he is not entitled tothose employee benefits because he is
an independent contractor.

This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The NLRC is,
therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is
REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission is REINSTATED and AFFIRMED. SO
ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

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 ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

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